Builders FirstSource (BFS) reported late today that its net loss deepened six-fold in 2008 to $139.5 million from $23.8 million in 2007 on a 32.4% decline in sales to $1.03 billion from 2007's $1.53 billion.
The Dallas-based dealer's net loss tripled in the fourth quarter alone from the previous year to reach $58.9 billion from $20.4 million in the year-earlier quarter on a 30.6% drop in net sales to $201.3 million from $290.2 million.
"We felt the impact of these difficult conditions on our 2008 results although we were able to limit it through our action plan," said Floyd Sherman, Builders FirstSource's CEO. "Our action plan principally consisted of growing market share, reducing physical capacity, adjusting staffing levels, implementing cost containment programs, managing credit tightly, and, most importantly, conserving cash."
BFS noted that sales measured by volume dropped 27.9% in the fourth quarter compared with a 45.6% in housing activity in the markets it serves. For the full year, sales volume dropped an estimated 30.4% vs. an estimated 42.5% decline in housing activity.
The dealer closed or mothballed 14 facilities during 2008. Headcount as of Dec. 31 was cut 39.3% from the year earlier to total 3,274.
As of today, BFS operates 58 distribution centers and 57 manufacturing facilities in 11 states.
BFS ranked seventh on the 2008 ProSales 100 list of leading LBM dealers.
During a conference call with analysts on Friday, CFO Charles Horn was asked about the ability of builders to pay their bills. He said the larger builders still have been paying their bills, but at the same time BFS is seeing more regional and small builders moving toward an orderly liquidation. He said this is because a number of builders' operations are structured for tax purposes so that the losses incurred by the construction company can flow back to the company's owner.
"I think you'll see more and more builders say 'I'll take the tax refund and wind down operations'," Horn said.
Sherman said it's apparent that banks are forcing builders to stop any spec construction and are requiring builders to reduce inventories before the builders get any more loans. "We're going to see some really diminished inventories over the next few months," he said. Sherman said BFS doesn't expect any upturn until at least the third and fourth quarters of this year.