Builders FirstSource (BFS), the Dallas-based and top 10 ProSales 100 dealer, reported its first-quarter net loss doubled to $30.6 million from a net loss of $15.8 million during the same period a year ago. It also said April 23 that for the three-month period ended March 31, sales fell 37% to $163.8 million from $259.9 million. From all indications, "2009 will likely be more challenging than 2008," CEO Floyd Sherman told analysts Friday, April. 24.
BFS noted that in the markets where it operates, including 11 Southern and Eastern states, its sales volume dropped an estimated 33% while houring starts in the same markets declined an estimated 50%.
"Our action plan of conserving cash, growing market share, reducing physical capacity, adjusting staffing levels, implementing cost-containment programs, and prudently managing credit continues to help us mitigate the impact of the sluggish housing market on our operations," Sherman said in a prepared statement issued April 23.
During the quarter, the dealer closed one distribution center and one truss manufacturing facility and also continued to reduce payroll, lowering full-time headcount for the quarter to 3,169 employees. That's a 38% drop from 1Q08 and down 22% from 4Q08.
BFS said the payroll reductions, coupled with cost reductions, allowed it to reduce selling, general, and administrative expenses by 29%.
Charles Horn, senior vice president and CFO, said the dealer is targeting a 10% reduction in average full-time employees by the end of the second quarter. The company estimates that will lower annual payroll costs by approximately $14 million.
"This reduction is contingent upon actual market conditions," Horn said in the company statement. "In addition, we are endeavoring to lower our lease expense by returning excess rolling stock and negotiating rent abatements with certain landlords."
The dealer also said its bad debt expense was $1.2 million, or 0.7% of sales in the quarter, down from $1.6 million, or 0.8% of sales in 4Q08.
Net cash used during 1Q09 was $4.3 million, down from $15.7 million a year before and consistent with $4.3 million of net cash used during final quarter of 2008. However, this excludes a $20 million repayment to the dealer's revolving credit facility.
"We expect the difficult housing environment to present unprecedented challenges for the remainder of 2009 for everyone operating within our industry, Sherman said. "We are optimistic that the sustained execution of our strategy, coupled with $83.5 million in available cash and over $30 million in income tax refunds to be received during 2009, will provide adequate liquidity to withstand these challenging industry conditions."
The company operates 57 distribution centers and 55 manufacturing facilities and ranked 7th on the 2008 ProSales 100.
During its April 24 conference call with stock analysts, Horn said the company feels good about its liquidity, but he also said there need to be about 480,000 single-family housing starts per year in order for BFS to break even financially, assuming its market share and expenses remain constant. On April 23, the NAHB forecast only 360,000 single-family starts this year. In money terms, Horn said, BFS needs roughly $80 million to $85 million worth of sales per month in order to record an operating profit.
One reason why BFS believes it can hold out until housing recovers is that it expects to get a $33 million income tax refund in the next two weeks. In addition, it is renegotiating terms with subcontractors so that they will be paid every 15 days rather than daily or weekly, and it is changing its payment terms with suppliers. BFS also is pushing more aggressively into the multifamily and commercial market, an area that provides about 10% of its revenues today.