Builders FirstSource (BFS) reported third quarter 2013 net income of $12.8 million, or $26.4 million improvement over the $13.6 million loss sustained in the third quarter of 2012.

However, for the first nine months of the year, BFS still lost $47.2 million, a 5.4% retrenchment from the first three quarters of 2012’s loss of $44.8 million. Sales for the first three months of 2013 reached $1.12 billion, compared to $783 million in the year-ago period.

The Dallas-based building material manufacturer and distributor posted third quarter sales of $402.9 million, a 38.1% increase over year ago sales of $291.8 million. Gross margins rose to 23% in the quarter compared to 19.8 percent in third quarter 2012. The results represented the eighth consecutive year of sales growth.

"Our trend of improving financial results continued as our top line growth and gross margin increase helped us achieve positive net income and positive cash flow in the current quarter,” said BFS CEO Floyd Sherman.

"Our gross margin percentage increased to 23% for the current quarter, up from 19.8% for the third quarter of 2012,” he said. “This margin increase was accomplished in spite of the continuation of a very competitive pricing environment, and was largely due to better customer pricing, an increase in sales volume, and a lower rate of material cost inflation."

Capital expenditures were $4.8 million for the third quarter of 2013, compared to $5.2 million for the same quarter of 2012. BFS expects capital expenditures in the fourth quarter of 2013 to be approximately $8 million, and between $15 million to $20 million in 2014 as it continues to invest in its fleet and truss, panel, door and window capabilities.

During Friday’s third quarter earnings call to investors, Sherman expressed optimism for the U.S. housing market in the coming year.

“Despite the challenges we still face within the industry, such as the historically low rate housing starts, availability of credit for home buyers, shortages of skilled construction labor, and the competitive pricing environment, we believe the demand for housing continues to strengthen and the outlook for continued industry improvement remains positive,” he said.

He said BFS sees very competitive pricing in the field with the company as well as competitors very attuned to the commodity markets. Oriented-strand board pricing has leveled out and there’s not a lot of volatility in that category. “We’ve done a good job of protecting ourselves for the remainder the quarter.

Lumber, however, is a different story, with increased volatility and more upward pressure on prices. “We will probably see a continual inflationary curve to the lumber commodity side of the business and people are going to take that into account in their pricing,” Sherman said.

In terms of production, BFS has the cash to either expand existing facilities, bring mothballed ones back on line, or either build or acquire new facilities in markets beyond the company’s current reach.

“A couple mothballed facilities may be opened next year and [we could] have them up and running if the demand occurs,” Sherman said. “We have a truss operation and a panel operation that I would anticipate that we would open in 2014.”

The company may buy under-performing operations that have the potential capacity to add BFS lines to their production. The price tag for most of the acquisitions, according to Sherman, would fall in the $20 million to $75 million range.

An additional factor accelerating the use of manufactured components such as truss and wall panels is a shortage of skilled labor, particular framers, on jobsites. “The use of prefab trusses and panels reduces skill levels required on the job site to build a house,” Sherman said.

BFS ranked seventh on the 2013 ProSales 100 with $1.07 billion sales to pros.