Thanks in particular to $21.1 million in new tax benefits, Builders FirstSource (BFS) swung to a $6.6 million net profit in the fourth quarter despite racking up a $19.5 million operating loss during that period, the company said in an SEC filing today. For the year, America's eighth-biggest LBM operation recorded a net loss of $61.8 million, down sharply from 2008's loss of $139.5 million.
The $6.6 million net profit for October through December 2009 was a marked improvement from the $48.2 million net loss in the year-earlier period. It occurred even though sales sank 20.2% to $154 million and the gross margin slipped to 19.7% from a year-earlier 21.5%. Its operating loss of $19.5 million did mark a big improvement from its year-earlier $58.7 million loss.
Dallas-based BFS was able to book $33.2 million in income tax benefits, up from $17.3 million in the final three months of 2008. Of that $33.2 million, BFS says $21.1 million was due to a change in income tax rules affecting the Net Operating Loss carryback provision. Put simply, the provision used to enable a company to apply losses from the current year against profits from the previous two years. But under a change that Congress enacted late in 2009, the carryback was extended to five years, back to the middle of the last decade. For many companies in the building material business, that was quite a profitable time.
The 20.2% drop in sales would have been two points worse had it not been for increases in commodity prices, BFS said. It attributed the sales drop primarily to a decline in new home-building activity in the South, where the company operates. Single-family starts in the region increased 9.3% but units under construction fell by more than 28%, and BFS doesn't make money until the actual construction work begins, it noted.
Selling, general and administrative (SG&A) expenses decreased $13.4 million, or 21.2% as the number of full-time equivalent employees shrank 25.4% from the fourth quarter 2008 average to reach 2,800.
For the year, BFS recorded a net loss of $61.8 million, less than half its $139.5 million net loss in 2008.Sales in 2009 declined nearly 32% to $677.9 million from $992 million, while gross margin slipped to 21.0% from 21.7%.On the other hand, SG&A decreased 28.1% to $78.6 million.
Since the fourth quarter ended, BFS completed a rights offering and debt exchange that cut long-term debt by $130 million and added $65 million in net proceeds, BFS said.
"The successful closing of our rights offering and debt exchange in early 2010 allowed us to reduce our outstanding debt by $130 million and extend the maturity of most of our remaining debt until 2016," BFS CEO Floyd Sherman said in a statment. "These transactions, along with an income tax refund of$32 million to $34 million that we expect to receive in the second quarter of 2010, will certainly improve our liquidity position and provide us with a substantial amount of additional cash to help fund our operations during this difficult housing environment, and potentially take advantage of acquisition opportunities."
Sherman continued: "Although these challenging industry conditions persist, we believe that continued execution of our action plan to generate new business, conserve liquidity, contain costs, and prudently manage credit will help us to be a stronger, more efficient company when the housing market begins its recovery."
BFS ranked eighth on last year's ProSales 100. At the end of 2008 it had 115 locations. In its SEC filing today, the company reported 106 facilities, 55 of them in distribution and another 51 in manufacturing.
When measured by type of product sold, BFS' sales declines were proportionally consistent. Sales of prefabricated components dropped to $29.2 million from $36.2 million, window and door sales declined to $36.3 million from $49.3 million, sales of lumber and lumber sheet goods fell to $39.6 million from $43.5 million, millwork sales edged down to $16.9 million from $19.4 million, and sales of other building products and services fell to $31.9 million from $44.5 million.