
Builders FirstSource (BFS) touted its third-quarter results released today as evidence that its swallowing of ProBuild to create the nation's biggest full-service, pro-oriented lumberyard is en route to achieving the results promised.
The Dallas-based dealer said sales totaled $1.75 billion in the July-to-September period. That's 3.1% higher than the combined results for BFS and ProBuild during 2015's third quarter. The two merged on July 31, 2015, so direct year-over-year comparisons aren't possible. Again on this pro forma basis, net income more than doubled to $64.8 million. That growth was helped in a big way by a $131.5 million income tax benefit recorded in 2016's third quarter. BFS also credited operating synergies, the benefit of debt refinancings on interest payments, and increased depreciation and amortizations.
Gross margin percentage on a pro forma basis slipped to 25.0% from 25.9%. BFS attributed that to a combination of commodity price deflation benefits in 2015 and commodity price inflation in 2016. Normally those two trends would point to gross margin increases, BFS said, but in its case a combination of "short-term pricing commitments we provide customers versus the volatility of the commodity markets" ganged up to hurt it.

"Integration efforts continue to progress as expected, creating approximately $20 million in savings in the quarter and almost $60 million year to date, before one time cost to implement," CEO Floyd Sherman said in a news release. He added later: "We are confident in our cost savings actions that are on target to achieve $100 million to $120 million of annual cost savings before one-time integration expenses. I am also pleased with the progress we are making on de-levering our capital structure and reducing our interest expense."
Measured on a GAAP basis, which for 2015 excludes the July results from ProBuild facilities, the company recorded net income of $125.5 million--of which $117.6 million came from the tax benefit--compared with a net loss of $8.7 million a year earlier. Net sales on a GAAP basis jumped 37% to $1.7 billion. Operating income climbed to $86.3 million from $38.2 million.

BFS prefers to measure itself in terms of adjusted EBITDA--earnings before interest, taxes, depreciation, amortization, integration-related expenses, debt issuance and refinancing costs, tax valuation allowances, stock compensation expenses, the gains/and facility closure costs. By that measure, and assuming all of ProBuild's revenues and costs for 2Q15, BFS' adjusted EBITDA increased only marginally, to $118.3 million in this year's third quarter vs. a year-earlier $116 million.