Building Materials Holding Corp. announced today, May 12, that it will merge its BMC West and SelectBuild units in an attempt to streamline services that it estimates will save $20 million to $25 million annually. The San Francisco-based company–the fifth-biggest on the 2008 ProSales 100–also reported its loss deepened to $33.9 million in the first quarter vs. $5 million in the same period a year ago, while first-quarter sales sank 37% to $355 million from a year-earlier $559 million.

"BMC West and SelectBuild have traditionally maintained their independence not only in terms of branding, but also with regard to strategy, purchasing, administration and leadership," president and chief operating officer Stanley M. Wilson said. "While maintaining the unique brand identities of BMC West and SelectBuild, we intend to flatten our management structure and reduce our operational organization from 13 regions into seven regions. We expect to take advantage of the new synergies created by this realignment, while also working to grow the bottom line by leveraging our purchasing power to improve margins and by streamlining our back-office support functions to reduce expenses."

BMHC chairman and CEO Robert E. Mellor said the merger of BMC West and SelectBuild were part of an effort "to right-size the organization to reflect today's homebuilding market." BMC West is the company's distribution and component-manufacturing arm, while SelectBuild provides construction services to high-volume production homebuilders.

The new regions and their previous components are:

  • Intermountain (Colorado, Idaho, Montana, Utah)
  • Midwest (Illinois)
  • Northwest (Oregon, Washington)
  • Pacific (California, Northern Nevada)
  • Southeast (Florida)
  • Southwest (Arizona, Southern Nevada)
  • Texas

Some business units will be closed, BMHC said. It didn't identify them, but said they collectively represent approximately $120 million of 2007 sales, $19 million of expenses, $12 million of 2007's operating loss and about 700 employees. In addition, another group of business units–also unidentified–may be consolidated. In 2007, these units had sales of approximately $435 million, expensed of $36 million, operating income of $11 million, and they currently have approximately 1,300 employees. The BMHC statement said SelectBuild's accounting, accounts payable, purchasing, payroll and information technology support will be absorbed into the existing corporate support operations. It didn't say the same for BMC West's back-office units.

"BMHC expects to realize improved operating margins through utilization of distribution and cross-selling synergies between BMC West and SelectBuild, as well as from its consolidated administrative functions and unified purchasing power," the company's announcement said.

As for the first-quarter results, Mellor said that even while "very difficult market conditions" hurt business, "once again the distribution side of our business gained market share with sales declining less than single-family permits in its regions while sustaining gross margins."

BMHC also noted that its employee count–which it reported to the ProSales 100 as 14,000 as of the end of 2007–dropped another 20% during the quarter.

BMC West sales decreased 24% to $211 million from $279 million in the same quarter of 2007, while operating income shrank 83% to $1.8 million from $10.7 million. SelectBuild's sales shrank 49% to $144 million from $281 million, while the loss on operations in the first quarter widened to $17.3 million from $2.8 million in the year-earlier period.