Building Materials Holding Corp. (BMHC), the No. 5 LBM dealer on the ProSales 100, announced today a net loss of $45.2 million in the third quarter on a 39% drop in sales to $364 million. That's a swing from the net income of $4.2 million reported in last year's third quarter, when sales totaled $594 million.
The latest results deepen BMHC's net loss for the first nine months of this year to $111 million on a 39% drop in sales to $1.1 billion from $1.8 billion.
BMHC in essence has two sections that, until earlier this year, were separate divisions. The building products section--known typically as BMC West--saw sales drop 31% during the quarter to $184.6 million and are down 28% for the year to $563.1 million. The construction services section--called SelectBuild until that division was eliminated--did even worse, posting a 45% drop in sales for the quarter to $179.9 million and a 47% decline for the year to $528.9 million. Combined, the two sections recorded an operating loss of $29 million for the quarter vs. $11 million in income for the third quarter of 2007. For the year to date, the operating loss now stands at $80 million compared with $45.6 million in operating income in January through September 2007.
Gross margins dropped to 17.3% of sales from 19.4%, the company said in a filing to the Securities and Exchange Commission. It added in that filing that costs for building products "increased due to changes in vendor terms and prices as a result of perceived credit and liquidity concerns." It added: "Margins for construction services continued to contract from increasingly competitive market conditions as a result of a sharp decline in available contracts."
"As the unprecedented volatility in the capital markets and the downturn in the homebuilding industry persisted, we remained focused on our goal of realigning our business to the current environment," Robert E. Mellor, BMHC's chairman and CEO, said in a statement. "We made significant progress on our restructuring program during the third quarter, executing on a wide range of operational and financial actions designed to address the impact of the homebuilding industry downturn. Importantly, we successfully negotiated an amendment to our $540 million secured credit facility.
"Year-to-date, we have reduced selling, general and administrative expenses by $51.2 million, or 16%," Mellor said. "We continued to enhance our liquidity during the quarter through the wind-down of certain operations and the sale of underperforming business units and excess assets. We remain on track for these and other restructuring initiatives."
Mellor said in a call to analysts that BMHC has cut its workforce 57% from its peak (and 37% from the third quarter of 2007) to the point where there now are fewer than 11,000 employees. He said the company's concrete operation in Northern California is being wound down, while negotiations have begun to sell concrete operations in Southern California. During the third quarter, BMHC:
- Closed and relocated millwork operations in Reno, Nev., and buiding and truss operations in Minden, Nev., to an existing facility in Sparks, Nev.;
- Relocated and consolidated millwork operations in Boise, Idaho, to an existing distribution and truss facility in Boise
- Closed and relocated millwork operations in Salt Lake City to an existing facility in Orem, Utah.
In addition, a lumber reload center in Southern California is being closed, building distribution operations in Kent, Wash., will be moved to an existing facility in the Puget Sound area, and a panel center in Fort Collins, Colo., is being moved to a facility in Greeley, Colo. Earlier this year, BMHC quit the New Jersey market, gave up its Florida concrete block masonry, concrete services and truss manufacturing business, and closed its Virginia-base framing services. By year's end, it expects to have closed 34 units and consolidated 12 others.
"We're doing everything we can to cut our costs and make ourselves as valuable to customers as possible," Stan Wilson, BMHC's president and COO, told analysts. He said the company doesn't plan to exit any more markets. In addition, he said the company's operations--particularly the former SelectBuild part of BMHC--is hard at work "moving to a sales operation from an order-taking operation."
BMHC primarily serves big builders in the Western and Southern United States. It distributes building products, manufactures building components (millwork, floor and roof trusses and wall panels) and provide construction services to professional builders. It has 35 distribution facilities, 53 manufacturing facilities and five regional construction services facilities.