Builders FirstSource (BFS), America's ninth-biggest pro-oriented building materials dealer, reported today its net loss improved to $15.5 million in the second quarter from $19 million in the year-earlier period despite a 2.4% drop in sales to $206.4 million.
The Dallas-based dealer prefers to view its results using adjusted EBITDA--net income before income taxes, depreciation, and amortization as well as before gains and losses on sale of assets, income or loss from discontinued operations, and other non-cash or non-recurring items, including asset impairments, facility closure costs, severance, recapitalization costs, expense acquisition costs, and stock compensation expense. By that metric, adjusted EBITDA shrank to a negative $1.3 million from a negative $7.6 million.
"We are very encouraged by our second-quarter results, as our near break-even adjusted EBITDA was our best operating performance since the third quarter of 2007," BFS chief executive officer Floyd Sherman said in the company's earnings announcement. He said BFS was "seeing positive trends in our results in spite of the difficult environment" for homebuilders. For instance, he expected the company to burn roughly $50 million in cash this year and end 2011 with liquidity of about $85 million rather than the $70 million it previously forecast.
In another sign of improvement, senior vice president and chief financial officer Chad Crow noted that the company's gross margin percentage climbed 2.4 points from 2010's second quarter to reach 20.7%."The primary drivers of our margin increase were improved pricing on sales of our manufactured products during the quarter, coupled with less volatility in the commodity markets," Crow said. "We also achieved further cost reductions for the quarter, as selling, general and administrative expenses decreased $2.5 million, or 4.8%, compared to the second quarter of 2010." Those expenses totaled $49 million in the second quarter, down from $51.4 million a year before. During the conference call discussing the results, Crow also said that the company needed to reach about $900 million in sales to break even, but that coming close, but not quite reaching, such a plateau would also work considering the conditions in the building industry.
During a conference call discussing the results, Sherman said during the first month of the current quarter, the company experienced its first month in the black after 45 straight in the red.
"It's still a brutal environment out there, but we are starting to make gains," Sherman said.
BFS racked up $1.9 million in facility closure costs, which it said stemmed primarily from the company's decision to pay off the remainder of the lease of a closed distribution facility in Georgia. That helped lead to an operating loss of $8 million, improving from 2010's $12.7 million, while the loss from continuing operations shrank to $15.4 million from $18.2 million.
Sales volume actually increased a bit in the second quarter, BFS reported, but commodity price deflation pushed sales down 2.8%, leaving overall sales 2.4% lower.
Sales of lumber and sheet goods accounted for 29.4% of BFS' total sales, or roughly $60.7 million, while sales of windows and doors contributed 22.6% of the total ($46.6 million), prefabricated components 19.5% ($40.2 million), millwork 10.4% ($21.6 million), and other building products and services the remaining 18.1% ($37.3 million).
BFS ranks ninth on the latest ProSales 100, with sales of $700 million. It has roughly 2,500 employees and nearly 100 facilities stretching from Texas to the Atlantic coast. It focuses on serving production builders.
