An "unprecedented" increase in commodity prices swamped the modest sales gains that Builders FirstSource (BFS) recorded during the first quarter and led to a net loss of $31.4 million during the period, slightly deeper than the $30.6 million net loss in 2009's first quarter, BFS reported late today.
Sales rose 1.1% to $161.4 million in the first quarter, primarily because of commodity inflation, Dallas-based BFS said. But the cost of sales jumped 4.7% from the year-earlier period to $131.9 million. That pushed the gross margin down by $4 million
"We experienced a 48.1% increase in commodity prices quarter-over-quarter," BFS CEO Floyd Sherman said in a news release. "While commodity prices were up dramatically, fixed pricing agreements with our customers, which range from 30, 60 and 90 days, prevented us from passing along a substantial portion of these increases to our customers. As a result of this unprecedented run-up in commodity prices during the quarter, combined with fixed pricing agreements with our customers, our gross margin fell to 18.2%, down from 21.0% in the first quarter of 2009.
"This run-up in commodity pricing has continued into April, but we believe our current inventory levels should help mitigate some of the pricing pressure in the second quarter," Sherman continued. "While higher commodity prices are good for the long-term health of our company, rapid increases which we are currently experiencing places added pressure on gross margins."
The company's loss from continuing operations deepened to $31.2 million from $28.6 million a year before. Selling, general, and administrative expenses dropped 5% to $49.4 million. Those costs as a percentage of sales fell to 30.6% from 32.6% in the first quarter of 2009.
BFS--the No. 8 company on last year's ProSales 100--prefers to measure its financial strength through Adjusted EBITDA. It does that by taking EBITDA (earnings before interest, taxes, depreciation, and amortization) and then also removes a variety of non-cash or non-recurring charges, including asset impairments, facility closure costs, severance, recapitalization costs, and stock compensation expenses. By that measure, the company's Adjusted EBITDA loss deepened to $15.3 million from a year-earlier $12.5 million.
Accounts receivable days decreased to 36.1 for the current quarter from 42.1 days last year, reported Chad Crow, BFS' senior vice president and chief financial officer. Inventory turns improved to 9.1 from 7.7. The operating cash flow was a negative $26.9 million, but Crow noted that the company received a $33.8 million income tax refund in April.
Lumber and lumber sheet goods accounted for $44.4 million of the first quarter's sales, or 27.5% of total revenue. Sales of windows and doors brought in another $36.9 million, or 22.9% of total sales, while prefabricated components sales totaled $32 million (19.8% of total) and millwork added $17.8 million to company coffers (11% of total sales). Other building products and services accounted for $30.3 million in sales, or 18.8% of the total.
Sherman noted that housing starts in the first quarter may be improving, but the number of homes in the construction pipeline continues to decrease.
"Although housing starts have somewhat stabilized, we continue to experience intense pricing pressure from competition, and rapidly rising commodity prices will continue to present challenges in the second quarter," Sherman continued. "We also do not yet know the future impact on our sales, if any, that may result from the upcoming expiration of the federal tax credit for first-time homebuyers. However, while industry conditions remain difficult, our improved liquidity position, coupled with our $33.8 million federal income tax refund received in April, currently has us well positioned to take advantage of a housing recovery."
