Specialty dealer Foundation Building Materials (FBM) reported healthy growth in net sales and net income in the first quarter of 2020, however the impact of coronavirus (COVID-19) has begun to have a negative effect on the business in the second quarter. According to the dealer’s quarterly earnings report, net sales for the three-month period ending on March 31 increased $9.4 million on a year-over-year (YOY) basis to $524.3 million. Net income from continuing operations in the same period increased $9.5 million YOY to $14.4 million.
FBM’s average daily net sales in the first quarter of 2020 increased 0.2% YOY. This quarter included an additional business day compared to the 2019 first quarter. Net sales from base business branches decreased $1.5 million compared to the first quarter of 2019, while net sales from acquired branches and existing branches that were strategically combined contributed $10.9 million of FBM’s net sales increase. The base business net sales decrease was driven by the impacts and disruptions caused by COVID-19, according to FBM.
Tustin, Calif.-based FBM reported gross profit in the first quarter increased 6.0% YOY to $162.2 million. The gross profit increase was driven by an expansion of the company’s gross margin and an increase in sales from acquisitions. The dealer’s first quarter gross margin increased 120 basis points YOY to 30.9%. Improved profitability across wallboard, metal framing, and complementary and other product lines drove the improved first quarter gross margin.
The dealer recorded a first quarter adjusted EBITDA of $40.3 million, a 7.5% increase YOY. The company’s adjusted EBITDA margin grew 40 basis points YOY to 7.7%.
“While our first quarter results reflect the resiliency of our employees and operations, we have implemented a number of strategic actions and cost-saving initiatives in response to the current market environment,” president and CEO Ruben Mendoza said in a news release. “Our company continues to operate the vast majority of its branches in the United States and Canada utilizing safety precautions based on recommendations from federal, state, and local authorities, and we believe the company is well-positioned to successfully navigate this challenging time.”
Despite positive growth through the fiscal first quarter, FBM said COVID-19 has had a negative impact on most of its local markets through April 2020, with many markets posting low single-digit daily sales decreases compared to April 2019. In states where stronger restrictions are in place, including Washington, California, Michigan, New Jersey, and Pennsylvania, FBM has experienced more significant YOY headwinds. As a result of COVID-19 effects, April net sales are down approximately 20% YOY. FBM anticipates future financial performance will be adversely affected due to the ongoing impacts of the pandemic.
FBM recently drew down $120 million under its revolving credit facility to increase its cash on hand during the COVID-19 pandemic. The dealer also announced it was delaying or reducing capital expenditures not anticipated to impact near-term business, reducing salaries for exempt employees, and reducing independent board member compensation.
FBM operates more than 175 branches across the United States and Canada. The company distributes wallboard, suspended ceiling systems, metal framing, and complementary products.
