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Builders FirstSource Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 28, 2010 03:34PM

Builders FirstSource Inc. (BLDR) filed Quarterly Report for the period ended 2010-09-30. Builders Firstsource Inc. has a market cap of $201.9 million; its shares were traded at around $2.06 with and P/S ratio of 0.3.

BLDR is in the portfolios of Arnold Schneider of Schneider Capital Management, Michael Price of MFP Investors LLC, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $1.7 million, or 3.4%. Included as a reduction to these expenses is a $1.2 million litigation settlement we received in the current quarter. As a percentage of total sales, however, these expenses, excluding stock-based compensation expense and the litigation settlement, increased from 25.8% in 2009 to 26.4% in 2010. Our salaries and benefits expense, excluding stock compensation expense, was $28.5 million, or 15.8% of total sales, compared to $28.4 million, or 15.0% of total sales in the third quarter of 2009. Our office general and administrative expense, excluding the litigation settlement, decreased $0.5 million quarter over quarter and as a percentage of total sales, down to 2.7% in 2010 from 2.9% in 2009. Occupancy expenses decreased $0.1 million, or 2.6%, while bad debt expense increased $0.3 million from last year. Delivery expenses decreased $0.8 million due to lower equipment lease expense. We continue to monitor our operating cost structure closely and make adjustments as necessary.

Income Tax (Benefit) Expense. We recorded an income tax benefit of $0.5 million during the quarter compared to $0.1 million of expense in the third quarter of 2009. We recorded an after-tax, non-cash valuation allowance of $7.2 million and $6.2 million, in 2010 and 2009, respectively, related to our net deferred tax assets. Absent this valuation allowance, our tax benefit rate would have been 38.4% and 38.5% in 2010 and 2009, respectively.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $3.2 million, or 2.1%. Included as a reduction to these expenses is a $1.2 million litigation settlement we received in the current quarter. As a percentage of total sales these expenses, excluding stock-based compensation expense and the litigation settlement, decreased from 28.5% in 2009 to 26.5% in 2010. Our salaries and benefits expense, excluding stock compensation expense, was $86.4 million, or 15.6% of total sales, compared to $85.5 million, or 16.3% of total sales in the first nine months of 2009. Our office general and administrative expense, excluding the litigation settlement, decreased $0.7 million year over year, down to 2.7% of total sales in 2010 from 3.0% in 2009. Occupancy expenses decreased $1.3 million, or 8.5%, and our bad debt expense decreased $1.0 million. Delivery expenses were consistent with last year.

Asset Impairments. Asset impairments was $0.8 million for the nine months ended September 30, 2010. The continued downturn in the macroeconomic factors that drive our business and the unfavorable economic conditions that exist caused us to revise our expectations and assess the recoverability of our long-lived assets in certain markets during the third quarter of 2010. Based upon the results of our assessments, we determined that the carrying amounts of certain assets exceeded their estimated fair values and recorded approximately $0.7 million of asset impairment charges. The remaining $0.1 million of the asset impairment charges related to land we have held for sale. We also recorded an $0.5 million asset impairment charge related to land we have held for sale during the nine months ended September 30, 2009.

Interest Expense, Net. Interest expense was $24.8 million in 2010, an increase of $5.2 million. The increase was primarily due to the write-off of $1.6 million of unamortized debt issuance costs related to long-term debt repaid and $2.5 million of costs incurred related to our recapitalization transaction in the first quarter of 2010. The remaining difference was due to higher interest rates during the current year and partially offset by lower average debt balances and $1.2 million of debt issuance cost write-offs in the first quarter of 2009 related to the capacity reduction of our revolving credit facility.

Income Tax (Benefit) Expense. We recorded an income tax benefit of $1.0 million for the first nine months of 2010 compared to $2.4 million of expense for 2009. We recorded an after-tax, non-cash valuation allowance of $25.9 million and $25.0 million, in 2010 and 2009, respectively, related to our net deferred tax assets. Absent this valuation allowance, our tax benefit rate would have been 38.1% and 37.3% in 2010 and 2009, respectively.

Read the The complete Report



Stocks Discussed: BLDR,
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