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Builders FirstSource Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 28, 2011 04:00PM
Builders FirstSource Inc. (BLDR) filed Quarterly Report for the period ended 2011-03-31. Builders Firstsource Inc. has a market cap of $258.4 million; its shares were traded at around $2.67 with and P/S ratio of 0.4.
Highlight of Business Operations:
Our sales in the current quarter were up 0.9% over the same period a year ago despite the difficult housing environment and commodity prices for lumber and lumber sheet goods being, on average, comparable to the first quarter of 2010. We have continued to experience the same competitive pricing conditions that we have been faced with in recent years. However, our gross margin increased 1.1 percentage points during the quarter compared to the prior year due to a slight increase in sales volume along with a decrease of fixed costs in cost of goods sold. We have continued to manage our operating expenses during this downturn with our key focus being to conserve liquidity. During the quarter, our selling, general and administrative expenses decreased $2.7 million, or 5.5%, from the same period a year ago largely due to a reduction of our average full-time equivalent headcount of approximately 7.0%. The continued execution of our cost containment strategies along with our improved operating results contributed to us ending the quarter with $115.4 million of total liquidity, which includes $77.6 million of cash and $37.8 million of net borrowing availability under our credit facility.
Sales. Sales for the three months ended March 31, 2011 were $162.8 million, a 0.9% increase from sales of $161.4 million for the three months ended March 31, 2010. Market prices for lumber and lumber sheet goods in the quarter were, on average, comparable to the same period a year ago. However, actual U.S. single-family housing starts decreased approximately 21% compared to the first quarter of 2010. Despite the trend in housing starts, commodity sales increased by $3.7 million, or 8.4%, quarter over quarter primarily due to an increase in pricing and to a lesser degree volume. This increase was partially offset by a decline in sales of other building products and services of approximately $2.3 million.
Interest Expense, net. Interest expense was $5.9 million in the first quarter of 2011, a decrease of $5.4 million. Interest expense in the first quarter of 2010 included a write-off of $1.6 million of unamortized debt issuance costs related to long-term debt repaid during the quarter and $2.5 million of expense related to our rights offering and debt exchange. Interest expense also decreased $0.8 million from the first quarter of 2010 due to a reduction in fair value adjustments on our interest rate swaps.
Income Tax Benefit. We recorded no income tax benefit during the quarter compared to $0.1 million for the three months ended March 31, 2010. We recorded an after-tax, non-cash valuation allowance of $8.1 million and $11.6 million, in 2011 and 2010, respectively, related to our net deferred tax assets. Excluding the effect of the valuation allowance, our tax benefit rate would have been 38.4% and 37.6% in 2011 and 2010, respectively.
At March 31, 2011, our total liquidity of $115.4 million, which consisted of $77.6 million of cash on hand and $37.8 million of net borrowing base availability, was slightly better than anticipated. As a result, we still expect our cash usage for fiscal 2011 will be in the range of $55-$65 million and to end the year with total liquidity of approximately $65-$70 million. We believe our current liquidity is sufficient to meet our needs over the next twelve months. We do not expect working capital or our credit facility to be a significant source of funds during this time period.
During the three months ended March 31, 2011 and 2010, cash used in investing activities was $0.3 million and $1.7 million, respectively. The decrease was primarily due to a $1.3 million decrease in capital expenditures related to buyouts of expiring vehicle and equipment leases in the prior year.
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