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Builders FirstSource Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: May 4, 2012 10:25PM
Builders FirstSource Inc. (BLDR) filed Quarterly Report for the period ended 2012-03-31. Builders Firsts has a market cap of $378.5 million; its shares were traded at around $3.83 with and P/S ratio of 0.5.
Highlight of Business Operations:Targeting Large Production Homebuilders. Over the past ten years, the homebuilding industry has undergone consolidation, and the larger homebuilders have increased their market share. We expect that trend to continue due to the better liquidity and land positions of the larger homebuilders relative to the smaller, less capitalized homebuilders. Our focus is on maintaining relationships and market share with these customers while balancing the competitive pressures we are facing in our markets with certain profitability expectations. Our sales to the Builder 100, the countrys largest 100 homebuilders, increased 46.7% compared to the first quarter of 2011, while actual U.S. single-family housing starts increased 16.8% over that same time period. We expect that our ability to maintain strong relationships with the largest builders will be vital to our ability to grow and expand into new markets as well as maintain our current market share through the current downturn. Additionally, during this downturn, we have been successful in expanding our custom homebuilder base while maintaining acceptable credit standards.
Despite these difficult conditions, our sales for the first quarter of 2012 were up 34.7% over the same period last year. We believe our broad offering of building products and construction services represents a value proposition to our customers that is superior to that of our competitors. We believe this allowed us to increase our sales volume despite these difficult housing conditions, as we gained market share by expanding our customer base and promoting our wide array of products and services to existing and new customers. We were also able to increase our gross margin percentage by 1.3 percentage points during the first quarter of 2012 compared to the first quarter of 2011, largely due to increased sales volume and our ability to leverage fixed costs within cost of goods sold. We have continued to manage our operating expenses with a key focus on conserving liquidity. Our selling, general and administrative expenses, as a percentage of sales, decreased 5.5% in the quarter compared to the same period a year ago. We have made significant changes to our business during the downturn that have improved our operating efficiency and allowed us to better leverage our operating costs against changes in sales. The continued execution of our cost containment strategies along with our improved operating results contributed to us ending the quarter with $94.6 million of liquidity, which includes $129.6 million of cash reduced by the $35.0 million minimum cash requirement in our term loan.
Sales. Sales for the three months ended March 31, 2012 were $219.4 million, a 34.7% increase over sales of $162.8 million for the three months ended March 31, 2011. We achieved this increase in sales despite actual U.S. single-family housing starts increasing only 16.8% in the first quarter of 2012 as compared to the first quarter of 2011. The increase was primarily due to increased sales volume as commodity prices for lumber and lumber sheet goods in the quarter were, on average, comparable to the same period a year ago. The increased sales volume was achieved across all product categories, as we continued to expand our customer base while increasing our sales to existing customers.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $4.2 million, or 9.1%. Our salaries and benefits expense, excluding stock compensation expense, was $31.1 million, an increase of $4.5 million from the first quarter of 2011. Delivery expense increased $0.6 million as compared to the first quarter of 2011, primarily due to fuel costs related to higher prices and increased sales volume. Our office general and administrative expense decreased $0.7 million from the first quarter of 2011, primarily due to a reduction in professional service fees.
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