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Builders FirstSource Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 31, 2012 02:02PM

Builders FirstSource Inc. (BLDR) filed Quarterly Report for the period ended 2012-09-30. Builders Firstsource, Inc. has a market cap of $499.3 million; its shares were traded at around $5.4 with and P/S ratio of 0.6.



Highlight of Business Operations:

Our sales for the third quarter of 2012 were up 34.3% over the same period last year. We believe our broad offering of building products and construction services, as well as our exceptional customer service, 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 at a rate in excess of the increase in residential new construction activity during the current quarter, as we gained market share by expanding our customer base and promoting our wide array of products and services to existing and new customers. However, our gross margin percentage decreased by 0.7 percentage point during the third quarter of 2012 compared to the third quarter of 2011. Our gross margin percentage decreased 1.5 percentage points primarily due to commodity lumber inflation relative to customer pricing commitments; however, this was partially offset by a 0.8 percentage point gross margin improvement due to increased sales volume. 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 3.0% in the quarter compared to the same period a year ago. We have made significant changes to our business during the recent 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 $55.7 million of liquidity, consisting of $90.7 million of cash reduced by the $35.0 million minimum cash requirement in our term loan.

Sales. Sales for the three months ended September 30, 2012 were $291.8 million, a 34.3% increase from sales of $217.2 million for the three months ended September 30, 2011. Actual U.S. single-family housing starts increased 29.0% in the third quarter of 2012 as compared to the third quarter of 2011. In the South Region, actual single-family housing starts increased 27.7% during the third quarter of 2012 compared to the same quarter a year ago, however, the number of single-family units under construction increased only 12.4% over this same time period. We achieved increased sales volume across all product categories, as we continued to expand our customer base while increasing our sales to existing customers. We estimate that our sales volume increased approximately 27%, while commodity price inflation resulted in an additional 7% increase in sales during the current quarter compared to the same quarter a year ago. Commodity prices for lumber and lumber sheet goods were on average 32.0% higher in the current quarter compared to the same period a year ago. Prices have risen to levels not seen on a consistent basis since 2005 and 2006. This commodity price inflation has resulted in sales growth for lumber & lumber sheet goods and prefabricated components exceeding that of our other product categories.

Sales. Sales for the nine months ended September 30, 2012 were $783.1 million, a 33.5% increase from sales of $586.4 million for the nine months ended September 30, 2011. Actual U.S. single-family housing starts increased 23.5% in the first nine months of 2012 as compared to the first nine months of 2011. In the South Region, actual single-family housing starts increased 22.7% compared to a year ago, however, the number of single-family units under construction increased only 3.7% over this same time period. We achieved increased sales volume across all product categories, as we continued to expand our customer base while increasing our sales to existing customers. We estimate that our sales volume increased approximately 31%, while commodity price inflation resulted in an additional 3% increase in sales during the first nine months of 2012 compared to the same time period a year ago. Commodity prices for lumber and lumber sheet goods were on average 17.8% higher in the first nine months of 2012 compared to the first nine months of 2011. Prices have risen to levels not seen on a consistent basis since 2005 and 2006. This commodity price inflation has resulted in sales growth for lumber & lumber sheet goods and prefabricated components exceeding that of our other product categories.

Gross Margin. Gross margin increased $37.8 million to $156.5 million. Our gross margin percentage decreased from 20.2% in the first nine months of 2011 to 20.0% in the current period, a 0.2 percentage point decrease. Our gross margin percentage decreased 1.0 percentage points primarily due to commodity lumber price inflation in the second and third quarters of 2012 relative to quarterly customer pricing commitments, as higher than expected sales volume in the second and third quarters of 2012 resulted in us replacing inventory during these quarters at higher costs. However, the decrease was offset by a 0.8 percentage point gross margin improvement due to increased sales volume and our ability to leverage fixed costs in cost of goods sold.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $18.6 million, or 12.7%. Our salaries and benefits expense, excluding stock compensation expense, was $100.7 million, an increase of $17.4 million from the first nine months of 2011. This increase was primarily due to higher sales commissions and additional staffing needs to service the increased sales volume. Delivery expense increased $2.7 million as compared to the first nine months of 2011, primarily due to fuel costs related to higher prices and increased sales volume. Our office general and administrative expense decreased $0.5 million from the first nine months of 2011, primarily due to a reduction in professional service fees.

Read the The complete Report



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