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Builders FirstSource Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: April 29, 2010 10:16PM
Builders FirstSource Inc. (BLDR) filed Quarterly Report for the period ended 2010-03-31. Builders Firstsource Inc. has a market cap of $373.3 million; its shares were traded at around $3.86 with and P/S ratio of 0.6.BLDR is in the portfolios of Arnold Schneider of Schneider Capital Management, Arnold Schneider of Schneider Capital Management, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Sales. Sales for the three months ended March 31, 2010 were $161.4 million, a 1.1% increase from sales of $159.6 million for the three months ended March 31, 2009. In the three months ended March 31, 2010, housing starts increased approximately 46% from the same quarter a year ago, however units under construction declined by 16.8% over this same time period. Market prices for lumber and lumber sheet goods were on average 48.1% higher in the quarter compared to the same period a year ago. Consistent with the trend in housing starts, commodity and manufactured products increased sales by $8.5 million, or 12.5%, quarter over quarter primarily due to an increase in volume and to a lesser degree price inflation. This increase was partially offset by a decline in sales of other building products and services of approximately $5.0 million as a result of a reduction in install services and multi-family construction.
benefits expense, excluding severance and stock compensation expense, decreased $0.2 million compared to a 1.1% increase in sales. Additionally, our office general and administrative expense decreased $0.7 million, or 12.5%, occupancy expenses decreased $0.6 million, or 11.4%, and our bad debt expense decreased $0.7 million. As an offset to these declines, our delivery expenses increased $0.2 million due to higher fuel costs.
Interest Expense, net. Interest expense was $11.3 million in the first quarter of 2010, an increase of $3.8 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 during the quarter, and $2.5 million of costs related to our recapitalization transaction. Interest expense also increased by $0.8 million due to fair value adjustments on our interest rate swaps. These increases were partially offset by $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 from $350 million to $250 million.
Income Tax (Benefit) Expense. We recognized an income tax benefit of $0.1 million during the quarter compared to income tax expense of $2.1 million for the same period a year ago. We recorded an after-tax, non-cash valuation allowance of $11.6 million and $12.2 million, in 2010 and 2009, respectively, related to our net deferred tax assets. Excluding the effect of the valuation allowance, our tax benefit rate would have been 37.6% and 38.0% in 2010 and 2009, respectively.
At March 31, 2010, we had $124.8 million of usable cash and $6.4 million of net borrowing base availability, which we believe is sufficient to meet our anticipated needs, including contractual obligations for the next twelve months. We do not expect working capital or our credit facility to be a significant source of funds for the next twelve months. Based upon current housing conditions, we expect to use $60-$70 million of cash over the next twelve months to fund cash operating losses, capital expenditures, and cash interest expense. This use of cash will be partially offset by our income tax refund of $33.8 million received in April 2010. Our projected cash use is subject to change, and will be influenced by actual housing activity over the next twelve months, commodity prices, as well as customer and supplier responses to our changing liquidity position. Additional cash could be used if we choose to pursue strategic acquisition opportunities that may become available. Since the housing downturn began, we have continued our focus on protecting our liquidity. Our action plan, which consists of generating new business, reducing physical capacity, adjusting staffing levels, implementing cost containment programs, managing credit tightly, and most importantly, conserving cash has allowed us to limit the effects of the difficult industry conditions. We will continue to execute this strategy as long as these conditions persist.
Cash used in operating activities was $26.9 million and $3.2 million for the three months ended March 31, 2010 and March 31, 2009, respectively. This increase in cash used was primarily driven by an increase in working capital of $4.4 million during the quarter compared to a decrease in working capital of $18.7 million during the same period last year. The change in working capital is the result of improved sales in March, higher commodity prices, and increased inventory buys to cover fixed customer pricing arrangements.
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