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Builders FirstSource Inc. Reports Operating Results (10-Q)

July 28, 2010 | About:
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10qk

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Builders FirstSource Inc. (BLDR) filed Quarterly Report for the period ended 2010-06-30.

Builders Firstsource Inc. has a market cap of $217.5 million; its shares were traded at around $2.25 with and P/S ratio of 0.4. BLDR is in the portfolios of Arnold Schneider of Schneider Capital Management, Michael Price of MFP Investors LLC, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $1.1 million, or 2.2%. As a percentage of total sales, however, these expenses decreased from 28.7% in 2009 to 24.3% in 2010. Our salaries and benefits expense, excluding stock compensation expense, was $29.8 million, or 14.1% of total sales, compared to $28.7 million, or 16.4% of total sales in the second quarter of 2009. Our office general and administrative expense increased $0.4 million quarter over quarter, but decreased as a percentage of total sales, down to 2.5% in 2010 from 2.8% in 2009. Occupancy expenses decreased $0.6 million, or 11.1%, and our bad debt expense decreased $0.6 million. Delivery expenses increased $0.5 million due to higher fuel costs and increased sales volume. 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 $0.3 million during the quarter compared to $0.1 million of expense in the second quarter of 2009. We recorded an after-tax, non-cash valuation allowance of $7.1 million and $6.6 million, in 2010 and 2009, respectively, related to our net deferred tax assets. Absent this valuation allowance, our tax benefit rate would have been 38.5% and 35.2% in 2010 and 2009, respectively.

Sales. Sales for the six months ended June 30, 2010 were $372.9 million, an 11.3% increase from sales of $335.1 million for the six months ended June 30, 2009. For the six months ended June 30, 2010, actual U.S. single-family housing starts increased approximately 27%, however, units under construction declined approximately 12% over the same time period. We increased our sales to the Builder 100 by 47.0% over the same period last year. Market prices for lumber and lumber sheet goods were on average 52.8% higher than the same period a year ago. Commodity and manufactured product sales increased by approximately $41 million, or 28.9%, year over year partly due to volume and partly due to price inflation. This increase was offset by a decline in sales of other building products and services of approximately $8.1 million for the six months ended June 30, 2010 compared to the same time period last year.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $1.5 million, or 1.5%. As a percentage of total sales, these expenses decreased from 30.6% in 2009 to 27.1% in 2010. Our salaries and benefits expense, excluding stock compensation expense, was $57.9 million, or 15.5% of total sales, compared to $57.2 million, or 17.1% of total sales in the first six months of 2009. Our office general and administrative expense decreased $0.3 million year over year, down to 2.8% of total sales in 2010 from 3.2% in 2009. Occupancy expenses decreased $1.2 million, or 11.2%, and our bad debt expense decreased $1.3 million. Delivery expenses increased $0.7 million due primarily to higher fuel costs and increased sales volume.

Interest Expense, Net. Interest expense was $17.9 million in 2010, an increase of $4.2 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. Interest expense also increased by $0.8 million due to fair value

Income Tax (Benefit) Expense. We recorded an income tax benefit of $0.5 million for the first six months of 2010 compared to $2.2 million of expense for 2009. We recorded an after-tax, non-cash valuation allowance of $18.7 million and $18.8 million, in 2010 and 2009, respectively, related to our net deferred tax assets. Absent this valuation allowance, our tax benefit rate would have been 37.9% and 36.9% in 2010 and 2009, respectively.

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