Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Builders FirstSource Inc., solvency ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
A consistent and significant improvement in the solvency and financial risk profile is evident between 2018 and 2022. The organization has undergone a substantial deleveraging process, characterized by a steady reduction in debt relative to equity, capital, and total assets.
- Leverage and Capital Structure
- A sharp decline in leverage is observed across all primary metrics. The debt to equity ratio decreased from 2.62 in 2018 to 0.60 in 2022, while the ratio including operating lease liabilities fell from 2.62 to 0.70. This trend is mirrored in the debt to capital ratio, which declined from 0.72 to 0.38. Furthermore, financial leverage experienced a marked reduction, falling from 4.92 to 2.14, indicating a systemic shift away from debt-funded growth toward a more equity-centric capital structure.
- Asset Solvency
- The debt to assets ratio moved from 0.53 in 2018 to 0.28 in 2022. When incorporating operating lease liabilities, the ratio decreased from 0.53 to 0.33. This indicates that a smaller proportion of the total asset base is financed through debt, thereby reducing the overall financial risk and increasing the cushion available to creditors.
- Debt Service Capacity
- There is a notable surge in the ability to service obligations, particularly beginning in 2021. The interest coverage ratio increased from 3.41 in 2018 to 19.01 in 2022, with the most significant jump occurring between 2020 and 2021. Similarly, the fixed charge coverage ratio rose from 2.36 to 11.41 over the five-year period. This suggests a substantial increase in operating earnings relative to fixed financial costs.
The convergence of declining leverage ratios and exponentially increasing coverage ratios indicates a strengthened solvency position. The transition from high debt-to-equity levels to a more conservative balance sheet, paired with a heightened capacity to meet fixed charges, reflects a significant reduction in long-term financial vulnerability.
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Debt to Equity
Builders FirstSource Inc., debt to equity calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current maturities of long-term debt | 6,355) | 3,660) | 27,335) | 13,875) | 15,565) | |
| Long-term debt, net of current maturities, discounts and issuance costs | 2,977,842) | 2,926,122) | 1,596,905) | 1,277,398) | 1,545,729) | |
| Total debt | 2,984,197) | 2,929,782) | 1,624,240) | 1,291,273) | 1,561,294) | |
| Stockholders’ equity | 4,962,566) | 4,802,481) | 1,152,783) | 824,953) | 596,338) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.60 | 0.61 | 1.41 | 1.57 | 2.62 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.33 | 2.29 | — | — | — | |
| Eaton Corp. plc | 0.51 | 0.52 | — | — | — | |
| GE Aerospace | 0.89 | 0.87 | — | — | — | |
| Honeywell International Inc. | 1.17 | 1.06 | — | — | — | |
| Lockheed Martin Corp. | 1.68 | 1.07 | — | — | — | |
| RTX Corp. | 0.44 | 0.43 | — | — | — | |
| Debt to Equity, Sector | ||||||
| Capital Goods | 1.33 | 1.26 | — | — | — | |
| Debt to Equity, Industry | ||||||
| Industrials | 1.42 | 1.37 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity
= 2,984,197 ÷ 4,962,566 = 0.60
2 Click competitor name to see calculations.
The solvency profile of the organization demonstrates a significant strengthening of the balance sheet over the five-year period from 2018 to 2022. This improvement is characterized by a substantial increase in stockholders' equity that far outpaced the growth of total debt, resulting in a marked reduction in financial leverage and a strengthened capital structure.
- Total Debt Trends
- Total debt exhibited volatility in the early period, with a decrease in 2019 followed by a steady increase. A significant escalation occurred between 2020 and 2021, where debt rose from approximately 1.62 billion to 2.93 billion, remaining relatively stable through 2022 at 2.98 billion.
- Stockholders' Equity Growth
- Equity experienced consistent and aggressive growth throughout the analyzed timeframe. A critical inflection point occurred in 2021, during which equity expanded from 1.15 billion to 4.80 billion, eventually reaching 4.96 billion by the end of 2022. This represents an approximately eight-fold increase in equity since 2018.
- Debt to Equity Ratio Analysis
- The debt to equity ratio shows a continuous downward trajectory, declining from 2.62 in 2018 to 0.60 in 2022. The most dramatic reduction took place between 2020 and 2021, where the ratio dropped from 1.41 to 0.61. This trend indicates a fundamental shift toward a more equity-funded capital structure, significantly lowering the organization's solvency risk and its reliance on external debt.
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Debt to Equity (including Operating Lease Liability)
Builders FirstSource Inc., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current maturities of long-term debt | 6,355) | 3,660) | 27,335) | 13,875) | 15,565) | |
| Long-term debt, net of current maturities, discounts and issuance costs | 2,977,842) | 2,926,122) | 1,596,905) | 1,277,398) | 1,545,729) | |
| Total debt | 2,984,197) | 2,929,782) | 1,624,240) | 1,291,273) | 1,561,294) | |
| Current portion of operating lease liabilities | 100,758) | 96,680) | 61,625) | 61,653) | —) | |
| Noncurrent portion of operating lease liabilities | 404,463) | 375,289) | 219,239) | 236,948) | —) | |
| Total debt (including operating lease liability) | 3,489,418) | 3,401,751) | 1,905,104) | 1,589,874) | 1,561,294) | |
| Stockholders’ equity | 4,962,566) | 4,802,481) | 1,152,783) | 824,953) | 596,338) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.70 | 0.71 | 1.65 | 1.93 | 2.62 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.37 | 2.33 | — | — | — | |
| Eaton Corp. plc | 0.54 | 0.55 | — | — | — | |
| GE Aerospace | 0.96 | 0.94 | — | — | — | |
| Honeywell International Inc. | 1.23 | 1.11 | — | — | — | |
| Lockheed Martin Corp. | 1.81 | 1.19 | — | — | — | |
| RTX Corp. | 0.47 | 0.46 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 1.39 | 1.32 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Industrials | 1.59 | 1.54 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Stockholders’ equity
= 3,489,418 ÷ 4,962,566 = 0.70
2 Click competitor name to see calculations.
The financial solvency profile exhibits a significant improvement over the five-year period from 2018 to 2022. Although total debt increased in absolute terms, the growth of stockholders' equity was substantially more aggressive, resulting in a marked reduction in financial leverage and a strengthened balance sheet.
- Total Debt Evolution
- Total debt, inclusive of operating lease liabilities, rose from US$ 1,561,294 thousand in 2018 to US$ 3,489,418 thousand by the end of 2022. A period of rapid expansion is observed between 2020 and 2021, during which total debt increased by approximately 78%, moving from US$ 1,905,104 thousand to US$ 3,401,751 thousand.
- Stockholders' Equity Growth
- Stockholders' equity demonstrated exponential growth, increasing from US$ 596,338 thousand in 2018 to US$ 4,962,566 thousand in 2022. The most critical surge occurred in 2021, where equity grew from US$ 1,152,783 thousand to US$ 4,802,481 thousand, suggesting a major capital infusion or a significant increase in retained earnings.
- Debt to Equity Ratio Interpretation
- The debt-to-equity ratio shows a consistent downward trajectory, decreasing from 2.62 in 2018 to 0.70 in 2022. The entity transitioned from a highly leveraged position, where debt was more than double the equity in 2018, to a more conservative capital structure where equity exceeds debt. The most dramatic shift occurred between 2020 and 2021, where the ratio fell from 1.65 to 0.71, indicating a rapid deleveraging relative to the equity base.
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Debt to Capital
Builders FirstSource Inc., debt to capital calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current maturities of long-term debt | 6,355) | 3,660) | 27,335) | 13,875) | 15,565) | |
| Long-term debt, net of current maturities, discounts and issuance costs | 2,977,842) | 2,926,122) | 1,596,905) | 1,277,398) | 1,545,729) | |
| Total debt | 2,984,197) | 2,929,782) | 1,624,240) | 1,291,273) | 1,561,294) | |
| Stockholders’ equity | 4,962,566) | 4,802,481) | 1,152,783) | 824,953) | 596,338) | |
| Total capital | 7,946,763) | 7,732,263) | 2,777,023) | 2,116,226) | 2,157,632) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.38 | 0.38 | 0.58 | 0.61 | 0.72 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Boeing Co. | 1.39 | 1.35 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | |
| Eaton Corp. plc | 0.34 | 0.34 | — | — | — | |
| GE Aerospace | 0.47 | 0.47 | — | — | — | |
| Honeywell International Inc. | 0.54 | 0.51 | — | — | — | |
| Lockheed Martin Corp. | 0.63 | 0.52 | — | — | — | |
| RTX Corp. | 0.31 | 0.30 | — | — | — | |
| Debt to Capital, Sector | ||||||
| Capital Goods | 0.57 | 0.56 | — | — | — | |
| Debt to Capital, Industry | ||||||
| Industrials | 0.59 | 0.58 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 2,984,197 ÷ 7,946,763 = 0.38
2 Click competitor name to see calculations.
The solvency profile from December 31, 2018, through December 31, 2022, demonstrates a significant improvement in financial leverage. Despite an overall increase in absolute debt levels during the latter half of the period, the expansion of total capital occurred at a substantially higher rate, resulting in a marked reduction in the company's reliance on borrowed funds relative to its total capital base.
- Debt to Capital Ratio Trend
- A consistent downward trend in the debt to capital ratio is observed, falling from 0.72 in 2018 to 0.38 in 2022. This represents a decrease of 34 percentage points over five years, indicating a shift toward a more conservative capital structure and an enhanced solvency position.
- Total Capital Expansion
- Total capital experienced modest changes between 2018 and 2020, but underwent a massive surge between December 31, 2020, and December 31, 2021, increasing from 2,777,023 thousand to 7,732,263 thousand. This rapid growth in the capital base acted as the primary driver for the compression of the debt to capital ratio.
- Total Debt Dynamics
- Total debt exhibited volatility in the early period, decreasing in 2019 before rising in 2020. A substantial increase in borrowing occurred between 2020 and 2021, where debt rose from 1,624,240 thousand to 2,929,782 thousand. However, since the growth in total capital far exceeded the growth in debt, the net effect on solvency remained positive.
The stabilization of the debt to capital ratio at 0.38 between 2021 and 2022 suggests that the capital structure reached a new equilibrium. The overall trajectory indicates a strategic strengthening of the balance sheet, significantly reducing the proportion of debt within the total capital mix.
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Debt to Capital (including Operating Lease Liability)
Builders FirstSource Inc., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current maturities of long-term debt | 6,355) | 3,660) | 27,335) | 13,875) | 15,565) | |
| Long-term debt, net of current maturities, discounts and issuance costs | 2,977,842) | 2,926,122) | 1,596,905) | 1,277,398) | 1,545,729) | |
| Total debt | 2,984,197) | 2,929,782) | 1,624,240) | 1,291,273) | 1,561,294) | |
| Current portion of operating lease liabilities | 100,758) | 96,680) | 61,625) | 61,653) | —) | |
| Noncurrent portion of operating lease liabilities | 404,463) | 375,289) | 219,239) | 236,948) | —) | |
| Total debt (including operating lease liability) | 3,489,418) | 3,401,751) | 1,905,104) | 1,589,874) | 1,561,294) | |
| Stockholders’ equity | 4,962,566) | 4,802,481) | 1,152,783) | 824,953) | 596,338) | |
| Total capital (including operating lease liability) | 8,451,984) | 8,204,232) | 3,057,887) | 2,414,827) | 2,157,632) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.41 | 0.41 | 0.62 | 0.66 | 0.72 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 1.37 | 1.34 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | |
| Eaton Corp. plc | 0.35 | 0.36 | — | — | — | |
| GE Aerospace | 0.49 | 0.49 | — | — | — | |
| Honeywell International Inc. | 0.55 | 0.53 | — | — | — | |
| Lockheed Martin Corp. | 0.64 | 0.54 | — | — | — | |
| RTX Corp. | 0.32 | 0.31 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.58 | 0.57 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.61 | 0.61 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 3,489,418 ÷ 8,451,984 = 0.41
2 Click competitor name to see calculations.
An analysis of the solvency position reveals a consistent downward trend in the debt-to-capital ratio from 2018 through 2021, followed by a period of stability in 2022. The transition from a ratio of 0.72 to 0.41 indicates a significant reduction in the reliance on debt relative to the total capital base over the five-year period.
- Debt Accumulation Trends
- Total debt, including operating lease liabilities, grew moderately between 2018 and 2020, rising from 1.56 billion to 1.91 billion. A substantial increase occurred in 2021, where debt levels jumped to 3.40 billion, ending the period at 3.49 billion in 2022.
- Capital Base Expansion
- Total capital experienced a more aggressive growth trajectory than total debt. While capital increased steadily from 2.16 billion in 2018 to 3.06 billion in 2020, a massive expansion occurred in 2021, with total capital increasing to 8.20 billion. This rapid expansion of the capital base was the primary driver behind the overall reduction of the debt-to-capital ratio.
- Solvency Ratio Performance
- The debt-to-capital ratio declined steadily from 0.72 in 2018 to 0.62 in 2020. The most significant improvement took place in 2021, when the ratio dropped sharply to 0.41. This level remained constant through 2022, suggesting a restructured capital framework with a significantly stronger equity component or higher capital reserves relative to total liabilities.
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Debt to Assets
Builders FirstSource Inc., debt to assets calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current maturities of long-term debt | 6,355) | 3,660) | 27,335) | 13,875) | 15,565) | |
| Long-term debt, net of current maturities, discounts and issuance costs | 2,977,842) | 2,926,122) | 1,596,905) | 1,277,398) | 1,545,729) | |
| Total debt | 2,984,197) | 2,929,782) | 1,624,240) | 1,291,273) | 1,561,294) | |
| Total assets | 10,595,160) | 10,714,343) | 4,173,671) | 3,249,490) | 2,932,309) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.28 | 0.27 | 0.39 | 0.40 | 0.53 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Boeing Co. | 0.42 | 0.42 | — | — | — | |
| Caterpillar Inc. | 0.45 | 0.46 | — | — | — | |
| Eaton Corp. plc | 0.25 | 0.25 | — | — | — | |
| GE Aerospace | 0.17 | 0.18 | — | — | — | |
| Honeywell International Inc. | 0.31 | 0.30 | — | — | — | |
| Lockheed Martin Corp. | 0.29 | 0.23 | — | — | — | |
| RTX Corp. | 0.20 | 0.20 | — | — | — | |
| Debt to Assets, Sector | ||||||
| Capital Goods | 0.28 | 0.28 | — | — | — | |
| Debt to Assets, Industry | ||||||
| Industrials | 0.31 | 0.30 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 2,984,197 ÷ 10,595,160 = 0.28
2 Click competitor name to see calculations.
An analysis of the solvency profile from 2018 to 2022 reveals a significant improvement in the organization's financial leverage position. The overall trend is characterized by a substantial expansion of the asset base that has outpaced the growth of total debt, resulting in a lower debt-to-assets ratio over the five-year period.
- Total Debt Trajectory
- Total debt experienced fluctuations between 2018 and 2020, decreasing from 1.56 billion in 2018 to 1.29 billion in 2019, before rising to 1.62 billion in 2020. A sharp increase occurred in 2021, with debt climbing to 2.93 billion, and remaining relatively stable at 2.98 billion by the end of 2022.
- Total Asset Expansion
- Assets demonstrated consistent growth from 2018 to 2020, moving from 2.93 billion to 4.17 billion. A substantial surge was observed in 2021, where total assets increased to 10.71 billion, representing a growth of approximately 156% in a single year. This figure slightly contracted to 10.60 billion in 2022.
- Debt to Assets Ratio Analysis
- The debt-to-assets ratio shows a clear downward trend, falling from 0.53 in 2018 to 0.28 in 2022. The most significant improvement occurred between 2020 and 2021, where the ratio dropped from 0.39 to 0.27. This indicates that while absolute debt levels increased, the scale of asset acquisition or appreciation significantly reduced the proportion of assets financed through debt, thereby strengthening the overall solvency position.
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Debt to Assets (including Operating Lease Liability)
Builders FirstSource Inc., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Current maturities of long-term debt | 6,355) | 3,660) | 27,335) | 13,875) | 15,565) | |
| Long-term debt, net of current maturities, discounts and issuance costs | 2,977,842) | 2,926,122) | 1,596,905) | 1,277,398) | 1,545,729) | |
| Total debt | 2,984,197) | 2,929,782) | 1,624,240) | 1,291,273) | 1,561,294) | |
| Current portion of operating lease liabilities | 100,758) | 96,680) | 61,625) | 61,653) | —) | |
| Noncurrent portion of operating lease liabilities | 404,463) | 375,289) | 219,239) | 236,948) | —) | |
| Total debt (including operating lease liability) | 3,489,418) | 3,401,751) | 1,905,104) | 1,589,874) | 1,561,294) | |
| Total assets | 10,595,160) | 10,714,343) | 4,173,671) | 3,249,490) | 2,932,309) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.33 | 0.32 | 0.46 | 0.49 | 0.53 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 0.43 | 0.43 | — | — | — | |
| Caterpillar Inc. | 0.46 | 0.46 | — | — | — | |
| Eaton Corp. plc | 0.26 | 0.27 | — | — | — | |
| GE Aerospace | 0.19 | 0.19 | — | — | — | |
| Honeywell International Inc. | 0.33 | 0.32 | — | — | — | |
| Lockheed Martin Corp. | 0.32 | 0.26 | — | — | — | |
| RTX Corp. | 0.21 | 0.21 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.30 | 0.29 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.34 | 0.34 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 3,489,418 ÷ 10,595,160 = 0.33
2 Click competitor name to see calculations.
An analysis of the solvency metrics indicates a significant improvement in the relationship between total debt and total assets over the five-year period from 2018 to 2022. While absolute debt levels increased, the growth in the asset base occurred at a much faster rate, resulting in a lower overall leverage ratio.
- Total Debt Trends
- Total debt, inclusive of operating lease liabilities, remained relatively stable between 2018 and 2019, followed by a moderate increase in 2020. A substantial spike occurred in 2021, where debt rose from approximately 1.91 billion to 3.40 billion, before stabilizing at 3.49 billion by the end of 2022.
- Total Asset Expansion
- Assets exhibited steady growth from 2018 through 2020. A transformative increase was observed in 2021, with total assets jumping from 4.17 billion to 10.71 billion. This represents a more than twofold increase in a single year, with assets remaining largely stable at 10.60 billion in 2022.
- Debt to Assets Ratio Interpretation
- The debt to assets ratio followed a consistent downward trajectory, decreasing from 0.53 in 2018 to 0.32 in 2021. The most significant contraction in the ratio occurred between 2020 and 2021, coinciding with the massive expansion of the asset base. A marginal increase to 0.33 was noted in 2022, reflecting a slight contraction in total assets alongside a small increase in total debt.
The overall trend suggests that the company significantly expanded its balance sheet in 2021. Because the increase in assets disproportionately outweighed the increase in debt during this period, the company's solvency position strengthened, reducing the proportion of assets financed through debt.
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Financial Leverage
Builders FirstSource Inc., financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Total assets | 10,595,160) | 10,714,343) | 4,173,671) | 3,249,490) | 2,932,309) | |
| Stockholders’ equity | 4,962,566) | 4,802,481) | 1,152,783) | 824,953) | 596,338) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.14 | 2.23 | 3.62 | 3.94 | 4.92 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 5.16 | 5.02 | — | — | — | |
| Eaton Corp. plc | 2.06 | 2.07 | — | — | — | |
| GE Aerospace | 5.16 | 4.93 | — | — | — | |
| Honeywell International Inc. | 3.73 | 3.47 | — | — | — | |
| Lockheed Martin Corp. | 5.71 | 4.64 | — | — | — | |
| RTX Corp. | 2.19 | 2.21 | — | — | — | |
| Financial Leverage, Sector | ||||||
| Capital Goods | 4.71 | 4.55 | — | — | — | |
| Financial Leverage, Industry | ||||||
| Industrials | 4.65 | 4.52 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity
= 10,595,160 ÷ 4,962,566 = 2.14
2 Click competitor name to see calculations.
A comprehensive evaluation of the balance sheet from 2018 to 2022 reveals a period of significant asset expansion accompanied by a consistent reduction in financial risk. The organization has successfully transitioned toward a more conservative capital structure, characterized by a substantial increase in equity relative to total assets.
- Asset Expansion and Scale
- Total assets experienced aggressive growth over the five-year period, rising from approximately 2.93 billion USD in 2018 to 10.60 billion USD by the end of 2022. A pivotal increase occurred between 2020 and 2021, where total assets more than doubled, increasing from 4.17 billion USD to 10.71 billion USD. This surge indicates a major expansion of the company's operational scale or the acquisition of significant new resources.
- Equity Growth and Capitalization
- Stockholders' equity grew proportionally and significantly, starting at 596 million USD in 2018 and reaching 4.96 billion USD by 2022. Similar to the asset trend, the most substantial growth was recorded in 2021, with equity jumping from 1.15 billion USD to 4.80 billion USD. This trend suggests a strong increase in the company's net worth and a shift toward a more equity-heavy financing model.
- Financial Leverage Trajectory
- The financial leverage ratio demonstrates a continuous downward trend, decreasing from 4.92 in 2018 to 2.14 in 2022. This steady decline indicates a reduced reliance on debt to finance the asset base. The most pronounced improvement occurred between 2020 and 2021, as the ratio dropped from 3.62 to 2.23, aligning with the massive influx of stockholders' equity. By 2022, the leverage ratio reached its lowest point in the analyzed period, signaling enhanced long-term solvency and a decreased risk profile regarding debt obligations.
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Interest Coverage
Builders FirstSource Inc., interest coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 2,749,369) | 1,725,416) | 313,537) | 221,809) | 205,191) | |
| Add: Income tax expense | 822,464) | 526,131) | 94,629) | 60,946) | 55,564) | |
| Add: Interest expense, net | 198,373) | 135,877) | 135,688) | 109,551) | 108,213) | |
| Earnings before interest and tax (EBIT) | 3,770,206) | 2,387,424) | 543,854) | 392,306) | 368,968) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 19.01 | 17.57 | 4.01 | 3.58 | 3.41 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Boeing Co. | -0.98 | -0.88 | — | — | — | |
| Caterpillar Inc. | 20.80 | 17.88 | — | — | — | |
| Eaton Corp. plc | 21.22 | 21.11 | — | — | — | |
| GE Aerospace | 1.88 | -0.96 | — | — | — | |
| Honeywell International Inc. | 16.41 | 22.09 | — | — | — | |
| Lockheed Martin Corp. | 11.72 | 14.27 | — | — | — | |
| RTX Corp. | 5.64 | 4.71 | — | — | — | |
| Interest Coverage, Sector | ||||||
| Capital Goods | 4.84 | 3.98 | — | — | — | |
| Interest Coverage, Industry | ||||||
| Industrials | 4.98 | 5.14 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 3,770,206 ÷ 198,373 = 19.01
2 Click competitor name to see calculations.
The solvency profile demonstrates a significant strengthening of the capacity to meet interest obligations between 2018 and 2022. This improvement is primarily driven by an exponential increase in operating profitability that far exceeded the growth of financing costs.
- Earnings Before Interest and Tax (EBIT)
- EBIT exhibited consistent and accelerating growth over the analyzed period, rising from 368.97 million USD in 2018 to 3.77 billion USD in 2022. A substantial surge is observed starting in 2021, where earnings increased more than fourfold from the previous year, indicating a dramatic expansion in operational performance.
- Interest Expense, Net
- Net interest expenses remained relatively stable in the early part of the period, moving from 108.21 million USD in 2018 to 135.88 million USD in 2021. An increase to 198.37 million USD occurred in 2022; however, this rise was marginal when compared to the scale of growth in operating income.
- Interest Coverage Ratio
- The interest coverage ratio reflects a sharp upward trajectory, moving from 3.41 in 2018 to 19.01 in 2022. The most significant improvement occurred between 2020 and 2021, where the ratio jumped from 4.01 to 17.57. This progression indicates a vastly increased margin of safety and a significantly reduced risk of default on interest payments.
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Fixed Charge Coverage
Builders FirstSource Inc., fixed charge coverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net income | 2,749,369) | 1,725,416) | 313,537) | 221,809) | 205,191) | |
| Add: Income tax expense | 822,464) | 526,131) | 94,629) | 60,946) | 55,564) | |
| Add: Interest expense, net | 198,373) | 135,877) | 135,688) | 109,551) | 108,213) | |
| Earnings before interest and tax (EBIT) | 3,770,206) | 2,387,424) | 543,854) | 392,306) | 368,968) | |
| Add: Operating lease costs | 144,755) | 133,009) | 85,798) | 84,603) | 83,900) | |
| Earnings before fixed charges and tax | 3,914,961) | 2,520,433) | 629,652) | 476,909) | 452,868) | |
| Interest expense, net | 198,373) | 135,877) | 135,688) | 109,551) | 108,213) | |
| Operating lease costs | 144,755) | 133,009) | 85,798) | 84,603) | 83,900) | |
| Fixed charges | 343,128) | 268,886) | 221,486) | 194,154) | 192,113) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 11.41 | 9.37 | 2.84 | 2.46 | 2.36 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Boeing Co. | -0.70 | -0.64 | — | — | — | |
| Caterpillar Inc. | 14.92 | 12.73 | — | — | — | |
| Eaton Corp. plc | 10.01 | 10.40 | — | — | — | |
| GE Aerospace | 1.35 | -0.22 | — | — | — | |
| Honeywell International Inc. | 11.00 | 13.67 | — | — | — | |
| Lockheed Martin Corp. | 8.44 | 9.95 | — | — | — | |
| RTX Corp. | 4.40 | 3.66 | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Capital Goods | 3.61 | 3.06 | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Industrials | 3.30 | 3.44 | — | — | — | |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 3,914,961 ÷ 343,128 = 11.41
2 Click competitor name to see calculations.
A significant strengthening of the solvency position is observed between 2018 and 2022. The capacity to meet fixed financial obligations has improved substantially, shifting from a moderate coverage level to a robust margin of safety.
- Earnings before fixed charges and tax
- Earnings exhibited an exponential growth trajectory, increasing from 452,868 thousand US dollars in 2018 to 3,914,961 thousand US dollars by 2022. The most pronounced acceleration occurred after 2020, with a nearly fourfold increase in earnings recorded in 2021 alone.
- Fixed charges
- Fixed obligations grew at a measured and steady pace, rising from 192,113 thousand US dollars in 2018 to 343,128 thousand US dollars in 2022. The growth of these charges was substantially outpaced by the surge in earnings over the same period.
- Fixed charge coverage ratio
- The coverage ratio increased from 2.36 in 2018 to 11.41 in 2022. While the improvement was incremental between 2018 and 2020, the ratio expanded sharply starting in 2021, indicating a vastly reduced risk regarding the fulfillment of fixed financial commitments and an enhanced overall solvency profile.
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