There's an old saying about bad things coming in pairs or threes. It seems to be the former for Building Materials Holding
Other than that, all is calm at the San Francisco-based company. Unless, of course, you factor in the likelihood that its business probably won't return to its former health for about, oh, as far as the eye can see. In the most recent quarter, Building Materials' net income was $4.17 million, down from $35.35 million year over year. On a diluted per-share basis, the company reported $0.14, down the same 88% as net income from $1.20 in Q3 2006.
Even the most casual Fools can probably guess what's befallen the company, which competes with the likes of Builders FirstSource
Unfortunately for Building Materials, the problems don't end there. Chapman Capital, the company's largest shareholder with control of about 9% of the company's shares, has called for the resignation of Builder Materials CEO Robert Mellor. The activist fund manager contends that Mellor's approximately $6 million in compensation during the past three years is "out of date and untenable in today's challenging homebuilding environment."
From my perspective, yes, that amount of compensation may be untenable for a company in an atrophying industry. But almost nothing is out of date in today's increasingly and crazily bifurcated world of corporate compensation.
We've known for some time now that any business related to the homebuilding industry would suffer. Even homebuilding retailers that target non-professional DIY customers, like Home Depot
It's difficult to properly time the bottom of the housing cycle, and to know when to reinvest in the industry, but this company has more than just cyclical business problems. Even a stock with great performance shouldn't be considered if it's encountering management problems.
To build upon past Foolishness:
Home Depot and Builders FirstSource are Inside Value pick. Come see why with a free 30-day trial.