Builders FirstSource (BLDR) 10-K risk factor changes: FY2020 vs FY2019

Risks associated with our business, [removed: an] [added: any] investment in our securities, and with achieving the [removed: forward-looking] [added: forward looking] statements contained in this report or in our news releases, websites, public filings, investor and analyst conferences or elsewhere, [removed: include, but are not limited to,] [added: include] the risk factors described below.

Any of [removed: the risk factors described below] [added: these risks, whether known or unknown,] could cause our actual results to differ materially from expectations and could have a material adverse effect on our business, financial condition or [removed: operating results.][added: results of operations, and we may not succeed in addressing these challenges and risks.]

The building products industry is highly dependent on new home and multifamily [removed: construction,] [added: construction as well as repair and remodel,] which in turn are dependent upon a number of factors, including interest rates, consumer confidence, employment rates, foreclosure rates, housing inventory levels and occupancy, housing demand and the health of the U.S. economy and mortgage markets.

Unfavorable changes in demographics, credit markets, consumer confidence, housing affordability, or housing inventory levels and occupancy, or a weakening of the U.S. economy or of any regional or local [removed: economy] [added: economy, including as a result of the COVID-19 pandemic,] in which we operate could adversely affect consumer spending, result in decreased demand for our products, and adversely affect our business.

For example, prices of wood products, including lumber and panel products, are subject to significant [removed: volatility] [added: volatility, such as the spike in lumber prices during the COVID-19 outbreak,] and directly affect our sales and earnings.

Our lumber and lumber sheet goods product category represented [removed: 30.9%] [added: 35.9%] of total net sales for the year ended December 31, [removed: 2019.][added: 2020.]

[removed: The] [added: Despite disruptions from the COVID-19 pandemic, the] homebuilding industry has experienced growth in recent years and industry forecasters expect to see continued growth in the housing market over the next year.

[removed: Although] [added: In addition, general] weather patterns affect our operating results throughout the year, [added: with] adverse weather historically [removed: has reduced] [added: reducing] construction activity in the first and fourth quarters in the regions [removed: where] [added: in which] we [added: primarily] operate.

This could cause homebuyer demand to [added: soften or] shift [removed: towards smaller homes] [added: substantially] which could have an adverse impact on our financial condition, operating results and cash [removed: flows.][added: flows if we are unable to respond to the new market demands effectively.]

Furthermore, certain product manufacturers sell and distribute their products directly to production homebuilders or commercial [removed: builders.][added: builders, and the volume of such direct sales could increase in the future.]

Production homebuilders and multi-family builders historically have exerted and will continue to exert significant pressure on their outside [removed: suppliers] [added: suppliers, including on us,] to keep prices low because of their market share and their ability to leverage such market share in the highly fragmented building products supply industry.

Our ten largest customers generated approximately [removed: 15.3%] [added: 15.8%] of our net sales for the year ended December 31, [removed: 2019.][added: 2020.]

Moreover, [removed: during the downturn and] in [removed: subsequent years,] [added: the event of any downturn,] some of our homebuilder customers [removed: exited] [added: may exit] or severely [removed: curtailed] [added: curtail] building activity in certain of our [removed: regions.][added: markets.]

As of December 31, [removed: 2019,] [added: 2020,] our debt totaled [removed: $1,300.0] [added: $1,642.4] million, which includes [removed: $242.1] [added: $239.9] million of finance lease and other finance obligations.

We [removed: also have a $900.0 million revolving credit facility (“2023 facility”), under which we] had [removed: $27.0] [added: $75.0] million of outstanding borrowings and [removed: $82.2] [added: $78.0] million of letters of credit outstanding as of December 31, [removed: 2019.][added: 2020 under the 2023 facility.]

In addition, we also have [removed: $298.6] [added: $280.9] million in obligations under operating leases.

Our [removed: substantial debt] [added: level of indebtedness] could have important consequences to us, including:

| | • | exposing us to the risk of increased interest rates, and corresponding increased interest expense, because borrowings under the 2023 facility [removed: and the $52.0 million senior secured term loan facility due 2024 (“2024 term loan”)] are at variable rates of interest; |

| | • | limiting our ability to adjust to changing marketplace conditions and placing us at a competitive disadvantage compared to our competitors who may have less [removed: debt.] [added: debt; and] |

We are substantially reliant on cash on hand and borrowing availability under the 2023 facility, which totaled [removed: $695.3] [added: $1,170.8] million at December 31, [removed: 2019,] [added: 2020,] to provide working capital and fund our operations.

[removed: Our] [added: Our] debt instruments contain various covenants that limit our ability to operate our [removed: business.][added: business.]

The agreement governing the 2023 facility contains a financial covenant requiring the satisfaction of a minimum fixed charge ratio of 1.00 to 1.00 if our excess availability falls below the greater of $80.0 million or 10% of the maximum borrowing amount, which was [removed: $80.0] [added: $90.0] million as of December 31, [removed: 2019.][added: 2020.]

[removed: Our] [added: Our] variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase [removed: significantly.][added: significantly.]

As a result, interest rates on our 2023 facility [removed: and our 2024 term loan] could be higher or lower than current levels.

As of December 31, [removed: 2019,] [added: 2020,] we had approximately [removed: $79.0] [added: $75.0] million, or [removed: 6.1%,] [added: 4.6%,] of our outstanding debt at variable interest rates.

A 1.0% increase in interest rates on the 2023 facility would result in approximately [removed: $0.3] [added: $0.8] million in additional interest expense annually as we had [removed: $27.0] [added: $75.0] million in outstanding borrowings as of December 31, [removed: 2019.][added: 2020.]

The factors expected to contribute to this variability include, among others: (1) the volatility of prices of lumber, wood products and other building products, (2) the cyclical nature of the homebuilding industry, (3) general economic conditions in the various areas that we serve, (4) the intense competition in the industry, including expansion and growth strategies by competitors, (5) the production schedules of our [removed: customers,] [added: customers] and [added: suppliers, and] (6) the effects of the weather.

[removed: Product] [added: Product] shortages, loss of key suppliers, and our dependence on third-party suppliers and manufacturers could affect our financial [removed: health.][added: health.]

[removed: However, the] [added: The] loss of, or [removed: a] [added: an ongoing] substantial decrease in the availability [removed: of,] [added: of] products from our suppliers or the loss of key supplier arrangements could adversely impact our financial condition, operating results, and cash flows.

In addition, we are involved on an ongoing basis in other types of legal [added: proceedings, such as workers’ compensation] proceedings.

[removed: We have closed] or idled a number of facilities for which we continue to remain liable.

A substantial disruption in our information technology systems for any prolonged time period [removed: (arising from, for example, system capacity limits from unexpected increases in our volume of business, outages, natural or other disasters, or disruptions in our service)] could result in problems and delays in generating critical financial and operational information, processing receivables, receiving inventory and supplies and filling customer orders.

[removed: There can be no assurance that such] [added: Such] disruptions, delays, problems, or associated costs relating to our systems or those of our significant customers, suppliers or third-party providers [removed: would not] [added: could] have a material adverse effect on our financial condition, operating results and cash flows.

[removed: We] [added: We] may be adversely affected by any natural or man-made disruptions to our [added: operations and our] distribution and manufacturing [removed: facilities.][added: facilities.]

We currently maintain a broad network of distribution and manufacturing facilities throughout the U.S. Any widespread disruption to our operations resulting from fire, earthquake, weather-related [removed: events,] [added: events (such as tornadoes, hurricanes, flooding and other storms), other natural disasters,] an act of terrorism or any other cause could damage multiple facilities and a significant portion of our inventory and could materially impair our ability to distribute our products to customers.

[removed: In addition, any] [added: Any] shortages of fuel or significant fuel cost increases [added: related to geopolitical conditions, or other factors,] could [added: seriously] disrupt our ability to distribute products to our customers.

We may be unable to successfully implement our growth strategy, which includes increasing sales of our prefabricated components and other value-added products, pursuing strategic acquisitions, opening new [removed: facilities] [added: facilities, implementing operational excellence,] and [removed: reducing our outstanding debt.][added: maintaining a balanced debt level.]

Our long-term strategy depends in part on growing our sales of prefabricated components and other value-added [removed: products and] [added: products,] increasing our market [removed: share.][added: share, and implementing various initiatives to increase our operational efficiency.]

Moreover, our liquidity position, or the requirements of [removed: or] [added: our] debt instruments could prevent us from obtaining the capital required to effect new acquisitions or expand our existing facilities.

[removed: Our failure to make successful acquisitions or to build or expand needed facilities, including manufacturing facilities, produce saleable] product, or meet customer demand in a timely manner could adversely affect our financial condition, operating results, and cash flows.

Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

You should read these Risk Factors in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Item 8.

Economic and Industry Risks

The COVID-19 pandemic has impacted our business, and will likely continue to impact our business in the future.

The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide, including workforces, liquidity, capital markets, consumer behavior, supply chains, and macroeconomic conditions, which in turn has materially impacted our business.

In particular, the COVID-19 pandemic has recently caused significant disruptions and delays in the manufacture and distribution of building products throughout the industry supply chain, resulting in shortages and shipping delays of several categories of building products, such as windows and lumber.

In turn, these supply chain disruptions have in many cases led to significant spikes in the prices of the affected building products.

While we expect the COVID-19 pandemic to continue to impact our business in the near term, particularly in regions where we derive a significant amount of our revenue or profit or where our suppliers and customers are located, the extent and duration of the continued effects of the COVID-19 pandemic on our business and results of operation is unknown and will depend on future developments, which are highly uncertain and outside our control.

These developments include the scope, duration and severity of the pandemic (including the possibility of further surges or variations of COVID-19 or the emergence of other health epidemics or pandemics), the timing and efficacy of the vaccination program in the U.S., further actions taken by governmental authorities, including future stimulus programs, in response to the pandemic and changing consumer and supplier behavior.

It is also possible that the pandemic and its aftermath will lead to a prolonged economic slowdown or recession in the U.S. economy.

The current COVID-19 pandemic has impacted and may continue to impact our industry and cause disruptions to our operations, including as a result of temporary closure of locations, decreased demand for our products and services or disruption to our supply chain, all of which could materially and adversely affect our business, financial condition and results of operations.

While we have taken significant precautions to ensure the health and safety of our team members and customers throughout the pandemic, we have had several employees test positive for COVID-19 to date, requiring us to quarantine certain groups of employees and disinfect at certain locations and to occasionally temporarily close certain locations to disinfect.

Our operations could be further disrupted in the future if additional employees or employees of our suppliers or customers were suspected or confirmed of having COVID-19 or other illnesses, and such illness required us or our suppliers or customers to quarantine some or all such employees or disinfect additional locations.

Also, a number of our administrative employees are working remotely.

Remote working may heighten cybersecurity, information security and operational risks and affect the productivity of our employees.

The COVID-19 pandemic has caused, and may continue to cause disruptions in our supply chain.

Such disruptions may also be caused by the outbreak of new health epidemics or pandemics.

The inability of our suppliers to meet our supply needs in a timely

manner or our quality standards could cause delays to delivery date requirements of our customers.

Such failures could result in the cancellation of orders, customers’ refusal to accept deliveries, a reduction in purchase prices, and ultimately, termination of customer relationships, any of which could have a material adverse effect on our business, financial condition, results of operations and liquidity.

In that case, we may be required to seek alternative sources of materials or products.

Although we believe that we can manage our exposure to these risks, we cannot be certain that we will be able to identify such alternative materials or sources without delay or without greater cost to us.

Our inability to identify and secure alternative sources of supply in this situation could have a material adverse effect on our ability to satisfy customer orders.

While we have largely been able to manage these supply chain disruptions to date, there is no guarantee that we will be able to do so in the future.

While only some of our locations were temporarily closed in the few states or counties where construction activities were temporarily prohibited at the beginning of the pandemic, we could also be adversely affected if government authorities impose further mandatory closures, seek voluntary closures or impose restrictions on our operations.

Even if such measures are not further implemented and a virus or other disease does not spread significantly, the perceived risk of infection or health risk may adversely affect our business and operating results.

We cannot predict the duration or scope of the COVID-19 pandemic or when or how our business, financial conditions and results of operations will be further impacted by it, including as a result of the recent deterioration in the U.S. economy and any related impact on the residential homebuilding industry, and based on the duration and scope, such impact could be material.

Historically, in times of an economic recession, new home construction in the United States has slowed considerably.

Any significant downturn in new home construction as a result of the economic impact of the COVID-19 pandemic could have an adverse effect on our business, financial condition and results of operations.

To the extent the COVID-19 pandemic adversely affects our business, financial conditions and results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

Furthermore, consumer preferences could shift to smaller or larger homes in the future.

Operational and Strategic Risks

Our failure to make successful acquisitions or to build or expand needed facilities, including manufacturing facilities, produce saleable

Furthermore, in periods of economic downturn these pricing pressures tend to increase.

As a result, we may face heightened pricing pressures in the event of an ongoing economic downturn resulting from the continuing COVID-19 pandemic or otherwise, and our financial condition, operating results and cash flows may be adversely affected.

However, as noted above, the COVID-19 pandemic has recently caused significant disruptions and delays in the manufacture and distribution of building products throughout the industry supply chain, resulting in shortages and shipping delays of several categories of building products, including windows and lumber.

Failure to attract and retain our key employees and the impact of our recent leadership changes may adversely impact our ability to successfully execute our business strategies.

Furthermore, business combinations such as the BMC Merger increase the risk of employee retention and we may not be successful in retaining the talents and dedication of the professionals previously separately employed by us and BMC.

It is possible that these employees may decide not to remain with us.

If key employees terminate their employment, or if an insufficient number of employees are retained to maintain effective operations, our business activities may be adversely affected and management’s attention may be diverted from successfully integrating the operations of BMC into our existing operations to hiring suitable replacements, all of which may have an adverse impact on our business and results of operations.

We may not succeed in addressing these challenges and risks.

The homebuilding industry is currently experiencing a shortage of qualified, trained labor in many areas, including those served by us.

According to the U.S. Census Bureau, annual U.S. total and single-family housing starts were 1.3 million and 0.9 million, respectively, for the year ended December 31, 2019.

However, both total and single-family housing starts remain below the normalized historical averages (from 1959 through 2019) of 1.5 million and 1.1 million, respectively.

Due to the lower levels in housing starts, increased competition for homebuilder business, and cyclical fluctuations in commodity prices, we have seen, and may continue to experience pressure on our gross margins.

The building supply industry is seasonal.

To the extent that hurricanes, severe storms, floods, other natural disasters or similar events occur in the regions in which we operate, our business may be adversely affected.

We anticipate that fluctuations from period to period will continue in the future.

The volume of such direct sales could increase in the future.

The housing industry downturn and its aftermath resulted in significantly increased pricing pressures from production homebuilders and other customers.

A 1.0% increase in interest rates on the 2024 term loan outstanding as of December 31, 2019 would result in approximately $0.5 million in additional interest expense annually.

The interest rates on our 2023 facility and 2024 term loan may be impacted by the phase out of the London Interbank Offered Rate (“LIBOR”)

Interest rates on borrowings under our 2023 facility and 2024 term loan can, at our option, be based on LIBOR.

In July 2017, the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021.

The U.S. Federal Reserve, in conjunction with the Alternative Rates Reference Committee, is considering various alternatives, such as the Secured Overnight Financing Rate (“SOFR”), to replace LIBOR.

The phase out of LIBOR may have an adverse impact on the cost of our borrowings under our 2023 facility and 2024 term loan.

The agreements that govern our indebtedness contain various covenants that impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our businesses.

The agreements that govern our indebtedness contain various affirmative and negative covenants that may, subject to certain significant exceptions, restrict the ability of us and certain of our subsidiaries to, among other things, have liens on our property, and/or merge or consolidate with any other person or sell or convey certain of our assets to any one person.

The ability of us and our subsidiaries to comply with these provisions may be affected by events beyond our control.

Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations.

Our continued success will depend on our ability to retain our key employees and to attract and retain new qualified employees.

Management may explore offsets to remaining obligations such as subleasing opportunities or negotiated lease terminations.

We are a holding company and conduct all of our operations through our subsidiaries.

We are a holding company that derives all of our operating income from our subsidiaries.

All of our assets are held by our direct and indirect subsidiaries.

We rely on the earnings and cash flows of our subsidiaries, which are paid to us by our subsidiaries in the form of dividends and other payments or distributions, to meet our debt service obligations.

The ability of our subsidiaries to pay dividends or make other payments or distributions to us will depend on their respective operating results and may be restricted by, among other things, the laws of their jurisdiction of organization (which may limit the amount of funds available for the payment of dividends and other distributions to us), the terms of existing and future indebtedness and other agreements of our subsidiaries, as well as the covenants of any future outstanding indebtedness we or our subsidiaries incur.

To our knowledge, we have not experienced a material cybersecurity breach to date.

We are subject to payments-related risks that could increase our operating costs, expose us to fraud, subject us to potential liability and potentially disrupt our business.

We accept payments using a variety of methods, including credit card, debit card, direct debit from a customer’s bank account, consumer invoicing, and physical bank checks, and we may offer different payment options over time.

These payment options subject us to many compliance requirements, including, but not limited to, compliance with payment card association operating rules, including data security rules, certification requirements, rules governing electronic funds transfers and Payment Card Industry Data Security Standards.

They also subject us to potential fraud by criminal elements seeking to discover and take advantage of security vulnerabilities that may exist in some of these payment systems.

For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability.

We rely on third parties to provide payment processing services, including the processing of credit and debit cards, and it could disrupt our business if these companies become unwilling or unable to provide these services to us.

If we fail to comply with these rules or requirements, or if our data security systems are breached or compromised, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating results could be adversely affected.

The 2017 Tax Act contains limitations on the ability of homeowners to deduct property taxes and mortgage interest as well as limitations on an individual taxpayer’s ability to deduct state and local income taxes.

The 2017 Tax Act also raises the standard deduction.

These changes could reduce the perceived affordability of homeownership, and therefore the demand for homes, and/or have a moderating impact on home sales prices in areas with relatively high housing prices and/or high state and local income taxes and real estate taxes, including in certain of our served markets such as California and New York.

As a result, some communities in those locations could experience lower net orders and/or a tempering of average sales prices in future periods depending on how homebuyers react to the tax law changes under the 2017 Tax Act.

Any shortages of fuel or significant fuel cost increases related to geopolitical conditions could seriously disrupt our ability to distribute products to our customers.

[removed: The] [added: Following the BMC Merger, the] Company operates approximately [removed: 400] [added: 550] locations in 40 states across the United States.

Given the span and depth of our geographical reach, [added: prior to the BMC Merger] our locations [removed: are] [added: were] organized into nine geographical regions (Regions 1 through 9), which [removed: are] [added: were] also our operating segments, and these [removed: are] [added: were] further aggregated into four reportable segments: Northeast, Southeast, South and West.

| | • | *Homebuilding [removed: Industry.*] [added: Industry and Market Competition.*] Our business is driven primarily by the residential new construction market and the residential repair and remodel market, which are in turn dependent upon a number of factors, including demographic trends, interest rates, consumer confidence, employment rates, housing affordability, household formation, land development costs, the availability of skilled construction labor, and the health of the economy and mortgage markets. According to the U.S. Census Bureau, annual U.S. total and single-family housing starts were [removed: 1.3] [added: 1.4] million and [removed: 0.9] [added: 1.0] million, respectively, in [removed: 2019. However, both total and single-family housing starts remain below the normalized historical averages (from 1959 through 2019) of 1.5 million and 1.1 million, respectively.] [added: 2020.] Due to [removed: the lower levels in housing starts versus historical norms,] increased competition for homebuilder business and cyclical fluctuations in commodity prices, we may experience pressure on our gross margins. In addition to these factors, there has been a trend of consolidation within the building products supply industry. However, our industry remains highly fragmented and competitive and we will continue to face significant competition from local and regional suppliers. We [removed: still] believe there are several meaningful trends that indicate U.S. housing demand will continue to [removed: trend towards recovering to the historical average. These trends include relatively] [added: grow, including historically] low interest rates, the aging of housing stock, and normal population growth due to immigration and birthrate exceeding death rate. [removed: While] [added: Building upon] the [added: current] rate of market [removed: growth has recently eased,] [added: growth,] industry forecasters, including the National Association of Homebuilders (“NAHB”), expect to see continued increases in housing demand over the next year. |

| | • | *Repair and remodel end market*. Although the repair and remodel end market is influenced by housing starts to a lesser degree than the homebuilding market, the repair and remodel end market is still dependent upon some of the same factors as the homebuilding market, including demographic trends, interest rates, consumer confidence, employment rates and the health of the economy and home financing markets. [added: The repair and remodel end market has been impacted by the COVID-19 pandemic and while the extent of this impact and related uncertainties are yet to be fully known, we may experience reduced sales demand, increased margin pressures and/or increased operating costs in this area of our business as a result.] We expect that our ability to remain competitive in this space will depend on our continued ability to provide a high level of customer service coupled with a broad product offering. |

| | • | *Economic Conditions.* Economic changes both nationally and locally in our markets impact our financial performance. The building products supply industry is highly dependent upon new home construction and subject to cyclical market changes. Our operations are subject to fluctuations arising from changes in supply and demand, national and local economic conditions, labor costs and availability, competition, government regulation, trade policies and other factors that affect the homebuilding industry such as demographic trends, interest rates, housing starts, the high cost of land development, employment levels, consumer confidence, and the availability of credit to homebuilders, contractors, and homeowners. [added: The disruptions and uncertainties as a result of the ensuing COVID-19 pandemic may have a significant impact on our future operating results.] |

| | • | *Housing Affordability.* The affordability of housing can be a key driver in demand for our products. Home affordability is influenced by a number of economic factors, such as the level of employment, consumer confidence, consumer income, [removed: the] supply of houses, the availability of financing and interest rates. Changes in the inventory of available homes as well as economic factors relative to home prices could result in changes to the affordability of homes. As a result, homebuyer demand may shift towards smaller, or larger, homes creating fluctuations in demand for our products. |

| | • | *Capital Structure.* As a result of our historical growth through acquisitions, we [removed: have substantial indebtedness.] [added: had $1,642.4 million of indebtedness as of December 31, 2020.] We strive to optimize our capital structure to ensure that our financial needs are met in light of economic conditions, business activities, organic investments, opportunities for growth through acquisition and the overall risk characteristics of our underlying assets. In addition to these factors, we also evaluate our capital structure on the basis of our leverage ratio, our liquidity position, our debt maturity profile and market interest rates. As such, we may enter into various debt or equity transactions in order to appropriately manage and optimize our capital [removed: structure.] [added: structure and liquidity needs.] |

[removed: RECENT DEVELOPMENTS][added: RECENT DEVELOPMENTS]

During the year ended December 31, [removed: 2019,] [added: 2020,] the Company executed several debt transactions, including [removed: extending] the [removed: maturity of our $900.0 million revolving credit facility (“2023 facility”),] redemption [removed: and repurchase] of [removed: $192.4] [added: $503.9] million in [added: outstanding] aggregate principal amount of [removed: our] 5.625% senior secured notes due 2024 (“2024 notes”), [added: the redemption of $47.5 million in aggregate principal amount of 6.75% senior secured notes due 2027 (“2027 notes”),] and repayment of [removed: $406.3] [added: $52.0] million of our senior secured term loan facility due 2024 (“2024 term loan”).

The repayments of our 2024 notes and [removed: 2024 term loan] [added: 2027 notes] were funded with the proceeds [removed: from] [added: of] the issuance of [removed: $475.0] [added: $550.0] million in aggregate principal amount of [removed: our 6.75%] [added: 5.00% unsecured] senior [removed: secured] notes due [removed: 2027 (“2027] [added: 2030 (“2030] notes”) and [removed: cash] [added: borrowings] on [removed: hand.][added: our $900.0 million revolving credit facility (“2023 facility”).]

Collectively, these transactions have extended our debt [removed: maturity profile and reduced the amount of long-term debt outstanding.][added: maturity.]

On January 9, 2020, we acquired certain assets and [removed: the] operations of Bianchi & Company, Inc. (“Bianchi”) for [removed: $17.2] [added: $15.9] million in [removed: cash, subject to certain adjustments.][added: cash.]

Located in Charlotte, North Carolina, Bianchi is a supplier and installer of interior and exterior [removed: doors, crown moldings, open stair rail, chair rail, wainscoting, commercial hollow metal frames and doors and other custom] millwork.

These acquisitions are described in [removed: Notes] [added: Note] 5 [removed: and 18] to the consolidated financial statements included in Item 8 of this annual report on Form 10-K.

[removed: On] [added: In] January [removed: 10,] 2020, Mr. [added: Chad] Crow notified our Board of his decision to retire as President and Chief Executive Officer of the Company during 2020 after assisting the Board in hiring his replacement.

According to the U.S. Census Bureau, actual U.S. total housing starts for the year ended December 31, [removed: 2019] [added: 2020] were [removed: 1.3] [added: 1.4] million, an increase of [removed: 3.3%] [added: 7.0%] compared to the year ended December 31, [removed: 2018.][added: 2019.]

Actual U.S. single-family housing starts for the year ended December 31, [removed: 2019] [added: 2020] were [removed: 0.9] [added: 1.0] million, an increase of [removed: 1.4%] [added: 11.7%] compared to the year ended December 31 [removed: 2018.][added: 2019.]

A composite of third party sources, including the NAHB, are forecasting [removed: 1.3] [added: 1.5] million U.S. total housing starts and [removed: 0.9] [added: 1.1] million U.S. single-family housing starts for [removed: 2020,] [added: 2021,] which are increases of [removed: 1.0%] [added: 6.0%] and [removed: 5.8%,] [added: 11.0%,] respectively, from [removed: 2019.][added: 2020.]

In addition, in its September [removed: 2019] [added: 2020] semi-annual forecast, the Home Improvement Research Institute (“HIRI”) forecasted sales in the professional repair and remodel end market to increase approximately [removed: 0.9%] [added: 5.3%] in [removed: 2020] [added: 2021] compared to [removed: 2019.][added: 2020.]

Our net sales for the year ended December 31, [removed: 2019 decreased 5.8%] [added: 2020 increased 17.6%] over the same period last year.

Excluding the impact of commodity price [removed: deflation,] [added: inflation, acquisitions and the impact of one more selling day,] we achieved [removed: 6.5%] [added: 5.6%] net sales growth in the single-family, multi-family and repair and remodel/other end [removed: markets, primarily as a result of sales volume growth in our manufactured products and windows, doors & millwork categories.][added: markets.]

Our gross margin percentage [removed: increased] [added: decreased] by [removed: 2.3%] [added: 1.2%] during the year ended December 31, [removed: 2019] [added: 2020] compared to the year ended December 31, [removed: 2018.][added: 2019, primarily attributable to margin pressures as a result of commodity price inflation.]

[removed: Our selling,] [added: Selling,] general and administrative [removed: expenses,] [added: expenses increased $94.2 million, or 5.9%, and] as a percentage of net [removed: sales, were 21.8% in 2019, a 1.7% increase] [added: sales decreased to 19.6%] from [removed: 20.1%] [added: 21.8%] in [removed: 2018.][added: 2019.]

We believe the long-term outlook for the housing industry is positive due to growth in the underlying [removed: demographics.][added: demographics compared to historical new construction levels.]

We strive to achieve the appropriate balance of short-term expense control while maintaining the expertise and capacity to grow the business as market conditions [removed: warrant.][added: continue to improve.]

A discussion regarding our financial condition and results of operations for the year ended December 31, [removed: 2019] [added: 2020] compared to the year ended December 31, [removed: 2018] [added: 2019] is presented below.

A discussion regarding our financial condition and results of operations for the year ended December 31, [removed: 2018] [added: 2019] compared to the year ended December 31, [removed: 2017] [added: 2018] can be found under Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2018,] [added: 2019,] filed with the SEC on [removed: March 1, 2019.][added: February 21, 2020.]

[removed: 2019] [added: 2020] Compared with [removed: 2018][added: 2019]

| Cost of sales | | | [removed: 72.8] [added: 74.0] | % | | | [removed: 75.1] [added: 72.8] | % | |

| Gross margin | | | [removed: 27.2] [added: 26.0] | % | | | [removed: 24.9] [added: 27.2] | % | |

| Selling, general and administrative expenses | | | [removed: 21.8] [added: 19.6] | % | | | [removed: 20.1] [added: 21.8] | % | |

| Income from operations | | | [removed: 5.4] [added: 6.4] | % | | | [removed: 4.8] [added: 5.4] | % | |

| Interest expense, net | | | [removed: 1.5] [added: 1.6] | % | | | [removed: 1.4] [added: 1.5] | % | |

| Income tax expense | | | [removed: 0.8] [added: 1.1] | % | | | [removed: 0.7] [added: 0.8] | % | |

| Net income | | | [removed: 3.1] [added: 3.7] | % | | | [removed: 2.7] [added: 3.1] | % | |

Net sales for the year ended December 31, [removed: 2019] [added: 2020] were [removed: $7,280.4] [added: $8,558.9] million, a [removed: 5.8% decrease] [added: 17.6% increase] from net sales of [removed: $7,724.8] [added: $7,280.4] million for [removed: 2018.][added: 2019.]

| Lumber & lumber sheet goods | | $ | [removed: 2,251.6] [added: 3,076.4] | | | | [removed: 30.9] [added: 35.9] | % | | $ | [removed: 2,902.2] [added: 2,251.6] | | | | [removed: 37.6] [added: 30.9] | % | | | [removed: (22.4] [added: 36.6] | [removed: )%] [added: %] |

| Manufactured products | | | [removed: 1,449.5] [added: 1,640.5] | | | | [removed: 19.9] [added: 19.2] | % | | | [removed: 1,392.0] [added: 1,449.5] | | | | [removed: 18.0] [added: 19.9] | % | | | [removed: 4.1] [added: 13.2] | % |

| Windows, doors & millwork | | | [removed: 1,542.9] [added: 1,629.2] | | | | [removed: 21.2] [added: 19.0] | % | | | [removed: 1,445.9] [added: 1,542.9] | | | | [removed: 18.7] [added: 21.2] | % | | | [removed: 6.7] [added: 5.6] | % |

| Gypsum, roofing & insulation | | | [removed: 528.6] [added: 514.6] | | | | [removed: 7.3] [added: 6.0] | % | | | [removed: 528.4] [added: 528.6] | | | | [removed: 6.9] [added: 7.3] | % | | | [removed: 0.0] [added: (2.6] | [removed: %] [added: )%] |

Following the BMC Merger, we will re-evaluate our operating and reportable segments for future reporting periods.

| | • | *Effect of COVID-19 Pandemic.* In March of 2020, the U.S. economy began to see significant disruption, uncertainty and record high levels of unemployment as a result of the COVID-19 pandemic. While the COVID-19 pandemic did not have a materially adverse impact on our financial results in 2020, the extent and duration of any future impact resulting from the pandemic is not fully known, and we may experience a decline in housing starts, reduced sales demand, volatility in commodity prices, challenges in the supply chain, increased margin pressures and/or increased operating costs as a result. |

| --- | --- | --- |

General

On January 1, 2021, we completed our previously announced all stock merger transaction with BMC.

The BMC Merger will be accounted for using the acquisition method of accounting, and Builders FirstSource, Inc. will be treated as the accounting acquirer.

The operating results of BMC will be reported as part of the Company beginning on the closing date of the BMC Merger and as such, the historical financial condition, results of operations and cash flows of the Company presented in this annual report do not include BMC.

COVID-19 Pandemic

The COVID-19 pandemic resulted in significant disruption to the U.S. economy in 2020 and impacted our operations and those of our customers.

Despite experiencing disruptions to our operations and implementing a number of health and safety precautions as a result of the pandemic, our financial results and financial condition were not materially adversely affected by the pandemic.

In most of the states in which we operate, construction was deemed an essential activity and, as a result, our operations faced limited temporary closures early on in the pandemic.

Furthermore, housing starts and repair and remodeling activity generally increased throughout our markets in 2020 despite the pandemic.

Despite the limited impact of the COVID-19 pandemic on our 2020 financial results, the extent to which the pandemic may impact our results in future periods is uncertain and will depend upon, among other things, the duration and severity of the outbreak or subsequent outbreaks, related government responses, such as required physical distancing or restrictions on business operations and travel, the pace of recovery of economic activity and the impact to consumers, the effectiveness of available vaccines, and any potential supply disruptions, all of which are uncertain and difficult to predict in light of the rapidly evolving landscape.

Refer to Part I, Item 1A.

Risk Factors for a full discussion of the risks associated with the COVID-19 pandemic.

On November 2, 2020 we acquired certain assets and operations of Kansas Building Supply Company, Inc. (“KBS”) for $16.8 million in cash.

Located in Overland Park, Kansas, KBS is a supplier for interior and exterior doors, windows, millwork cabinetry, and hardware.

The repayment of our 2024 term loan was funded with cash on hand.

The Company also issued an additional $350.0 million in aggregate principal amount of our 2027 notes.

On January 29, 2021, the Company amended the 2023 facility to, among other things, increase the total commitments by an aggregate amount of $500.0 million resulting in a new $1.4 billion amended credit facility, and extended the maturity date from November 2023 to January 2026.

On February 16, 2021, pursuant to the optional call feature in the 2027 Indenture, the Company gave notice that on March 3, 2021, $82.5 million of 2027 notes will be redeemed at a redemption price equal to 103% of the principal amount of the notes, plus accrued and unpaid interest.

Mr. Crow will continue to serve as the Company’s Chief Executive Officer for a transition period of 90 days after the BMC Merger, following which BMC’s former Chief Executive Officer, and the recently appointed President of the Company, Mr. Dave Flitman, will succeed Mr. Crow as Chief Executive Officer of the Company.

Composition of the Board of Directors of the Company

As a result of the BMC Merger, effective January 1, 2021, the size of the board of directors was increased to twelve directors, with seven directors designated by the Company and five directors designated by BMC.

Commodity price inflation increased our net sales in 2020 by an estimated 9.0%, while acquisitions and one more selling day increased our sales by 2.5% and 0.5%, respectively.

Our selling, general and administrative expenses, as a percentage of net sales, were 19.6% in 2020, a 2.2% decrease from 21.8% in 2019, primarily driven by the effect of leverage from commodity price inflation in our net sales in the year ended December 31, 2020 compared to the year ended December 31, 2019.

2020 Compared with 2019

| | | 2020 | | | | 2019 | | | |

Core organic growth increased net sales by 5.6%, commodity price inflation accounted for another 9.0% of the change, while acquisitions and one additional selling day accounted for 2.5% and 0.5%, respectively, of the increase.

Core organic growth came primarily from increased sales volume within our single-family end market.

| | | 2020 | | | | | | | | 2019 | | | | | | | | | | |

We achieved increased net sales in all our product categories, except in the gypsum, roofing & insulation category, in part due to higher sales volumes in our single-family end market and as a result of our continued efforts to focus on higher margin opportunities through both acquisition targets and core organic growth, as well as the impact of commodity price inflation, primarily on the lumber & lumber sheet goods category, in the period.

The decrease was primarily attributable to the impact of commodity price inflation during the year ended December 31, 2020 relative to our short-term customer pricing commitments.

This increase in selling, general and administrative expenses was primarily driven by higher variable compensation expense, professional service expense, and depreciation expense, which were partially offset by lower fuel costs, as well as lower travel and entertainment costs, resulting from changed behavior during the pandemic.

We expect these variable costs to increase post pandemic.

Interest expense was $135.7 million in 2020, an increase of $26.1 million from 2019.

This increase in interest expense is primarily due to one-time charges of $29.4 million related to debt transactions executed in 2020, compared to one-time charges of $10.2 million related to debt transactions executed in 2019.

Adjusting for the one-time charges, interest expense increased for the year ended December 31, 2020 due to higher outstanding debt balance as compared to the year ended December 31, 2019, partially offset by the effect of lower interest rates.

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| Northeast | | $ | 1,323,972 | | | | 16.0 | % | | $ | 1,293,472 | | | | 18.6 | % | | | 2.4 | % | | $ | 56,574 | | | | 4.3 | % | | $ | 56,573 | | | | 4.4 | % | | | — | | |

In February 2020, we completed a private offering of $550.0 million in aggregate principal amount of 5.0% unsecured senior notes due 2030 (“2030 notes”) at an issue price equal to 100% of their par value.

The proceeds from this offering were used together with borrowing under our 2023 facility to redeem the remaining $503.9 million in aggregate principal amount of 2024 notes outstanding at a redemption price of 104.2% of their par value and $47.5 million in aggregate principal amount of 2027 notes at a redemption price of 103.0% of their par value.

On July 1, 2019, we acquired certain assets and the operations of Sun State Components (“Sun State”) for $42.5 million in cash.

Sun State is comprised of three truss locations, which are located in Las Vegas, Nevada; Surprise, Arizona; and Kingman, Arizona.

Sun State manufactures roof trusses and floor trusses and distributes lumber and related products to residential homebuilders and commercial contractors.

On December 9, 2019, we acquired certain assets and the operations of Raney Components, LLC and Raney Construction, Inc. (collectively “Raney”) for $59.0 million in cash, subject to certain adjustments.

Located in Groveland, Florida, Raney is a vertically-integrated manufacturer and installer of residential structures for production builder customers.

Raney combines sub-contractor labor and material supply to place concrete slabs, install masonry block for exterior walls, set wall panels and roof trusses, frame interior walls and install roof decking.

Mr. Crow has agreed to continue with the Company in a consulting capacity for a period of time following the appointment of a new Chief Executive Officer to assist in the transition.

The Board has retained a leading global executive search firm to help identify a successor.

Commodity price deflation decreased our net sales in 2019 by an estimated 12.3%.

This increase in gross margin percentage is primarily attributable to an improved product mix, the decline in the cost of commodities relative to our customer pricing commitments and continued pricing discipline.

In addition, sales growth in our value-add higher margin product categories, primarily our manufactured products and windows, doors & millwork categories, contributed to increased gross profit dollars and percentage compared to the year ended December 31, 2018.

This increase was largely due to the effects of commodity price deflation on our net sales and an increase in variable compensation related to increased sales volume and gross margin for the year ended December 31, 2019 compared to the year ended December 31, 2018.

| | | 2019 | | | | 2018 | | | |

Excluding the impact of commodity price deflation, we achieved 6.5% sales growth in the single-family, multi-family and repair and remodel/other end markets, primarily as a result of sales volume growth in our manufactured products and windows, doors & millwork categories.

| | | 2019 | | | | | | | | 2018 | | | | | | | | | | |

The decrease in net sales in our lumber and lumber sheet goods category resulted from the impact of commodity price deflation in 2019 compared to the prior year, which offset increased volume in the category.

We achieved increased net sales in our remaining product categories due to higher sales volume.

Our gross margin percentage increase was primarily attributable to an improved product mix, the decline in the cost of commodities relative to our customer pricing commitments and continued pricing discipline.

Selling, general and administrative expenses increased $30.6 million, or 2.0%, and as a percentage of net sales increased to 21.8% from 20.1% in 2018.

This increase was primarily due to increases in variable compensation related to increased sales volume and gross margin.

Interest expense was $109.6 million in 2019, a decrease of $1.3 million from 2018.

This decrease in interest expense is primarily due to lower outstanding debt balances in 2019 compared to 2018.

However, offsetting the overall decrease were one-time charges of $10.2 million in 2019 related to the debt transactions executed in that period.

In addition, interest expense for the year ended December 31, 2018 included a $3.2 million gain on debt extinguishment.

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| Northeast | | $ | 1,295,643 | | | | 18.4 | % | | $ | 1,309,391 | | | | 17.5 | % | | | (1.0 | )% | | $ | 56,012 | | | | 4.3 | % | | $ | 36,354 | | | | 2.8 | % | | | 54.1 | % |

| Southeast | | | 1,610,156 | | | | 22.9 | % | | | 1,700,317 | | | | 22.7 | % | | | (5.3 | )% | | | 83,466 | | | | 5.2 | % | | | 67,465 | | | | 4.0 | % | | | 23.7 | % |

| South | | | 1,866,891 | | | | 26.6 | % | | | 2,020,258 | | | | 27.0 | % | | | (7.6 | )% | | | 113,550 | | | | 6.1 | % | | | 111,515 | | | | 5.5 | % | | | 1.8 | % |

| West | | | 2,253,854 | | | | 32.1 | % | | | 2,448,581 | | | | 32.8 | % | | | (8.0 | )% | | | 86,144 | | | | 3.8 | % | | | 106,525 | | | | 4.4 | % | | | (19.1 | )% |

| | | $ | 7,026,544 | | | | 100.0 | % | | $ | 7,478,547 | | | | 100.0 | % | | | | | | $ | 339,172 | | | | 4.8 | % | | $ | 321,859 | | | | 4.3 | % | | | | |

Actual single-family starts increased 6.8% in the South region during the same period.

We achieved increased profitability in our Northeast, Southeast and South reportable segments largely due to an improved product mix, the decline in the cost of commodities relative to our customer pricing commitments and continued pricing discipline.

We are required to meet a fixed charge coverage ratio of 1:00 to 1:00 if our excess availability falls below the greater of $80.0 million or 10% of the maximum borrowing amount, which was $80.0 million as of December 31, 2019.

In addition, our capital expenditures increased $11.5 million in 2019 compared to 2018.

This increase in capital expenditures was largely due to the Company’s decision to purchase, rather than lease, more of its machinery and rolling stock units in 2019 compared to 2018.

Cash used in financing activities for the year ended December 31, 2019 was primarily due to $610.8 million in long-term debt repayments, largely consisting of $406.3 million in repayments of the 2024 term loan and $191.5 million in cash repayments of our 2024 notes.

In addition, we had $152.0 million in net repayments on our 2023 facility in 2019.

These payments were offset by $478.4 million in proceeds received from the issuance of 2027 notes.

Our [removed: 2024] [added: 2027] notes and [removed: 2027] [added: 2030] notes bear interest at a fixed rate, therefore, our interest expense related to these notes would not be affected by an increase in market interest rates.

Borrowings under the 2023 facility [removed: and the 2024 term loan] bear interest at either a base rate or eurodollar rate, plus, in each case, an applicable margin.

A 1.0% increase in interest rates on the 2023 facility would result in approximately [removed: $0.3 million] [added: $0.8] in additional interest expense annually [removed: as we had $27.0] [added: based on our $75.0] million in outstanding borrowings as of December 31, [removed: 2019.][added: 2020.]

Short-term changes in the cost of these materials and the related in-bound freight costs, some of which are subject to significant fluctuations, are [removed: oftentimes,] [added: sometimes,] but not always, passed on to our customers.

| [Report of Independent Registered Public Accounting Firm](#REPORT_INDEPENDENT_REGISTERED_PUBLIC_ACC) | | [removed: 33] [added: 38] |

| [Consolidated Statement of Operations and Comprehensive Income for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#COMPREHENSIVE_LOSS)] [added: 2018](#COMPREHENSIVE_LOSS)] | | [removed: 35] [added: 40] |

| [Consolidated Balance Sheet at December 31, [removed: 2019] [added: 2020] and [removed: 2018](#BALANCE_SHEETS)] [added: 2019](#BALANCE_SHEETS)] | | [removed: 36] [added: 41] |

| [Consolidated Statement of Cash Flows for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#CASH_FLOWS)] [added: 2018](#CASH_FLOWS)] | | [removed: 37] [added: 42] |

| [Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#STOCKHOLDERS_EQUITY)] [added: 2018](#STOCKHOLDERS_EQUITY)] | | [removed: 38] [added: 43] |

| [Notes to Consolidated Financial Statements](#NOTES_TO) | | [removed: 39] [added: 44] |

We have audited the accompanying consolidated balance sheet of Builders FirstSource, Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the related consolidated statements of operations and comprehensive income, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] including the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in [removed: *Internal] [added: Internal] Control - Integrated [removed: Framework*] [added: Framework] (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019] [added: 2020] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.

As described in Notes 2 and 6 to the consolidated financial statements, the Company’s consolidated goodwill balance was [removed: $769.0] [added: $785.3] million as of December 31, [removed: 2019,] [added: 2020,] and $77.1 million of the goodwill balance was assessed utilizing a quantitative assessment.

In performing the quantitative impairment test, management developed [removed: a range of] [added: the] fair [removed: values] [added: value] using a [removed: five-year] discounted cash flow methodology.

The principal considerations for our determination that performing procedures relating to the goodwill quantitative impairment test is a critical audit matter are [removed: there was] [added: the] significant judgment by management when determining the fair value of any reporting unit where a goodwill quantitative impairment test was [removed: performed.][added: performed; this in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the terminal value and expected future profitability.]

These procedures also included, among others, testing management’s process for determining the fair value of any reporting unit where a goodwill quantitative impairment test was [removed: performed,] [added: performed;] evaluating the appropriateness of the discounted cash flow [removed: methodology,] [added: methodology;] testing the completeness, accuracy, and relevance of underlying data used in the [removed: valuation methodology,] [added: discounted cash flow methodology;] and evaluating the [added: reasonableness of] significant assumptions [removed: used by management, including] [added: related to] the terminal [removed: value,] [added: value and] expected future [removed: revenues and] profitability.

Evaluating management’s assumptions related to the [added: terminal value and] expected future [removed: revenues and] profitability involved evaluating whether the assumptions used were reasonable considering the [added: current and] past performance of the reporting [removed: unit and whether these assumptions were consistent] [added: unit, relevant industry forecasts, consistency] with evidence obtained in other areas of the [removed: audit.][added: audit, and in the case of terminal value, consideration of relevant market transactions.]

| | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | |

| Net sales | | $ | [removed: 7,280,431] [added: 8,558,874] | | | $ | [removed: 7,724,771] [added: 7,280,431] | | | $ | [removed: 7,034,209] [added: 7,724,771] | |

| Cost of sales | | | [removed: 5,303,602] [added: 6,336,290] | | | | [removed: 5,801,831] [added: 5,303,602] | | | | [removed: 5,306,818] [added: 5,801,831] | |

| Gross margin | | | [removed: 1,976,829] [added: 2,222,584] | | | | [removed: 1,922,940] [added: 1,976,829] | | | | [removed: 1,727,391] [added: 1,922,940] | |

| Selling, general and administrative expenses | | | [removed: 1,584,523] [added: 1,678,730] | | | | [removed: 1,553,972] [added: 1,584,523] | | | | [removed: 1,442,288] [added: 1,553,972] | |

| Income from operations | | | [removed: 392,306] [added: 543,854] | | | | [removed: 368,968] [added: 392,306] | | | | [removed: 285,103] [added: 368,968] | |

| Interest expense, net | | | [removed: 109,551] [added: 135,688] | | | | [removed: 108,213] [added: 109,551] | | | | [removed: 193,174] [added: 108,213] | |

| Income before income taxes | | | [removed: 282,755] [added: 408,166] | | | | [removed: 260,755] [added: 282,755] | | | | [removed: 91,929] [added: 260,755] | |

| Income tax expense | | | [removed: 60,946] [added: 94,629] | | | | [removed: 55,564] [added: 60,946] | | | | [removed: 53,148] [added: 55,564] | |

| Net income | | $ | [removed: 221,809] [added: 313,537] | | | $ | [removed: 205,191] [added: 221,809] | | | $ | [removed: 38,781] [added: 205,191] | |

| Comprehensive income | | $ | [removed: 221,809] [added: 313,537] | | | $ | [removed: 205,191] [added: 221,809] | | | $ | [removed: 38,781] [added: 205,191] | |

| Basic | | $ | [removed: 1.92] [added: 2.69] | | | $ | [removed: 1.79] [added: 1.92] | | | $ | [removed: 0.34] [added: 1.79] | |

| Diluted | | $ | [removed: 1.90] [added: 2.66] | | | $ | [removed: 1.76] [added: 1.90] | | | $ | [removed: 0.34] [added: 1.76] | |

| Basic | | | [removed: 115,713] [added: 116,611] | | | | [removed: 114,586] [added: 115,713] | | | | [removed: 112,587] [added: 114,586] | |

| Diluted | | | [removed: 117,025] [added: 117,917] | | | | [removed: 116,554] [added: 117,025] | | | | [removed: 115,597] [added: 116,554] | |

| | | [added: 2020 | | | |] 2019 | | | | 2018 | | |

| Cash and cash equivalents [added: at beginning of period] | | [removed: $] | 14,096 | | | [removed: $] | 10,127 | | [added: | | 57,533 | |]

| Accounts receivable, less allowances of [removed: $13,492] [added: $17,637] and [removed: $13,054] [added: $13,492] at December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively | | | [removed: 614,946] [added: 880,018] | | | | [removed: 654,170] [added: 614,946] | |

| Other receivables | | | [removed: 77,447] [added: 76,436] | | | | [removed: 68,637] [added: 77,447] | |

| Inventories, net | | | [removed: 561,255] [added: 784,527] | | | | [removed: 596,896] [added: 561,255] | |

| Other current assets | | | [removed: 39,123] [added: 58,895] | | | | [removed: 43,921] [added: 39,123] | |

| Accrued purchases of property, plant and equipment | | $ | 1,962 | | | $ | 3,378 | | | $ | 2,350 | |

| Acquisition of assets under operating lease obligations | | | 42,606 | | | | 86,373 | | | | — | |

| Acquisition of assets under finance and capital lease obligations | | | 16,964 | | | | 16,462 | | | | 10,198 | |

| Exercise of stock options | | 235 | | | | 2 | | | | 1,422 | | | | — | | | | 1,424 | | | |

| Balance at December 31, 2020 | | 116,829 | | | $ | 1,168 | | | $ | 589,241 | | | $ | 562,374 | | | $ | 1,152,783 | | | |

Following the merger with BMC Stock Holdings, Inc. on January 1, 2021, which is discussed in more detail in Note 18, the company operates approximately 550 locations in 40 states across the United States.

| | | 2020 | | | | 2019 | | |

| Net income | $ | 313,537 | | | $ | 221,809 | | | $ | 205,191 | |

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The purpose of ASU 2020-04 is to provide optional guidance for a period of time related to accounting for reference rate reform on financial reporting.

It is intended to reduce the potential burden of reviewing contract modifications related to discontinued rates.

The amendments and expedients in this update are effective as of March 12, 2020 through December 31, 2022 and may be elected by topic.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.

ASU 2018-13 modifies the disclosure requirements on fair value measurements by removing, modifying and adding certain disclosure requirements in ASC 820.

ASU 2018-13 is effective for the Company’s annual and interim periods beginning on January 1, 2020.

Certain disclosures in ASU 2018-13 are required to be applied prospectively, while others require retrospective application.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

The adoption of this guidance did not have a material impact on our consolidated financial statements.

| | | 2020 | | | | 2019 | | |

| | | 2020 | | | | 2019 | | |

On November 2, 2020 we acquired certain assets and operations of Kansas Building Supply Company, Inc. (“KBS”) for $16.8 million in cash.

Located in Overland Park, Kansas, KBS is a supplier for interior and exterior doors, windows, millwork cabinetry, and hardware.

This acquisition was funded with cash on hand.

The fair value of acquired intangible assets of $13.6 million,

| Inventory | | | 3,171 | |

| Acquisitions | | | — | | | 8,261 | | | 8,022 | | | — | | | 16,284 | |

| Balance as of December 31, 2020 | | | | | | | | | | | | | | | | |

| Goodwill | | $ | 97,102 | | $ | 68,952 | | $ | 351,941 | | $ | 311,946 | | $ | 829,941 | |

| Accumulated impairment losses | | | (494 | ) | | (615 | ) | | (43,527 | ) | | — | | | (44,636 | ) |

| | | $ | 96,608 | | $ | 68,337 | | $ | 308,414 | | $ | 311,946 | | $ | 785,305 | |

| | | 2020 | | | | | | | | 2019 | | | | | | |

| 2021 | | $ | 21,120 | |

| 2022 | | | 19,427 | |

| 2023 | | | 16,050 | |

| 2024 | | | 14,640 | |

| 2025 | | | 12,439 | |

| Thereafter | | | 36,206 | |

| 2030 notes | | 550,000 | | | | — | |

| | | 1,642,445 | | | | 1,299,982 | |

| | | 1,624,240 | | | | 1,291,273 | |

A 1.0% increase in interest rates on the 2024 term loan would result in approximately $0.5 million in additional interest expense annually as of December 31, 2019.

This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s future cash flows, including the significant assumptions for the terminal value, expected future revenues and profitability.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating audit evidence obtained.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the valuation method used and the reasonableness of certain significant assumptions, including the terminal value.

February 21, 2020

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | (In thousands) | | | | | | | | | | |

For the years ended December 31, 2019, 2018 and 2017, the Company retired assets subject to other finance obligations of $0.6 million, $0.6 million and $14.0 million and extinguished the related other finance obligations of $0.6 million, $0.7 million and $11.7 million, respectively.

The Company purchased equipment which was financed through finance lease obligations of $16.5 million, and capital lease obligations of $10.2 million and $14.2 million in the years ended December 31, 2019, 2018 and 2017, respectively.

In addition, purchases of property, plant and equipment included in accounts payable were $3.4 million, $2.4 million and $3.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.

| Balance at December 31, 2016 | | 111,564 | | | $ | 1,115 | | | $ | 527,868 | | | $ | (219,363 | ) | | $ | 309,620 | | | |

| Exercise of stock options | | 1,449 | | | | 15 | | | | 8,040 | | | | — | | | | 8,055 | | | |

| Cumulative effect adjustment | | — | | | | — | | | | — | | | | 8,889 | | | | 8,889 | | | |

| --- | --- |

The company operates approximately 400 locations in 40 states across the United States.

| --- | --- | --- | --- | --- |

The expected dividend yield is based on our history of not paying regular dividends in the past and our current intention to not pay regular dividends in the foreseeable future.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the year ended December 31:

| | | | 2017 |

| --- | --- | --- | --- |

| Expected life | | | 6.0 years |

| Expected volatility | | | 59.2% |

| Expected dividend yield | | | 0.0% |

| Risk-free rate | | | 2.2% |

The expected life represents the period of time the options are expected to be outstanding.

Historically, we used the simplified method for determining the expected life assumption due to limited historical exercise experience on our stock options.

The expected volatility is based on the historical volatility of our common stock over the most recent period equal to the expected life of the option.

The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and has a term equal to the expected life of the options.

Supplemental cash flow information was as follows for the years ended December 31:

This update is effective for public companies for annual and interim periods beginning after December 15, 2019.

As such, this guidance will be effective for us on January 1, 2020.

Adoption of the new standard resulted in the recording of right-of-use assets and lease liabilities of $269.7 million and $267.5 million, respectively, as of January 1, 2019 to recognize operating leases, primarily related to real estate and rolling stock, which were not recognized on our balance sheet under previous guidance.

Further, the adoption of this guidance had no impact to our remaining other finance obligations as they continue to fail to meet the sale-leaseback requirements of the new standard.

The adoption of this guidance did not have a material impact on our condensed consolidated statement of operations and comprehensive income or on our condensed consolidated statement of cash flows as our leases retained their classifications as determined under previous guidance.

| Machinery and equipment | | | — | | | | 27,188 | |

| * | Totals as of December 31, 2018 included assets which, under previous guidance, were held under capital leases. As of December 31, 2019 these assets are now presented as finance lease right-of-use assets as reflected in the table above. |

On July 1, 2019, we acquired certain assets and the operations of Sun State Components (“Sun State”) for $42.5 million in cash.

Sun State is comprised of three truss locations, which are located in Las Vegas, Nevada; Surprise, Arizona; and Kingman, Arizona.

Sun State manufactures roof trusses and floor trusses and distributes lumber and related products to residential homebuilders and commercial contractors.

On December 9, 2019 we acquired certain assets and the operations of Raney Components, LLC and Raney Construction, Inc. (collectively “Raney”) for $59.0 million in cash, subject to certain adjustments.

Any forward-looking statements involve risks and uncertainties, many of which are beyond the Company’s control or may be currently unknown to the Company, that could cause actual events or results to differ materially from the events or results described in the forward-looking statements, including risks or uncertainties related to the [added: novel coronavirus disease 2019 (“COVID-19”), the BMC Merger (as defined below), the] Company’s growth strategies, including gaining market share, or the Company’s revenues and operating results being highly dependent on, among other things, the homebuilding industry, lumber prices and the economy.

[removed: The Company operates] [added: Following the BMC Merger, we operate] approximately [removed: 400] [added: 550] locations in 40 states across the United States.

[removed: OUR INDUSTRY][added: OUR INDUSTRY]

There were only eight building product [removed: suppliers] [added: suppliers, one of which was BMC,] with manufacturing capabilities in the Pro Segment that generated more than $500 million in sales, according to *ProSales* magazine’s [removed: 2019] [added: 2020] ProSales 100 list.

We were the largest building product supplier with manufacturing capabilities on [removed: this list.][added: *ProSales*’ list and have further increased our size through the BMC Merger.]

The residential building products industry is characterized by several key trends, including greater utilization of manufactured components, an expanding role of the distributor in providing turn-key services and a consolidation of suppliers by [removed: homebuilders.][added: homebuilders, as described in more detail below.]

| | • | *Prefabricated components*: Compared to conventional “stick-build” construction where builders cut and assemble lumber at the job site with their own labor, prefabricated components are engineered in an offsite location using specialized equipment and labor. This outsourced task allows for optimal material usage, lower overall labor costs and improved quality of structural elements. In addition, using prefabricated components typically results in faster construction because fabrication can be automated and performed more systematically. As such, we believe there is a [removed: long term] [added: long-term] trend towards increased use of prefabricated components by homebuilders. |

| | • | *Consolidation of suppliers by homebuilders*: We believe that homebuilders are increasingly looking to consolidate their supplier base. Many homebuilders are seeking a more strategic relationship with suppliers that are able to offer a broad range of products and services and, as a result, are allocating a greater share of wallet to a select number of larger, [removed: full service] [added: full-service] suppliers. |

According to the U.S. Census Bureau, the single-family residential construction market was an estimated [removed: $289.3] [added: $365.0] billion in [removed: 2019,] [added: 2020,] which was [removed: 5.2%] [added: 23.5%] higher than [removed: 2018,] [added: 2019,] and still down [removed: significantly] from the historical high of $413.2 billion in 2006.

Further, according to the Home Improvement Research Institute (“HIRI”) in its September [removed: 2019] [added: 2020] semi-annual forecast, the professional repair and remodel end market was an estimated [removed: $124.6] [added: $126.8] billion in [removed: 2019,] [added: 2020,] which was [removed: 4.5%] [added: 3.5%] higher than [removed: 2018.][added: 2019.]

We have a diverse geographic footprint as we [added: now] have operations in [removed: 77] [added: 85] of the top 100 U.S. Metropolitan Statistical Areas [removed: (“MSAs”),] [added: (“MSAs”) following the BMC Merger,] as ranked by single family housing permits based on available [removed: 2019] [added: 2020] U.S. Census data.

In addition, approximately [removed: 86%] [added: 91%] of U.S. single-family housing permits in [removed: 2019] [added: 2020] were issued in MSAs in which we operate.

For the year ended December 31, [removed: 2019,] [added: 2020,] our top 10 customers accounted for approximately [removed: 15.3%] [added: 15.8%] of net sales, and no single customer accounted for more than [removed: 5%] [added: 6%] of net sales.

Our top 10 customers are comprised primarily of the largest production homebuilders, including publicly traded companies such as D.R. Horton, Inc., Pulte Homes, Inc., Lennar Corporation, [removed: Hovnanian Enterprises, Inc., and] Taylor Morrison Home [removed: Corporation.][added: Corporation, and M/I Homes, Inc.]

Our sales team expects to work very closely with the designers on a day-to-day basis in order to ensure [removed: the appropriate products are identified, ordered or produced and delivered on time to the building site.]

Roof trusses, floor trusses, wall panels and stair units are built in a [removed: factory controlled] [added: factory-controlled] environment.

[removed: *Windows, Doors & Millwork.*] Windows & doors are comprised of the manufacturing, assembly and distribution of windows, and the assembly and distribution of interior and exterior door units.

Upgrading to our premium windows, doors, and insulating products [removed: reduces] [added: can reduce] overall cost to the homebuilder by minimizing costs of the required heating/cooling system.

We believe our integrated approach and scale allow us to compete effectively through our comprehensive product lines, prefabricated components, and value-added [removed: services] [added: services,] combined with the knowledge of our integrated sales forces to enable our homebuilder customers to complete construction more quickly, with higher quality and at a lower cost.

[removed: MANUFACTURING][added: MANUFACTURING]

Our manufacturing facilities utilize [removed: the latest] industry leading technology and high quality materials to improve product quality, increase efficiency, reduce lead times and minimize production errors.

Each house requires its own set of designed shop drawings, which vary by builder [removed: type:] [added: type —] production versus custom builders.

As with trusses and wall panels, engineered wood components have [removed: a] design and fabrication [removed: step.][added: steps.]

[removed: We fabricate] [added: The fabricated] box stairs [added: are] based on these measurements.

Our manufactured custom millwork consists primarily of [added: interior and] exterior trim, interior and exterior doors, custom windows, features and box columns.

[removed: *Windows.*] We manufacture a full line of traditional vinyl windows at an approximately 200,000 square foot manufacturing facility located in Houston, Texas.

By pursuing the [removed: following strategies,] [added: Company’s four pillar strategic priorities as outlined below,] we intend to build on our advantaged market position to create value for our shareholders by increasing profits and net cash flow generation, while making us a more valuable partner to our customers.

The resulting cash flow should provide meaningful opportunities for [removed: debt reduction and] increased investment in organic and acquisitive [removed: growth.][added: growth that preserve our balance sheet strength, grow our return on invested capital and return capital to our shareholders.]

[added: Leverage our competitive strengths to capitalize on housing market growth.] As the U.S. housing market returns to a historically normalized level, we intend to leverage our core business strengths including size, national footprint, unmatched scale in manufacturing capability, breadth of product portfolio, and end market exposure to expand our sales and profit margins.

Maximize our share of wallet by capturing above-market growth in our higher margin value added [removed: products][added: products.]

We believe our national manufacturing footprint and differentiated capabilities will allow us to capture growth in our higher margin value-added [removed: products.][added: products, including trusses, wall panels and millwork.]

This operational platform often will make us a preferred distributor for large scale national homebuilders as well as local and custom [removed: homebuilders looking for more efficient ways to build a home.]

[added: Optimize our highly scalable cost structure with operational excellence initiatives.] We continue to focus on standardizing [added: and automating] processes and technology-based workflows to minimize costs, streamline our operations and enhance working capital efficiency.

Environmental, social and governance [removed: strategy][added: strategy.]

We are [added: also] committed to making informed choices that improve our corporate governance, financial strength, operational efficiency, environmental stewardship, community engagement and resource management.

Consistent with our core values, our goal is to be recognized by our customers as the preferred supplier, by our employees as a safe, diverse and inclusive workforce, by the industry as being at the forefront of [removed: innovation and] [added: innovation,] by our stakeholders as an ethical [removed: company.][added: company and by the communities in which we serve as a good corporate citizen.]

Helping homebuilders become more [removed: productive] [added: productive, more efficient,] and [removed: efficient] [added: safer] is fundamental to what we do and we are passionate about building this future together.

At [removed: December] [added: January] 31, [removed: 2019,] [added: 2021, following the BMC Merger,] we employed approximately [removed: 1,900] [added: 2,400] sales representatives, who are paid a commission based on gross margin dollars collected and worked with approximately [removed: 1,600] [added: 2,100] sales coordinators and product specialists.

The key materials we purchase include dimensional [removed: OSB, lumber] [added: lumber, OSB] and plywood along with engineered wood, windows, doors, millwork, gypsum and roofing.

Our largest suppliers are national companies such as Boise Cascade Company, Weyerhaeuser Company, Canfor Corporation, Norbord, Inc., James Hardie Industries plc, National Gypsum Company, PlyGem Holdings, Inc., M I Windows and Doors, Inc., Andersen Corporation, Masonite International Corporation and JELD-WEN Inc. We believe [removed: there is sufficient supply in the] marketplace [added: supply allows us] to competitively source most of our requirements without reliance on any particular supplier and that our diversity of suppliers affords us purchasing flexibility.

BMC MERGER

On January 1, 2021, Builders FirstSource, Inc. completed its previously announced all stock merger transaction with BMC Stock Holdings, Inc., a Delaware corporation (“BMC”), pursuant to the Agreement and Plan of Merger, dated as of August 26, 2020 (as amended, restated, supplemented, or otherwise modified from time to time, the “Merger Agreement”), by and among Builders FirstSource, Inc., Boston Merger Sub I Inc., a Delaware corporation and direct wholly owned subsidiary of Builders FirstSource, Inc. (“Merger Sub”), and BMC.

On the terms and subject to the conditions set forth in the Merger Agreement, on January 1, 2021, Merger Sub merged with and into BMC, with BMC continuing as the surviving corporation and a wholly owned subsidiary of Builders FirstSource, Inc. (the “BMC Merger”).

The BMC Merger will be accounted for using the acquisition method of accounting, and the Company will be treated as the accounting acquirer.

The operating results of BMC will be reported as part of the Company beginning on January 1, 2021, and as such, references to the Company in this annual report, including the Company’s historical financial condition, results of operations and cash flows, does not include BMC, unless otherwise noted.

the appropriate products are identified, ordered or produced and delivered on time to the building site.

While not as sensitive to commodity price fluctuations as Lumber & Lumber Sheet Goods, the products in this category include lumber & lumber sheet goods, and thus are somewhat sensitive to commodity price fluctuations.

Windows, Doors & Millwork.

Windows.

Organic Growth of Value-add Products and Services

homebuilders looking for more efficient ways to build a home.

Drive Operational Excellence

Continue to Build our High-Performing Culture

Strong emphasis on putting our people first.

Our team members are a critical resource, and every single one makes a difference.

Enhancing talent acquisition, employee development and retention will ensure we continue to attract and retain this valuable component of our business.

Our team members are the face of the Company to our customers and the communities in which we operate.

Their contributions in serving our customers is a fundamental component in our success.

We care about our team members and strive to have a strong environmental, health and safety program that drives world-class safety results and ensures our team members leave their workplace safely, every day.

We recognize how important it is for our team members to develop and progress in their careers and strive to build a performance-based culture.

We recognize that the environmental sustainability of our products is important to both us as a company, and to our customers.

We prioritize purchasing and supplying sustainable wood products led by the Sustainable Forestry Initiative.

Pursue Strategic Acquisitions

Leverage free cash flow to accelerate strategic growth.

The highly fragmented nature of the Pro Segment of the U.S. residential new construction building products supply market presents substantial acquisition opportunities.

Our long-term acquisition strategy is focused on the continued growth of our prefabricated components business and on the potential for geographic expansion.

First, we plan to selectively seek acquisition targets that manufacture prefabricated components such as factory-built roof and floor trusses, wall panels, stairs, and engineered wood, as well as other value-added products such as vinyl windows and millwork.

We also intend to pursue potential acquisitions that present an opportunity to add manufacturing capabilities in a relatively short period of time.

Second, there remain a number of attractive homebuilding markets where we do not currently operate.

We believe that our proven operating model can be successfully adapted to these markets and where homebuilders, many of whom we currently serve elsewhere, would value our broad product and service offering, professional expertise, and superior customer service.

When entering a new market, our strategy is to acquire market-leading distributors and subsequently expand their product offerings or add manufacturing facilities while integrating their operations into our centralized platform.

This strategy allows us to quickly achieve the scale required to maximize profitability and leverage existing customer relationships in the local market.

Our management has shown the capability to effectively and efficiently integrate newly acquired businesses, ramping up productivity and driving value.

Prior to the BMC Merger, we successfully integrated 43 acquisitions since 1998.

sophisticated information technology systems and large-scale procurement capabilities.

Our largest competitors in our markets often include one or more of 84 Lumber Company, Carter Lumber Company, US LBM Holdings, LLC and, prior to the BMC Merger, BMC Stock Holdings, Inc.

HUMAN CAPITAL

Following the BMC Merger, we had more than 26,000 employees.

Approximately 500 are covered by collective bargaining agreements and the Company believes that its relations with the labor unions are generally good.

Employee levels are managed to align with the pace of business and management believes it has sufficient human capital to operate its business successfully.

Leverage our competitive strengths to capitalize on housing market growth

Optimize our highly scalable cost structure with operational excellence initiatives

We are working towards identifying, measuring and mapping the environmental, social and governance impacts of our business in an effort to be a good corporate citizen and proactively manage the impacts on the communities in which we serve.

Our largest competitors in our markets include 84 Lumber Co., which is privately held, as well as BMC Stock Holdings, Inc., which is publicly held.

EMPLOYEES

At December 31, 2019, we had approximately 15,800 employees.

Less than 2% of the workforce at our company are members of eight different unions.

We believe that we have good relations with our employees, as evidenced by our recent Forbes “America’s Best Large Employers” awards.

EXECUTIVE OFFICERS

M.

Chad Crow, President, Chief Executive Officer and Director, age 51.

Mr. Crow joined the Company in September 1999, and has held several roles of increasing responsibility.

Mr. Crow became a director in 2017 and President and CEO on December 29, 2017.

In 2009, Mr. Crow was named Senior Vice President and Chief Financial Officer and in 2014 he was promoted to President and Chief Operating Officer.

Prior to joining Builders FirstSource, he served in a variety of positions at Pier One Imports and Price Waterhouse LLP.

Mr. Crow received his B.B.A. degree from Texas Tech University.

Peter M.

Jackson, Senior Vice President and Chief Financial Officer, age 47.

Mr. Jackson joined the Company on November 4, 2016 as Senior Vice President and Chief Financial Officer.

Prior to joining the Company, Mr. Jackson was employed by Lennox International, Inc. (“Lennox”).

Since July 2014, Mr. Jackson had served as Vice President and CFO of Lennox’s Refrigeration Segment.

His previous positions at Lennox also included Vice President, Finance - Financial Planning and Analysis and Mergers and Acquisitions as well as Vice President and Chief Financial Officer of Lennox’s Residential Heating and Cooling Segment.

Before joining Lennox, Mr. Jackson served in multiple financial leadership positions at SPX Corporation, General Electric, and Gerber Scientific.

Mr. Jackson is a certified public accountant and a graduate of General Electric’s Experienced Financial Leadership program.

He holds an M.B.A. degree from Rensselaer Polytechnic Institute and a B.S. from Bryant University.

Donald F.

McAleenan, Senior Vice President and General Counsel, age 65.

Mr. McAleenan has served as Senior Vice President and General Counsel of the Company since 1998.

Prior to joining the Company, Mr. McAleenan served as Vice President and Deputy General Counsel of Fibreboard Corporation from 1992 to 1997.

Mr. McAleenan was also Assistant General Counsel of AT&E Corporation and spent nine years as a securities lawyer at two New York City law firms.

Mr. McAleenan has a B.S. from Georgetown University and a J.D. from New York University Law School.

Scott L.

Robins, Senior Vice President and Chief Operating Officer – West, age 52.

Mr. Robins was appointed to his current position on February 20, 2018.

He had been a Senior Vice President – Operations of the Company since the acquisition of ProBuild Holdings LLC by the Company in July 2015 and with ProBuild prior to that since 2007.

At the time of his promotion, he had supervisory responsibility for 93 locations in eight states.

Mr. Robins joined Hope Lumber Company in 2004 as a Vice President of Operations, overseeing numerous operations in a three-state area, and continued in that role when Hope was acquired by ProBuild Holdings LLC in 2007.

Before then, he had worked in various operational and supply chain management positions with Andersen Lumber and Stock Building Supply since 1988.

Mr. Robins has 30 years of experience in the building products industry.

He holds a B.A. in Finance from Weber State University.

For the fiscal year ended December 31, [removed: 2019][added: 2020]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T [removed: (Section] [added: (§] 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a shell company (as defined [removed: by] [added: in] Rule 12b-2 of the Act).

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, [removed: 2019] [added: 2020] was approximately [removed: $1,920.7] [added: $2,375.5] million based on the closing price per share on that date of [removed: $16.86] [added: $20.70] as reported on the NASDAQ Stock Market LLC.

The number of shares of the registrant’s common stock, par value $0.01, outstanding as of February [removed: 19, 2020] [added: 24, 2021] was [removed: 116,130,284.][added: 206,431,681.]

Portions of the registrant’s definitive proxy statement for its annual meeting of stockholders to be held on [removed: May 21, 2020] [added: June 16, 2021] are incorporated by reference into Part II and Part III of this Form 10-K.

| Item 1A. | | [Risk Factors](#ITEM_1A_RISK_FACTORS) | | [removed: 10] [added: 11] |

| Item 1B. | | [Unresolved Staff Comments](#Item_1B_Unresolved_Staff_Comments) | | [removed: 19] [added: 23] |

| Item 2. | | [Properties](#Item_2_Properties) | | [removed: 19] [added: 23] |

| Item 3. | | [Legal Proceedings](#Item_3_Legal_Proceedings) | | [removed: 20] [added: 24] |

| Item 4. | | [Mine Safety Disclosures](#Item_4_Mine_Safety_Disclosures) | | [removed: 20] [added: 24] |

| Item 5. | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#Item_5) | | [removed: 21] [added: 25] |

| Item 6. | | [Selected Financial Data](#Item_6) | | [removed: 22] [added: 26] |

| Item 7. | | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS_F) | | [removed: 23] [added: 27] |

| Item 7A. | | [Quantitative and Qualitative Disclosures About Market Risk](#Item_7A) | | [removed: 31] [added: 36] |

| Item 8. | | [Financial Statements and Supplementary Data](#Item_8) | | [removed: 32] [added: 37] |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#Item_9) | | [removed: 65] [added: 69] |

| Item 9A. | | [Controls and Procedures](#Item_9A) | | [removed: 65] [added: 69] |

| Item 9B. | | [Other Information](#Item_9B) | | [removed: 66] [added: 70] |

| Item 10. | | [Directors, Executive Officers and Corporate Governance](#Item_10_Directors_Executive_Officers) | | [removed: 67] [added: 71] |

| Item 11. | | [Executive Compensation](#Item_11_Executive_Compensation) | | [removed: 67] [added: 71] |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#Item_12) | | [removed: 67] [added: 71] |

| Item 13. | | [Certain Relationships and Related Transactions, and Director Independence](#Item_13) | | [removed: 68] [added: 72] |

| Item 14. | | [Principal Accountant Fees and Services](#Item_14) | | [removed: 68] [added: 72] |

| Item 15. | | [Exhibits and Financial Statement Schedules](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH) | | [removed: 69] [added: 73] |

| Item 16 | | [Form 10-K Summary](#ITEM_16_FORM_10K_SUMMARY) | | [removed: 73] [added: 76] |

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

We have a broad network of distribution and manufacturing facilities in 40 states throughout the U.S. Based on available [removed: 2018] [added: 2020] U.S. Census data, we have operations in [removed: 77] [added: 85] of the top 100 U.S. Metropolitan Statistical [removed: Areas,] [added: Areas following the BMC Merger,] as ranked by single family housing permits in [removed: 2018.][added: 2020.]

Truss and panel manufacturing facilities vary in size from 30,000 square feet to 60,000 square feet with [removed: 8] [added: eight] to 10 acres of outside storage for lumber and for finished goods.

Our window manufacturing facility in Houston, Texas [removed: has] [added: is] approximately 200,000 square feet.

[removed: We] [added: Following the BMC Merger, we] contractually lease approximately [removed: 310] [added: 400] facilities and own approximately [removed: 90] [added: 150] facilities.

These leases typically have an initial lease term of [removed: 5] [added: five] to 15 years and most provide options to renew for specified periods of time.

As described in Note 10 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K, [removed: 139] [added: 131] of our leased facilities are subject to a sales-lease back transaction that is accounted for in our financial statements as owned assets with offsetting financing obligations.

[removed: We] [added: In addition, following the BMC Merger, we] operate a fleet of approximately [removed: 11,000] [added: 17,000] rolling stock units, which includes approximately [removed: 4,500] [added: 7,500] trucks and [removed: 4,500] [added: 6,500] forklifts as well as trailers to deliver products from our distribution and manufacturing centers to our customers’ job sites.

The approximate number of stockholders of record of our common stock as of February [removed: 19, 2020] [added: 24, 2021] was [removed: 70.][added: 139.]

We currently [removed: have no intention to] [added: do not] pay dividends.

The graph assumes that the value of the investment in our common stock, in each index, and in the peer group (including reinvestment of dividends) was $100 on [removed: 12/31/2014] [added: December 31, 2015] and tracks it through [removed: 12/31/2019.][added: December 31, 2020.]

[removed: ][added: ]

The information regarding securities authorized for issuance under equity compensation plans appears in our definitive proxy statement for our annual meeting of stockholders to be held on [removed: May 21, 2020] [added: June 16, 2021] under the caption “Equity Compensation Plan Information,” which information is incorporated herein by reference.

| | | 12/15 | | | | 12/16 | | | | 12/17 | | | | 12/18 | | | | 12/19 | | | | 12/20 | |

| Builders FirstSource, Inc. | | | 100.00 | | | | 99.01 | | | | 196.66 | | | | 98.47 | | | | 229.33 | | | | 368.32 |

| Russell 2000 | | | 100.00 | | | | 121.31 | | | | 139.08 | | | | 123.76 | | | | 155.35 | | | | 186.36 |

| S&P 600 Building Products Index | | | 100.00 | | | | 131.67 | | | | 141.97 | | | | 102.71 | | | | 130.08 | | | | 164.06 |

| | | 12/14 | | | | 12/15 | | | | 12/16 | | | | 12/17 | | | | 12/18 | | | | 12/19 | |

| Builders FirstSource, Inc. | | | 100.00 | | | | 161.28 | | | | 159.68 | | | | 317.18 | | | | 158.81 | | | | 369.87 |

| Russell 2000 | | | 100.00 | | | | 95.59 | | | | 115.95 | | | | 132.94 | | | | 118.30 | | | | 148.49 |

| S&P 600 Building Products Index | | | 100.00 | | | | 121.42 | | | | 162.96 | | | | 185.64 | | | | 135.56 | | | | 202.37 |

The following selected consolidated financial data for the years ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017] [added: 2018] and as of December 31, [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] were derived from our consolidated financial statements which are included in Item 8 of this annual report on Form 10-K.

Selected consolidated financial data as of December 31, [removed: 2017] [added: 2018] and as of and for the years ended December 31, [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] were derived from our consolidated financial statements, but are not included herein.

| | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | |

| Net sales (1) | | $ | [removed: 7,280,431] [added: 8,558,874] | | | $ | [removed: 7,724,771] [added: 7,280,431] | | | $ | [removed: 7,034,209] [added: 7,724,771] | | | $ | [removed: 6,367,284] [added: 7,034,209] | | | $ | [removed: 3,564,425] [added: 6,367,284] | | |

| Gross margin | | | [removed: 1,976,829] [added: 2,222,584] | | | | [removed: 1,922,940] [added: 1,976,829] | | | | [removed: 1,727,391] [added: 1,922,940] | | | | [removed: 1,596,748] [added: 1,727,391] | | | | [removed: 901,458] [added: 1,596,748] | | |

| Selling, general and administrative expenses | | | [removed: 1,584,523] [added: 1,678,730] | | | | [removed: 1,553,972] [added: 1,584,523] | | | | [removed: 1,442,288] [added: 1,553,972] | | | | [removed: 1,360,412] [added: 1,442,288] | | | | [removed: 810,703] [added: 1,360,412] | | |

| Net income (loss) (2)(3) | | | [removed: 221,809] [added: 313,537] | | | | [removed: 205,191] [added: 221,809] | | | | [removed: 38,781] [added: 205,191] | | | | [removed: 144,341] [added: 38,781] | | | | [removed: (22,831] [added: 144,341] | [removed: )] | |

| Net income (loss) per share — basic | | $ | [removed: 1.92] [added: 2.69] | | | $ | [removed: 1.79] [added: 1.92] | | | $ | [removed: 0.34] [added: 1.79] | | | $ | [removed: 1.30] [added: 0.34] | | | $ | [removed: (0.22] [added: 1.30] | [removed: )] | |

| Net income (loss) per share — diluted | | $ | [removed: 1.90] [added: 2.66] | | | $ | [removed: 1.76] [added: 1.90] | | | $ | [removed: 0.34] [added: 1.76] | | | $ | [removed: 1.27] [added: 0.34] | | | $ | [removed: (0.22] [added: 1.27] | [removed: )] | |

| Cash and cash equivalents | | $ | [removed: 14,096] [added: 423,806] | | | $ | [removed: 10,127] [added: 14,096] | | | $ | [removed: 57,533] [added: 10,127] | | | $ | [removed: 14,449] [added: 57,533] | | | $ | [removed: 65,063] [added: 14,449] | | |

| Total assets (4) | | | [removed: 3,249,490] [added: 4,173,671] | | | | [removed: 2,932,309] [added: 3,249,490] | | | | [removed: 3,006,124] [added: 2,932,309] | | | | [removed: 2,909,887] [added: 3,006,124] | | | | [removed: 2,882,038] [added: 2,909,887] | | |

| Total debt (including current portion) | | | [removed: 1,291,273] [added: 1,624,240] | | | | [removed: 1,561,294] [added: 1,291,273] | | | | [removed: 1,784,420] [added: 1,561,294] | | | | [removed: 1,802,052] [added: 1,784,420] | | | | [removed: 1,951,671] [added: 1,802,052] | | |

| Stockholders’ equity | | | [removed: 824,953] [added: 1,152,783] | | | | [removed: 596,338] [added: 824,953] | | | | [removed: 376,209] [added: 596,338] | | | | [removed: 309,620] [added: 376,209] | | | | [removed: 149,195] [added: 309,620] | | |

| Depreciation and amortization | | $ | [removed: 100,038] [added: 116,566] | | | $ | [removed: 97,906] [added: 100,038] | | | $ | [removed: 92,993] [added: 97,906] | | | $ | [removed: 109,793] [added: 92,993] | | | $ | [removed: 58,280] [added: 109,793] | | |

| (2) | [removed: As discussed in Note 12 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K, net] [added: Net] income for the year ended December 31, 2017 includes $29.0 million in income tax expense attributable to revaluation of our net deferred tax assets resulting from the enactment of the 2017 Tax Act. Net income for the year ended December 31, 2016 includes a reduction to our valuation allowance of $131.7 million as we released the valuation allowance against our net federal and certain state deferred tax assets in that period. [removed: Net loss for the year ended December 31, 2015 includes a valuation allowance of $9.7 million against primarily all of our deferred tax assets.] |

| (3) | Net income for the year ended December 31, [removed: 2019] [added: 2020] includes net losses on debt extinguishment and other financing costs of [removed: $10.2] [added: $29.4] million. Net income for the year ended December 31, [removed: 2018] [added: 2019] includes [removed: a] net [removed: gain] [added: losses] on debt extinguishment [added: and other financing costs] of [removed: $3.2] [added: $10.2] million. Net income for the year ended December 31, [removed: 2017] [added: 2018] includes [added: a] net [removed: losses] [added: gain] on debt extinguishment [removed: and other financing costs] of [removed: $58.7] [added: $3.2] million. Our [added: 2020,] 2019, [removed: 2018] and [removed: 2017] [added: 2018] debt transactions are discussed in detail in Note 9 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K. Net income for the year ended December 31, [removed: 2016] [added: 2017] includes net losses on debt extinguishment and other financing costs of [removed: $56.9] [added: $58.7] million. Net [removed: loss] [added: income] for the year ended December 31, [removed: 2015] [added: 2016] includes [removed: $38.6 million of acquisition and transaction related costs associated with the ProBuild acquisition, including $13.2 million in commitment fees related to bridge and backstop financing facilities incurred in connection with the financing of the ProBuild acquisition. In addition,] net [removed: loss for the year ended December 31, 2015 also includes $10.3 million related to non-cash interest expense from the amortization of] [added: losses on] debt [removed: discount and deferred loan costs,] [added: extinguishment] and [removed: fair value adjustments related to previously outstanding stock warrants.] [added: other financing costs of $56.9 million.] |

| (4) | [removed: As discussed in Note 2 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K we] [added: We] adopted [removed: updated] guidance relating to leases using the modified retrospective method as of January 1, 2019. As such, periods prior to the adoption date have not been restated and continue to be presented in accordance with previous guidance. |

Based on the required evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of December 31, [removed: 2019,] [added: 2020,] we maintained disclosure controls and procedures that were effective in providing reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Based on our evaluation under the framework set forth in *Internal Control — Integrated Framework (2013)*, our management concluded that our internal control over financial reporting was effective as of December 31, [removed: 2019.][added: 2020.]

The effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

During the quarter ended December 31, [removed: 2019,] [added: 2020,] there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held [removed: May 21, 2020] [added: June 16, 2021] under the captions “Proposal 1 — Election of Directors,” “Continuing Directors,” “Information Regarding the Board and Its Committees,” “Corporate Governance,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Executive Officers of the Registrant,” which information is incorporated herein by reference.

| | • | The grant of any waiver, including an implicit waiver, from a provision of one of these policies to one of these officers that relates to one or more of the items set forth in Item 406(b) of Regulation [removed: S-K.] [added: S-K,] |

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held [removed: May 21, 2020] [added: June 16, 2021,] under the captions “Executive Compensation and Other Information,” “Information Regarding the Board and its Committees — Compensation of Directors,” and “Compensation Committee Interlocks and Insider Participation,” which information is incorporated herein by reference.

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held on [removed: May 21, 2020] [added: June 16, 2021,] under the caption “Ownership of Securities” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.

[removed: Item 13.] [added: Item 13.] *Certain Relationships and Related Transactions, and Director Independence*

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held [removed: May 21, 2020] [added: June 16, 2021,] under the caption “Election of Directors and Management Information,” “Information Regarding the Board and its Committees,” and “Certain Relationships and Related Party Transactions,” which information is incorporated herein by reference.

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held [removed: May 21, 2020] [added: June 16, 2021,] under the caption “Proposal 3 — Ratification of Selection of Independent Registered Public Accounting Firm — Fees Paid to PricewaterhouseCoopers LLP,” which information is incorporated herein by reference.

| [removed: 3.2] [added: 3.3] | | [Amended and Restated By-Laws of Builders FirstSource, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on [removed: November 6, 2017,] [added: August 14, 2020,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312517334452/d471628dex31.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312520220347/d27662dex31.htm)] |

| 4.1 | | [Indenture, dated as of [removed: August 22, 2016,] [added: May 30, 2019,] among Builders FirstSource, Inc., the guarantors party thereto, and Wilmington Trust, National Association, as trustee and notes collateral agent (form of Note included therein) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on [removed: August 23, 2016,] [added: May 31, 2019,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312516688065/d131759dex41.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519162897/d736510dex41.htm)] |

| 4.2 | | [removed: [Indenture,] [added: [First Supplemental Indenture,] dated as of [removed: May 30,] [added: July 25,] 2019, among Builders FirstSource, Inc., the guarantors party thereto, and Wilmington Trust, National Association, as trustee and notes collateral agent [removed: (form of Note included therein)] (incorporated by reference to Exhibit [removed: 4.1] [added: 4.3] to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on [removed: May 31,] [added: July 30,] 2019, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519162897/d736510dex41.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519207090/d784014dex43.htm)] |

| 4.3 | | [removed: [First] [added: [Second] Supplemental Indenture, dated as of [removed: July 25, 2019,] [added: April 24, 2020,] among Builders FirstSource, Inc., the guarantors [removed: party thereto,] [added: named therein] and Wilmington Trust, National Association, as trustee and [added: as] notes collateral agent (incorporated by reference to Exhibit [removed: 4.3] [added: 4.4] to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on [removed: July 30, 2019,] [added: April 24, 2020,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519207090/d784014dex43.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000156459020018519/bldr-ex44_6.htm)] |

| 4.5* | | [Description of Capital [removed: Stock](https://www.sec.gov/Archives/edgar/data/1316835/000156459020005717/bldr-ex45_372.htm)] [added: Stock](https://www.sec.gov/Archives/edgar/data/1316835/000156459021009308/bldr-ex45_7.htm)] |

| 10.1 | | [removed: [Term Loan] [added: [Amended and Restated ABL] Credit Agreement, dated as of July 31, 2015, among Builders FirstSource, Inc., [removed: Deutsche Bank AG, New York Branch,] [added: SunTrust Bank,] as administrative [added: agent and collateral] agent, and the lenders and financial institutions party thereto (incorporated by reference to Exhibit [removed: 10.1] [added: 10.2] to the Company’s Current Report on Form 8-K, filed with the Securities Exchange Commission on August 6, 2015, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex101.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex102.htm)] |

| 10.2 | | [removed: [First Amendment] [added: [Amendment No. 1] to Credit Agreement, dated as of [removed: August] [added: March] 22, [removed: 2016, by and] [added: 2017,] among Builders FirstSource, Inc., [removed: Deutsche Bank AG, New York Branch,] [added: SunTrust Bank,] as administrative [added: agent and collateral] agent, and the lenders [removed: and financial institutions] party thereto (incorporated by reference to Exhibit [removed: 10.2] [added: 10.1] to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on [removed: August 23, 2016,] [added: March 28, 2017,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312516688065/d131759dex102.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312517098501/d366623dex101.htm)] |

| [removed: 10.3] [added: 10.4] | | [removed: [Second Amendment] [added: [Amendment No. 3] to Credit Agreement, dated as of [removed: February 23, 2017, by and] [added: January 29, 2021,] among Builders FirstSource, Inc., [removed: Deutsche Bank AG, New York Branch,] [added: SunTrust Bank,] as administrative [added: agent and collateral] agent, and the lenders [removed: and financial institutions] party thereto (incorporated by reference to Exhibit [removed: 10.3] [added: 10.1] to the Company’s Current Report on Form [removed: 10-K for the year ended December 31, 2016,] [added: 8-K,] filed with the Securities [added: and] Exchange Commission on [removed: March 1, 2017,] [added: February 3 2021,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000156459017003114/bldr-ex103_578.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312521026414/d89986dex101.htm)] |

| [removed: 10.4] [added: 10.6] | | [Amended and Restated ABL [removed: Credit] [added: Collateral] Agreement, dated as of July 31, 2015, among [removed: Builders FirstSource, Inc., SunTrust Bank, as administrative agent and collateral agent, and] the [removed: lenders] [added: Company, certain of its subsidiaries,] and [removed: financial institutions party thereto] [added: SunTrust Bank] (incorporated by reference to Exhibit [removed: 10.2] [added: 10.5] to the Company’s Current Report on Form 8-K, filed with the Securities Exchange Commission on August 6, 2015, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex102.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex105.htm)] |

| [removed: 10.5] [added: 10.3] | | [Amendment No. [removed: 1] [added: 2] to Credit Agreement, dated as of [removed: March 22, 2017,] [added: April 24, 2019,] among Builders FirstSource, Inc., [added: Truist Bank (as successor by merger to] SunTrust [removed: Bank,] [added: Bank),] as administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on [removed: March 28, 2017,] [added: April 30, 2019,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312517098501/d366623dex101.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519129650/d734639dex101.htm)] |

| [removed: 10.6] [added: 10.7] | | [removed: [Amendment No. 2 to Credit] [added: [Notes Collateral] Agreement, dated as of [removed: April 24,] [added: May 30,] 2019, among Builders FirstSource, Inc., [removed: SunTrust Bank, as administrative agent and collateral agent,] [added: certain of its subsidiaries,] and [removed: the lenders party thereto] [added: Wilmington Trust, National Association, as trustee] (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on [removed: April 30,] [added: May 31,] 2019, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519129650/d734639dex101.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519162897/d736510dex101.htm)] |

| [removed: 10.7] [added: 10.5] | | [ABL/Bond Intercreditor Agreement, dated as of May 29, 2013, among Builders FirstSource, Inc. and certain of its subsidiaries, as grantors, SunTrust Bank, as ABL agent, and Wilmington Trust, National Association, as notes collateral agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities Exchange Commission on June 3, 2013, File Number 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312513245434/d547322dex102.htm) |

| 10.8 | | [removed: [Collateral] [added: [Amended and Restated ABL Guarantee] Agreement, dated as of July 31, 2015, among the [removed: Company, certain of its subsidiaries,] [added: Guarantors (as defined therein)] and [removed: Deutsche] [added: SunTrust] Bank [removed: AG, New York Branch] (incorporated by reference to Exhibit [removed: 10.4] [added: 10.7] to the Company’s Current Report on Form 8-K, filed with the Securities Exchange Commission on August 6, 2015, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex104.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex107.htm)] |

| [removed: 10.9] [added: 10.34+] | | [Amended and Restated [removed: ABL Collateral] [added: Employment] Agreement, dated as of [removed: July 31, 2015, among the Company, certain of its subsidiaries,] [added: August 26, 2020, between David E. Flitman, Builders FirstSource, Inc.,] and [removed: SunTrust Bank] [added: BMC Stock Holdings, Inc.] (incorporated by reference to Exhibit [removed: 10.5] [added: 10.1] to the Company’s Current Report on Form 8-K, filed with the Securities [added: and] Exchange Commission on August [removed: 6, 2015,] [added: 27, 2020,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex105.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312520233278/d89165dex101.htm)] |

| [removed: 10.10] [added: 2.1] | | [removed: [Notes Collateral Agreement, dated as] [added: [Agreement and Plan] of [added: Merger, dated] August [removed: 22, 2016,] [added: 26, 2020, by and] among Builders FirstSource, Inc., [removed: certain of its subsidiaries,] [added: BMC Stock Holdings, Inc.,] and [removed: Wilmington Trust, National Association, as trustee] [added: Boston Merger Sub I Inc.] (incorporated by reference to Exhibit [removed: 10.1] [added: 2.1] to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August [removed: 23, 2016,] [added: 27, 2020,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312516688065/d131759dex101.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312520233278/d89165dex21.htm)] |

| [removed: 10.11] [added: 3.2] | | [removed: [Notes Collateral Agreement, dated as] [added: [Amendment to Amended and Restated Certificate] of [removed: May 30, 2019, among] [added: Incorporation of] Builders FirstSource, [removed: Inc., certain of its subsidiaries, and Wilmington Trust, National Association, as trustee] [added: Inc.] (incorporated by reference to Exhibit [removed: 10.1] [added: 3.1] to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on [removed: May 31, 2019,] [added: January 4, 2021,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519162897/d736510dex101.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312521000344/d101613dex31.htm)] |

| [removed: 10.12] [added: 10.9] | | [removed: [Guarantee Agreement,] [added: [Lease and Master Agreement Guaranty,] dated as of July 31, 2015, [removed: among] [added: by] the [removed: guarantors party thereto and Deutsche Bank AG, New York Branch] [added: Company in favor of LN Real Estate LLC] (incorporated by reference to Exhibit [removed: 10.6] [added: 10.10] to the Company’s [removed: Current] [added: Quarterly] Report on Form [removed: 8-K,] [added: 10-Q for the quarter ended September 30, 2015,] filed with the Securities [added: and] Exchange Commission on [removed: August 6,] [added: November 9,] 2015, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex106.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000156459015010186/bldr-ex1010_344.htm)] |

| [removed: 10.13] [added: 10.25+] | | [Amended and Restated [removed: ABL Guarantee] [added: Employment] Agreement, dated [removed: as of July 31, 2015, among the Guarantors (as defined therein)] [added: December 29, 2017, between Builders FirstSource, Inc.] and [removed: SunTrust Bank] [added: M. Chad Crow] (incorporated by reference to Exhibit [removed: 10.7] [added: 10.32] to the Company’s [removed: Current] [added: Annual] Report on Form [removed: 8-K,] [added: 10-K for the year ended December 31, 2017,] filed with the Securities [added: and] Exchange Commission on [removed: August 6, 2015,] [added: March 1, 2018,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex107.htm)] [added: 0-51357](http://www.sec.gov/Archives/edgar/data/1316835/000156459018004035/bldr-ex1032_241.htm))] |

| [removed: 10.14] [added: 10.26+] | | [removed: [Lease and Master Agreement Guaranty,] [added: [Employment Agreement,] dated [removed: as of July 31, 2015, by the Company in favor of LN Real Estate LLC] [added: January 15, 2004, between Builders FirstSource, Inc. and Donald F. McAleenan] (incorporated by reference to Exhibit [removed: 10.10] [added: 10.3] to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, [removed: 2015,] [added: 2005,] filed with the Securities [removed: and] Exchange Commission on November [removed: 9, 2015,] [added: 2, 2005,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000156459015010186/bldr-ex1010_344.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000156459021009308/bldr-ex1031_8.htm)] |

| [removed: 10.15+] [added: 10.24+] | | [Builders FirstSource, Inc. [removed: 1998 Stock Incentive Plan, as amended, effective March 1, 2004] [added: Form of Director Indemnification Agreement] (incorporated by reference to Exhibit [removed: 10.4] [added: 10.13] to Amendment No. [removed: 1] [added: 3] to the Registration Statement of the Company on Form S-1, filed with the Securities and Exchange Commission on [removed: April 27,] [added: May 26,] 2005, File Number [removed: 333-122788)](http://www.sec.gov/Archives/edgar/data/1316835/000095012305005102/y05301a1exv10w4.txt)] [added: 333-122788)](http://www.sec.gov/Archives/edgar/data/1316835/000095012305006750/e05301a3exv10w13.txt)] |

| 10.16+ | | [removed: [Amendment No. 7 to the] [added: [2015 Form of] Builders FirstSource, Inc. [removed: 1998 Stock] [added: 2014] Incentive Plan [added: Non-Statutory Stock Option Award Certificate] (incorporated by reference to Exhibit [removed: 10.6] [added: 10.22] to the Company’s Annual Report on Form 10-K for the year ended December 31, [removed: 2006,] [added: 2014,] filed with the Securities and Exchange Commission on March [removed: 12, 2007,] [added: 3, 2015,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000095013407005357/d43878exv10w6.htm)] [added: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000156459015001235/bldr-ex1022_20141231219.htm)] |

| [removed: 10.17+] [added: 10.22+] | | [removed: [2004 Form] [added: [Form] of [removed: Builders FirstSource, Inc. 1998 Stock Incentive Plan] Nonqualified Stock Option Agreement [added: Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan] (incorporated by reference to Exhibit [removed: 10.5] [added: 10.23] to Amendment No. [removed: 1] [added: 2] to the Registration Statement of [removed: the Company] [added: Stock Building Supply Holdings, Inc.] on Form S-1, filed with the Securities and Exchange Commission on [removed: April 27, 2005,] [added: July 29, 2013,] File Number [removed: 333-122788)](http://www.sec.gov/Archives/edgar/data/1316835/000095012305005102/y05301a1exv10w5.txt)] [added: 333-189368)](http://www.sec.gov/Archives/edgar/data/1574815/000119312513306259/d520315dex1023.htm)] |