Builders FirstSource (BLDR) 10-K risk factor changes: FY2022 vs FY2021

[removed: Economic and Industry Risks][added: Industry Risks]

While [removed: demand for building products has remained high throughout most of] the [removed: pandemic, the] COVID-19 pandemic [removed: has] caused significant disruptions and delays in the manufacture and distribution of building products throughout the industry supply chain, [removed: resulting] [added: we are beginning to see a return to pre-pandemic levels] in [removed: shortages and shipping delays of several categories of building products, such as windows and lumber.][added: many areas.]

[removed: In particular, any significant downturn in residential construction as a result] [added: Any worsening] of the [removed: economic impact of] [added: pandemic, a new health-related emergency and their effects on] the [removed: COVID-19 pandemic] [added: economy] could have an adverse [removed: effect on] [added: impact] our business, financial condition and results of operations.

[removed: The] [added: The] industry in which we operate is dependent upon the residential homebuilding industry, as well as the U.S. economy, the credit markets and other important [removed: factors.][added: factors.]

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

Production of new homes and multifamily buildings may also decline because of shortages of qualified tradesmen, reliance on inadequately capitalized builders and sub-contractors, [removed: and] shortages of suitable building lots and [removed: material.][added: material, and lack of financing or more expensive financing available to homebuilders.]

[removed: The] [added: The] building supply industry is subject to cyclical market [removed: pressures.][added: pressures.]

For example, prices of wood products, including lumber and panel products, are subject to significant volatility, such as the spike in lumber prices experienced in our industry [removed: as a result of the COVID-19 outbreak,] [added: in 2020] and [removed: directly affect our sales] [added: 2021] and [removed: earnings.][added: the more recent decline in lumber prices.]

Our lumber and lumber sheet goods product category represented [removed: 42.3%] [added: 35.6%] of total net sales for the year ended December 31, [removed: 2021.][added: 2022.]

[removed: However, it is likely, based on historical experience,] [added: Industry forecasters expect] that we will face future downturns in the homebuilding industry which could have an adverse effect on our operating results, financial condition or cash flows.

[removed: Our] [added: Our] industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our [removed: results.][added: results.]

Any of these competitors may (1) foresee the course of market development more accurately than we do, (2) develop products that are superior to our products, (3) have the ability to produce or supply similar products at a lower cost, (4) develop stronger relationships with local homebuilders or commercial builders or (5) adapt more quickly to new technologies or evolving customer requirements than we [removed: do or.][added: do.]

In addition, home center retailers, which have historically concentrated their sales efforts on retail consumers and small contractors, have intensified their marketing [removed: efforts] [added: efforts, including expanding e-commerce offerings,] to professional homebuilders in recent years and may continue to intensify these efforts in the future.

Home affordability can be a key driver in demand for our products and home prices have increased meaningfully [removed: since the beginning of] [added: over] the [removed: COVID-19 pandemic.][added: past several years.]

[removed: A] [added: A] range of factors may make our quarterly revenues, earnings and cash flows [removed: variable.][added: variable.]

[removed: Operational] [added: Operational] and Strategic [removed: Risks][added: Risks]

[removed: We] [added: 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 facilities, implementing operational excellence, pursuing digitization opportunities and initiatives, and maintaining a balanced debt [removed: level.][added: level.]

[removed: We] [added: We] have consummated a number of strategic acquisitions as part of our growth strategy and intend to continue to pursue strategic acquisitions in the future as part of our growth strategy.

Strategic acquisitions involve risks and if we are unable to realize the anticipated benefits of these transactions or identify suitable acquisition candidates in the [removed: future] [added: future,] our growth, financial condition and results of operations could be materially and adversely [removed: affected][added: affected.]

Strategic acquisitions are an important part of our growth strategy and we seek to identify attractive [removed: acquisitions] [added: acquisition] opportunities that we believe will be accretive and result in increased sales and EBITDA, cost savings, synergies and various other benefits.

Although we have been successful in the past with the integration of numerous acquisitions, we may not be able to successfully integrate the operations of any future acquired [removed: businesses, including the recent BMC Merger,] [added: businesses] with our own in an efficient and cost-effective manner or without significant disruption to our or the acquired companies’ existing operations.

Our failure to fully integrate future acquired businesses effectively or to manage other consequences of our acquisitions, including increased indebtedness, could prevent us from remaining competitive and, ultimately, could adversely affect our financial condition, operating results and cash [removed: flows][added: flows.]

[removed: We] [added: We] are subject to competitive pricing pressure from our [removed: customers.][added: customers.]

Production homebuilders and [removed: multi-family] [added: multifamily] builders historically have exerted and will continue to exert significant pressure on their outside 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.

Given this pricing pressure, we may not be able to pass along price increases for lumber, wood [removed: products and] [added: products,] other building [removed: products] [added: products, or related labor costs] to our customers, which could impact our margins.

In addition, continued consolidation among production homebuilders or [removed: multi-family] [added: multifamily] and commercial builders, or changes in such builders’ purchasing policies or payment practices, could result in additional pricing pressure, and our financial condition, operating results and cash flows may be adversely affected.

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

[removed: The] [added: The] loss of any of our significant customers or a reduction in the quantity of products they purchase could affect our financial [removed: health.][added: health.]

Our ten largest customers generated approximately 18% of our net sales for the year ended December 31, [removed: 2021.][added: 2022.]

We cannot guarantee that we will maintain or improve our relationships with these customers or that we will supply these customers at historical [removed: levels.]

In addition, production homebuilders, [removed: multi-family] [added: multifamily] builders and other customers may: (1) seek to purchase some of the products that we currently sell directly from manufacturers, (2) elect to establish their own building products manufacturing and distribution facilities or (3) give advantages to manufacturing or distribution intermediaries in which they have an economic stake.

[added: The loss] of one or more of our significant customers or deterioration in our relations with any of them could significantly affect our financial condition, operating results and cash flows.

[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: Generally,] [added: Historically,] our products are obtainable from various sources and in sufficient quantities.

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

[removed: Failure] [added: 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 [removed: strategies.][added: strategies.]

[removed: Any significant leadership changes involve inherent risk and] [added: In addition,] any failure to ensure the effective transfer of knowledge and a smooth transition could hinder our strategic planning, execution and future performance.

[removed: While only a small percentage of our] workforce is unionized, there can be no assurance that additional employees will not conduct union organization campaigns or become union members in the future and a failure to renew existing collective bargaining agreements on favorable terms could lead to further labor shortages and higher labor costs.

[removed: We] [added: We] are subject to cybersecurity risks and expect to incur increasing costs in an effort to minimize those [removed: risks.][added: risks.]

While we have implemented administrative and technical controls and have taken other preventive [removed: actions] [added: actions, such as deploying company-wide cybersecurity training and conducting threat simulations] to reduce the risk of cyber incidents and protect our information technology, they may be insufficient to prevent physical and electronic break-ins, cyber-attacks or other security breaches to our computer systems.

The prices of wood products directly affect our sales and earnings.

If lumber or structural panel prices were to significantly decline from current levels, our sales and profits would be negatively affected as compared to 2022 operating results.

levels.

Furthermore, we have had recent leadership changes and transitions involving our senior leadership team, as previously announced.

Such leadership changes can be inherently difficult to manage, and an inadequate transition may cause disruption to our business, including to our relationships with our customers, suppliers, vendors and employees.

It may also make it more difficult for us to hire and retain key employees.

While only a small percentage of our

Furthermore, advances in computer and software capabilities, encryption technology, and other discoveries increase the complexity of our technological environment, including how each interacts with our various software platforms.

Such advances could delay or hinder our ability to process transactions or could compromise the integrity of our data, resulting in a material adverse impact on our financial condition and results of operations.

The risk of system disruption is increased when significant system changes are undertaken.

If we fail to timely integrate and update our information technology systems and processes, including our new ERP system, we may fail to realize the cost savings or operational benefits anticipated to be derived from these initiatives.

Additionally, we may be impacted by intrusions or failures of critical infrastructure such as the power grid or communications systems.

We regularly invest resources to update and improve our internal information technology systems and software platforms.

Should our investments not succeed, or if delays or other issues with new or existing internal technology systems and software platforms disrupt our operations, our business could be harmed.

We rely on our network infrastructure, ERP systems, data hosting, public cloud and software-as-a-service providers, and internal technology systems for many of our development, marketing, operational, support, sales, accounting and financial reporting activities.

We are continually investing resources to update and improve these systems and environments in order to meet existing needs, as well as the growing and changing requirements of our business and customers.

If we experience prolonged delays or unforeseen difficulties in updating and upgrading our systems and architecture, including our new ERP system, we may experience outages and may not be able to deliver certain offerings or develop new offerings and enhancements that we need to remain competitive.

Improvements, upgrades and, to a greater extent, system conversions, are often complex, costly and time consuming.

In addition, such improvements can be challenging to integrate with our existing technology systems, or may uncover problems with our existing technology systems.

Unsuccessful implementation of hardware or software updates and improvements could result in outages, disruption in our business operations, loss of revenue or damage to our reputation.

We have a $1.8 billion revolving credit facility with maturity dates between December 17, 2026 and January 17, 2028 (“Revolving facility”), under which we had $264.0 million in outstanding borrowings and $128.9 million of letters of credit outstanding as of December 31, 2022.

The ongoing COVID-19 pandemic and its contributory effects on the economy could adversely impact, our business, financial condition, liquidity, capital and results of operations.

While the level of disruption caused by, and the economic impact of, the COVID-19 pandemic lessened in 2022, there is no assurance that the pandemic will not worsen again, including as a result of the emergence of new strains of the virus, or another health-related emergency will not emerge.

Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations.

We are operating in an uncertain economic environment.

The global credit and financial markets have experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, high rates of inflation, and uncertainty about economic stability and a potential recession.

While our management team continually monitors market conditions and economic factors throughout our footprint, we are unable to predict the duration or severity of such conditions or factors.

If conditions were to worsen nationally, regionally or locally, then we could see a decrease in housing starts, which would adversely affect our business, financial condition, operating results, and cash flows.

In addition, the financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the current conflict between Russia and Ukraine, which is increasing volatility in commodity and energy prices, creating supply chain issues and causing instability in financial markets.

Sanctions imposed by the United States and other countries in response to such conflict could further adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability.

There can be no assurance that further deterioration in markets and confidence in economic conditions will not occur.

Our general business strategy may be adversely affected by any such economic downturn or recession, volatile business environment, hostile third-party action or continued unpredictable and unstable market conditions.

The effects of any economic downturn or recession could continue for many years after the downturn or recession is considered to have ended.

ESG risks could adversely affect our reputation and shareholder, employee, customer and third party relationships and may negatively affect our stock price.

Our business faces increasing public scrutiny related to ESG activities.

We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as DEI, environmental stewardship, including with respect to climate change, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations.

Additionally, investors and shareholder advocates are placing an increasing emphasis on how corporations address ESG issues in their business strategy when making investment decisions and when developing their investment theses and proxy recommendations.

We may incur meaningful costs with respect to our ESG efforts and if such efforts are negatively perceived, our reputation and stock price may suffer.

Climate change could adversely affect our business and damage our reputation.

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts.

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 turn, these supply chain disruptions have in many cases led to significant spikes in the prices of the affected building products, which may impact our margins if we are unable to pass along these price increases to our customers.

Furthermore, the COVID-19 pandemic has resulted in increased labor costs and a general labor shortage in our industry to meet the high demand for our services.

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 concern of COVID-19 or the emergence of other health epidemics or pandemics), the efficacy of the vaccination program in the U.S., supply chain disruptions, decreased demand for our products and services, rising inflation, our ability to maintain sufficient qualified personnel due to labor shortages, employee illness, quarantine, willingness to return to work, vaccine and/or testing mandates, face-coverings and other safety requirements, or travel and other restrictions, and the actions taken by governments, businesses and individuals to contain the impact of COVID-19, as well as further actions taken to limit the resulting economic impact.

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

Any of these developments could materially and adversely affect our business, financial condition and results of operations.

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 a deterioration in the U.S. economy, inflation, rising interest rates, supply chain disruption or labor shortages.

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.

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.

The loss

However, as noted above, the COVID-19 pandemic has 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.

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 also underwent significant leadership changes in connection with the BMC Merger.

We tend to realize higher gross margins on sales to remodeling contractors due to the smaller product volumes purchased by those customers, as well as the more customized nature of the projects those customers generally undertake.

Integrating the business of BMC into our existing business may be more difficult, costly or time-consuming than expected, and we may fail to realize the anticipated benefits of the BMC Merger, which may adversely affect our business results and negatively affect the value of our common stock following the BMC Merger.

The success of the BMC Merger will depend on, among other things, our continued ability to integrate the business of BMC into our existing business in a manner that facilitates growth opportunities and realizes cost savings.

Our goal is to achieve the anticipated growth and cost savings without adversely affecting current revenues and investments in future growth.

While our integration of BMC has been largely successful to date, anticipated growth and cost savings, may be lower than what we expect and may take longer to achieve than anticipated, which could have an adverse effect on our revenues, level of expenses and operating results.

In addition, the continued integrating of the business of BMC into our existing business may result in additional and unforeseen expenses, and the anticipated benefits of our integration plan may not be fully realized.

If we are not able to adequately address integration challenges, we may be unable to fully realize the anticipated benefits of the integration of BMC’s operations into our existing business.

If we are not able to successfully achieve these objectives, the anticipated benefits of the BMC Merger may not be realized fully, or may take longer to realize than expected.

An inability to realize the full extent of the anticipated benefits of the BMC Merger, as well as any delays encountered in the integration process, could have an adverse effect upon our revenues, level of expenses and operating results, which may adversely affect the value of our common stock.

We will incur significant integration costs in connection with the BMC Merger.

We have incurred and expect to incur a number of non-recurring costs associated with combining the operations of BMC into our existing operations.

These costs and expenses include fees paid to financial, legal and accounting advisors, facilities and systems consolidation costs, severance and other potential employment-related costs, and other related charges.

There are also a large number of processes, policies, procedures, operations, technologies and systems that must be integrated as part of integrating BMC’s operations into our existing operations.

While we anticipated that a certain level of expenses would be incurred in connection with the BMC Merger, there are many factors beyond our control that could affect the total amount or the timing of the integration and implementation expenses.

There may also be additional unanticipated significant costs in connection with the BMC Merger that we may not recoup.

These costs and expenses could reduce the realization of efficiencies, strategic benefits and additional income we expect to achieve from the BMC Merger.

Although we expect that these benefits will offset the transaction expenses and implementation costs over time, this net benefit may not be achieved in the near term or at all

As of December 31, 2021, we also had a $1.4 billion revolving credit facility which was extended in December 2021 to a maturity date of December 17, 2026 (“2026 facility”) and increased on February 4, 2022 to $1.8 billion.

We had $588.0 million in outstanding borrowings and $126.4 million of letters of credit outstanding as of December 31, 2021 under the 2026 facility.

Subsequent to December 31, 2021, the Company also completed a private offering of an additional $300.0 million in aggregate principal amount of 2032 notes.

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

transactions in the future.

We do not have any current plan to pay dividends on our common stock, and as a result, your ability to achieve a return on your investment in our common stock may be limited to any increases in the price of our common stock.

The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related [removed: footnotes] [added: notes] contained in Item 8.

[removed: OVERVIEW][added: OVERVIEW]

The Company operates [removed: approximately 565] [added: 569] locations in 42 states across the United States.

Given the span and depth of our geographical reach, our locations are organized into three geographical divisions (East, Central, and West), which [removed: were] [added: are] also our operating segments.

We offer an integrated solution to our customers [added: by] providing manufacturing, [removed: supply] [added: supply,] and installation of a full range of structural and related building products.

Additionally, we supply our customers with a broad offering of professional grade building products not manufactured by us, such as dimensional lumber and lumber sheet [removed: goods and] [added: goods,] various window, door and millwork lines along with other various building products.

We group our building products into [removed: six] [added: four] product categories:

[removed: | | • |] *Lumber [removed: &] [added: and] Lumber Sheet Goods.* Lumber [removed: &] [added: and] lumber sheet goods include dimensional lumber, plywood, and OSB products used in on-site house framing. [removed: |]

[removed: | | • |] *Manufactured Products.* Manufactured products consist of wood floor and roof trusses, steel roof trusses, wall panels, and engineered wood. [removed: |]

[removed: | | • | *Windows, Door & Millwork.* Windows & doors are comprised of the manufacturing, assembly, and distribution of windows and the assembly and distribution of interior and exterior door units.] Millwork includes interior [removed: and exterior] trim and custom features that we manufacture, such as intricate mouldings, stair parts, and columns. [removed: |]

[removed: | | • | *Other Building Products & Services.* Other building products & services are comprised of products such as cabinets and hardware as well as] [added: This category also includes] services such as turn-key framing, shell construction, design [removed: assistance,] [added: assistance] and professional installation [added: of products] spanning [removed: the majority] [added: all] of our product [removed: categories, as well as revenue from our Paradigm subsidiary. |][added: categories.]

[removed: | | • |] *Use of Prefabricated Components.* Homebuilders are increasingly using prefabricated components in order to realize increased efficiency, overcome skilled construction labor shortages and improve quality. [removed: Shortening cycle time from start to completion is a key imperative of the homebuilders during periods of strong consumer demand. We continue to see the demand for prefabricated components increasing within the residential new construction market as the availability of skilled construction labor remains limited. |]

[removed: | | • | *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, rising inflation and other factors that affect the homebuilding [removed: industry] [added: industry,] such as demographic trends, [added: increasing] interest rates, housing starts, the high cost of land development, employment levels, consumer confidence, and the availability of credit to homebuilders, contractors, and homeowners. [removed: The disruptions and uncertainties as a result of the ensuing COVID-19 pandemic may have a significant impact on our future operating results. |]

[removed: | | • | *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, supply of houses, the availability of financing and interest rates. [removed: 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. |]

[removed: | | • |] *Controlling Expenses.* Another important aspect of our strategy is controlling costs and striving to be a [removed: low-cost] [added: low total-cost] building materials supplier in the markets we serve. [removed: We pay close attention to managing our working capital and operating expenses. Further, we pay careful attention to our logistics function and its effect on our shipping and handling costs. |]

[removed: | | • | *Multi-Family] [added: *Multifamily] and Light Commercial Business.* Our primary focus has [removed: been, and continues to be,] [added: been] on single-family residential new construction and the repair and remodel end market. [removed: However, we will continue to identify opportunities for profitable growth in the multi-family and light commercial markets. |]

[removed: | | • | *Capital Structure.*] We [removed: had $2,957.3 million of indebtedness as of December 31, 2021. 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. [removed: 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 structure and liquidity needs. |]

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

These transactions are described [added: further] in [removed: Note 3] [added: Notes 8 and 15] to the consolidated financial statements included in Item 8 of this annual report on Form 10-K.

[removed: Company] [added: *Company] Shares [removed: Repurchases][added: Repurchases*]

[removed: Subsequent to year-end, on] [added: On] February 18, 2022, the Company announced that its board of directors authorized the repurchase of [removed: an additional] $1.0 billion of its shares of common stock.

These [removed: transactions] [added: acquisitions further expand our market footprint and provide additional operations in our value-add product categories and our multifamily customer segment and] are [added: further] described in Note [added: 3 and Note] 15 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K.

[removed: Debt Transactions][added: *Debt Transactions*]

[removed: Subsequent to year-end, on] [added: On] January 21, 2022, the Company completed a private offering of an additional $300.0 million in aggregate principal amount of [removed: 2032] [added: 4.25% senior unsecured] notes [added: due 2032 (“4.25% 2032 notes”)] at an issue price equal to 100.50% of par value.

On February 4, 2022, the Company amended the [removed: 2026] [added: previous credit] facility to increase the total commitments by an aggregate amount of $400.0 million resulting in a new $1.8 billion amended credit facility.

According to the U.S. Census Bureau, actual U.S. total housing starts for the year ended December 31, [removed: 2021] [added: 2022] were 1.6 million, [removed: an increase] [added: a decrease] of [removed: 15.8%] [added: 3.0%] compared to the year ended December 31, [removed: 2020.][added: 2021.]

Actual U.S. single-family housing starts for the year ended December 31, [removed: 2021] [added: 2022] were [removed: 1.1] [added: 1.0] million, [removed: an increase] [added: a decrease] of [removed: 13.6%] [added: 10.6%] compared to the year ended December 31 [removed: 2020.][added: 2021.]

A composite of third party sources, including the NAHB, are forecasting [removed: 1.7] [added: 1.3] million U.S. total housing starts and [removed: 1.2] [added: 0.9] million U.S. single-family housing starts for [removed: 2022,] [added: 2023,] which are [removed: increases] [added: projected decreases] of [removed: 4.0%] [added: 16.6%] and [removed: 4.0%,] [added: 11.6%,] respectively, from [removed: 2021.][added: 2022.]

In addition, in its September [removed: 2021] [added: 2022] semi-annual forecast, the Home Improvement Research Institute (“HIRI”) forecasted sales in the professional repair and remodel end market to increase approximately [removed: 7.1%] [added: 3.6%] in [removed: 2022] [added: 2023] compared to [removed: 2021.][added: 2022.]

Our net sales for the year ended December 31, [removed: 2021] [added: 2022] increased [removed: 132.4%] [added: 14.2%] over the same period last year.

The [removed: remainder of the] increase was [added: driven by] a [removed: result of] [added: 7.3% increase in sales related to acquisitions and] core organic sales growth [added: of 6.6%,] primarily in [removed: the] [added: our] single-family [added: and repair and remodel] customer [removed: segment.][added: segments.]

Our gross margin percentage increased by [removed: 3.4%] [added: 4.7%] during the year ended December 31, [removed: 2021] [added: 2022] compared to the year ended December 31, [removed: 2020,] [added: 2021,] primarily [removed: attributable to effective pricing relative] [added: due] to [removed: the impact of commodity inflation, as well as] [added: core organic] growth in value-added product [removed: categories.][added: categories, as well as disciplined pricing in a volatile, supply-constrained marketplace.]

We believe the long-term outlook for the housing industry is positive [added: and that the housing industry remains underbuilt] due to growth in the underlying demographics compared to historical new construction [removed: levels, despite the uncertainty in the industry at the outset of the COVID-19 pandemic.][added: levels.]

We [removed: feel] [added: believe] we are well-positioned to take advantage of the construction activity in our markets and to increase our market share, which may include strategic acquisitions.

We will continue to focus on working capital by closely monitoring the credit exposure of our customers, remaining focused on maintaining the right level of inventory and by working with our vendors to improve payment [removed: terms and pricing on our products.][added: terms.]

[removed: RESULTS] [added: RESULTS] OF [removed: OPERATIONS][added: OPERATIONS]

A discussion regarding our financial condition and results of operations for the year ended December 31, [removed: 2021] [added: 2022] compared to the year ended December 31, [removed: 2020] [added: 2021] is presented below.

A discussion regarding our financial condition and results of operations for the year ended December 31, [removed: 2020] [added: 2021] compared to the year ended December 31, [removed: 2019] [added: 2020] can be found under Item 7 of Part II of our Annual Report on Form [removed: 10-K, as amended] [added: 10-K] for the fiscal year ended December 31, [removed: 2020, filed with the SEC on February 21,] 2021, [removed: with such amendment] filed with the SEC on [removed: July 21, 2021.][added: March 1, 2022.]

[removed: 2021] [added: 2022] Compared with [removed: 2020][added: 2021]

| Cost of sales | | | [removed: 70.6] [added: 65.9] | % | | | [removed: 74.0] [added: 70.6] | % |

*Windows, Door and Millwork.* Windows and doors are comprised of the manufacturing, assembly, and distribution of windows and the assembly and distribution of interior and exterior door units.

*Specialty Building Products and Services.* Specialty building products and services consist of various products, including vinyl, composite and wood siding, exterior trim, metal studs, cement, roofing, insulation, wallboard, ceilings, cabinets, and hardware.

We also offer software products through our Paradigm subsidiary, including drafting, estimating, quoting, and virtual home design services, which provide software solutions to retailers, distributors, manufacturers and homebuilders that boost sales, reduce costs, and help them become more competitive.

*Homebuilding 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, rising inflationary pressures, mortgage markets and the health of the economy.

According to the U.S. Census Bureau, the seasonally adjusted annual U.S. total and single-family housing starts were 1.4 million and 0.9 million, respectively, in 2022.

Many factors have impacted and may continue to impact our sales and gross margins, including continued consolidation within the building products supply industry, increased competition for homebuilder business, supply chain constraints and cyclical fluctuations in commodity prices.

Moreover, our industry remains highly fragmented and competitive, and we will continue to face significant competition from local and regional suppliers.

As a result of various current market dynamics, including rising inflationary pressures, mortgage rate increases and shifts in housing affordability, industry forecasters, including the National Association of Home Builders (“NAHB”), expect to see housing demand soften near-term.

Despite expected near-term tempered market conditions, we believe the housing industry remains underbuilt and that there are several meaningful trends that indicate U.S. housing demand will continue to be strong over the long-term, including the aging of housing stock and normal population growth due to immigration and birthrate exceeding death rate.

*Targeting Large Production Homebuilders.* The homebuilding industry continues to undergo consolidation, and the larger homebuilders continue to increase their market share.

We expect that trend to continue as larger homebuilders have better liquidity and land positions relative to the smaller, less capitalized homebuilders.

Our focus is on maintaining relationships and market share with these customers while balancing the competitive pressures we face in servicing large homebuilders with certain profitability expectations.

Additionally, we have been successful in expanding our custom homebuilder base while maintaining acceptable credit standards.

*Repair and remodel end market*.

While influenced by housing starts to a lesser degree than the homebuilding market, the repair and remodel market is still dependent upon some of the same factors, including demographic trends, interest rates, consumer confidence, employment rates, the health of the economy and home financing markets.

As a result of these pressures, we may experience reduced sales demand, challenges in the supply chain, 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.

Shortening cycle time from start to completion is a key imperative of the homebuilders during periods of strong consumer demand.

As the availability of skilled construction labor remains limited, we continue to see the demand for prefabricated components increasing within the residential new construction market.

*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, to a lesser extent, repair and remodel activities, and is subject to cyclical market changes.

Disruptions and uncertainties as a result of a pandemic, or other health related emergency, like the 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.

Changes in the inventory of available homes and other economic factors relative to home prices could result in changes to the affordability of homes.

As a result, homebuyer demand may shift toward smaller or larger homes creating fluctuations in demand for our products.

*Cost and/or Availability of Materials.* Prices of building materials, including wood products, are subject to cyclical market fluctuations, which may adversely impact operating income when prices rapidly rise or fall within a relatively short period of time.

We purchase materials which are then sold to customers as well as used as direct production inputs for our manufactured and prefabricated products.

Short-term changes in the cost and/or availability of these materials, some of which are subject to significant fluctuations, are often passed on to our customers, but our pricing quotation periods and market competition may limit our ability to pass on such price changes.

We may also be limited in our ability to pass on increases on in-bound freight costs on our products.

We may also experience challenges sourcing suitable products for our customers and may be forced to provide alternative materials as substitution for contracted orders.

Our inability to pass on material price increases to our customers could adversely impact our operating results.

We closely manage our working capital and operating expenses.

Further, we pay careful attention to our logistics function and its effect on our shipping and handling costs.

However, through recent acquisitions we have expanded our operational footprint in the multifamily and light commercial markets, growing our value-add components and millwork product offerings in this end market.

We will continue to identify opportunities for profitable growth in these areas.

*Capital Structure.* We had $3,015.4 million of indebtedness as of December 31, 2022.

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, our market capitalization, and market interest rates.

As such, we may enter into various debt or equity transactions to appropriately manage and optimize our capital structure and liquidity needs.

During 2022 and through the date of this filing, we completed a number of acquisitions for a combined $722.3 million purchase price, net of cash acquired, including the acquisitions of (i) Panel Truss of Longview, Inc., Panel Truss – Hearne, LLC, Case-Hill, Inc., Panel Truss-Dallas, LLC, Truss Ops Trucking, LLC and Truss Ops, LLC (the “Texas Panel Truss Businesses”), (ii) Panel Truss – Oakwood, LLC, Panel Truss – Townville, LLC and Panel Truss – Ringgold, LLC (the “East Panel Truss Businesses”), (iii) Valley Truss Co., Inc. (“Valley Truss”), (iv) Odds-N-Ends, Inc., d/b/a HomCo Lumber & Hardware (“HomCo”), (v) Trussway, LLC and its subsidiaries (“Trussway”), (vi) Fulcrum Building Group Holdings, LLC and its subsidiaries (“Fulcrum”), (vii) Pima Door and Supply and Sunrise Carpentry (“Pima”), and subsequent to year-end, (viii) Noltex Truss and its affiliates (“Noltex”).

On May 9, 2022, the board of directors authorized a new share repurchase program of $2.0 billion, which replaced the previous $1.0 billion program authorized in February 2022.

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

| | • | *Gypsum, Roofing & Insulation.* Gypsum, roofing, & insulation include wallboard, ceilings, joint treatment and finishes. |

| | • | *Siding, Metal, and Concrete.* Siding, metal, and concrete includes vinyl, composite, and wood siding, exterior trim, other exteriors, metal studs and cement. |

| | • | *Homebuilding 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 1.6 million and 1.1 million, respectively, in 2021. Due to 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 believe there are several meaningful trends that indicate U.S. housing demand will continue to grow, including historically low interest rates, the aging of housing stock, and normal population growth due to immigration and birthrate exceeding death rate. Building upon the current rate of market growth, industry forecasters, including the National Association of Homebuilders (“NAHB”), expect to see continued increases in housing demand over the next year. |

| | • | *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 has not had a materially adverse impact on our financial results to date, 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, labor shortages, increased margin pressures and/or increased operating costs as a result. |

| | • | *Targeting Large Production Homebuilders.* The homebuilding industry continues to undergo consolidation, and the larger homebuilders continue to increase their market share. We expect that trend to continue as larger homebuilders have better liquidity and land positions relative to the smaller, less capitalized homebuilders. Our focus is on maintaining relationships and market share with these customers while balancing the competitive pressures we are facing in servicing large homebuilders with certain profitability expectations. Additionally, we have been successful in expanding our custom homebuilder base while maintaining acceptable credit standards. |

| | • | *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. 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, challenges in the supply chain, 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. |

| | • | *Cost and/or Availability of Materials.* Prices of wood products, which are subject to cyclical market fluctuations, may adversely impact operating income when prices rapidly rise or fall within a relatively short period of time. We purchase certain materials, including lumber products, which are then sold to customers as well as used as direct production inputs for our manufactured and prefabricated products. Short-term changes in the cost and/or availability of these materials, some of which are subject to significant fluctuations, are oftentimes passed on to our customers, but our pricing quotation periods and market competition may limit our ability to pass on such price changes. We may also be limited in our ability to pass on increases on in-bound freight costs on our products. We may also be limited in our ability to find suitable products for our customers and may be forced to provide other materials as substitution for contracted orders. Our inability to pass on material price increases to our customers could adversely impact our operating results. |

BMC Merger & Other Acquisitions

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

During the twelve months ended December 31, 2021, we have also completed six other acquisitions.

The BMC Merger and the other acquisitions were accounted for using the acquisition method of accounting, with Builders FirstSource, Inc. as the accounting acquirer.

The operating results of BMC are included as part of the Company beginning on January 1, 2021, while the results of the other acquired companies are included from the date of each acquisition and as such, the historical financial condition, results of operations and cash flows of the Company presented in this annual report Form 10-K for periods prior to that date do not include BMC or the other acquired companies.

COVID-19 Pandemic

Despite experiencing disruptions to our operations and implementing a number of health and safety precautions as a result of the COVID-19 pandemic, our financial results and financial condition were not materially adversely affected by the pandemic.

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

Despite the limited impact of the COVID-19 pandemic on our 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, the pace of recovery of economic activity and the impact to consumers, and contributing effects of the pandemic including any potential supply disruptions, labor shortages, inflation, and the impact of housing starts and repair and remodeling activity, 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.

This authorization is in addition to the two previous $1.0 billion authorizations in 2021, which were completed on January 12, 2022.

During the year ended December 31, 2021, the Company executed several debt transactions, including the issuance of $1.0 billion in aggregate principal amount of 4.25% senior unsecured notes due 2032 (“2032 notes”), redemption of $165.0 million in outstanding aggregate principal amount of 6.75% senior secured notes due 2027 (“2027 notes”), and amendments to our 2026 facility to both extend maturity and increase the total commitments.

These transactions are described in Notes 8 and 15 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K.

The significant increase was primarily driven by acquisitions with our BMC Merger accounting for 76.6% of our sales growth in the year ended December 31, 2021, while commodity price inflation accounted for another 30.2%.

Our selling, general and administrative expenses, as a percentage of net sales, were 17.4% in 2021, a 2.2% decrease from 19.6% in 2020, primarily driven by cost leverage on increased net sales in the year ended December 31, 2021 compared to the year ended December 31, 2020.

| | | 2021 | | | | 2020 | | |

Net Sales.

The BMC Merger and commodity price inflation increased net sales by 76.6% and 30.2%, respectively.

The remaining increase in sales is attributable to core organic growth in our single family customer segment and net sales from other acquisitions.

| | Twelve Months Ended December 31, | | | | | | | | | | | | | | | | | | |

| | 2021 | | | | | | | | 2020 | | | | | | | | | | |

| Lumber & lumber sheet goods | $ | 8,412.2 | | | | 42.3 | % | | $ | 3,076.4 | | | | 35.9 | % | | | 173.4 | % |

| Manufactured products | | 4,333.3 | | | | 21.8 | % | | | 1,640.5 | | | | 19.2 | % | | | 164.1 | % |

| Windows, doors & millwork | | 3,332.0 | | | | 16.7 | % | | | 1,629.2 | | | | 19.0 | % | | | 104.5 | % |

| Siding, metal & concrete products | | 1,531.1 | | | | 7.7 | % | | | 773.6 | | | | 9.0 | % | | | 97.9 | % |

| Gypsum, roofing & insulation | | 656.4 | | | | 3.3 | % | | | 514.6 | | | | 6.0 | % | | | 27.6 | % |

| Other building products & services | | 1,628.9 | | | | 8.2 | % | | | 924.6 | | | | 10.9 | % | | | 76.2 | % |

Gross Margin.

Gross margin increased $3.6 billion to $5.9 billion, driven primarily by the BMC Merger, commodity price inflation, and core organic sales growth.

This increase was primarily attributable to pricing relative to the impact of commodity price inflation, as well as growth particularly in value-added product categories.

This increase in expenses was primarily due to the BMC Merger, which accounted for approximately 73% of the increase including an increase of $387.4 million in related depreciation and amortization expense, and higher variable compensation costs as a result of higher sales and profitability.

We may experience changes in interest expense if changes in our debt occur.

Changes in market interest rates could also affect our interest expense.

Our 2027 notes, 2030 notes and 2032 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 2026 facility 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 2026 facility would result in approximately $5.9 million in additional interest expense annually based on our $588.0 million in outstanding borrowings as of December 31, 2021.

The 2026 facility also assesses variable commitment and outstanding letter of credit fees based on quarterly average loan utilization.

We purchase certain materials, including lumber products, which are then sold to customers as well as used as direct production inputs for our manufactured products that we deliver.

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 sometimes, but not always, passed on to our customers.

Delays in our ability to pass on material price increases to our customers can adversely impact our operating results.

CAUTIONARY STATEMENT

Statements in this report and the schedules hereto that are not purely historical facts or that necessarily depend upon future events, including statements about expected market share gains, forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.

Readers are cautioned not to place undue reliance on forward-looking statements.

In addition, oral statements made by our directors, officers and employees to the investor and analyst communities, media representatives and others, depending upon their nature, may also constitute forward-looking statements.

All forward-looking statements are based upon currently available information and the Company’s current assumptions, expectations and projections about future events.

Forward-looking statements are by nature inherently uncertain, and actual results or events may differ materially from the results or events described in the forward-looking statements as a result of many factors.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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 continuing COVID-19 pandemic, the BMC Merger (as defined below) and the Company’s other acquisitions, the Company’s growth strategies, including gaining market share and its digital strategies, or the Company’s revenues and operating results being highly dependent on, among other things, the homebuilding industry, lumber prices and the economy, including labor and supply shortages.

The Company may not succeed in addressing these and other risks.

Further information regarding the risk factors that could affect our financial and other results are included as Item 1A of this annual report on Form 10-K and may also be described from time to time in the other reports the Company files with the Securities and Exchange Commission (“SEC”).

Consequently, all forward-looking statements in this report are qualified by the factors, risks and uncertainties contained therein.

BMC MERGER

On January 1, 2021, Builders FirstSource, Inc. completed its 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”).

On January 1, 2022, we completed a legal entity reorganization pursuant to which, among other things, BMC was merged with and into Builders FirstSource, Inc., with Builders FirstSource, Inc. continuing as the surviving corporation.

In this annual report, unless otherwise stated or the context otherwise requires, references to the “company,” “we,” “our,” “ours” or “us” refer to Builders FirstSource, Inc. and its consolidated subsidiaries.

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

The operating results of BMC are reported as part of the Company beginning on January 1, 2021, and as such, references to the Company’s historical financial condition prior to that date, including results of operations and cash flows, do not include BMC, unless otherwise noted.

OVERVIEW

We are a leading supplier and manufacturer of building materials, manufactured components and construction services to professional homebuilders, sub-contractors, remodelers and consumers.

The Company operates approximately 565 locations in 42 states across the United States, which are internally organized into geographic operating divisions.

Due to the similar economic characteristics, categories of products, distribution methods and customers, our operating divisions are aggregated into one reportable segment.

We offer an integrated solution to our customers by providing manufacturing, supply and installation of a full range of structural and related building products.

Our manufactured products include our factory-built roof and floor trusses, wall panels, vinyl windows, custom millwork and trim, as well as engineered wood that we design, cut, and assemble specifically for each home.

We also assemble interior and exterior doors into pre-hung units.

Additionally, we supply our customers with a broad offering of professional grade building products not manufactured by us, such as dimensional lumber and lumber sheet goods and various window, door and millwork lines.

Our full range of construction-related services include professional installation, turn-key framing and shell

construction, spanning all of our product categories.

Further, through our Paradigm subsidiary, we offer software solutions and services for the building products industry.

Builders FirstSource, Inc. is a Delaware corporation formed in 1998 as BSL Holdings, Inc. On October 13, 1999, our name changed to Builders FirstSource, Inc. Our common stock traded on the NASDAQ Global Select Market of the NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “BLDR” from June 22, 2005 until July 16, 2021.

On July 19, 2021, we transferred the listing of our common stock to the New York Stock Exchange (“NYSE”) under the symbol “BLDR.”

OUR INDUSTRY

We compete in the professional segment (“Pro Segment”) of the U.S. residential building products supply market.

Suppliers in the Pro Segment primarily focus on serving professional customers such as homebuilders and remodeling contractors.

The Pro Segment consists predominantly of small, privately owned suppliers, including framing and shell construction contractors, local and regional materials distributors, single or multi-site lumberyards, and truss manufacturing and millwork operations.

Because of the predominance of smaller privately owned companies and the overall size and diversity of the target customer market, the Pro Segment remains highly fragmented.

There were only nine building product suppliers, excluding BMC, with manufacturing capabilities in the Pro Segment that generated more than $500 million in sales, according to *HBS Dealer* magazine’s 2021 Top 300 list.

Including BMC, we are the largest building product supplier with manufacturing capabilities on the *HBS Dealer’s* list and the only building supplier with manufacturing capabilities with over $5 billion in sales.

The residential building products industry is driven by the level of activity in both the U.S. residential new construction market and the U.S. residential repair and remodeling market.

Growth within these markets is linked to a number of key factors, including demographic trends, housing demand, interest rates, employment levels, availability of credit, foreclosure rates, consumer confidence, the availability of qualified tradesmen, and the state of the economy in general.

The Company has a number of known and threatened construction defect legal claims.

While these claims are generally covered under the Company’s existing insurance programs to the extent any loss exceeds the deductible, there is a reasonable possibility of loss that is not able to be estimated at this time because (i) many of the proceedings are in the discovery stage, (ii) the outcome of future litigation is uncertain, and/or (iii) the complex nature of the claims.

Although the Company cannot estimate a reasonable range of loss based on currently available information, the resolution of these matters could have a material adverse effect on the Company's financial position, results of operations or cash flows.

In addition, we are involved in various other claims and lawsuits incidental to the conduct of our business in the ordinary course.

We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of such claims and lawsuits.

Although the ultimate disposition of these other proceedings cannot be predicted with certainty, management believes the outcome of any such claims that are pending or threatened, either individually or on a combined basis, will not have a material adverse effect on our consolidated financial position, cash flows or results of operations.

However, there can be no assurances that future adverse judgments and costs would not be material to our results of operations or liquidity for a particular period.

Although our business and facilities are subject to federal, state and local environmental regulation, environmental regulation does not have a material impact on our operations.

We believe that our facilities are in material compliance with such laws and regulations.

As owners and lessees of real property, we can be held liable for the investigation or remediation of contamination on such properties, in some circumstances without regard to whether we knew of or were responsible for such contamination.

Our current expenditures with respect to environmental investigation and remediation at our facilities are minimal, although no assurance can be provided that more significant remediation may not be required in the future as a result of spills or releases of petroleum products or hazardous substances or the discovery of unknown environmental conditions.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: Form 10-K][added: Form 10-K]

[removed: |] ☑ [removed: | ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934 |][added: 1934]

For the fiscal year ended December 31, [removed: 2021][added: 2022]

[removed: |] ☐ [removed: | TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934 |][added: 1934]

[removed: BUILDERS] [added: BUILDERS] FIRSTSOURCE, [removed: INC.][added: INC.]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Delaware] [added: Delaware] | | [removed: 52-2084569] [added: 52-2084569] |

| [removed: (State] [added: *(State] or other jurisdiction of incorporation or [removed: organization)] [added: organization)*] | | [removed: (I.R.S.] [added: *(I.R.S.] Employer Identification [removed: No.)] [added: No.)*] |

| [removed: 2001] [added: 2001] Bryan [removed: Street, Suite 1600 Dallas, Texas] [added: Street, Suite 1600 Dallas, Texas] | | [removed: 75201] [added: 75201] |

| [removed: (Address] [added: *(Address] of principal executive [removed: offices)] [added: offices)*] | | [removed: (Zip Code)] [added: *(Zip Code)*] |

[removed: Registrant’s] [added: Registrant’s] telephone number, including area [removed: code:][added: code:]

[removed: (214) 880-3500][added: (214) 880-3500]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of Each [removed: Class] [added: Class] | [removed: Trading Symbol(s)] [added: Trading Symbol(s)] | [removed: Name] [added: Name] of Each Exchange on Which [removed: Registered] [added: Registered] |

| [removed: Common] [added: Common] stock, par value $0.01 per [removed: share] [added: share] | [removed: BLDR] [added: BLDR] | [removed: New] [added: New] York Stock [removed: Exchange] [added: Exchange] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the [removed: Act:][added: Act:]

[removed: None][added: None]

| Large accelerated filer ☑ | | Accelerated filer ☐ | | Non-accelerated filer ☐ | | Smaller reporting company ☐ | [removed: |]

| Emerging growth company ☐ | | | | | | | [removed: |]

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, [removed: 2021] [added: 2022] was approximately [removed: $8,744.7] [added: $8,478.4] million based on the closing price per share on that date of [removed: $42.66] [added: $53.70] as reported on the [removed: NASDAQ] [added: New York] Stock [removed: Market LLC.][added: Exchange.]

The number of shares of the registrant’s common stock, par value $0.01, outstanding as of [removed: February] [added: Feb] 23, [removed: 2022] [added: 2023] was [removed: 176,772,541.][added: 138,012,302.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s definitive proxy statement for its annual meeting of stockholders to be held on June 14, [removed: 2022] [added: 2023] are incorporated by reference into Part II and Part III of this Form 10-K.

[removed: Table] [added: Table] of Contents to Form [removed: 10-K][added: 10-K]

| | | | | [removed: Page] [added: Page] |

| | | [removed: [PART I](#PART_I)] [added: PART I] | | |

| Item 3. | | [Legal [removed: Proceedings](#Item_3_Legal_Proceedings)] [added: Proceedings](#item_3_legal_proceedings)] | | [removed: 23] [added: 22] |

| | | [removed: [PART II](#PART_2)] [added: [PART II](#part_2)] | | |

| Item 9. | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#Item_9)] [added: Disclosure](#item_9)] | | [removed: 67] [added: 65] |

| Item 9A. | | [Controls and [removed: Procedures](#Item_9A)] [added: Procedures](#item_9a)] | | [removed: 67] [added: 65] |

| Item 9B. | | [Other [removed: Information](#ITEM_9B_OR_INFORMATION)] [added: Information](#item_9b_or_information)] | | [removed: 68] [added: 66] |

| Item 9C. | | [Disclosure Regarding Foreign Jurisdictions That Prevent [removed: Inspections](#ITEM_9C_DISCLOSURE_REGARDING_FOREIGN_JUR)] [added: Inspections](#item_9c_disclosure_regarding_foreign_jur)] | | [removed: 68] [added: 67] |

| | | [removed: [PART III](#PART_III)] [added: [PART III](#part_iii)] | | |

| Item 10. | | [Directors, Executive Officers and Corporate [removed: Governance](#Item_10_Directors_Executive_Officers)] [added: Governance](#item_10_directors_executive_officers)] | | [removed: 69] [added: 68] |

| Item 11. | | [Executive [removed: Compensation](#Item_11_Executive_Compensation)] [added: Compensation](#item_11_executive_compensation)] | | [removed: 69] [added: 68] |

| Item 12. | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#Item_12)] [added: Matters](#item_12)] | | [removed: 69] [added: 68] |

| Item 13. | | [Certain Relationships and Related Transactions, and Director [removed: Independence](#Item_13)] [added: Independence](#item_13)] | | [removed: 70] [added: 69] |

| | | |

| | | |

| | | | | | | |

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

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).

BUILDERS FIRSTSOURCE, INC.

| | | | | |

Item 1. Business

CAUTIONARY STATEMENT

Statements in this report and the schedules hereto that are not purely historical facts or that necessarily depend upon future events, including statements about expected market share gains, forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future, may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.

Readers are cautioned not to place undue reliance on forward-looking statements.

In addition, oral statements made by our directors, officers and employees to the investor and analyst communities, media representatives and others, depending upon their nature, may also constitute forward-looking statements.

All forward-looking statements are based upon currently available information and the Company’s current assumptions, expectations and projections about future events.

Forward-looking statements are by nature inherently uncertain, and actual results or events may differ materially from the results or events described in the forward-looking statements as a result of many factors.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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 Company’s other acquisitions, the Company’s growth strategies, including gaining market share and its digital strategies, or the Company’s revenues and operating results being highly dependent on, among other things, the homebuilding industry, lumber prices and the economy, including labor and supply shortages.

The Company may not succeed in addressing these and other risks.

Further information regarding the risk factors that could affect our financial and other results are included as Item 1A of this annual report on Form 10-K and may also be described from time to time in the other reports the Company files with the Securities and Exchange Commission (“SEC”).

Consequently, all forward-looking statements in this report are qualified by the factors, risks and uncertainties contained therein.

OVERVIEW

We are a leading supplier and manufacturer of building materials, manufactured components and construction services to professional homebuilders, sub-contractors, remodelers and consumers.

The Company operates 569 locations in 42 states across the United States, which are internally organized into geographic operating divisions.

Due to the similar economic characteristics, categories of products, distribution methods and customers, our operating divisions are aggregated into one reportable segment.

We offer an integrated solution to our customers by providing manufacturing, supply and installation of a full range of structural and related building products.

Our manufactured products include our factory-built roof and floor trusses, wall panels, vinyl windows, custom millwork and trim, as well as engineered wood that we design, cut, and assemble specifically for each home.

We also assemble interior and exterior doors into pre-hung units.

Additionally, we supply our customers with a broad offering of professional grade building products not manufactured by us, such as dimensional lumber and lumber sheet goods and various window, door and millwork lines.

Our full range of construction-related services include professional installation, turn-key framing and shell construction, spanning all of our product categories.

Further, through our Paradigm subsidiary, we offer software solutions and services for the building products industry.

Builders FirstSource, Inc. is a Delaware corporation formed in 1998 as BSL Holdings, Inc. On October 13, 1999, our name changed to Builders FirstSource, Inc. Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “BLDR”.

OUR INDUSTRY

We operate in the professional segment (“Pro Segment”) of the U.S. residential building products supply market.

Customers in the Pro Segment primarily include production and custom homebuilders, remodeling contractors, and multifamily builders.

While we are the largest building product supplier according to HBS Dealer magazine’s 2022 Top 200 ProDealers list and the only building supplier with manufacturing capabilities with over $10 billion in sales, the industry remains highly fragmented with competition from large national dealers, specialty dealers, large building supply retailers, regional and local material distributors and smaller privately owned suppliers, truss manufacturers and lumberyards.

As such, the industry presents significant opportunities for growth and a number of potential acquisitions.

The residential building products industry is driven by the level of activity in both the U.S. residential new construction market and the U.S. residential repair and remodeling market.

Growth within these markets is linked to a number of key factors, including demographic trends, housing demand, interest rates, employment levels, availability of credit, foreclosure rates, consumer confidence, the availability of qualified tradesmen, and the state of the economy in general.

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 homebuilders, as described in more detail below.

Additionally, there is increasing interest in using digital tools to help drive end-to-end efficiencies throughout the construction industry.

| --- | --- |

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

[removed: INDEX] [added: INDEX] TO CONSOLIDATED FINANCIAL [removed: STATEMENTS][added: STATEMENTS]

| [removed: [Report] [added: Report] of Independent Registered Public Accounting [removed: Firm](#REPORT_INDEPENDENT_REGISTERED_PUBLIC_ACC)] [added: Firm] – PCAOB ID 238 | | [removed: 35] |

| [Consolidated Statement of Operations for the years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#COMPREHENSIVE_LOSS)] [added: 2020](#comprehensive_loss)] | | 37 |

| [Consolidated Balance Sheet at December 31, [removed: 2021] [added: 2022] and [removed: 2020](#BALANCE_SHEETS)] [added: 2021](#balance_sheets)] | | 38 |

| [Consolidated Statement of Cash Flows for the years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#CASH_FLOWS)] [added: 2020](#cash_flows)] | | 39 |

| [Consolidated Statement of Changes in Stockholders’ Equity for the years ended December 31, [removed: 2021, 2020] [added: 2022, 2021] and [removed: 2019](#STOCKHOLDERS_EQUITY)] [added: 2020](#stockholders_equity)] | | 40 |

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

To the Board of Directors and [removed: Stockholders’] [added: Stockholders] of Builders FirstSource, Inc.

[removed: Opinions] [added: Opinions] on the Financial Statements and Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited the accompanying consolidated balance [removed: sheet] [added: sheets] of Builders FirstSource, Inc. and its subsidiaries (the “Company”) as of December 31, [removed: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the related consolidated statements of operations, of changes in stockholders' equity and of cash flows for each of the three years in the period ended December 31, [removed: 2021,] [added: 2022,] 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: 2021,] [added: 2022,] 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: 2021] [added: 2022] and [removed: 2020,] [added: 2021,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2021] [added: 2022] 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: 2021,] [added: 2022,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] (2013) issued by the COSO.

[removed: Basis] [added: Basis] for [removed: Opinions][added: Opinions]

[removed: Definition] [added: Definition] and Limitations of Internal Control over Financial [removed: Reporting][added: Reporting]

[removed: Critical] [added: Critical] Audit [removed: Matters][added: Matters]

[removed: Management estimated the] [added: The] fair value of acquired customer relationship intangible assets [added: was primarily estimated] by applying the [removed: multi-period] [added: multiperiod] excess earnings method, which involved the use of significant estimates and assumptions [added: primarily] related to forecasted revenue growth rates, gross margin, contributory asset charges, customer attrition rates, and market-participant discount rates.

The principal considerations for our determination that performing procedures relating to the [removed: valuation] [added: goodwill impairment test] of [removed: customer relationships acquired in connection with] the [removed: merger with BMC Stock Holdings, Inc.] [added: West geographic reporting unit] is a critical audit matter are [added: (i)] the significant judgment by management when [removed: estimating] [added: developing] the fair value [added: estimate] of the [removed: customer relationships acquired; this in turn led to] [added: West reporting unit and (ii)] a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant [removed: assumptions] [added: assumption] related to [removed: the forecasted revenue growth rates, gross margin, customer attrition rates, and market-participant discount rates.][added: expected future revenues.]

Evaluating management’s significant [removed: assumptions] [added: assumption] related to [removed: the forecasted revenue growth rates and gross margin] [added: expected future revenues] involved evaluating whether the [removed: significant assumptions] [added: assumption] used [removed: were] [added: was] reasonable considering the current and past performance of [removed: BMC Stock Holdings, Inc.;] the [removed: consistency with external market and] [added: West reporting unit, relevant] industry [removed: data;] [added: forecasts,] and [removed: whether the assumptions were consistent] [added: consistency] with evidence obtained in other areas of the audit.

[removed: BUILDERS] [added: BUILDERS] FIRSTSOURCE, INC. AND [removed: SUBSIDIARIES][added: SUBSIDIARIES]

[removed: CONSOLIDATED] [added: CONSOLIDATED] STATEMENT OF [removed: OPERATIONS][added: OPERATIONS]

| | | [removed: Years] [added: Years] Ended December [removed: 31,] [added: 31,] | | | | | | | | | | |

| [removed: (in] [added: (in] thousands, except per share [removed: amounts)] [added: amounts)] | | [removed: 2021] [added: 2022] | | | | [removed: 2020] [added: 2021] | | | | [removed: 2019] [added: 2020] | | |

| Net sales | | $ | [removed: 19,893,856] [added: 22,726,418] | | | $ | [removed: 8,558,874] [added: 19,893,856] | | | $ | [removed: 7,280,431] [added: 8,558,874] | |

| Cost of sales | | | [removed: 14,042,900] [added: 14,982,039] | | | | [removed: 6,336,290] [added: 14,042,900] | | | | [removed: 5,303,602] [added: 6,336,290] | |

| Gross margin | | | [removed: 5,850,956] [added: 7,744,379] | | | | [removed: 2,222,584] [added: 5,850,956] | | | | [removed: 1,976,829] [added: 2,222,584] | |

| Selling, general and administrative expenses | | | [removed: 3,463,532] [added: 3,974,173] | | | | [removed: 1,678,730] [added: 3,463,532] | | | | [removed: 1,584,523] [added: 1,678,730] | |

| Income from operations | | | [removed: 2,387,424] [added: 3,770,206] | | | | [removed: 543,854] [added: 2,387,424] | | | | [removed: 392,306] [added: 543,854] | |

| Interest expense, net | | | [removed: 135,877] [added: 198,373] | | | | [removed: 135,688] [added: 135,877] | | | | [removed: 109,551] [added: 135,688] | |

| Income before income taxes | | | [removed: 2,251,547] [added: 3,571,833] | | | | [removed: 408,166] [added: 2,251,547] | | | | [removed: 282,755] [added: 408,166] | |

| Income tax expense | | | [removed: 526,131] [added: 822,464] | | | | [removed: 94,629] [added: 526,131] | | | | [removed: 60,946] [added: 94,629] | |

| Net income | | $ | [removed: 1,725,416] [added: 2,749,369] | | | $ | [removed: 313,537] [added: 1,725,416] | | | $ | [removed: 221,809] [added: 313,537] | |

| [removed: Net] [added: *Net] income per [removed: share:] [added: share:*] | | | | | | | | | | | | |

| Basic | | $ | [removed: 8.55] [added: 16.98] | | | $ | [removed: 2.69] [added: 8.55] | | | $ | [removed: 1.92] [added: 2.69] | |

| Diluted | | $ | [removed: 8.48] [added: 16.82] | | | $ | [removed: 2.66] [added: 8.48] | | | $ | [removed: 1.90] [added: 2.66] | |

| [removed: Weighted] [added: *Weighted] average common [removed: shares:] [added: shares:*] | | | | | | | | | | | | |

| Basic | | | [removed: 201,839] [added: 161,960] | | | | [removed: 116,611] [added: 201,839] | | | | [removed: 115,713] [added: 116,611] | |

| Diluted | | | [removed: 203,470] [added: 163,481] | | | | [removed: 117,917] [added: 203,470] | | | | [removed: 117,025] [added: 117,917] | |

[removed: CONSOLIDATED] [added: CONSOLIDATED] BALANCE [removed: SHEET][added: SHEET]

| [removed: (in] [added: (in] thousands, except per share [removed: amounts)] [added: amounts)] | | [removed: December] [added: December] 31, [removed: 2021] [added: 2022] | | | | [removed: December] [added: December] 31, [removed: 2020] [added: 2021] | | |

| | | |

*Goodwill Impairment Test - West Geographic Reporting Unit*

As described in Notes 2 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was $3.5 billion as of December 31, 2022, a portion of which relates to the Company’s West geographic operating segment.

The Company’s reporting units are aligned with their three geographic operating segments.

In evaluating goodwill for impairment, management developed the fair value using a discounted cash flow methodology.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment test, including management’s controls over the goodwill quantitative impairment test.

These procedures also included, among others, testing management’s process for developing the fair value estimate of the West reporting unit; evaluating the appropriateness of the discounted cash flow methodology; testing the completeness and accuracy of underlying data used in the discounted cash flow methodology; and evaluating the reasonableness of the significant assumption related to expected future revenues.

February 28, 2023

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

| Net income | | $ | 2,749,369 | | | $ | 1,725,416 | | | $ | 313,537 | |

| Bad debt expense | | | 38,921 | | | | 20,451 | | | | 4,720 | |

| Receivables | | | 381,223 | | | | (474,362 | ) | | | (251,632 | ) |

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

| | | | | | | | | | | | | | | | | | | | | |

| Repurchase of common stock (2) | | | (41,853 | ) | | | (418 | ) | | | — | | | | (2,585,872 | ) | | | (2,586,290 | ) |

| Exercise of stock options | | | 60 | | | | 1 | | | | 588 | | | | — | | | | 589 | |

| Net income | | | — | | | | — | | | | — | | | | 2,749,369 | | | | 2,749,369 | |

| Balance at December 31, 2022 | | | 138,864 | | | $ | 1,389 | | | $ | 4,257,667 | | | $ | 703,510 | | | $ | 4,962,566 | |

(1)

The primary purpose of the repurchase program was to offset dilution from the BMC Merger.

(2)

The primary purpose of the repurchase program was to offset dilution from the BMC Merger.

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

Certain prior periods’ amounts have been reclassified to conform to the current year presentation, including presenting bad debt expense on the face of the consolidated statement of cash flows and changing the composition of our product categories, including a decrease to four product categories.

As a result of these changes, prior period amounts, as disclosed in this Note 2 under Revenue Recognition, have been reclassified to conform to the current year presentation.

| Lumber & lumber sheet goods | | $ | 8,088,147 | | | $ | 8,455,046 | | | $ | 3,076,376 | |

| Manufactured products | | | 5,692,406 | | | | 4,404,054 | | | | 1,640,460 | |

| Windows, doors & millwork | | | 4,790,820 | | | | 3,400,907 | | | | 1,629,179 | |

| Specialty building products & services | | | 4,155,045 | | | | 3,633,849 | | | | 2,212,859 | |

| Net sales | | $ | 22,726,418 | | | $ | 19,893,856 | | | $ | 8,558,874 | |

Through December 31, 2022, 2021, and 2020, we recognized as revenue substantially all of the contract liabilities balance at December 31, 2021, 2020, and 2019, respectively.

| | | | | | | | | |

| | |

| | | Years Ended December 31, | | | | | | | | | | |

| Net income | | $ | 2,749,369 | | | $ | 1,725,416 | | | $ | 313,537 | |

| | | | | | | | | | | | | |

| | | | | | | | | | | | | |

| Basic | | $ | 16.98 | | | $ | 8.55 | | | $ | 2.69 | |

| Diluted | | $ | 16.82 | | | $ | 8.48 | | | $ | 2.66 | |

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

Merger with BMC Stock Holdings, Inc. - Valuation of Customer Relationships

As described in Notes 3 and 6 to the consolidated financial statements, the Company completed an all stock merger transaction with BMC Stock Holdings, Inc. on January 1, 2021 for consideration transferred of $3.7 billion.

This merger transaction resulted in the recording of $1.47 billion of intangible assets, of which a significant portion relates to customer relationship intangible assets.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships and controls over the development of significant assumptions related to the forecasted revenue growth rates, gross margin, customer attrition rates, and market-participant discount rates.

These procedures also included, among others, reading the purchase agreement; testing management’s process for estimating the fair value of the customer relationships; evaluating the appropriateness of the multi-period excess earnings method; testing the completeness, accuracy, and relevance of underlying data used in the multi-period excess earnings method; and evaluating the reasonableness of significant assumptions related to the forecasted revenue growth rates, gross margin, customer attrition rates, and market-participant discount rates.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the multi-period excess earnings method and the reasonableness of the significant assumptions related to the customer attrition rates and market-participant discount rates.

March 1, 2022

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

| Receivables | | | (453,911 | ) | | | (246,912 | ) | | | 45,687 | |

| (1) | Includes $5.0 million, $22.7 million and $2.3 million of debt extinguishment costs paid in 2021, 2020, and 2019, respectively, classified as financing outflows above and discussed more fully in Note 8. |

| --- | --- |

| Balance at December 31, 2018 | | | 115,078 | | | $ | 1,151 | | | $ | 560,221 | | | $ | 34,966 | | | $ | 596,338 | |

| Repurchase of common stock (1) | | | (460 | ) | | | (4 | ) | | | — | | | | (7,938 | ) | | | (7,942 | ) |

| Exercise of stock options | | | 895 | | | | 9 | | | | 4,950 | | | | — | | | | 4,959 | |

| Net income | | | — | | | | — | | | | — | | | | 221,809 | | | | 221,809 | |

1.

2.

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Actual results could materially differ from those estimates.

Estimates are used when accounting for items such as revenue, vendor rebates, allowance for returns, discounts and credit losses, employee compensation programs, depreciation and amortization periods, income taxes, inventory values, insurance programs, goodwill, other intangible assets and long-lived assets.

Certain prior periods’ amounts have been reclassified to conform to the current year presentation, including presenting contract assets and contract liabilities separately on the face of the financial statements, whereas, these contract assets and contract liabilities had previously been presented as a component of accounts receivable and accrued liabilities, respectively.

Following the merger with BMC Stock Holdings, Inc. on January 1, 2021, which is discussed in Note 3 to these consolidated financial statements, the Company reorganized the structure of its internal organization.

| Lumber & lumber sheet goods | | $ | 8,412,210 | | | $ | 3,076,376 | | | $ | 2,251,580 | |

| Manufactured products | | | 4,333,283 | | | | 1,640,460 | | | | 1,449,550 | |

| Windows, doors & millwork | | | 3,332,005 | | | | 1,629,179 | | | | 1,542,924 | |

| Siding, metal & concrete products | | | 1,531,058 | | | | 773,640 | | | | 712,644 | |

| Gypsum, roofing & insulation | | | 656,383 | | | | 514,638 | | | | 528,571 | |

| Other building products & services | | | 1,628,917 | | | | 924,581 | | | | 795,162 | |

arrangements are amortized using the straight-line method.

We also lease certain properties from related parties, including current employees and non-affiliate stockholders.

In addition, we have residual value guarantees on certain equipment leases.

Under these leases, we have the option of (a) purchasing the equipment at the end of the lease term, (b) arranging for the sale of the equipment to a third party, or (c) returning the equipment to the lessor to sell the equipment.

If the sales proceeds in any case are less than the residual value, we are required to reimburse the lessor for the deficiency up to a specified level as stated in each lease agreement.

If the sales proceeds exceed the residual value, we are entitled to all of such excess amounts.

We did not grant any options during the years ended December 31, 2021, 2020, or 2019.

In December 2019, the FASB issued an update to existing guidance under the *Income Taxes* topic of the FASB Accounting Standards Codification (“Codification”).

This updated guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in the *Income Taxes* topic.

This guidance is effective for public companies annual and interim periods beginning after December 15, 2020 with early adoption permitted.

On February 24, 2023, our Board of Directors approved and adopted the Builders FirstSource, Inc. Executive and Key Employee Severance Plan (the “Severance Plan”), which provides for severance payments and benefits to certain key employees of the Company in the event their employment is involuntary terminated under certain circumstances.

Under the Severance Plan, participants are grouped into three tiers of benefits, as selected and designated by the Compensation Committee of the Board of Directors (the “Committee”).

The Committee designated the following named executive officers to participate in the Severance Plan: Dave Rush, as a Tier I Participant; and Peter M.

Jackson, Scott L.

Robins, Michael A.

Farmer and Timothy D.

Johnson, as Tier II Participants.

Under the Severance Plan, if a participating executive’s employment is terminated by the Company without cause or by the participant for good reason (as such terms are defined in the Severance Plan), and the termination does not occur within the 3-month period prior to or the 24-month period following a change in control of the Company, the participant will be entitled to certain severance payments and benefits (“Regular Severance Benefits”).

The Regular Severance Benefits include cash payments of the following amounts: (1) a pro rata annual bonus, (2) a severance payment equal to 2.0 times, in the case of a Tier I Participant, or 1.5 times, in the case of a Tier II Participant, the participant’s base salary and target annual bonus, and (3) a payment equal to the full cost to provide group health benefits to the participant for 24 months, in the case of a Tier I Participant, or 18 months, in the case of a Tier II Participant (based on group health benefits sponsored by the Company and maintained by the participant as of the termination date).

In addition, a pro rata portion of the participant’s outstanding stock options, restricted stock units and other stock awards with time-based vesting restrictions will become vested and exercisable, and a pro rata portion of the participant’s outstanding performance-based stock awards will be deemed vested and earned based on the actual level of achievement of all relevant performance measures as of the end of the regular performance period.

If a participating executive’s employment is terminated by the Company without cause or by the participant for good reason, and the termination occurs within the 3-month period prior to or the 24-month period following a change in control of the Company, the participant will be entitled to certain severance payments and benefits (“Change in Control Severance Benefits”).

The Change in Control Severance Benefits include lump sum cash payments of the following amounts: (1) a pro rata target annual bonus, (2) a severance payment equal to 2.5 times, in the case of a Tier I Participant, or 2.0 times, in the case of a Tier II Participant, the participant’s base salary and target annual bonus, and (3) a payment equal to the full cost to provide group health benefits to the participant for 30 months, in the case of a Tier I Participant, or 24 months, in the case of a Tier II Participant (based on group health benefits sponsored by the Company and maintained by the participant as of the termination date).

In addition, the level of achievement of all performance goals relating to the participant’s outstanding performance-based stock awards will be based on (i) the greater of an assumed level of achievement at “target” level or actual level of achievement measured as of the termination date for performance periods that had commenced but were not completed prior to the termination date, and (ii) an assumed level of achievement at “target” level for performance periods that had not commenced prior to the termination date.

As a condition to participating in the Severance Plan, a participant must enter into a restrictive covenant agreement that includes non-competition, customer non-solicitation and employee non-recruitment provisions, that will apply for a period of \[24\] months, in the case of a Tier I Participant, or \[18\] months, in the case of a Tier II Participant, following the participant’s termination of employment.

Upon acknowledgment by a named executive officer of his or her participation in the Severance Plan, any existing employment agreement between the Company and such named executive officer will terminate.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held June 14, 2023 under the captions “Proposal 1 — Election of Directors,” “Continuing Directors,” “Information Regarding the Board and Its Committees,” “Corporate Governance,” “Delinquent Section 16(a) Reports,” and “Executive Officers of the Registrant,” which information is incorporated herein by reference.

Code of Business Conduct and Ethics

Builders FirstSource, Inc. and its subsidiaries endeavor to do business according to the highest ethical and legal standards, complying with both the letter and spirit of the law.

Our board of directors approved a Code of Business Conduct and Ethics that applies to our directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees.

Our Code of Business Conduct and Ethics is administered by a compliance committee made up of representatives from our legal, human resources, finance and internal audit departments.

Our employees are encouraged to report any suspected violations of laws, regulations and the Code of Business Conduct and Ethics, and all unethical business practices.

We provide continuously monitored hotlines for anonymous reporting by employees.

Our board of directors has also approved a Supplemental Code of Ethics for the Chief Executive Officer, President, and Senior Financial Officers of Builders FirstSource, Inc., which is administered by our general counsel.

Both of these policies are listed as exhibits to this annual report on Form 10-K and can be found in the “Investors” section of our corporate Web site at: www.bldr.com.

Stockholders may request a free copy of these policies by contacting the Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201, United States of America.

In addition, within four business days of:

Any amendment to a provision of our Code of Business Conduct and Ethics or our Supplemental Code of Ethics for Chief Executive Officer, President and Senior Financial Officers of Builders FirstSource, Inc. that applies to our chief executive officer, chief financial officer or chief accounting officer as it relates to one or more of the items set forth in Item 406(b) of Regulation S-K; or

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 S-K,

We will provide information regarding any such amendment or waiver (including the nature of any waiver, the name of the person to whom the waiver was granted and the date of the waiver) on our Web site at the Internet address above, and such information will be available on our Web site for at least a 12-month period.

In addition, we will disclose on our Web site at the Internet address above any amendments and waivers to our Code of Business Conduct and Ethics or our Supplemental Code of Ethics for Chief Executive Officer, President and Senior Financial Officers of Builders FirstSource, Inc. that relate to any element of the definition of “code of ethics” enumerated in Item 406(b) of Regulation S-K under the Securities Exchange Act of 1934, as amended.

Item 11. Executive Compensation

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held June 14, 2023, under the captions “Executive Compensation and Other Information,” “Director Compensation — Compensation of Directors,” and “Compensation Committee Interlocks and Insider Participation,” which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held on June 14, 2023, under the caption “Securities Owned by Directors, Executive Officers, and Certain Beneficial Owners” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.

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 June 14, 2023, 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.

Item 14. Principal Accountant Fees and Services

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held June 14, 2023,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.

PART IV

PART III

| [removed: Exhibit Number] [added: Exhibit Number] | | [removed: Description] [added: Description] |

| 2.1 | | [Agreement and Plan of Merger, dated August 26, 2020, by and among Builders FirstSource, Inc., BMC Stock Holdings, Inc., and Boston Merger Sub I Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 27, 2020, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312520233278/d89165dex21.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312520233278/d89165dex21.htm)] |

| 3.1 | | [Amended and Restated Certificate of Incorporation of Builders FirstSource, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 4 to the Registration Statement of the Company on Form S-1, filed with the Securities and Exchange Commission on June 6, 2005, File Number [removed: 333-122788)](http://www.sec.gov/Archives/edgar/data/1316835/000095012305007065/e05301a4exv3w1.txt)] [added: 333-122788)](https://www.sec.gov/Archives/edgar/data/1316835/000095012305007065/e05301a4exv3w1.txt)] |

| 3.2 | | [Amendment to Amended and Restated Certificate of Incorporation 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 January 4, 2021, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312521000344/d101613dex31.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312521000344/d101613dex31.htm)] |

| 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: August 14, 2020,] [added: April 28, 2022,] File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312520220347/d27662dex31.htm)] [added: 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000119312520220347/d27662dex31.htm)] |

| 4.1 | | [Indenture, dated as of 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 May 31, 2019, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519162897/d736510dex41.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312519162897/d736510dex41.htm)] |

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

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

| 4.4 | | [Indenture, dated as of July 23, 2021, among Builders FirstSource, Inc., the guarantors named therein and Wilmington Trust, National Association, as trustee (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 July 23, 2021, File Number [removed: 001-40620)](http://www.sec.gov/Archives/edgar/data/1316835/000119312521222999/d169326dex41.htm)] [added: 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000119312521222999/d169326dex41.htm)] |

| [removed: 4.5*] [added: 4.7*] | | [Description of Capital [removed: Stock](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex45_11.htm)] [added: Stock](https://www.sec.gov/Archives/edgar/data/1316835/000095017023004939/bldr-ex4_7.htm)] |

| [removed: 10.1] [added: 10.1+] | | [Amended and Restated ABL Credit Agreement, dated as of July 31, 2015, among Builders FirstSource, Inc., SunTrust Bank, as administrative agent and collateral agent, and the lenders and financial institutions party thereto (incorporated by reference to Exhibit 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/d89945dex102.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex102.htm)] |

| 10.2 | | [Amendment No. 1 to Credit Agreement, dated as of March 22, 2017, among Builders FirstSource, Inc., SunTrust 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 March 28, 2017, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312517098501/d366623dex101.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312517098501/d366623dex101.htm)] |

| 10.3 | | [Amendment No. 2 to Credit Agreement, dated as of April 24, 2019, among Builders FirstSource, Inc., Truist Bank (as successor by merger to SunTrust 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 April 30, 2019, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519129650/d734639dex101.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312519129650/d734639dex101.htm)] |

| 10.4 | | [Amendment No. 3 to Credit Agreement, dated as of January 29, 2021, among Builders FirstSource, Inc., SunTrust 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 February 3 2021, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312521026414/d89986dex101.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312521026414/d89986dex101.htm)] |

| 10.5 | | [Amendment No. 4 to Credit Agreement, dated as of December 17, 2021, among the Company, Truist Bank (as successor by merger to SunTrust 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 December 22, 2021, File Number [removed: 001-40620)](http://www.sec.gov/Archives/edgar/data/0001316835/000119312521364975/d272527dex101.htm)] [added: 001-40620)](https://www.sec.gov/Archives/edgar/data/0001316835/000119312521364975/d272527dex101.htm)] |

| 10.6 | | [Amendment No. 5 to Credit Agreement, dated as of February 4, 2022, among the Company, Truist Bank (as successor by merger to SunTrust 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 February 8, 2022, File Number [removed: 001-40620)](http://www.sec.gov/Archives/edgar/data/1316835/000119312522030386/d304596dex101.htm)] [added: 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000119312522030386/d304596dex101.htm)] |

| [removed: 10.7] [added: 10.8] | | [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 [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312513245434/d547322dex102.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312513245434/d547322dex102.htm)] |

| [removed: 10.8] [added: 10.9] | | [Amended and Restated ABL Collateral Agreement, dated as of July 31, 2015, among the Company, certain of its subsidiaries, and SunTrust Bank (incorporated by reference to Exhibit 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/d89945dex105.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex105.htm)] |

| [removed: 10.9] [added: 10.10] | | [Notes Collateral Agreement, dated as of May 30, 2019, among Builders FirstSource, Inc., certain of its subsidiaries, and 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 May 31, 2019, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312519162897/d736510dex101.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312519162897/d736510dex101.htm)] |

| [removed: 10.10] [added: 10.11] | | [Amended and Restated ABL Guarantee Agreement, dated as of July 31, 2015, among the Guarantors (as defined therein) and SunTrust Bank (incorporated by reference to Exhibit 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/d89945dex107.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312515281152/d89945dex107.htm)] |

| [removed: 10.11] [added: 10.12] | | [Lease and Master Agreement Guaranty, dated as of July 31, 2015, by the Company in favor of LN Real Estate LLC (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, filed with the Securities and Exchange Commission on November 9, 2015, 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/1316835/000156459015010186/bldr-ex1010_344.htm)] |

| [removed: 10.12+] [added: 10.13+] | | [Builders FirstSource, Inc. 2014 Incentive Plan (incorporated herein by reference to Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on April 11, 2014, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312514140211/d709448ddef14a.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312514140211/d709448ddef14a.htm)] |

| [removed: 10.13+] | | [Amendment to the Builders FirstSource, Inc. 2014 Incentive Plan (incorporated by reference to Appendix A of the Company’s Definitive Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on April 14, 2016, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312516541362/d169561ddef14a.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312516541362/d169561ddef14a.htm)] |

| [removed: 10.14+] [added: 10.15+] | | [Second Amendment to the Builders FirstSource, Inc. 2014 Incentive Plan (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 26, 2021, File Number [removed: 0-51351)](http://www.sec.gov/Archives/edgar/data/1316835/000156459021009308/bldr-ex1014_302.htm)] [added: 0-51351)](https://www.sec.gov/Archives/edgar/data/1316835/000156459021009308/bldr-ex1014_302.htm)] |

| [removed: 10.15+] [added: 10.16+] | | [2017 Form of Builders FirstSource, Inc. 2014 Incentive Plan Director Restricted Stock Unit Award Certificate (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed with the Securities and Exchange Commission on November 9, 2017, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000156459017023142/bldr-ex102_14.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000156459017023142/bldr-ex102_14.htm)] |

| [removed: 10.16+] [added: 10.17+] | | [2017 Form of Builders FirstSource, Inc. 2014 Incentive Plan Restricted Stock Unit Award Certificate (incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on March 1, 2018, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000156459018004035/bldr-ex1029_236.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000156459018004035/bldr-ex1029_236.htm)] |

| [removed: 10.17+] [added: 10.18+] | | [2019 Form of Builders FirstSource, Inc. 2014 Incentive Plan Restricted Stock Unit Award Certificate (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed with the Securities and Exchange Commission on May 3, 2019, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000156459019015572/bldr-ex101_104.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000156459019015572/bldr-ex101_104.htm)] |

| [removed: 10.18+] [added: 10.19+] | | [Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated by reference to Exhibit 10.21 to Amendment No. 2 to the Registration Statement of BMC Stock Holdings, Inc. on Form S-1, filed with the Commission on July 29, 2013, File Number [removed: 333-189368)](http://www.sec.gov/Archives/edgar/data/1574815/000119312513306259/d520315dex1021.htm)] [added: 333-189368)](https://www.sec.gov/Archives/edgar/data/1574815/000119312513306259/d520315dex1021.htm)] |

| [removed: 10.19+] [added: 10.20+] | | [Form of Nonqualified Stock Option Agreement Pursuant to the Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (incorporated by reference to Exhibit 10.23 to Amendment No. 2 to the Registration Statement of Stock Building Supply Holdings, Inc. on Form S-1, filed with the Securities and Exchange Commission on July 29, 2013, File Number [removed: 333-189368)](http://www.sec.gov/Archives/edgar/data/1574815/000119312513306259/d520315dex1023.htm)] [added: 333-189368)](https://www.sec.gov/Archives/edgar/data/1574815/000119312513306259/d520315dex1023.htm)] |

| [removed: 10.21+] [added: 10.22+] | | [Builders FirstSource, Inc. Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.13 to Amendment No. 3 to the Registration Statement of the Company on Form S-1, filed with the Securities and Exchange Commission on May 26, 2005, File Number [removed: 333-122788)](http://www.sec.gov/Archives/edgar/data/1316835/000095012305006750/e05301a3exv10w13.txt)] [added: 333-122788)](https://www.sec.gov/Archives/edgar/data/1316835/000095012305006750/e05301a3exv10w13.txt)] |

| [removed: 10.22+] [added: 10.23+] | | [Amended and Restated Employment Agreement, dated as of August 26, 2020, between David E. Flitman, Builders FirstSource, Inc., and BMC Stock Holdings, Inc. (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 August 27, 2020, File Number [removed: 0-51357)](http://www.sec.gov/Archives/edgar/data/1316835/000119312520233278/d89165dex101.htm)] [added: 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000119312520233278/d89165dex101.htm)] |

| [removed: 10.23*+] [added: 10.24+] | | [Amendment No. 1 to Amended and Restated Employment Agreement, entered into as of January 31, 2022, between David E. Flitman and Builders FirstSource, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1023_443.htm)] [added: Inc. (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1023_443.htm)] |

| [removed: 10.24*+] [added: 10.25+] | | [Employment Agreement, entered into as of January 31, 2022, between Peter M. Jackson and Builders FirstSource, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1024_442.htm)] [added: Inc. (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1024_442.htm)] |

| [removed: 10.25*+] [added: 10.26+] | | [Employment Agreement, entered into as of January 31, 2022, between Timothy D. Johnson and Builders FirstSource, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1025_441.htm)] [added: Inc. (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1025_441.htm)] |

| [removed: 10.26*+] [added: 10.27+] | | [Employment Agreement, entered into as of January 31, 2022, between Michael A. Farmer and Builders FirstSource, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1026_440.htm)] [added: Inc. (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1026_440.htm)] |

| [removed: 10.27*+] [added: 10.28+] | | [Employment Agreement, entered into as of January 31, 2022, between Stephen J. Herron and Builders FirstSource, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1027_439.htm)] [added: Inc. (incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1027_439.htm)] |

| [removed: 10.28*+] [added: 10.29+] | | [Employment Agreement, entered into as of January 31, 2022, between Michael Hiller and Builders FirstSource, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1028_438.htm)] [added: Inc. (incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1028_438.htm)] |

| [removed: 10.29*+] [added: 10.30+] | | [Employment Agreement, entered into as of January 31, 2022, between Scott L. Robins and Builders FirstSource, [removed: Inc.](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1029_437.htm)] [added: Inc. (incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1029_437.htm)] |

| [removed: 10.30+] [added: 10.33+] | | [Consulting Agreement, dated as of March 5, 2021, between Builders FirstSource, Inc. and M. Chad Crow (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed with the Securities and Exchange Commission on May 6, 2021, File Number [removed: 0-51357](http://www.sec.gov/Archives/edgar/data/1316835/000156459021024887/bldr-ex104_24.htm))] [added: 0-51357](https://www.sec.gov/Archives/edgar/data/1316835/000156459021024887/bldr-ex104_24.htm)[)](https://www.sec.gov/Archives/edgar/data/1316835/000156459021024887/bldr-ex104_24.htm)] |

| [removed: 14.1*] [added: 14.1] | | [Builders FirstSource, Inc. Code of Business Conduct and [removed: Ethics](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex141_436.htm)] [added: Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex141_436.htm)] |

| | | |

| 4.5 | | [Second Supplemental Indenture, dated as of January 21, 2022, among Builders FirstSource, Inc., the guarantors named therein and Wilmington Trust, National Association, as trustee (form of Note included therein) (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 21, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000119312522014799/d301209dex43.htm) |

| 4.6 | | [Indenture, dated as of June 15, 2022, among Builders FirstSource, Inc., the guarantors named therein and Wilmington Trust, National Association, as trustee (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 June 16, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000119312522175497/d307421dex41.htm) |

| | | |

| 10.7 | | [Amendment No. 6 to Credit Agreement, dated as of January 17, 2023, among the Company, Truist Bank (as successor by merger to SunTrust 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 January 23, 2023, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000119312523013162/d433164dex101.htm) |

| 10.14+ | | |

| | | |

| 10.21+ | | [Builders FirstSource, Inc. Director Compensation Policy (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1020_435.htm) |

| | | |

| 10.31+ | | [Employment Agreement, entered into as of January 31, 2022, between Amy Bass Messersmith and Builders FirstSource, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed with the Securities and Exchange Commission on May 10, 2022, File Number 001-40620)](https://www.sec.gov/Archives/edgar/data/1316835/000156459022019150/bldr-ex102_295.htm) |

| 10.32+ | | [Amended and Restated Employment Agreement, entered into as of January 1, 2021, between David E. Rush and Builders FirstSource, Inc. (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 26, 2021, File Number 0-51357)](https://www.sec.gov/Archives/edgar/data/1316835/000156459021009308/bldr-ex1033_303.htm) |

| 10.34*+ | | [Builders FirstSource, Inc. Executive and Key Employee Severance Plan](https://www.sec.gov/Archives/edgar/data/1316835/000095017023004939/bldr-ex10_34.htm) |

Jackson, our Chief Financial Officer.

| 10.20*+ | | [Builders FirstSource, Inc. Director Compensation Policy](https://www.sec.gov/Archives/edgar/data/1316835/000156459022007980/bldr-ex1020_435.htm) |

| --- | --- |

| | [removed: BUILDERS] [added: BUILDERS] FIRSTSOURCE, [removed: INC.] [added: INC.] |

| [removed: Signature] [added: Signature] | | [removed: Title] [added: Title] | | [removed: Date] [added: Date] |

| [removed: David E. Flitman] [added: Dave Rush] | | (Principal Executive Officer) | | |

| /s/ PETER M. JACKSON | | Executive Vice President and Chief Financial Officer | | [removed: March 1, 2022] [added: Feb 28, 2023] |

| /s/ JAMI [removed: COULTER] [added: BECKMANN] | | Senior Vice President and Chief Accounting Officer | | [removed: March 1, 2022] [added: Feb 28, 2023] |

| Jami [removed: Coulter] [added: Beckmann] | | (Principal Accounting Officer) | | |

| /s/ PAUL S. LEVY | | Chairman and Director | | [removed: March 1, 2022] [added: Feb 28, 2023] |

| /s/ MARK ALEXANDER | | Director | | [removed: March 1, 2022] [added: Feb 28, 2023] |

| /s/ CORY J. BOYDSTON | | Director | | [removed: March 1, 2022] [added: Feb 28, 2023] |

| /s/ CLEVELAND A. CHRISTOPHE | | Director | | [removed: March 1, 2022] [added: Feb 28, 2023] |

| /s/ WILLIAM B. HAYES | | Director | | [removed: March 1, 2022] [added: Feb 28, 2023] |

| /s/ BRETT N. MILGRIM | | Director | | [removed: March 1, 2022] [added: Feb 28, 2023] |

| /s/ JAMES O’LEARY | | Director | | [removed: March 1, 2022] [added: Feb 28, 2023] |

| Craig A. Steinke | | Director | | [removed: March 1, 2022] [added: Feb 28, 2023] |

SIGNATURES

Feb 28, 2023

| | |

| | /s/ DAVE RUSH |

| | Dave Rush |

| /s/ DAVE RUSH | | Chief Executive Officer and Director | | Feb 28, 2023 |

| /s/ DIRKSON R. CHARLES | | Director | | Feb 28, 2023 |

| Dirkson R. Charles | | | | |

SIGNATURES

March 1, 2022

| | /s/ DAVID E. FLITMAN |

| | David E. Flitman |

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

| /s/ DAVID E. FLITMAN | | Chief Executive Officer and Director | | March 1, 2022 |

| /s/ DANIEL AGROSKIN | | Director | | March 1, 2022 |

| Daniel Agroskin | | | | |

| /s/ DAVID W. BULLOCK | | Director | | March 1, 2022 |

| David W. Bullock | | | | |

| /s/ FLOYD F. SHERMAN | | | | |

| Floyd F. Sherman | | Director | | March 1, 2022 |

None.

We have a broad network of distribution and manufacturing facilities in 42 states throughout the U.S. Based on available 2021 U.S. Census data, we have operations in 47 of the top 50 and 85 of the top 100 U.S. Metropolitan Statistical Areas, as ranked by single family housing permits in 2021.

Distribution centers typically include 10 to 15 acres of outside storage, a 45,000 square foot warehouse, 4,000 square feet of office space, and 15,000 square feet of covered storage.

The outside area provides space for lumber storage and a staging area for delivery while the warehouse stores millwork, windows and doors.

The distribution centers are usually located in industrial areas with

low cost real estate and easy access to freeways to maximize distribution efficiency and convenience.

Many of our distribution centers are situated on rail lines for efficient receipt of goods.

Our manufacturing facilities produce trusses, wall panels, engineered wood, windows, pre-hung doors and custom millwork.

Where efficient, they are located on the same premises as our distribution facilities.

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

Our window manufacturing facility in Houston, Texas is approximately 200,000 square feet.

We contractually lease approximately 415 facilities and own approximately 150 facilities.

These leases typically have an initial lease term of five to 15 years and most provide options to renew for specified periods of time.

A majority of our leases provide for fixed annual rentals.

Certain of our leases include provisions for escalating rent, as an example, based on changes in the consumer price index.

Most of the leases require us to pay taxes, insurance and common area maintenance expenses associated with the properties.

As described in Note 9 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K, 121 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.

In addition, we operate a fleet of approximately 17,700 rolling stock units, which includes approximately 7,700 trucks and 7,100 forklifts as well as trailers to deliver products from our distribution and manufacturing centers to our customers’ job sites.

Through our emphasis on local market flexibility and strategically placed locations, we minimize shipping and freight costs while maintaining a high degree of local market expertise.

Through knowledge of local homebuilder needs, customer coordination and rapid restocking ability, we reduce working capital requirements and guard against out-of-stock products.

We believe that this reliability is highly valued by our customers and reinforces customer relationships.

Not applicable.

PART II

Our common stock is traded on the NYSE under the symbol “BLDR”.

The approximate number of stockholders of record of our common stock as of February 23, 2022 was 96.

We currently do not pay dividends.

Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including restrictions in our debt instruments, as well as our future earnings, capital requirements, financial condition, prospects and other factors that our board of directors may deem relevant.

Our debt agreements currently restrict our ability to pay dividends.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” contained in Item 7 of this annual report on Form 10-K.

The graph below matches the cumulative 5-Year total return of holders of Builders FirstSource, Inc.’s common stock with the cumulative total returns of the Russell 2000 index and the S&P 600 Building Products index.

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 December 31, 2016 and tracks it through December 31, 2021.


| | | 12/16 | | | | 12/17 | | | | 12/18 | | | | 12/19 | | | | 12/20 | | | | 12/21 | |

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

| Builders FirstSource, Inc. | | | 100.00 | | | | 198.63 | | | | 99.45 | | | | 231.63 | | | | 372.01 | | | | 781.31 |

| Russell 2000 | | | 100.00 | | | | 114.65 | | | | 102.02 | | | | 128.06 | | | | 153.62 | | | | 176.39 |

| S&P 600 Building Products Index | | | 100.00 | | | | 108.38 | | | | 78.68 | | | | 99.77 | | | | 126.08 | | | | 157.71 |

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

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 June 14, 2022 under the caption “Equity Compensation Plan Information,” which information is incorporated herein by reference.

Company Stock Repurchases

The following table provides information with respect to our purchases of Builders FirstSource, Inc. common stock during the fourth quarter of fiscal year 2021:

| Period | | Total Number of Shares Purchased | | | | Average Price Paid per Share (including fees) | | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | | Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs | | |

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

| October 1, 2021 — October 31, 2021 | | | 4,475,045 | | | $ | 56.01 | | | | 4,474,200 | | | $ | 171,531,266 | |

| November 1, 2021 — November 30, 2021 | | | 3,128,981 | | | | 70.10 | | | | 3,128,800 | | | | 952,276,139 | |

| December 1, 2021 — December 31, 2021 | | | 8,898,768 | | | | 78.65 | | | | 8,898,000 | | | | 252,635,195 | |

| Total | | | 16,502,794 | | | $ | 70.89 | | | | 16,501,000 | | | $ | 252,635,195 | |

In the fourth quarter of 2021, 16,501,000 share were repurchased and retired pursuant to the total $2.0 billion share repurchase plan authorized by our board of directors, including an incremental $1.0 billion share repurchase authorization in November 2021.

The remaining 1,794 shares presented in the table above represent shares tendered in order to meet tax withholding requirements for restricted stock units vested.

None.

Disclosure Controls Evaluation and Related CEO and CFO Certifications.

Our management, with the participation of our principal executive officer (“CEO”) and principal financial officer (“CFO”) conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this annual report.

Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), are attached as exhibits to this annual report.

This “Controls and Procedures” section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Limitations on the Effectiveness of Controls.

We do not expect that our disclosure controls and procedures will prevent all errors and all fraud.

A system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met.

Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

Furthermore, the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely.

Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements or omissions due to error or fraud may occur and not be detected.

Scope of the Controls Evaluation.

The evaluation of our disclosure controls and procedures included a review of their objectives and design, the Company’s implementation of the controls and procedures and the effect of the controls and procedures on the information generated for use in this annual report.

In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were being undertaken if needed.

This type of evaluation is performed on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our quarterly reports on Form 10-Q.

Many of the components of our disclosure controls and procedures are also evaluated by our internal audit department, our legal department and by personnel in our finance organization.

The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures on an ongoing basis, and to maintain them as dynamic systems that change as conditions warrant.

Conclusions regarding Disclosure Controls.

Based on the required evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of December 31, 2021, 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.

Management’s Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles ("GAAP").

Internal control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with existing policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in *Internal Control — Integrated Framework (2013*) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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, 2021.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control over Financial Reporting.

During the period covered by this report, other than described below, there were no changes in our internal control over financial reporting identified in connection with the evaluation described above that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

On January 1, 2021, the Company completed the BMC Merger.

Throughout 2021, the Company was in the process of integrating BMC pursuant to the Sarbanes-Oxley Act of 2002.

The Company evaluated changes to processes, information technology systems and other components of internal controls over financial reporting as part of its ongoing integration activities, and as a result, controls were periodically changed throughout the period.

The Company believes, however, that it was able to maintain sufficient controls over the substantive results of its financial reporting throughout this integration process.

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held June 14, 2022 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.

Code of Business Conduct and Ethics

Builders FirstSource, Inc. and its subsidiaries endeavor to do business according to the highest ethical and legal standards, complying with both the letter and spirit of the law.

Our board of directors approved a Code of Business Conduct and Ethics that applies to our directors, officers (including our principal executive officer, principal financial officer and principal accounting officer) and employees.

Our Code of Business Conduct and Ethics is administered by a compliance committee made up of representatives from our legal, human resources, finance and internal audit departments.

Our employees are encouraged to report any suspected violations of laws, regulations and the Code of Business Conduct and Ethics, and all unethical business practices.

We provide continuously monitored hotlines for anonymous reporting by employees.

Our board of directors has also approved a Supplemental Code of Ethics for the Chief Executive Officer, President, and Senior Financial Officers of Builders FirstSource, Inc., which is administered by our general counsel.

Both of these policies are listed as exhibits to this annual report on Form 10-K and can be found in the “Investors” section of our corporate Web site at: www.bldr.com.

Stockholders may request a free copy of these policies by contacting the Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201, United States of America.

In addition, within four business days of:

| | • | Any amendment to a provision of our Code of Business Conduct and Ethics or our Supplemental Code of Ethics for Chief Executive Officer, President and Senior Financial Officers of Builders FirstSource, Inc. that applies to our chief executive officer, chief financial officer or chief accounting officer as it relates to one or more of the items set forth in Item 406(b) of Regulation S-K; or |

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

| | • | 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 S-K, |

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

We will provide information regarding any such amendment or waiver (including the nature of any waiver, the name of the person to whom the waiver was granted and the date of the waiver) on our Web site at the Internet address above, and such information will be available on our Web site for at least a 12-month period.

In addition, we will disclose on our Web site at the Internet address above any amendments and waivers to our Code of Business Conduct and Ethics or our Supplemental Code of Ethics for Chief Executive Officer, President and Senior Financial Officers of Builders FirstSource, Inc. that relate to any element of the definition of “code of ethics” enumerated in Item 406(b) of Regulation S-K under the Securities Exchange Act of 1934, as amended.

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held June 14, 2022, 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 June 14, 2022, under the caption “Ownership of Securities” and “Equity Compensation Plan Information,” which information is incorporated herein by reference.

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 June 14, 2022, 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 June 14, 2022, 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.

PART IV