bldr 1 q 2013
TRANSCRIPT
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Cautionary Notice
Statements in this presentation which are not purely historical facts or which necessarily depend upon future events,including statements about 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 27A of theSecurities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Readers arecautioned not to place undue reliance on forward-looking statements. All forward-looking statements in this presentationare based upon information available to Builders FirstSource, Inc. on the date of this presentation. Except as required bylaw, Builders FirstSource, Inc. 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 anduncertainties that could cause actual events or results to differ materially from the events or results described in theforward-looking statements, including risks or uncertainties related to the Company’s revenues and operating resultsbeing highly dependent on, among other things, the homebuilding industry, lumber prices and the economy. BuildersFirstSource, Inc. may not succeed in addressing these and other risks. Further information regarding factors that couldaffect our financial and other results can be found in the risk factors section of Builders FirstSource, Inc.’s most recentForm 10-K filed with the Securities and Exchange Commission. Consequently, all forward-looking statements in thispresentation are qualified by the factors, risks and uncertainties contained therein
Use of Non-GAAP Financial Measures
This presentation includes financial measures and terms not calculated in accordance with accounting principles generallyaccepted in the United States (“GAAP”) in order to provide investors with an alternative method for assessing ouroperating results in a manner that enables investors to more thoroughly evaluate our current performance as compared topast performance. We believe these non-GAAP measures provide investors with a better baseline for modeling our futureearnings expectations. Our management uses these non-GAAP measures for the same purpose. We believe that ourinvestors should have access to the same set of tools that we use in analyzing our results. These non-GAAP measuresshould be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitutefor or superior to GAAP results. Our calculations of non-GAAP measures are not necessarily comparable to similarlytitled measures reported by other companies. Schedules that reconcile non-GAAP financialmeasures to their GAAP equivalents are included later in this presentation.
Safe Harbor & Non-GAAP Financial Measures
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Contents
Section 1 Company Overview 3
Section 2 Industry Update 8
Section 3 Investment Highlights 12
Section 4 Financial Overview 20
Section 5 Reconciliation of Non-GAAP Financial Measures 29
Company Overview
4
Prefabricated ComponentsLumber & Lumber Sheet Other Products & Services
Products includedimensional lumber,plywood and orientedstrand board (“OSB”)
Factory-built substitutesfor job side-framingincluding floor trusses,roof trusses, wallpanels, stairs, andengineered wood
Cabinets, gypsum,roofing and insulation.Services include turn-key framing, shellconstruction, designassistance, andinstallation
Windows & Doors Millwork
Manufacturing,assembly anddistribution ofaluminum and vinylwindows
Assembly anddistribution of interiorand exterior door units
Distribution of interiortrim, exterior trim,columns and posts.Manufacturing of customexterior features underthe Synboard™brand name
Third largest building products provider1 operating in the estimated $129.2 billion single family residentialhome construction market2
The Company is a fully-integrated supplier, manufacturer and installer of structural and related buildingproducts
Company Overview
Notes:1 According to ProSales Magazine among those with manufacturing capabilities, based on 2011 revenues2 2012 National Association of Home Builder (“NAHB”)
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Revenue Distribution
Approximately half of BFS sales are from value added product categories — PrefabricatedComponents, Millwork and Windows & Doors
Over 20% of sales are related to our installation services
Fiscal Year 2012 March YTD 2013
6
Top 10 customers represented approximately 23% of total sales, with no one customerexceeding 5% for FY 2012
Customer mix consists of large national homebuilders, regional homebuilders and localbuilders
Approximately 15% of sales are related to light commercial and multi-family construction
Our Customers
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Strong Market Position
BFS is the third largest building products provider in an estimated
$129.2 billion single family residential construction market1
Building Products Suppliers with Manufacturing Capabilities
Note:1 2012 NAHB
Pro Distributor
2011-2012
% Change
2010-2011
% Change
ProBuild Holdings $3,168 $2,838 11.6% -6.8%
84 Lumber 1,458 1,278 14.1% -7.2%
Builders FirstSource 1,070 779 37.4% 11.3%
Stock Building Supply 895 735 21.7% -10.1%
BMC 836 631 32.5% 10.7%
Carter Lumber 695 557 24.7% 4.2%
US LBM 499 429 16.2% 59.3%
McCoy’s Building Supply 437 380 15.2% 0.6%
Golden State Lumber 224 213 5.4% 0.4%
Parr Lumber 205 190 8.1% 4.7%
Source: ProSales Magazine (2012, 2011 & 2010 ProSales 100 List)
2011 Pro Segment
Sales ($mm)
2012 Pro Segment
Sales ($mm)
Industry Update
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Recent downturn in residential new construction market is without precedent since World War II
Since 2008, housing starts have been well below the long term trend of 1.5 million total starts and1.1 million single family starts.
Overbuild/Underbuild
New Construction Market Trends
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The residential new construction market has experienced a substantial downturn in recentyears as a result of the recession
The downturn resulted in the largest decline in housing starts since the Great Depressionfalling by 73% from the 2005 peak to the current trough
Building products sales have had a corresponding decline
Trends that will drive a recovery in U.S. housing demand include:
Low interest rates, the aging of housing stock, and population growth due toimmigration and birthrates exceeding death rates
The National Association of Home Builders (“NAHB”) is predicting that 2013 U.S.single family housing starts will grow approximately 24% from 2012, withapproximately 664,000 single family housing starts predicted
NAHB predicts single family housing starts will increase to 855,000 in 2014,representing a 29% increase over the 2013 forecast
The Macro Environment
BFS is well positioned to take advantage of anticipated renewed demand
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Commodity Price Trends
While commodity prices have fallen in recent weeks, prices have steadily increased since thebeginning of the 2012 and remain well above historical averages. Higher commodity prices willtypically result in increased gross profit dollars and improved EBITDA flow through.
Investment Highlights
Clear and Powerful Strategy
U.S. single-family housing market is at near record levels of affordability anddemonstrating clear recovery
Continue to capture an outsized share from new home construction recovery
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Capitalize on housingmarket recovery and
growth
Strategic relationships with vendors enhance penetration of new customers andmarkets
Relative size and homebuilder relationships provide our vendors access to a largecustomer base with significant purchasing power (“partner of choice”)
Leverage our strategicvendor relationships
Execute “one stop shop” strategy by further success in cross-selling and bolsteringservice offerings and manufacturing capabilities
Continue to expand product offering selectively
Maximize share ofwallet with customers
and across markets
Through the downturn, permanent elimination of ~$25 million in fixed costs
Continue to streamline operations and enhance working capital efficiency
Optimize cash flowwith highly scalable
cost structure
Invest in talented sales teams in existing markets
Selectively enter new markets through the opening of new facilitiesor acquiring existing suppliers
Selectively pursueopportunities for
organic expansion andstrategic acquisitions
Key Investment Highlights
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Market leadershipin highly attractive,fragmented markets
Integrated“one-stop shop”
approach
Experiencedmanagement team and
sales force
Industry-leadingIT system drivingsales growth and
operating efficiency
Sustained investmentthrough the cycle
1 2
3
4
5
Strong fundamentalmarket recovery
Market leadership in attractive, fragmentedmarkets
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One of the largest U.S. suppliers in the ProSegment
Operations in 33 markets in 9 states –primarily in the southern and Mid-Atlanticregions of the United States
16 of the nation’s top 50 MetropolitanStatistical Areas (as ranked by single familypermits)
~ 45% of 2012 U.S. housing permits wereissued in states in which BFS operates
Highly fragmented industry – competitionprimarily privately held, local businesses
1
North East
EmmitsburgFrederick
Port of Rocks
Hagerstown
Manassas
Culpeper
Washington
Hillsborough
High Point
Bristol
Piney FlatsKingsport
Johnson City
Knoxville Asheville
Hendersonville
BrevardCashiers
Blairsville
Gainsville
Atlanta
LaGrange
Columbus
CherryPoint
Edisto IslandJohns Island
Charleston
Pawleys Island
Columbia
SumterGoose Creek
ConwayLoris
Florence
Anderson
SenecaGreenville
Spartanburg
Cowpens
Charlotte
Aberdeen
Fayetteville
Southport
WilmingtonWilmington
Nashville
Chelsea
Shelby
Auburn
JacksonvilleFreeport
Tampa
Bunnell
Orlando
West Palm Beach
Dallas Headquarters
Lewisville
Arlington
Grand Prairie
Houston
San Antonio
Integrated “one stop shop” approach
Supplier and advisor to our construction customers
Exceptional breadth of product offering (65,000 SKUs) and services, enabling a “one stop shop”
Homebuilders value convenience and efficiency of using one supplier throughout building process
Full range of services – including professional installation, turn-key framing and shell construction and design
Salespeople with significant homebuilding experience – understand the challenges encountered at the job site
− Just-in-time delivery of just the right amount of product
− Value-added advice and consultation on engineering, building codes, etc.
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Supplier to Homebuilders
Trusted Consultant
2
Sustained investment through the cycle
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Sales forceManufacturing and
fabrication capabilitiesTechnology
infrastructure
Focus on cost, workingcapital and operating
improvements
Retained vast majorityof sales force
Preserved deepcustomer relationships
Closely monitoredcapital expenditures
Prudently invested inaccretive expendituresto position theCompany for growth
Centralized manycorporate and fieldtasks, and furtherenhanced servicelevels through real-time communication,including via iPad
Implemented a singletechnology platformin order to improveoperationalefficiencies andrespond to customers’needs faster
Continued focus on allaspects of workingcapital
The Companyregularly evaluates itsfacilities in an effortto reduce fixed costswithout compromisingservice
Permanent eliminationof $25 million in fixedcosts
3
Management has implemented certain strategies over the last several years that leave BFSwell-positioned to capture market share going forward
Industry-leading IT system driving sales andoperating efficiency
Centralized purchasing, payroll, IT, receivables and payable functions – the majority whichhistorically were performed in the field
Equipped sales force with mobile touch-screen devices offering real-time access to inventoryand scheduling
Competitive advantage allows the Company to differentiate itself from its competitors
− Provide higher level of customer service
− Offers management insight into the performance of the business
− Strategic purchasing and pricing decisions
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4
Experienced management team and seasonedsales force with long-standing relationships
Over 40 years of industry experience
Prior experience: Chairman & CEO of Triangle Pacific / Armstrong Flooring
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Floyd F. ShermanPresident and CEO
Over 40 years of industry experience
Prior experience: Area Manager at Pelican Companies, Inc.
Morris E. TollySenior Vice President –
Operations
13 years of industry experience
Prior experience: Director of Accounting at Pier One Imports and five yearsexperience with PriceWaterhouse
Chad CrowSenior Vice President
and CFO
20 years of industry experience
Prior experience: VP & Deputy General Counsel of Fibreboard, Asst GeneralCounsel of AT&E, nine years as a securities lawyer
Donald F. McAleenanSenior Vice Presidentand General Counsel
Average BFS tenure of 20 yearsArea VPs
5
Over 40 years of industry experience
Prior experience: Manufacturing management positions with Wickes, Inc., Fabricon,Inc., National Homes Corp
Lou DavisVice President –Manufacturing
Financial Overview
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Review of 2012 Operating Results
Sales for 2012 were 37.4% higher than 2011 primarily driven by volume, and to a lesser extent,commodity price inflation
U.S. single family housing starts (South region) were up only 23.1% over the same period
U.S. single family units under construction (South region) were up only 7.7% over the sameperiod
Combination of these data points, indicate market share gains
Gross margin decreased slightly from 20.3% in 2011 to 20.0% in 2012. Increased sales volume wasoffset by intra-quarter commodity lumber price inflation relative to quarterly customer pricingcommitments. Higher than expected sales volume resulted in us replacing inventory during the latterhalf of the quarters at higher costs.
Selling, general, and administrative expenses have been monitored closely by management and as apercentage of sales decreased from 24.2% in 2011 to 20.4% in 2012 (excluding stock compensationexpense)
FY 2012 Adjusted EBITDA improved $21.4 million – $6.4 million compared to ($15.0) million in2011
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After declines in 2007-2009, revenues stabilized in 2010 then grew 11% in 2011 and 37% in 2012
Historical margins demonstrate the potential for expansion from current margins as the businessbuilds toward historical scale and leverages a leaner cost structure
Proven ability to conserve capital through tight working capital management and reduced capitalspending
Summary Financial Performance
$mm except Sales per SF Start 2005 2006 2007 2008 2009 2010 2011 2012
South Region Single Family Housing Starts1
831,300 756,500 539,500 323,600 232,100 247,200 229,200 282,600
South region sales per SF start $2,572 $2,728 $2,722 $3,066 $2,921 $2,833 $3,399 $3,789
U.S. Single Family Housing Starts1
1,715,800 1,465,300 1,046,100 622,000 445,000 471,100 430,500 535,300
U.S. sales per SF start $1,246 $1,408 $1,404 $1,595 $1,523 $1,487 $1,810 $2,000
Total Revenue $2,138.1 $2,063.5 $1,468.4 $992.0 $677.9 $700.3 $779.1 $1,070.7
% growth -3.5% -28.8% -32.4% -31.7% 3.3% 11.2% 37.4%
Gross Profit $543.4 $544.8 $363.2 $215.5 $142.4 $131.8 $157.9 $214.6
% margin 25.4% 26.4% 24.7% 21.7% 21.0% 18.8% 20.3% 20.0%
Operating Expenses2
$388.6 $401.5 $341.9 $280.0 $201.4 $194.1 $193.0 $222.3
% revenue 18.2% 19.5% 23.3% 28.2% 29.7% 27.7% 24.8% 20.8%
Adjusted EBITDA3
$172.7 $169.9 $53.2 ($32.4) ($35.1) ($43.6) ($15.0) $6.4
% margin 8.1% 8.2% 3.6% -3.3% -5.2% -6.2% -1.9% 0.6%
Capex4
$29.7 $27.2 $10.1 $8.2 $2.1 $9.0 $4.8 $10.4
% revenue 1.4% 1.3% 0.7% 0.8% 0.3% 1.3% 0.6% 1.0%
Net Working Capital as % of Revenue5
10.0% 10.4% 11.6% 12.2% 10.2% 9.3% 10.0% 10.0%
Notes:
1 Source: U.S. Census
2 2005 operating expenses adjusted to exclude $35.5mm anti-dilution payment to stock option holders
3 See Adjusted EBITDA reconciliation on page 28
4 2005 and 2006 capex includes expansion expenditures.
5 Calculated as monthly average of net working capital divided by total annual revenue
Fiscal Year
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Recent Quarterly Performance
Recent quarterly performance demonstrates strong revenue trends with sixconsecutive quarters of revenue growth greater than 30%
Q2 Q3 Q4 2012 2012 2012 2012 2013
$mm except Sales per SF Start 2011 2011 2011 Q1 Q2 Q3 Q4 Q1
South Region Single Family Housing Starts1
63,800 61,700 51,600 62,000 77,200 78,100 65,300 79,000
South region sales per SF start $3,235 $3,520 $3,734 $3,539 $3,522 $3,736 $4,404 $4,047
U.S. Single Family Housing Starts1
123,400 117,700 99,900 105,500 151,100 150,100 128,600 135,200
U.S. sales per SF start $1,673 $1,845 $1,929 $2,080 $1,799 $1,944 $2,236 $2,365
Total Revenue $206.4 $217.2 $192.7 $219.4 $271.9 $291.8 $287.6 $319.7
% growth y-o-y -2.4% 20.4% 31.0% 34.7% 31.7% 34.3% 49.2% 34.7%
Gross Profit $42.8 $44.4 $39.3 $45.1 $53.7 $57.7 $58.1 $62.3
% margin 20.7% 20.4% 20.4% 20.6% 19.7% 19.8% 20.2% 19.5%
Operating Expenses $49.0 $50.2 $47.1 $50.8 $55.0 $58.7 $57.8 $61.1
% revenue 23.7% 23.1% 24.4% 23.2% 20.2% 20.1% 20.1% 19.1%
Adjusted EBITDA2
($1.3) ($0.7) ($3.3) ($2.1) $2.1 $3.0 $3.4 $5.4
% margin -0.6% -0.3% -1.7% -1.0% 0.8% 1.0% 1.2% 1.7%
Capex $1.1 $1.1 $2.1 $1.7 $2.3 $5.2 $1.2 $1.0
% revenue 0.5% 0.5% 1.1% 0.8% 0.8% 1.8% 0.4% 0.3%
Notes:
1 Source: U.S. Census
2 See Quarterly Adjusted EBITDA reconciliation on page 29
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Market Share Gains
Consistent growth in sales per single-family housing start indicates market sharegains
25
Sales & Adjusted EBITDA Trends
Consistent sales and adjusted EBITDA growth
Six straight quarters of y/o/y sales growth greater than 30%
Nine straight quarters of y/o/y adjusted EBITDA improvement
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March YTD 2013 Update
Sales for Q1 2013 were $319.7 million, a 45.7% increase over sales of $219.4 million for Q1 2012
Sales growth estimated to be driven by volume (29.7%) and price (16.0%)
U.S. single family housing starts (South region) were up only 27.4% over the same period
U.S. single family units under construction (South region) were up only 23.2% over the sameperiod
Gross margin was 19.5% for Q1 2013 compared to 20.6% for Q1 2012. Increased sales volume wasoffset by intra-quarter commodity lumber price inflation relative to quarterly customer pricingcommitments.
At March 31, 2013, our LTM Adjusted EBITDA had improved $21.3 million – $13.9 millioncompared to ($7.4) million for the same period in 2012
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Capital Structure Summary
$mm 3/31/2013 Coupon Maturity Call Provisions
Cash & Cash Equivalents $117.7
Term Loan*
225.0 L+950 bps (2% Libor floor) Sep-15 Interest make-whole through Dec 2014
Second-lien Floating Rate Notes 139.7 L+1000 bps (3% Libor floor) Feb-16 Currently callable at 100
Other debt 4.0
Total Debt 368.7
Stockholders' Equity 37.1
Total Capitalization 405.8
Net Debt $251.0
* Financing also includes a stand-alone LC facility that provides for the issuance of up to $10mm letters of credit and a sub-facility that
provides for the issuance of up to $15mm letters of credit
The capital structure information below is as of March 31, 2013. See the following pagefor information regarding our recent refinancing transaction.
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Recent Refinancing Transaction
On May 29, 2013, we issued $350 million aggregate principal amount of 7.625%Senior Secured Notes due 2021 and entered into a new 5-year $175 million revolvingcredit facility At closing, the company’s borrowing availability under the facility wasapproximately $162.3 million, after reducing for $12.7 million of outstanding lettersof credit
Net proceeds from the offering, together with cash on hand, were used to (i) redeemthe company’s $139.7 million second-lien floating rate notes due 2016 plus accruedand unpaid interest, (ii) repay in full the existing $225.0 million term loan plus aprepayment premium of approximately $39.5 million and accrued and unpaid interest(iii) pay related commissions, fees and expenses.
This transaction provides a more permanent capital structure, reduces annual interestby up to $16 million and provides ample liquidity that will allow us to take advantageof the recovering housing market and the growth that comes with it.
Reconciliation ofNon-GAAP Financial Measures
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Adjusted EBITDA Reconciliation
$mm 2005 2006 2007 2008 2009 2010 2011 2012
Net Income (Loss) $48.6 $68.9 ($23.8) ($139.5) ($61.9) ($95.5) ($65.0) ($56.9)
Reconciling Items:
Depreciation & amortization 16.9 20.4 22.4 20.8 17.9 15.4 14.0 11.1
Interest expense 47.2 28.7 27.7 25.6 27.0 31.7 24.9 45.1
Income tax expense (benefit) 27.0 43.3 (4.3) (17.7) (30.8) (1.1) 2.2 0.6
(Income) loss from discontinued operations, net of tax (3.6) 2.3 21.1 18.9 5.0 1.2 0.4 2.4
Asset impairments - - 0.4 46.9 0.5 0.8 - 0.0
Stock compensation expense 0.0 4.1 7.0 8.5 2.9 4.3 4.6 3.6
Litigation settlement - - - - - (1.2) - (0.6)
Transaction costs - - 1.1 2.8 3.2 (0.0) 1.2 -
Facility closure costs 0.8 0.6 0.1 1.2 1.2 0.6 2.5 1.0
Anti-dilution payment to stock option holders 35.5 - - - - - - -
Other 0.2 1.6 1.5 (0.1) (0.0) 0.2 0.2 (0.0)
Adjusted EBITDA $172.7 $169.9 $53.2 ($32.4) ($35.1) ($43.6) ($15.0) $6.4
Fiscal Year
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Quarterly Adjusted EBITDA Reconciliation
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
$mm 2011 2011 2011 2012 2012 2012 2012 2013
Net Loss ($15.5) ($11.6) ($16.7) ($19.2) ($12.1) ($13.6) ($12.0) ($11.8)
Reconciling Items:
Depreciation & amortization 3.5 3.4 3.5 2.9 2.5 2.9 2.9 2.8
Interest expense 5.7 5.3 8.1 13.1 10.5 10.6 11.0 12.5
Income tax expense (benefit) 1.7 0.3 0.3 0.2 0.1 0.0 0.2 0.3
Loss from discontinued operations, net of tax 0.1 0.1 0.1 0.1 0.1 1.3 1.0 0.2
Stock compensation expense 0.9 1.7 0.9 0.8 0.9 0.9 1.0 1.3
Transaction costs 0.3 - - - 0 0 - -
Facility closure costs 1.9 0.1 0.4 0.1 0.1 0.7 0.1 0.1
Other 0.1 (0.0) 0.1 0.0 (0.0) 0.0 (0.6) (0.0)
Adjusted EBITDA ($1.3) ($0.7) ($3.3) ($2.1) $2.1 $3.0 $3.4 $5.4