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- 2. Safe Harbor & Non-GAAP Financial Measures 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 the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue reliance on forward-looking statements. All forward-looking statements in this presentation are based upon information available to Builders FirstSource, Inc. on the date of this presentation. Except as required by law, 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 and uncertainties 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 revenues and operating results being highly dependent on, among other things, the homebuilding industry, lumber prices and the economy. Builders FirstSource, Inc. may not succeed in addressing these and other risks. Further information regarding factors that could affect our financial and other results can be found in the risk factors section of Builders FirstSource, Inc.’s most recent Form 10-K filed with the Securities and Exchange Commission. Consequently, all forward-looking statements in this presentation 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 generally accepted in the United States (“GAAP”) in order to provide investors with an alternative method for assessing our operating results in a manner that enables investors to more thoroughly evaluate our current performance as compared to past performance. We believe these non-GAAP measures provide investors with a better baseline for modeling our future earnings expectations. Our management uses these non-GAAP measures for the same purpose. We believe that our investors should have access to the same set of tools that we use in analyzing our results. These non-GAAP measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Our calculations of non-GAAP measures are not necessarily comparable to similarly titled measures reported by other companies. Schedules that reconcile non-GAAP financial measures to their GAAP equivalents are included later in this presentation. 1
- 3. Contents Section 1 Company Overview 3 Section 2 Industry Update 9 Section 3 Investment Highlights 13 Section 4 Financial Overview 19 Section 5 Reconciliation of Non-GAAP Financial Measures 27 2
- 5. Company Overview Third largest building products provider1 operating in the estimated $106.8 billion single family residential home construction market2 The Company is a fully-integrated supplier, manufacturer and installer of structural and related building products Lumber & Lumber Sheet Windows & Doors Prefabricated Components Millwork Other Products & Services Products include Manufacturing, Factory-built substitutes Distribution of interior Cabinets, gypsum, dimensional lumber, assembly and for job side-framing trim, exterior trim, roofing and insulation. plywood and oriented distribution of including floor trusses, columns and posts. Services include turn- strand board (“OSB”) aluminum and vinyl roof trusses, wall Manufacturing of custom key framing, shell windows panels, stairs, and exterior features under construction, design Assembly and engineered wood the Synboard™ assistance, and distribution of interior brand name installation and exterior door units Notes: 1 According to ProSales Magazine among those with manufacturing capabilities, based on 2011 revenues 2 2011 National Association of Home Builder (“NAHB”) 4
- 6. Revenue Distribution Over 50% of BFS sales are from value added product categories — Prefabricated Components, Millwork and Windows & Doors Over 20% of sales are related to our installation services FY 2011 Q3 YTD 2012 5
- 7. Our Customers Top 10 customers represented approximately 23% of total sales, with no one customer exceeding 5% for FY 2011 Customer mix consists of large national homebuilders, regional homebuilders and local builders Approximately 15% of sales are related to light commercial and multi-family construction Large builders, making up a significant portion of the Company’s customers, are winning market share due to cost advantages, land positions and easier access to financing 6
- 8. Geographic Footprint BFS has operations in 32 markets in 9 states primarily in the southern and eastern regions of the United States Hagerstown North East Emmitsburg Frederick Port of Rocks Manassas BFS is in 17 of the nation’s Culpeper top 50 Metropolitan Statistical Areas (as ranked by single Bristol Hillsborough Kingsport Piney Flats family housing permits) Clarksville Nashville Johnson City Knoxville Asheville High Point Apex Washington Hendersonville Fayetteville Charlotte Cashiers Brevard Aberdeen Cowpens Approximately 46% of 2011 Blairsville Gainsville Seneca Spartanburg Greenville Florence Wilmington Southport Loris U.S. housing permits were Atlanta Anderson Columbia Sumter Goose Creek Conway Pawleys Island Chelsea issued in states in which BFS Shelby LaGrange Charleston Johns Island Columbus Edisto Island operates Auburn CherryPoint 53 distribution centers and 44 Jacksonville manufacturing facilities, some Freeport of which are co-located Bunnell Lewisville Dallas Headquarters Arlington Grand Prairie Tampa Orlando Austin West Palm Beach Houston San Antonio 7
- 9. Strong Market Position BFS is the third largest building products provider in an estimated $106.8 billion single family residential construction market1 Building Products Suppliers with Manufacturing Capabilities 2011 Pro Segment 2010 Pro Segment Pro Distributor Sales ($mm) Sales ($mm) % Change ProBuild Holdings $2,838 $3,045 -6.8% 84 Lumber 1,278 1,378 -7.2% Builders FirstSource 779 700 11.3% Stock Building Supply 735 818 -10.1% BMC 631 570 10.7% Carter Lumber 557 535 4.2% US LBM 429 270 59.3% Harvey Building Products 400 n/m n/m McCoy’s Building Supply 380 377 0.6% Golden State Lumber 213 212 0.4% Source: ProSales Magazine, 2011 & 2010 Note: 1 2011 NAHB 8
- 10. Industry Update
- 11. New Construction Market Trends 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 and 1.1 million single family starts. Overbuild/Underbuild 2.5 2.1 Long Term Average: 1.5mm 2.0 2.0 1.8 1.8 Underbuild Total Starts (mm units) 1.7 1.6 1.5 1.4 Overbuild 0.9 1.0 0.6 0.6 0.6 0.5 - 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 10 Sources: US Census
- 12. The Macro Environment The residential new construction market has experienced a substantial downturn in recent years as a result of the recession The downturn resulted in the largest decline in housing starts since the Great Depression falling by 74% 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 to immigration and birthrates exceeding death rates The National Association of Home Builders (“NAHB”) is predicting that 2012 U.S. single family housing starts will grow approximately 21% from 2011, with approximately 528,000 single family housing starts predicted NAHB predicts single family housing starts will increase to 665,000 in 2013, representing a 26% increase over the 2012 forecast BFS is well positioned to take advantage of anticipated renewed demand 11
- 13. Commodity Price Trends Commodity prices have steadily increased from the beginning of the year. Higher commodity prices will typically result in increased gross profit dollars and improved EBITDA flow through. 12
- 15. Strategic Growth Plan Management continues to focus on profitable, disciplined growth and free cash flow generation Expand into Focus on Cost, Working Selective Expand Current Multi-Family and Light Capital and Operating Acquisitions Subject to Customer Base Commercial Business Improvements Liquidity Grow sales Diversify revenue base Focus on remaining a Focus on growing high to production into more stable end low cost supplier margin prefabricated homebuilders as they markets through operational component business continue to gain Utilize existing efficiencies such as and geographic market share capabilities of large implementation of expansion Continue with plan design centers and computer systems Acquire market-leading to prudently expand personnel with linking customers to distributors and presence in the custom necessary expertise to BFS network expand by adding homebuilder base effectively compete in Continued focus on product offerings these markets all aspects of and/or integrated working capital manufacturing facilities The Company regularly evaluates its facilities in an effort to reduce fixed costs without compromising service 14
- 16. Fully Integrated Distribution Platform BFS has an integrated business model that differentiates it from competitors that operate with a decentralized collection of facilities Network of 53 distribution centers and 44 manufacturing facilities, some which are co- located Size of facilities tailored to each market to meet customer needs Offering large-scale, full-service branches in larger markets and smaller, more tailored facilities in secondary markets Highly customized, proprietary information technology system drives internal efficiencies allowing the Company to respond rapidly to customers and reduce their costs BFS operates and owns the source code to its Enterprise Resource Planning (“ERP”) computer system that is tailored to the building supply industry in addition to laser technology that facilitates precision, speed and efficiency in the manufacturing process 15
- 17. Full Offering of Manufactured Products and Construction Services BFS acts as both a supplier and advisor to the homebuilding customer Due to the breadth of its product offering (63,000 SKUs), BFS functions as a “one-stop shop” Homebuilders value the convenience and efficiency of using one supplier throughout building process Supplier to Homebuilders Trusted Consultant BFS provides customers with a full range of services including professional installation, turn-key framing and shell construction and design BFS’s salespeople are typically trained homebuilders who understand the challenges that might be 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 and other building matters 16
- 18. Experienced Management Team Over 40 years of industry experience Floyd F. Sherman President and CEO Prior experience: Chairman & CEO of Triangle Pacific / Armstrong Flooring 48 years of industry experience Morris E. Tolly Senior Vice President – Operations Prior experience: Area Manager at Pelican Companies, Inc. 13 years of industry experience Chad Crow Prior experience: Director of Accounting at Pier One Imports and five Senior Vice President and CFO years experience with PriceWaterhouse 20 years of industry experience Donald F. McAleenan Prior experience: VP & Deputy General Counsel of Fibreboard, Asst Senior VP and General Counsel General Counsel of AT&E, nine years as a securities lawyer Over 30 years of industry experience Frederick B. Schenkel Vice President – Manufacturing Prior experience: Manufacturing management positions with Builders Supply and Lumber and The Ryland Group Average BFS tenure of 20 years Area VPs 17 17
- 19. Summary Differentiating factors that will enhance BFS’s ability to take advantage of anticipated housing recovery Leading Local Fully Integrated Market Positions Distribution in Attractive Platform Geographies Full Offering of Experienced Manufactured Management Products and Team Construction Services Diversification into Multi-family Superior and Light Customer Commercial End Service Markets Streamlined Operations and Attractive Cost Position 18
- 21. Review of 2011 Operating Results Sales for 2011 were 11.2% higher than 2010 primarily due to increased sales volume Comparing our sales growth to an 8.6% decline in U.S. single family housing starts indicates significant market share gains For the year, gross margins increased 150 bps, from 18.8% in 2010 to 20.3% in 2011 Margins improved 90 bps due to increased sales volume and our ability to leverage fixed costs in cost of goods sold Improving customer pricing, coupled with less volatility in the commodity market also contributed to margin improvement Margins are positioned to expand further due to operating leverage upon increased builder demand as well as an improved commodity inventory position Selling, general, and administrative expenses have been monitored closely by management and as a percentage of sales decreased from 27.3% in 2010 to 24.2% in 2011 (excluding stock compensation expense and 2010 litigation settlement) 20
- 22. Summary Financial Performance After declines in 2007-2009, revenues stabilized in 2010 and grew 11% in 2011 Historical margins demonstrate the potential for expansion from current margins as the business builds toward historical scale and leverages a leaner cost structure Proven ability to conserve capital through tight working capital management and reduced capital spending Fiscal Year $mm except Sales per SF Start 2005 2006 2007 2008 2009 2010 2011 South Region Single Family Housing Starts 1 831,300 756,500 539,500 323,600 232,100 247,200 229,200 South region sales per SF start $2,572 $2,728 $2,722 $3,066 $2,921 $2,833 $3,399 U.S. Single Family Housing Starts 1 1,715,800 1,465,300 1,046,100 622,000 445,000 471,100 430,500 U.S. sales per SF start $1,246 $1,408 $1,404 $1,595 $1,523 $1,487 $1,810 Total Revenue $2,138.1 $2,063.5 $1,468.4 $992.0 $677.9 $700.3 $779.1 % growth -3.5% -28.8% -32.4% -31.7% 3.3% 11.2% Gross Profit $543.4 $544.8 $363.2 $215.5 $142.4 $131.8 $157.9 % margin 25.4% 26.4% 24.7% 21.7% 21.0% 18.8% 20.3% Operating Expenses 2 $388.6 $401.5 $341.9 $280.0 $201.4 $194.1 $193.0 % revenue 18.2% 19.5% 23.3% 28.2% 29.7% 27.7% 24.8% Adjusted EBITDA3 $172.7 $169.9 $53.2 ($32.4) ($35.1) ($43.6) ($15.0) % margin 8.1% 8.2% 3.6% -3.3% -5.2% -6.2% -1.9% Capex 4 $29.7 $27.2 $10.1 $8.2 $2.1 $9.0 $4.8 % revenue 1.4% 1.3% 0.7% 0.8% 0.3% 1.3% 0.6% Net Working Capital5 $182.6 $184.6 $140.4 $95.3 $53.9 $61.0 $85.8 % revenue 8.5% 8.9% 9.6% 9.6% 7.9% 8.7% 11.0% 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. 21 5 Net working capital calculated as accounts receivable plus inventories plus other current assets minus accounts payable minus accrued liabilities. 2008 and 2009 net working capital excludes taxes receivable of $35mm and $34mm, respectively.
- 23. Recent Quarterly Performance Recent quarterly performance demonstrates strong revenue trends with five consecutive quarters of revenue growth greater than 20% Increasing sales per start indicates market share gains 2011 2012 $mm except Sales per SF Start Q1 Q2 Q3 Q4 Q1 Q2 Q3 South Region Single Family Housing Starts 1 52,100 63,800 61,700 51,600 62,000 77,200 78,800 South region sales per SF start $3,125 $3,235 $3,520 $3,734 $3,539 $3,522 $3,703 U.S. Single Family Housing Starts 1 89,500 123,400 117,700 99,900 105,500 151,100 151,800 U.S. sales per SF start $1,819 $1,673 $1,845 $1,929 $2,080 $1,799 $1,922 Total Revenue $162.8 $206.4 $217.2 $192.7 $219.4 $271.9 $291.8 % growth y-o-y 0.9% -2.4% 20.4% 31.0% 34.7% 31.7% 34.3% Gross Profit $31.4 $42.8 $44.4 $39.3 $45.1 $53.7 $57.7 % margin 19.3% 20.7% 20.4% 20.4% 20.6% 19.7% 19.8% Operating Expenses $46.7 $49.0 $50.2 $47.1 $50.8 $55.0 $58.7 % revenue 28.7% 23.7% 23.1% 24.4% 23.2% 20.2% 20.1% Adjusted EBITDA2 ($9.7) ($1.3) ($0.7) ($3.3) ($2.1) $2.1 $3.0 % margin -6.0% -0.6% -0.3% -1.7% -1.0% 0.8% 1.0% Capex $0.5 $1.1 $1.1 $2.1 $1.7 $2.3 $5.2 % revenue 0.3% 0.5% 0.5% 1.1% 0.8% 0.8% 1.8% Notes: 1 Source: U.S. Census 2 See Quarterly Adjusted EBITDA reconciliation on page 29 22
- 24. Market Share Gains BFS sales per South Region single-family housing start for FY 2011 grew 20% year-over-year. Gains continued in 2012 as Q3 YTD sales per single-family start grew 9% compared to Q3 YTD 2011. 23
- 25. Sales & Adjusted EBITDA Trends Consistent sales and adjusted EBITDA growth Five straight quarters of y/o/y sales growth greater than 20% Seven straight quarters of y/o/y adjusted EBITDA improvement In Q2 2012, achieved positive adjusted EBITDA for the first time in 19 quarters and breakeven LTM adjusted EBITDA at the end of Q3 2012 24
- 26. September YTD 2012 Update Sales for Q3 YTD 2012 were $783.1 million, a 33.5% increase over sales of $586.4 million for Q3 YTD 2011 Sales growth was primarily driven by volume U.S. single family housing starts (South region) were up only 22.7% over the same period U.S. single family units under construction (South region) were up only 3.7% over the same period Combination of these data points, indicate market share gains Gross margins was 20.0% for Q3 YTD 2012 compared to 20.2% for Q3 YTD 2011. Increased sales volume was offset by intra-quarter commodity lumber price inflation relative to quarterly customer pricing commitments, particularly in Q2 and Q3 2012. Higher than expected sales volume resulted in us replacing inventory during the latter half of the quarters at higher costs. At September 30, 2012, our LTM Adjusted EBITDA had improved $23.9 million – ($0.3) million compared to ($24.2) million for the same period in 2011 25
- 27. Capital Structure Summary $mm 9/30/2012 Coupon Maturity Call Provisions Cash & Cash Equivalents $90.7 Term Loan * 160.0 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 101 Other debt 4.1 Total Debt $303.8 Stockholders' Equity 58.9 Total Capitalization $362.7 * Financing also includes an LC facility that provides for the issuance of up to $20mm letters of credit 26
- 28. Reconciliation of Non-GAAP Financial Measures
- 29. Adjusted EBITDA Reconciliation Fiscal Year $mm 2005 2006 2007 2008 2009 2010 2011 Net Income (Loss) $48.6 $68.9 ($23.8) ($139.5) ($61.9) ($95.5) ($65.0) Reconciling Items: Depreciation & amortization 16.9 20.4 22.4 20.8 17.9 15.4 14.0 Interest expense 47.2 28.7 27.7 25.6 27.0 31.7 24.9 Income tax expense (benefit) 27.0 43.3 (4.3) (17.7) (30.8) (1.1) 2.2 (Income) loss from discontinued operations, net of tax (3.6) 2.3 21.1 18.9 5.0 1.2 0.4 Asset impairments - - 0.4 46.9 0.5 0.8 - Stock compensation expense 0.0 4.1 7.0 8.5 2.9 4.3 4.6 Litigation settlement - - - - - (1.2) - 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 Anti-dilution payment to stock option holders 35.5 - - - - - - Other 0.2 1.6 1.5 (0.1) (0.0) 0.2 0.2 Adjusted EBITDA $172.7 $169.9 $53.2 ($32.4) ($35.1) ($43.6) ($15.0) 28
- 30. Quarterly Adjusted EBITDA Reconciliation 2011 2012 $mm Q1 Q2 Q3 Q4 Q1 Q2 Q3 Net Loss ($21.2) ($15.5) ($11.6) ($16.7) ($19.2) ($12.1) ($13.6) Reconciling Items: Depreciation & amortization 3.7 3.5 3.4 3.5 2.9 2.5 2.9 Interest expense 5.9 5.7 5.3 8.1 13.1 10.5 10.6 Income tax expense (benefit) (0.0) 1.7 0.3 0.3 0.2 0.1 0.0 Loss from discontinued operations, net of tax 0.1 0.1 0.1 0.1 0.1 0.1 1.3 Stock compensation expense 1.1 0.9 1.7 0.9 0.8 0.9 0.9 Transaction costs 0.9 0.3 - - - 0 0 Facility closure costs 0.0 1.9 0.1 0.4 0.1 0.1 0.7 Other (0.1) 0.1 (0.0) 0.1 0.0 (0.0) 0.0 Adjusted EBITDA ($9.7) ($1.3) ($0.7) ($3.3) ($2.1) $2.1 $3.0 29