Builders FirstSource Annual Report 2015

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FY2015 Annual Report · Builders FirstSource

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

For the transition period from to

Commission File Number: 0-51357

BUILDERS FIRSTSOURCE, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

2001 Bryan Street, Suite 1600
Dallas, Texas
(Address of principal executive offices)

52-2084569
(I.R.S. Employer
Identification No.)

75201
(Zip Code)

Registrant’s telephone number, including area code:
(214) 880-3500
Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Common stock, par value $0.01 per share

Name of Exchange on Which Registered
NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of

1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes  No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 
(Do not check if a smaller reporting company)

Smaller reporting company 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes  No 
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2015 was approximately

$629.9 million based on the closing price per share on that date of $12.84 as reported on the NASDAQ Stock Market LLC.

The number of shares of the registrant’s common stock, par value $0.01, outstanding as of March 8, 2016 was 110,073,332.

Portions of the registrant’s definitive proxy statement for its annual meeting of stockholders to be held on May 25, 2016 are incorporated by reference

into Part II and Part III of this Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

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Business

Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4.

Properties
Legal Proceedings
Mine Safety Disclosures

BUILDERS FIRSTSOURCE, INC.
Table of Contents to Form 10-K

PART I

PART II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 5.
Item 6.
Item 7.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information

Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

PART III

Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

PART IV

Item 1. Business
CAUTIONARY STATEMENT

PART I

Statements in this report which are not purely historical facts or which necessarily depend upon future events, including
statements regarding our 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. All forward-looking statements in
this report are based upon information available to us on the date of this report. We undertake 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 made in this report 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. Readers are cautioned not to place undue reliance on these forward-
looking statements. In addition, oral statements made by our directors, officers and employees to the investment community, media
representatives and others, depending upon their nature, may also constitute forward-looking statements. As with the forward-looking
statements included in this report, these forward-looking statements are by nature inherently uncertain, and actual results may differ
materially as a result of many factors. 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.

OVERVIEW

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, including ProBuild Holdings LLC (“ProBuild”), as of July
31, 2015.

We are a leading supplier and manufacturer of building materials, manufactured components and construction services to
professional contractors, sub-contractors, and consumers. Following our acquisition of ProBuild in July 2015, the Company operates
399 locations in 40 states across the United States. We offer an integrated solution to our customers 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 and stairs, vinyl windows, custom millwork and trim, as well as engineered wood that we design, cut,
and assemble 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 includes professional installation,
turn-key framing and shell construction, and spans all our product categories.

Given the span and depth of our geographical reach, our locations are organized into nine geographical regions (Regions 1
through 9), which are also our operating segments, further aggregated into four reportable segments: Northeast, Southeast, South and
West. All of our segments have similar customers, products and services, and distribution methods as discussed below. Our financial
statements contain additional information regarding segment performance which is discussed in Note 15 to the consolidated financial
statements included in Item 8 of this annual report on Form 10-K.

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 is listed on the NASDAQ Stock Market LLC under the ticker 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 fragmented. On a combined basis with ProBuild, there were only seven non-specialty building product suppliers in the Pro
Segment that generated more than $500 million in sales, according to ProSales magazine’s 2014 ProSales 100 list. On a combined
basis with ProBuild, we were the largest building product supplier on this list.

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,
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.

•

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

Turn-key services: Many homebuilders have taken a more limited role in the homebuilding process and have outsourced
certain key elements of the construction process, including process management, product selection, order input,
scheduling, framing and installation. As such, we believe that many homebuilders are increasingly looking to suppliers in
the Pro Segment to perform these critical functions resulting in greater demand for integrated project services; and

Consolidation of suppliers by homebuilders: We believe that homebuilders are increasingly looking to consolidate their
supplier base. Many homebuilders are seeking a more strategic relationship with suppliers that are able to offer a broad
range of products and services and, as a result, are allocating a greater share of wallet to a select number of larger, full
service suppliers. We believe this trend accelerated during the recent downturn and continues in the current housing
market recovery.

The homebuilding industry experienced a significant downturn which began in 2006. During the downturn, many homebuilders

significantly decreased their housing starts because of lower demand and a surplus of both existing and new home inventory. The
weakness in the homebuilding industry resulted in a significant reduction in demand for our products and services. Beginning in late
2011, the industry began to stabilize and housing and remodeling activity has strengthened over the past four years. According to the
National Association of Homebuilders (“NAHB”), the single-family residential construction market was an estimated $218.3 billion in
2015, which was 12.9% higher than 2014, though still down significantly from the historical high of $413.2 billion in 2006. Further,
according to the Home Improvement Research institute (“HIRI”), the repair and remodel end market was an estimated $86.0 billion in
2015, which was 4.5% higher than 2014.

Beginning in 2007, the mortgage markets experienced substantial disruption due to increased defaults, primarily as a result of

credit quality deterioration. This disruption resulted in a stricter regulatory environment and reduced availability of mortgages for
potential homebuyers due to an illiquid credit market and more restrictive standards to qualify for mortgages. Mortgage financing and
commercial credit for smaller homebuilders continue to be constrained, which is slowing a recovery in our industry. However, we
believe there are several meaningful trends that indicate U.S. housing demand will likely continue to recover to levels consistent with
the historical average of the past fifty years. These trends include relatively low interest rates, the aging of housing stock, and
population growth due to immigration and birthrate exceeding death rate. According to the NAHB, U.S. single-family housing starts
increased 10.3% in 2015 compared to 2014. A composite of third party sources, including the NAHB, are predicting that U.S. single-
family housing starts will increase to approximately 825,000 in 2016, which would represent a 15.4% increase from 2015 actual U.S.
single-family housing starts of 714,600. In addition, HIRI is forecasting sales in the repair and remodel end market to increase
approximately 4.7% in 2016 compared to 2015.

OUR CUSTOMERS

We serve a broad customer base in 40 states across the United States. We have a diverse geographic footprint as we have
operations in 74 of the top 100 U.S. Metropolitan Statistical Areas (“MSAs”), as ranked by single family housing permits based on
2015 U.S. Census data. In addition, approximately 83% of U.S. housing permits in 2015 were issued in MSAs in which we operate.
Given the local nature of our business, we have historically and will continue to locate our facilities in close proximity to our key
customers and co-locate multiple operations in one facility to improve efficiency.

We have a diversified customer base, ranging from large production builders to small custom homebuilders, as well as multi-

family builders, repair and remodeling contractors and light commercial contractors. For the year ended December 31, 2015, our top
10 customers accounted for approximately 17.0% of sales, and no single customer accounted for more than 5% of sales. Our top 10
customers are comprised primarily of the largest production homebuilders, including publicly traded companies such as Beazer
Homes USA, Inc., D.R. Horton, Inc., Pulte Homes, Inc., Highland Homes, Ltd. and CalAtlantic Group.

In addition to the largest production homebuilders, we also service and supply regional production and local custom
homebuilders as well as repair and remodeling contractors. These customers require high levels of service and a broad product
offering. Our sales team expects to work very closely with the designers on a day-to-day basis in order to ensure the appropriate

products are identified, ordered or produced and delivered on time to the building site. To account for these increased service costs,
pricing in the industry is tied to the level of service provided and the volumes purchased.

OUR PRODUCTS AND SERVICES

We group our building products and services into six product categories:

Lumber & Lumber Sheet Goods. Lumber & lumber sheet goods include dimensional lumber, plywood and oriented strand board

(“OSB”) products used in on-site house framing. Lumber & lumber sheet goods are our largest sales volume product category. The
products in this category are highly sensitive to fluctuations in market prices for such commodities.

Windows, Doors & Millwork. Windows & doors are comprised of the manufacturing, assembly and distribution of windows,
and the assembly and distribution of interior and exterior door units. We manufacture vinyl windows in our plant in Houston, Texas
which allows us to supply builders, primarily in the Texas market, with cost-competitive products. Our pre-hung interior and exterior
doors consist of a door slab with hinges and door jambs attached, reducing on-site installation time and providing higher quality
finished door units than those constructed on site. These products typically require a high degree of product knowledge and training to
sell. Millwork includes interior trim, exterior trim, columns and posts that we distribute, as well as custom exterior features that we
manufacture under the Synboard ® brand name. Synboard is produced from extruded PVC and offers several advantages over
traditional wood features, such as greater durability and no ongoing maintenance such as periodic caulking and painting.

Manufactured Products. Manufactured products are factory-built substitutes for job-site framing and include wood floor and

roof trusses, steel roof trusses, wall panels, stairs, and engineered wood that we design, cut, and assemble for each home. Our
manufactured products allow builders to build higher quality homes more efficiently. Roof trusses, floor trusses, wall panels and stair
units are built in a factory controlled environment. Engineered floors and beams are cut to the required size and packaged for the given
application at many of our locations. Without manufactured products, builders construct these items on site, where weather and
variable labor quality can negatively impact construction cost, quality and installation time. In addition, engineered wood beams have
greater structural strength than conventional framing materials, allowing builders to frame houses with more open space creating a
wider variety of house designs. Engineered wood floors are also stronger and straighter than conventionally framed floors.

Gypsum, Roofing & Insulation. Gypsum, roofing, and insulation include wallboard, metal studs and trims, ceilings, joint

treatment and finishes, stucco and exteriors.

Siding, Metal, and Concrete. Siding, metal, and concrete include vinyl, composite, and wood siding, other exteriors, and

cement.

Other Building Products & Services. Other building products & services consist of various products, including cabinets and

hardware. This category also includes services such as turn-key framing, shell construction, design assistance and professional
installation of products spanning all our product categories. We provide professional installation and turn-key services as a solution
for our homebuilder customers. Through our installation services program, we help homebuilders realize efficiencies through
improved scheduling, resulting in reduced cycle time and better cost controls. By utilizing an energy efficiency software program, we
also assist homebuilders in designing energy efficient homes in order to meet increasingly stringent energy rating requirements.
Upgrading to our premium windows, doors, and insulating products reduces overall cost to the homebuilder by minimizing costs of
the required heating/cooling system. We work closely with the homebuilder to select the appropriate mix of our products in order to
meet current and forthcoming energy codes. We believe these services require scale, capital and sophistication that smaller
competitors do not possess. We will continue to pursue profitable business in this category.

We compete in a fragmented marketplace. Our integrated approach and scale allow us to compete effectively through our

comprehensive product lines, prefabricated components, and value-added services combined with the knowledge of our integrated
sales forces to enable our homebuilder customers to complete construction more quickly, with higher quality and at a lower cost.
While we expect these benefits to be particularly valuable to our customers in market environments characterized by labor shortages,
sourcing challenges or sharply rising demand for new homes, we expect such benefits will also be increasingly valued and demanded
by our customers operating under normal market conditions.

MANUFACTURING

Our manufacturing facilities utilize advanced technology and the highest quality materials to improve product quality, increase

efficiency, reduce lead times and minimize production errors. We manufacture products within two of our product categories:
manufactured products, and windows, doors & millwork.

Manufactured Products — Trusses and Wall Panels. Truss and wall panel production has two steps — design and fabrication.

Each house requires its own set of designed shop drawings, which vary by builder type: production versus custom builders. Production
builders use prototype house plans as they replicate houses. These house plans may be minimally modified to suit individual customer
demand. The number of changes made to a given prototype house, and the number of prototype houses used, varies by builder and
their construction and sales philosophy. We maintain an electronic master file of trusses and wall panels for each builder’s prototype
houses. There are three primary benefits to master filing. First, master filing is cost effective as the electronic master file is used rather
than designing the components individually each time the prototype house is built. Second, it improves design quality as a house’s
design is based on the proven prototype except for any minor builder modifications. Third, master filing allows us to change one file
and update all related prototype house designs automatically as we improve the design over time or as the builder modifies the base
prototype house. We do not maintain a master file for custom builders who do not replicate houses, as it is not cost effective. For these
builders, the components are designed individually for each house.

After we design shop drawings for a given house, we download the shop drawings into a proprietary software system to review

the design for potential errors and to schedule the job for production. The fabrication process begins by cutting individual pieces of
lumber to required lengths in accordance with the shop drawings. We download the shop drawings from our design department to
computerized saws. We assemble the cut lumber to form roof trusses, floor trusses or wall panels, and store the finished components
by house awaiting shipment to the job site.

We generate fabrication time standards for each component during the design step. We use these standards to measure

efficiency by comparing actual production time with the calculated standard. Each plant’s performance is benchmarked by comparing
efficiency across plants.

Manufactured Products — Engineered Wood. As with trusses and wall panels, engineered wood components have a design and
fabrication step. We design engineered wood floors using a master filing system similar to the truss and wall panel system. Engineered
wood beams are designed to ensure the beam will be structurally sound in the given application. After the design phase, a printed
layout is generated. We use this layout to cut the engineered wood to the required length and assemble all of the components into a
house package. We then install the components on the job site. We design and fabricate engineered wood at many of our distribution
locations.

Manufactured Products — Stairs. We manufacture box stairs at some of our locations. After a house is framed, our salesman
takes measurements at the job site prior to manufacturing to account for any variation between the blueprints and the actual framed
house. We fabricate box stairs based on these measurements.

Custom Millwork. Our manufactured custom millwork consists primarily of synthetic exterior trim, custom windows, features

and box columns that we sell under our Synboard brand name and throughout our company.

We sand, cut, and shape sheets of 4 foot by 18 or 20 foot Celuka-blown, extruded PVC, or Synboard, to produce the desired

product. We produce exterior trim boards by cutting the Synboard into the same industry-standard dimensions used for wood-based
exterior trim boards. We form exterior features by assembling pieces of Synboard and other PVC-based moldings that have been cut,
heated and bent over forms to achieve the desired shape. For custom windows, we build the frame from Synboard and glaze the glass
into place. We fabricate box columns from sections of PVC that are cut on a 45 degree angle and mitered together.

Windows. We manufacture a full line of traditional vinyl windows at an approximately 200,000 square foot manufacturing
facility located in Houston, Texas. The process begins by purchasing vinyl lineal extrusions. We cut these extrusions to size and join
them together to form the window frame and sash. We then purchase sheet glass and cut it to size. We combine two pieces of
identically shaped glass with a sealing compound to create a glass unit with improved insulating capability. We then insert the sealed
glass unit and glaze it into the window frame and sash. The unit is completed when we install a balance to operate the window and add
a lock to secure the window in a closed position.

Pre-hung Doors. We pre-hang interior and exterior doors at many of our locations. We insert door slabs and pre-cut door jambs

into a door machine, which bores holes into the doors for the door hardware and applies the jambs and hinges to the door slab. We
then apply the casing that frames interior doors at a separate station. Exterior doors do not have a casing, and instead may have
sidelights applied to the sides of the door, a transom attached over the top of the door unit and a door sill applied to the threshold.

OUR STRATEGY

We intend to build on our strong market positions and increase our sales and profits by pursuing the following strategies:

Utilize our competitive strengths to capitalize on housing market recovery and growth

As the U.S. housing market recovery develops, we intend to increase sales through our scale, product portfolio and structural

efficiencies. Our Pro Segment homebuilding customers continue to emphasize the importance of competitive pricing, a broad product
portfolio, sales force knowledge, on-site services and overall “ease of use” of their building products suppliers. Our comprehensive
product offering, experienced sales force and talented senior management team position us well to capitalize on strong demand in the
new home construction market as well as the repair and remodel segment. Our acquisition of ProBuild further developed the suite of
products and services we provide to our customers, in addition to substantially expanding our national footprint. This comprehensive
network of products, services and facilities provides a platform which we believe enhances our “one-stop-shop” strategy and more
evenly distributes and promotes additional “pull through” of our value added products. We believe that homebuilders will continue to
place an increased value on these capabilities, which will further differentiate us from our competitors.

Execute on identified cost saving strategies

Our management has shown the capability to effectively and efficiently integrate newly acquired businesses, ramping up
productivity and driving value. Prior to the ProBuild acquisition, we successfully integrated 33 acquisitions since 1998. These
integration capabilities are crucial, in particular in connection with our acquisition of ProBuild, which we believe can result in annual
run rate cost savings of $100 to $120 million within two years of the acquisition date. One-time costs to achieve these cost savings are
estimated to be $90-$100 million, of which we incurred approximately $43.0 million in 2015. We expect to incur approximately $30.0
million in 2016. The remainder of these costs is expected to be incurred in 2017. We plan to leverage our established operational
platform, take advantage of current vendor relationships and implement best-in class procurement and distribution IT systems. We
believe these initiatives will result in a substantial increase in free cash flow that we expect will be used to pay down debt as well as
reinvest in our Company to drive future growth.

Maximize our share of wallet with individual customers across our service areas

We believe that Pro Segment customers will continue to consolidate the number of supplier relationships they utilize in the

future. As a result, this will create the opportunity to win a greater share of wallet for remaining suppliers. By focusing on and
developing our differentiated “one-stop-shop” strategy, which includes broadening our product mix, we will be able to offer a
complete array of products and services that would otherwise need to be sourced from various distributors. Additionally, as the only
national distributor of building products, we will be capable of providing customers with a consistent partner on projects regardless of
where they are located. This operational platform often will make us a preferred distributor relationship for large scale national
homebuilders while still providing value to local and custom homebuilders looking for assistance with product selection, on-site
installation and project management.

Continue to leverage strategic vendor relationships

Our acquisition of ProBuild made us the largest distributor in the Pro Segment. We believe we will be able to leverage this size
and our strong homebuilder relationships to provide our vendors access to a large customer base. We believe that our size, purchasing
power, and strong financial position will allow us to negotiate favorable pricing (including back-end rebates), savings in procurement
costs and to receive a higher priority with our vendors when product supply is limited. We strive to continually enhance our role as a
preferred partner for vendors and our size, strong liquidity position, and access to capital markets is expected to mitigate natural credit
concerns. This will minimize significant resources that vendors would otherwise have to invest to monitor the credit worthiness of a
large number of smaller customers. Furthermore, our broad product portfolio includes a variety of higher-margin products, which we
believe will enhance our preferred partner status. This preferred status enables us to participate in mutually beneficial joint marketing
programs with our vendors. These incremental efficiencies in procurement provide an opportunity to pass on additional value to our
customers.

Optimize cash flow with highly scalable cost structure

Through the downturn we focused on standardizing processes and technology-based workflows to minimize costs, streamline
our operations and enhance working capital efficiency. Significant investments in our technology infrastructure and reengineering of
our business processes enabled us to centralize many corporate and field tasks. This standardization helps us to optimize our cost
structure, allows our centralized operating team to make better purchasing and pricing decisions based on an accurate, up-to-the-
minute understanding of costs and trends, and enables us to redeploy capital more strategically. We believe that these efficiencies will
drive enhanced profit margins and cash flow conversion across our entire platform as we continue to grow with improving market
conditions.

SALES AND MARKETING

We seek to attract and retain customers through exceptional customer service, leading product quality, broad product and
service offerings, and competitive pricing. This strategy is centered on building and maintaining strong customer relationships rather
than traditional marketing and advertising. We strive to add value for the homebuilders through shorter lead times, lower material
costs, faster project completion and higher quality. By executing this strategy, we believe we will continue to generate new business.

Our experienced, locally focused sales force is at the core of our sales effort. This sales effort involves deploying salespeople
who are skilled in housing construction to meet with a homebuilder’s construction superintendent, local purchasing agent, or local
executive with the goal of becoming their primary product supplier. If selected by the homebuilder, the salesperson and his or her
team review blueprints for the contracted homes and advise the homebuilder in areas such as opportunities for cost reduction,
increased energy efficiencies, and regional aesthetic preferences. Next, the team determines the specific package of products that are
needed to complete the project and schedules a sequence of site deliveries. Our large delivery fleet and comprehensive inventory
management systems enable us to provide “just-in-time” product delivery, ensuring a smoother and faster production cycle for the
homebuilder. Throughout the construction process, the salesperson makes frequent site visits to ensure timely delivery and proper
installation and to make suggestions for efficiency improvements. We believe this level of service is highly valued by our customers
and generates significant customer loyalty. At December 31, 2015, we employed approximately 1,700 sales representatives, who are
typically paid a commission based on gross margin dollars collected and work with approximately 1,600 sales coordinators and
product specialists.

BACKLOG

Due to the nature of our business, backlog information is not meaningful. While our customers may provide an estimate of their
future needs, in most cases we do not receive a firm order from them until just prior to the anticipated delivery dates. Accordingly, in
many cases the time frame from receipt of a firm order to shipment does not exceed a few days.

MATERIALS AND SUPPLIER RELATIONSHIPS

We purchase inventory primarily for distribution, some of which is also utilized in our manufacturing plants. The key materials
we purchase include dimensional lumber, plywood, OSB, engineered wood, windows, doors, and millwork. Our largest suppliers are
national companies such as Weyerhaeuser Company, Boise Cascade Company, Canfor Corporation, Norbord, Inc., James Hardie
Industries plc, National Gypsum Company, PlyGem Holdings, Inc., M I Windows and Doors, Inc., Andersen Corporation, Masonite
International Corporation and JELD-WEN Inc. We believe there is sufficient supply in the marketplace to competitively source most
of our requirements without reliance on any particular supplier and that our diversity of suppliers affords us purchasing flexibility.
Due to our centralized oversight of purchasing and our large lumber and OSB purchasing volumes, we believe we are better able to
maximize the advantages of both our and our suppliers’, broad footprints and negotiate purchases in multiple markets to achieve more
favorable contracts with respect to price, terms of sale, and supply than our regional competitors. Additionally, for certain customers,
we institute purchasing programs on raw materials such as OSB to align portions of our procurement costs with our customer pricing
commitments. We balance our lumber and OSB purchases with a mix of contract and spot market purchases to ensure consistent
quantities of product necessary to fulfill customer contracts, to source products at the lowest possible cost, and to minimize our
exposure to the volatility of commodity lumber prices.

We currently source products from approximately 8,000 suppliers in order to reduce our dependence on any single company and

to maximize purchasing leverage. Although no purchases from any single supplier represented more than 7% of our total materials
purchases for the year ended December 31, 2015, we believe we are one of the largest customers for many suppliers, and therefore
have significant purchasing leverage. We have found that using multiple suppliers ensures a stable source of products and the best
purchasing terms as the suppliers compete to gain and maintain our business.

We maintain strong relationships with our suppliers, and we believe opportunities exist to improve purchasing terms in the
future, including inventory storage or “just-in-time” delivery to reduce our inventory carrying costs. We will continue to pursue
additional procurement cost savings and purchasing synergies which would further enhance our margins and cash flow.

COMPETITION

We compete in the Pro Segment of the U.S. residential building products supply market. We have and will continue to

experience competition for homebuilder business due to the highly fragmented nature of the Pro Segment. Most of our competitors in
the Pro Segment are small, privately held local businesses. Most of these companies have limited access to capital and lack
sophisticated information technology systems and large-scale procurement capabilities. We believe we have substantial competitive
advantages over these smaller competitors due to our long-standing customer relationships, local market knowledge and competitive
pricing. Our largest competitors in our markets include 84 Lumber Co., which is privately held, as well as BMC Stock Holdings, Inc.,
which is publicly held.

Our customers primarily consist of professional homebuilders and those that provide construction services to them, with whom
we have developed strong relationships. The principal methods of competition in the Pro Segment are the development of long-term
relationships with professional builders and retaining such customers by delivering a full range of high-quality products on time and
offering trade credit, competitive pricing, flexibility in transaction processing, and integrated service and product packages, such as
turn-key framing and shell construction, as well as manufactured components and installation. Our leading market positions in the
highly competitive Pro Segment create economies of scale that allow us to cost-effectively supply our customers, which both enhances
profitability and reduces the risk of losing customers to competitors.

EMPLOYEES

At December 31, 2015, we had approximately 14,000 full-time equivalent employees. Approximately 2% of the workforce at

ProBuild are members of nine different unions. We believe that we have good relations with our employees.

INFORMATION TECHNOLOGY SYSTEMS

Our operations are dependent upon our information technology systems, which encompass all of our major business functions.

Historically, our primary enterprise resource planning (“ERP”) system, which we used for operations representing approximately 47%
of our sales in 2015, is a proprietary system that has been highly customized by our computer programmers. The system has been
designed to operate our businesses in a highly efficient manner. The materials required for thousands of standard builder plans are
stored by the system for rapid quoting or order entry. Hundreds of price lists are maintained on thousands of SKUs, facilitating rapid
price changes in a changing product cost environment. A customer’s order can be tracked at each stage of the process and billing can
be customized to reduce a customer’s administrative costs and speed payment.

Historically, we have a single financial reporting system that has been highly customized for our business. Consolidated
financial, sales and workforce reporting is integrated using Hyperion Business Intelligence system, which aggregates data from our
ERP systems along with workforce information from our third-party payroll administrator. This technology platform provides
management with robust corporate and location level performance management by leveraging standardized metrics and analytics
allowing us to plan, track and report performance and compensation measures.

We have developed a proprietary program for use in our component plants. This software reviews product designs for errors,

schedules the plants and provides the data used to measure plant efficiency. In addition, we have purchased several software products
that have been integrated with our primary ERP system. These programs assist in analyzing blueprints to generate material lists and in
purchasing lumber products at the lowest cost.

ProBuild maintained multiple ERP systems to manage its operations. We expect to integrate the legacy ProBuild systems with
ours over time. We expect the integration of our information technology systems with those of ProBuild to be a multi-year process.
Our initial area of focus will be where we have operations within the same geographic market. Once overlapping markets have been
addressed, we will begin integration of the broader geographic footprint of our Company.

SEASONALITY AND OTHER FACTORS

Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather
causing reduced construction activity during these quarters. In addition, quarterly results historically have reflected, and are expected
to continue to reflect, fluctuations from period to period arising from the following:



The volatility of lumber prices;
The cyclical nature of the homebuilding industry;
General economic conditions in the markets in which we compete;
The pricing policies of our competitors;
The production schedules of our customers; and
The effects of weather.

The composition and level of working capital typically change during periods of increasing sales as we carry more inventory
and receivables. Working capital levels typically increase in the second and third quarters of the year due to higher sales during the
peak residential construction season. These increases have in the past resulted in negative operating cash flows during this peak
season, which historically have been financed through available cash and our borrowing availability under credit facilities. Collection
of receivables and reduction in inventory levels following the peak building and construction season have in the past positively
impacted cash flow.

AVAILABLE INFORMATION

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance

therewith, we file reports, proxy and information statements and other information with the Securities and Exchange Commission
(“SEC”). Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information
statements and other information and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 are available through the investor relations section of our website under the links to “Financial
Information.” Our Internet address is www.bldr.com. Reports are available on our website free of charge as soon as reasonably
practicable after we electronically file them with, or furnish them to, the SEC. In addition, our officers and directors file with the SEC
initial statements of beneficial ownership and statements of change in beneficial ownership of our securities, which are also available
on our website at the same location. We are not including this or any other information on our website as a part of, nor incorporating it
by reference into, this Form 10-K or any of our other SEC filings.

In addition to our website, you may read and copy public reports we file with or furnish to the SEC at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains our reports, proxy and information
statements, and other information that we electronically file with, or furnish to, the SEC at www.sec.gov.

EXECUTIVE OFFICERS

Floyd F. Sherman, Chief Executive Officer and Director, age 76. Mr. Sherman has been our Chief Executive Officer and a
director since 2001, when he joined the company. He served as President of the company from 2001 until October 2006 and also
served from February 2008 until November 2014. Prior to joining the company, he spent 28 years at Triangle Pacific/Armstrong
Flooring, the last nine of which he served as Chairman and Chief Executive Officer. Mr. Sherman is currently a director of PGT, Inc.
Mr. Sherman has over 40 years of experience in the building products industry. A native of Kerhonkson, New York and a veteran of
the U.S. Army, Mr. Sherman is a graduate of the New York State College of Forestry at Syracuse University. He also holds an M.B.A.
degree from Georgia State University.

M. Chad Crow, President, Chief Operating Officer and Chief Financial Officer, age 47. Mr. Crow joined the company in
September 1999 as Assistant Controller. He served as Vice President – Controller of the company from May 2000 and was promoted
to Senior Vice President and Chief Financial Officer in November 2009. In November 2014, he was appointed to the position of
President and Chief Financial Officer. Prior to joining the company, Mr. Crow served in a variety of positions at Pier One Imports.
Mr. Crow also has five years of public accounting experience with Price Waterhouse LLP. Mr. Crow is a C.P.A. and received his
B.B.A. degree from Texas Tech University.

Donald F. McAleenan, Senior Vice President and General Counsel, age 61. Mr. McAleenan has served as Senior Vice President

and General Counsel of the company since 1998. Prior to joining the company, Mr. McAleenan served as Vice President and Deputy
General Counsel of Fibreboard Corporation from 1992 to 1997. Mr. McAleenan was also Assistant General Counsel of AT&E

Corporation and spent nine years as a securities lawyer at two New York City law firms. Mr. McAleenan has a B.S. from Georgetown
University and a J.D. from New York University Law School.

Morris E. Tolly, Senior Vice President — Operations, age 72. Mr. Tolly has served as Senior Vice President — Operations of
the company since January 25, 2007. Mr. Tolly has been with Builders FirstSource since 1998 when the company acquired Pelican
Companies, Inc. (“Pelican”) and has over 40 years of experience in the building products industry. He served in a myriad of roles at
Pelican, including sales, Sales Manager and General Manager. Mr. Tolly was an Area Vice President responsible for 12 locations at
the time of Pelican’s acquisition. In 2000, he was promoted to President of the company’s Southeast Group, with responsibility for 48
locations.

Item 1A. Risk Factors

Risks associated with our business, an investment in our securities, and with achieving the forward-looking statements contained

in this report or in our news releases, websites, public filings, investor and analyst conferences or elsewhere, include, but are not
limited to, the risk factors described below. Any of the risk factors described below could cause our actual results to differ materially
from expectations and could have a material adverse effect on our business, financial condition or operating results. We may not
succeed in addressing these challenges and risks.

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 factors.

The building products industry is highly dependent on new home and multifamily construction, which in turn are dependent
upon a number of factors, including interest rates, consumer confidence, employment rates, foreclosure rates, housing inventory levels
and occupancy, housing demand and the health of the U.S. economy and mortgage markets. Unfavorable changes in demographics,
credit markets, consumer confidence, housing affordability, or housing inventory levels and occupancy, or a weakening of the U.S.
economy or of any regional or local 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, and shortages of
suitable building lots and material. The homebuilding industry is currently experiencing a shortage of qualified, trained labor in many
areas, including those served by us. In addition, the building industry is subject to various local, state, and federal statutes, ordinances,
rules and regulations concerning zoning, building design and safety, construction, energy and water conservation and similar matters,
including regulations that impose restrictive zoning and density requirements in order to limit the number of homes that can be built
within the boundaries of a particular area or in order to maintain certain areas as primarily or exclusively residential. Regulatory
restrictions may increase our operating expenses and limit the availability of suitable building lots for our customers, which could
negatively affect our sales and earnings. Because we have substantial fixed costs, relatively modest declines in our customers’
production levels could have a significant adverse effect on our financial condition, operating results and cash flows.

The homebuilding industry underwent a significant downturn that began in mid-2006 and began to stabilize in late 2011. U.S.

homebuilding activity increased in 2014 and 2015 to approximately 647,800 and 714,700 single-family starts, respectively, although it
remains well below the historical average (from 1959 through 2015) of 1.0 million single-family starts per year. According to the U.S.
Census Bureau, actual U.S. single family housing starts in the U.S. during 2015 were 51.2% lower than in 2006. We believe that the
slow recovery of the housing market is due to a variety of factors including: a severe economic recession, followed by a gradual
economic recovery; limited credit availability; shortages of suitable building lots in many regions; shortages of experienced labor; a
substantial reduction in speculative home investment; and soft housing demand. The downturn in the homebuilding industry resulted
in a substantial reduction in demand for our products and services.

In addition, beginning in 2007, the mortgage markets experienced substantial disruption due to increased defaults, primarily as a
result of credit quality deterioration. The disruption resulted in a stricter regulatory environment and reduced availability of mortgages
for potential homebuyers due to a tight credit market and stricter standards to qualify for mortgages. Mortgage financing and
commercial credit for smaller homebuilders continue to be constrained, which is slowing a recovery in our industry. Since the housing
industry is dependent upon the economy as well as potential homebuyers’ access to mortgage financing and homebuilders’ access to
commercial credit, it is likely that the housing industry will not fully recover until conditions in the economy and the credit markets
further improve.

If the housing market declines, we may be required to take impairment charges relating to our operations or temporarily idle
or permanently close under-performing locations.

We recorded no goodwill impairment charges in 2015 or 2014. In continuing operations for the year ended December 31, 2015

we recorded impairment charges on held-for-use assets of $1.4 million related to customer relationship intangibles associated with a
location closure. We recorded no significant asset impairment charges in continuing operations in 2014. If conditions in the housing
industry deteriorate we may need to take goodwill and/or asset impairment charges relating to certain of our reporting units. Any such
non-cash charges would have an adverse effect on our financial results. In addition, in response to industry conditions, we may have to
temporarily idle or permanently close certain facilities in under-performing regions. Any such facility closures could have a significant
adverse effect on our financial condition, operating results and cash flows.

Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability
to react to changes in the economy or our industry, and prevent us from meeting our obligations under our debt instruments.

As of December 31, 2015, our debt totaled $1,997.7 million, including $289.1 million of lease finance obligations and capital
lease obligations. We also have an $800 million senior secured revolving credit facility (“2015 facility”). As of December 31, 2015,

we had $60.0 million in borrowings, as well as $79.1 million of letters of credit outstanding under the 2015 facility. In addition, we
have significant obligations under ongoing operating leases that are not reflected on our balance sheet.

Our substantial debt could have important consequences to us, including:

•

increasing our vulnerability to general economic and industry conditions;

requiring a substantial portion of our operating cash flow to be dedicated to the payment of principal and interest on our
indebtedness, therefore reducing our liquidity and our ability to use our cash flow to fund our operations, capital
expenditures, and future business opportunities;

exposing us to the risk of increased interest rates, and corresponding increased interest expense, because borrowings under
the 2015 facility and the $600.0 million term loan credit agreement (“2015 term loan”) are at variable rates of interest;

limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements,
acquisitions, and general corporate or other purposes; and

limiting our ability to adjust to changing marketplace conditions and placing us at a competitive disadvantage compared to
our competitors who may have less debt.

In addition, some of our debt instruments, including those governing the 2015 facility, the 2015 term loan, the 7.625% senior

secured notes due 2021 (“2021 notes”) and the 10.75% senior unsecured notes due 2023 (“2023 notes”), contain cross-default
provisions that could result in our debt being declared immediately due and payable under a number of debt instruments, even if we
default on only one debt instrument. In such event, it is unlikely that we would be able to satisfy our obligations under all of such
accelerated indebtedness simultaneously.

Our financial condition and operating performance and that of our subsidiaries are also subject to prevailing economic and

competitive conditions and to certain financial, business and other factors beyond our control. There are no assurances that we will
maintain a level of liquidity sufficient to permit us to pay the principal, premium and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay
capital expenditures, sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative measures may
not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and
resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations in an effort to
meet our debt service and other obligations. The agreements governing the 2015 facility and the 2015 term loan and the indentures
governing our 2021 notes and our 2023 notes restrict our ability to dispose of assets and to use the proceeds from such dispositions.
We may not be able to consummate those dispositions or be able to obtain the proceeds that we could realize from them, and these
proceeds may not be adequate to meet any debt service obligations then due.

We may have future capital needs and may not be able to obtain additional financing on acceptable terms.

We are substantially reliant on cash on hand and borrowing availability under the 2015 facility, which totaled $683.8 million at

December 31, 2015, to provide working capital and fund our operations. Our working capital requirements are likely to grow
assuming the housing industry improves. Our inability to renew, amend or replace the 2015 facility, the 2015 term loan, the 2021
notes or the 2023 notes when required or when business conditions warrant could have a material adverse effect on our business,
financial condition and results of operations.

Economic and credit market conditions, the performance of our industry, and our financial performance, as well as other factors,

may constrain our financing abilities. Our ability to secure additional financing, if available, and to satisfy our financial obligations
under indebtedness outstanding from time to time will depend upon our future operating performance, the availability of credit,
economic conditions and financial, business and other factors, many of which are beyond our control. Any worsening of current
housing market conditions or the macroeconomic factors that affect our industry could require us to seek additional capital and have a
material adverse effect on our ability to secure such capital on favorable terms, if at all.

We may be unable to secure additional financing or financing on favorable terms or our operating cash flow may be insufficient

to satisfy our financial obligations under indebtedness outstanding from time to time, including the 2021 notes, the 2023 notes, the
2015 facility and the 2015 term loan. The agreements governing the 2015 facility and the 2015 term loan and the indentures governing
the 2021 notes and the 2023 notes, moreover, restrict the amount of permitted indebtedness allowed. In addition, if financing is not
available when needed, or is available on unfavorable terms, we may be unable to take advantage of business opportunities, including
potential acquisitions, or respond to competitive pressures, any of which could have a material adverse effect on our business,
financial condition, and results of operations. If additional funds are raised through the issuance of additional equity or convertible
debt securities, our stockholders may experience significant dilution.
13

We may incur additional indebtedness.

We may incur additional indebtedness in the future, including collateralized debt, subject to the restrictions contained in the
agreements governing the 2015 facility and the 2015 term loan and the indentures governing the 2021 notes and the 2023 notes. If new
debt is added to our current debt levels, the related risks that we now face could intensify.

Our debt instruments contain various covenants that limit our ability to operate our business.

Our financing arrangements, including the agreements governing the 2015 facility and the 2015 term loan and the indentures

governing the 2021 notes and the 2023 notes, contain various provisions that limit our ability to, among other things:

•

transfer or sell assets, including the equity interests of our restricted subsidiaries, or use asset sale proceeds;

incur additional debt;

pay dividends or distributions on our capital stock or repurchase our capital stock;

make certain restricted payments or investments;

create liens to secure debt;

enter into transactions with affiliates;

merge or consolidate with another company or continue to receive the benefits of these financing arrangements under a
“change in control” scenario (as defined in those agreements); and

engage in unrelated business activities.

The agreement governing the 2015 facility contains a financial covenant requiring the satisfaction of a minimum fixed charge

coverage ratio of 1.00 to 1.00 if our excess availability falls below the greater of $80 million or 10% of the maximum borrowing
amount. As of December 31, 2015, our excess availability was $618.7 million. We do not anticipate excess availability falling below
$80 million in 2016.

These provisions may restrict our ability to expand or fully pursue our business strategies. Our ability to comply with the
agreements governing the 2015 facility and the 2015 term loan and the indentures governing the 2021 notes and the 2023 notes may
be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse
regulatory developments, a change in control or other events beyond our control. The breach of any of these provisions, including
those contained in the 2015 facility and the 2015 term loan and the indentures governing the 2021 notes and the 2023 notes, could
result in a default under our indebtedness, which could cause those and other obligations to become due and payable. If any of our
indebtedness is accelerated, we may not be able to repay it.

We occupy most of our respective facilities under long-term non-cancelable leases. We may be unable to renew leases at the
end of their terms. If we close a facility, we are still obligated under the applicable lease.

Most of our facilities are leased. Many of our leases are non-cancelable, typically have initial expiration terms ranging from five

to 15 years and most provide options to renew for specified periods of time. We believe that leases we enter into in the future will
likely be of the same terms (five to 15 years), will be non-cancelable and will feature similar renewal options. If we close or idle a
facility we would remain committed to perform our obligations under the applicable lease, which would include, among other things,
payment of the base rent, insurance, taxes and other expenses on the leased property for the balance of the lease term. Management
may explore offsets to remaining obligations such as subleasing opportunities or negotiated lease terminations. During the period from
2007 through 2015, we closed or idled a number of facilities for which we continue to remain liable. Our obligation to continue
making rental payments with respect to leases for closed or idled facilities could have a material adverse effect on our business and
results of operations. At the end of a lease term and any renewal period for a leased facility, for those locations where we have no
renewal options remaining, we may be unable to renew the lease without additional cost, if at all. If we are unable to renew our facility
leases, we may close or, if possible, relocate the facility, which could subject us to additional costs and risks which could have a
material adverse effect on our business. Additionally, the revenue and profit generated at a relocated facility may not equal the
revenue and profit generated at the existing operation.

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

We are a holding company that derives all of our operating income from our subsidiaries. All of our assets are held by our direct

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

dividends or make other payments or distributions to us will depend on their respective operating results and may be restricted by,
among other things, the laws of their jurisdiction of organization (which may limit the amount of funds available for the payment of
dividends and other distributions to us), the terms of existing and future indebtedness and other agreements of our subsidiaries, the
2015 facility, the 2015 term loan, the terms of the indentures governing the 2021 notes and the 2023 notes and the covenants of any
future outstanding indebtedness we or our subsidiaries incur.

The building supply industry is cyclical and seasonal.

The building products supply industry is subject to cyclical market pressures. Prices of building products are subject to
fluctuations arising from changes in supply and demand, national and international economic conditions, labor costs, competition,
market speculation, government regulation, and trade policies, as well as from periodic delays in the delivery of lumber and other
products. For example, prices of wood products, including lumber and panel products, are subject to significant volatility and directly
affect our sales and earnings. In particular, low prices for wood products over a sustained period can adversely affect our financial
condition, operating results and cash flows, as can excessive spikes in prices. For the year ended December 31, 2015, average prices
for lumber and lumber sheet goods were 11.1% lower than the prior year. Our lumber and lumber sheet goods product category
represented 32.3% of total sales for the year ended December 31, 2015. We have limited ability to manage the timing and amount of
pricing changes for building products. In addition, the supply of building products fluctuates based on available manufacturing
capacity. A shortage of capacity or excess capacity in the industry can result in significant increases or declines in prices for those
products, often within a short period of time. Such price fluctuations can adversely affect our financial condition, operating results and
cash flows.

In addition, although weather patterns affect our operating results throughout the year, adverse weather historically has reduced

construction activity in the first and fourth quarters in the regions where we operate. To the extent that hurricanes, severe storms,
floods, other natural disasters or similar events occur in the regions in which we operate, our business may be adversely affected. We
anticipate that fluctuations from period to period will continue in the future.

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

Following the ProBuild acquisition, our ten largest customers generated approximately 17.0% of our sales for the year ended

December 31, 2015. We cannot guarantee that we will maintain or improve the relationships with these customers or that we will
supply these customers at historical levels. Due to the weak housing market over the past several years, many of our homebuilder
customers substantially reduced their construction activity. Some homebuilder customers exited or severely curtailed building activity
in certain of our regions.

In addition, production homebuilders, commercial 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. Continued
consolidation among production homebuilders could also result in a loss of some of our present customers to our competitors. 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. Furthermore, our customers are not required to purchase any minimum amount of
products from us. The contracts into which we have entered with most of our professional customers typically provide that we supply
particular products or services for a certain period of time when and if ordered by the customer. Should our customers purchase our
products in significantly lower quantities than they have in the past, such decreased purchases could have a material adverse effect on
our financial condition, operating results and cash flows.

Our industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our results.

The building products supply industry is highly fragmented and competitive. We face, and will continue to face, significant

competition from local and regional building materials chains, as well as from privately-owned single site enterprises. 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, (5) adapt more quickly to new technologies or evolving customer requirements than we do, or
(6) have access to financing on more favorable terms that we can obtain in the market. As a result, we may not be able to compete
successfully with them. In addition, home center retailers, which have historically concentrated their sales efforts on retail consumers
and small contractors, have intensified their marketing efforts to professional homebuilders in recent years and may continue to
intensify these efforts in the future. Furthermore, certain product manufacturers sell and distribute their products directly to production
homebuilders or commercial builders. The volume of such direct sales could increase in the future. Additionally, manufacturers of
products distributed by us may elect to sell and distribute directly to homebuilders or commercial builders in the future or enter into
exclusive supplier arrangements with other distributors. Consolidation of production homebuilders or commercial builders may result
15

in increased competition for their business. Finally, we may not be able to maintain our operating costs or product prices at a level
sufficiently low for us to compete effectively. If we are unable to compete effectively, our financial condition, operating results and
cash flows may be adversely affected.

We are subject to competitive pricing pressure from our customers.

Production homebuilders and commercial builders historically have exerted and will continue to exert significant pressure on
their outside suppliers 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. The housing industry downturn and its aftermath have resulted in significantly
increased pricing pressures from production homebuilders and other customers. Over the past few years, these pricing pressures have
adversely affected our operating results and cash flows. In addition, continued consolidation among production homebuilders or
commercial builders, and changes in production homebuilders’ or commercial 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.

The ownership position of affiliates of JLL Partners, Inc. and Warburg Pincus LLC limits other stockholders’ ability to
influence corporate matters.

Affiliates of JLL Partners, Inc. and Warburg Pincus LLC (“Warburg”) together owned approximately 34.3% of our outstanding

common stock as of December 31, 2015. Four of our ten directors hold positions with affiliates of either JLL Partners, Inc. or
Warburg. Accordingly, JLL Partners, Inc. and Warburg have significant influence over our management and affairs and over all
matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or
other sale of our company or its assets. This concentrated ownership position limits other stockholders’ ability to influence corporate
matters and, as a result, we may take actions that some of our stockholders do not view as beneficial. Additionally, JLL Partners, Inc.
and Warburg are in the business of making investments in companies and may, from time to time, acquire and hold interests in
businesses that compete directly or indirectly with us. These entities may also pursue, for their own accounts, acquisition opportunities
that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. Further, certain
provisions of our amended and restated certificate of incorporation and amended and restated bylaws may limit your ability to
influence corporate matters, and, as a result, we may take actions that some of our stockholders do not view as beneficial.

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

Our success depends in part on our ability to attract, hire, train and retain qualified managerial, operational, sales and other

personnel. We face significant competition for these types of employees in our industry and from other industries. We may be
unsuccessful in attracting and retaining the personnel we require to conduct and expand our operations successfully. In addition, key
personnel may leave us and compete against us. Our success also depends to a significant extent on the continued service of our senior
management team. We may be unsuccessful in replacing key managers who either resign or retire. The loss of any member of our
senior management team or other experienced senior employees could impair our ability to execute our business plan, cause us to lose
customers and reduce our net sales, or lead to employee morale problems and/or the loss of other key employees. In any such event,
our financial condition, operating results and cash flows could be adversely affected.

The nature of our business exposes us to product liability, product warranty, casualty, construction defect, asbestos, vehicle
and other claims and legal proceedings.

We are involved in product liability, product warranty, casualty, construction defect, asbestos, vehicle and other claims relating

to the products we manufacture and distribute, and services we provide that, if adversely determined, could adversely affect our
financial condition, operating results, and cash flows. We rely on manufacturers and other suppliers to provide us with many of the
products we sell and distribute. Because we have no direct control over the quality of such products manufactured or supplied by such
third-party suppliers, we are exposed to risks relating to the quality of such products. We are also involved in several asbestos personal
injury suits due to the alleged sale of asbestos-containing products by legacy businesses that we acquired. In addition, we are exposed
to potential claims arising from the conduct of our respective employees and subcontractors, and builders and their subcontractors, for
which we may be contractually liable. Although we currently maintain what we believe to be suitable and adequate insurance in
excess of our self-insured amounts, there can be no assurance that we will be able to maintain such insurance on acceptable terms or
that such insurance will provide adequate protection against potential liabilities. Product liability, product warranty, casualty,
construction defect, asbestos, vehicle, and other claims can be expensive to defend and can divert the attention of management and
other personnel for significant periods, regardless of the ultimate outcome. Claims of this nature could also have a negative impact on
customer confidence in our products and our company. In addition, we are involved on an ongoing basis in other types of legal
proceedings. We cannot assure you that any current or future claims against us will not adversely affect our financial condition,
operating results and cash flows.

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

Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply

from manufacturers and other suppliers. Generally, our products are obtainable from various sources and in sufficient quantities.
However, the loss of, or a 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.

Although in many instances we have agreements with our suppliers, these agreements are generally terminable by either party
on limited notice. Failure by our suppliers to continue to supply us with products on commercially reasonable terms, or at all, could
put pressure on our operating margins or have a material adverse effect on our financial condition, operating results and cash flows.
Short-term changes in the cost of these materials, some of which are subject to significant fluctuations, are sometimes, but not always
passed on to our customers. Our delayed ability to pass on material price increases to our customers could adversely impact our
financial condition, operating results and cash flows.

A range of factors may make our quarterly revenues and earnings variable.

We have historically experienced, and in the future will continue to experience, variability in revenues and earnings on a
quarterly basis. The factors expected to contribute to this variability include, among others: (1) the volatility of prices of lumber, wood
products and other building products, (2) the cyclical nature of the homebuilding industry, (3) general economic conditions in the
various areas that we serve, (4) the intense competition in the industry, including expansion and growth strategies by competitors,
(5) the production schedules of our customers, and (6) the effects of the weather. These factors, among others, make it difficult to
project our operating results on a consistent basis, which may affect the price of our stock.

We may be adversely affected by any disruption in our respective information technology systems.

Our operations are dependent upon our information technology systems, which encompass all of our major business functions.

Our ProBuild subsidiary currently maintains multiple enterprise resource planning (“ERP”) systems to manage its operations. We plan
to integrate ProBuild’s systems with ours over time and have commenced that process. We may encounter significant operational
disruptions and higher than expected costs in connection with such integration process, which could have a material adverse effect on
our financial condition, operating results and cash flows. Our primary ERP system is a proprietary system that has been highly
customized by our computer programmers. Our centralized financial reporting system currently draws data from our ERP systems. We
rely upon our information technology systems to manage and replenish inventory, to fill and ship customer orders on a timely basis,
and to coordinate our sales activities across all of our products and services. A substantial disruption in our information technology
systems for any prolonged time period (arising from, for example, system capacity limits from unexpected increases in our volume of
business, outages, or delays in our service) could result in delays in receiving inventory and supplies or filling customer orders and
adversely affect our customer service and relationships. Our systems might be damaged or interrupted by natural or man-made events
or by computer viruses, physical or electronic break-ins, or similar disruptions affecting the global Internet. There can be no assurance
that such delays, problems, or associated costs will not have a material adverse effect on our financial condition, operating results and
cash flows.

We may be adversely affected by any natural or man-made disruptions to our distribution and manufacturing facilities.

We currently maintain a broad network of distribution and manufacturing facilities throughout the U.S. Any widespread
disruption to our facilities resulting from fire, earthquake, weather-related events, an act of terrorism or any other cause could damage
a significant portion of our inventory and could materially impair our ability to distribute our products to customers. Moreover, we
could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time
that it takes for us to reopen or replace a damaged facility. In addition, any shortages of fuel or significant fuel cost increases could
disrupt our ability to distribute products to our customers. If any of these events were to occur, our financial condition, operating
results and cash flows could be materially adversely affected.

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 and delevering.

Our long-term strategy depends in part on growing our sales of prefabricated components and other value-added products and

increasing our market share. If any of these initiatives are not successful, or require extensive investment, our growth may be limited,
and we may be unable to achieve or maintain expected levels of growth and profitability.

Our long-term business plan also provides for continued growth through strategic acquisitions and organic growth through the
construction of new facilities or the expansion of existing facilities. Failure to identify and acquire suitable acquisition candidates on
appropriate terms could have a material adverse effect on our growth strategy. Moreover, reduced operating results during the current
slow economic recovery, our liquidity position, or the requirements of the 2015 facility, the 2015 term loan or the indentures
governing the 2021 notes and the 2023 notes, could prevent us from obtaining the capital required to effect new acquisitions or
expansions of existing facilities. Our failure to make successful acquisitions or to build or expand facilities, including manufacturing
facilities, produce saleable product, or meet customer demand in a timely manner could result in damage to or loss of customer
relationships, which could adversely affect our financial condition, operating results, and cash flows. A negative impact on our
financial condition, operations results and cash flows, or our decision to invest in strategic acquisitions or new facilities, could
adversely affect our ability to delever.

In addition, although we have been successful in the past in integrating 33 acquisitions, we may not be able to integrate the
operations of ProBuild or any future acquired businesses with our own in an efficient and cost-effective manner or without significant
disruption to our or ProBuild’s existing operations. Moreover, acquisitions, including the ProBuild acquisition, involve significant
risks and uncertainties, including uncertainties as to the future financial performance of the acquired business, the achievement of
expected synergies, difficulties integrating acquired personnel and corporate cultures into our business, the potential loss of key
employees, customers or suppliers, difficulties in integrating different computer and accounting systems, exposure to unforeseen
liabilities of acquired companies and the diversion of management attention and resources from existing operations. We may be
unable to successfully complete potential acquisitions due to multiple factors, such as issues related to regulatory review of the
proposed transactions. We may also be required to incur additional debt in order to consummate acquisitions in the future, which debt
may be substantial and may limit our flexibility in using our cash flow from operations. Our failure to integrate ProBuild’s business or
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
flows.

Federal, state, local and other regulations could impose substantial costs and/or restrictions on our operations that would
reduce our net income.

We are subject to various federal, state, local and other regulations, including, among other things, regulations promulgated by

the Department of Transportation and applicable to our fleet of delivery trucks, work safety regulations promulgated by the
Department of Labor’s Occupational Safety and Health Administration, employment regulations promulgated by the United States
Equal Employment Opportunity Commission, accounting standards issued by the Financial Accounting Standards Board (“FASB”) or
similar entities and state and local zoning restrictions and building codes. More burdensome regulatory requirements in these or other
areas may increase our general and administrative costs and adversely affect our financial condition, operating results and cash flows.
Moreover, failure to comply with the regulatory requirements applicable to our business could expose us to substantial penalties that
could adversely affect our financial condition, operating results and cash flows.

We are subject to potential exposure to environmental liabilities and are subject to environmental regulation.

We are subject to various federal, state and local environmental laws, ordinances and regulations. Although we believe that our

facilities are in material compliance with such laws, ordinances, 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. No assurance can be provided that remediation may not be required in the
future as a result of spills or releases of petroleum products or hazardous substances, the discovery of unknown environmental
conditions, more stringent standards regarding existing residual contamination, or changes in legislation, laws, rules or regulations.
More burdensome environmental regulatory requirements may increase our general and administrative costs and adversely affect our
financial condition, operating results and cash flows.

We may be adversely affected by uncertainty in the economy and financial markets, including as a result of terrorism or
unrest in the Middle East, Europe or elsewhere.

Instability in the economy and financial markets, including as a result of terrorism or unrest in the Middle East, Europe or

elsewhere, may result in a decrease in housing starts, which would adversely affect our business. In addition, such unrest or related
adverse developments, including a retaliatory military strike or terrorist attack, may cause unpredictable or unfavorable economic
conditions and could have a material adverse effect on our financial condition, operating results, and cash flows. Any shortages of fuel
or significant fuel cost increases related to geopolitical conditions could seriously disrupt our ability to distribute products to our
customers. In addition, domestic terrorist attacks may affect our ability to keep our operations and services functioning properly and
could have a material adverse effect on our financial condition, operating results and cash flows.

Combining the operations of Builders First Source and ProBuild may be more difficult, costly or time consuming than
expected and the anticipated benefits and cost savings of the ProBuild acquisition may not be realized.

We continue to assess synergies that we may realize as a consolidated company, the realization of which will depend on a
number of factors. The success of the ProBuild acquisition, including anticipated benefits and cost savings, will depend, in part, on our
ability to successfully combine and integrate the two businesses. It is possible that the integration process could result in the loss of
key employees, higher than expected costs, diversion of management attention, the disruption of the combined company’s ongoing
businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the combined company’s ability to
maintain relationships with customers, suppliers, vendors and employees or to achieve the anticipated benefits and cost savings of the
ProBuild acquisition. If we experience difficulties with the integration process, or if the operating or financial performance of the
combined company is less than we expect, the anticipated benefits of the ProBuild acquisition may not be realized fully or at all, or
may take longer to realize than expected. Management continues to refine its integration plan. The integration planning and
implementation process has resulted and will continue to result in significant costs and diversion of management attention and
resources. The integration process could have an adverse effect on the combined company for an undetermined period. In addition, the
actual cost savings of the ProBuild acquisition could be less than anticipated.

In connection with the ProBuild acquisition, we incurred significant additional indebtedness which could adversely affect us,
including by decreasing our business flexibility, and increased our interest expense.

Our consolidated indebtedness as of December 31, 2015 was approximately $1,997.7 million. We substantially increased our

indebtedness in connection with the ProBuild acquisition, which has increased our interest expense and could have the effect of,
among other things, reducing our flexibility to respond to changing business and economic conditions.

The amount of cash required to pay interest on our increased indebtedness levels following the ProBuild acquisition, and thus

the demands on our cash resources, is substantially greater than the amount of cash flows required to service our indebtedness prior to
the ProBuild acquisition. The increased levels of indebtedness could also reduce funds available for working capital, capital
expenditures, acquisitions and other general corporate purposes and may create competitive disadvantages for us relative to other
companies with lower debt levels. If we do not achieve the expected benefits and cost savings from the ProBuild acquisition, or if the
financial performance of the combined company does not meet current expectations, then our ability to service our indebtedness may
be adversely impacted.

Moreover, we may be required to raise substantial additional financing to fund working capital, capital expenditures,

acquisitions or other general corporate requirements. Our ability to arrange additional financing or refinancing will depend on, among
other factors, our financial position and performance, as well as prevailing market conditions and other factors beyond our control. We
cannot assure you that we will be able to obtain additional financing or refinancing on terms acceptable to us or at all.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to
increase significantly.

Interest rates may increase in the future. As a result, interest rates on our 2015 facility and our 2015 term loan could be higher or

lower than current levels. As of December 31, 2015, we had approximately $658.6 million, or 33.0%, of our outstanding debt at
variable interest rates. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even
though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our
indebtedness, would correspondingly decrease. At December 31, 2015, a 1.0% increase in interest rates would result in approximately
$0.6 million in additional interest expense annually as we had $60.0 million in outstanding borrowings under the 2015 facility. The
2015 facility also assesses variable commitment and outstanding letter of credit fees based on quarterly average loan utilization. At
December 31, 2015, a 1.0% increase in interest rates on the 2015 term loan would result in approximately $3.7 million in additional
interest expense annually.

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

The agreements that govern our indebtedness contain various affirmative and negative covenants that may, subject to certain

significant exceptions, restrict the ability of us and certain of our subsidiaries to, among other things, have liens on our property,
and/or merge or consolidate with any other person or sell or convey certain of our assets to any one person. The ability of us and our
subsidiaries to comply with these provisions may be affected by events beyond our control. Failure to comply with these covenants
could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations.

The integration of ProBuild involves substantial costs.

We are incurring substantial fees and costs related to formulating and implementing integration plans, including facilities and

systems consolidation costs and employment-related costs. We estimate these integration-related costs in the range of $90 to $100
million over the two years following the closing of the ProBuild acquisition. We continue to assess the magnitude of these costs, and
additional unanticipated costs may be incurred in connection with the integration of the combined company’s businesses. Although we
expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the
businesses, should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

Uncertainties associated with the ProBuild acquisition may cause a loss of management and sales personnel and other key
employees of ProBuild or us, which could adversely affect the future business and operations of the combined company.

We are dependent on the experience and industry knowledge of our senior management team and other key employees to
execute our business plans. The combined company’s success will depend in part upon its ability to retain key management and sales
personnel and other key employees. Current and prospective employees may experience uncertainty about their future roles with the
combined company, which may materially adversely affect our ability to attract and retain key personnel. Accordingly, no assurance
can be given that we will be able to retain key management and sales personnel and other key employees.

Some ProBuild Employees are Unionized

Approximately 2% of the workforce at ProBuild are members of nine different unions. None of the workforce at our legacy
Company was unionized. There can be no assurance that additional employees of the combined company will not conduct union
organization campaigns or become union members in the future.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We have a broad network of distribution and manufacturing facilities in 40 states throughout the U.S. Based on 2015
U.S. Census data, we have operations in 74 of the top 100 U.S. Metropolitan Statistical Areas, as ranked by single family housing
permits in 2015.

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, stairs, windows, pre-hung doors and custom
millwork. In many cases, 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 8 to 10 acres of outside storage for lumber and for finished goods. Our
window manufacturing facility in Houston, Texas has approximately 200,000 square feet.

We contractually lease 309 facilities and own 90 facilities. These leases typically have an initial operating lease term of 5 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
8 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K, 171 of our leased facilities are
subject to a sales-lease back transaction that is accounted for in our financials as owned assets with offsetting lease financing
obligations.

We operate a fleet of approximately 9,400 rolling stock units, primarily forklifts, trailers and approximately 2,400 trucks to

deliver products from our distribution and manufacturing centers to our customer’s 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.

Item 3. Legal Proceedings

We are involved in various 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 claims and lawsuits. We do not believe that the ultimate resolution
of these matters will have a material adverse effect on our consolidated financial position, cash flows or operating results.

Although our business and facilities are subject to federal, state and local environmental regulation, environmental regulation

does not have a material effect 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, or changes in legislation, laws, rules or regulations.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the NASDAQ Stock Market LLC under the symbol “BLDR”. On March 8, 2016, the closing
price of our common stock as reported on the NASDAQ Stock Market LLC was $9.74. The approximate number of stockholders of
record of our common stock on that date was 100, although we believe that the number of beneficial owners of our common stock is
substantially greater.

The table below sets forth the high and low sales prices of our common stock for the periods indicated:

2015
First quarter
Second quarter
Third quarter
Fourth quarter
2014
First quarter
Second quarter
Third quarter
Fourth quarter

High

Low

$
$
$
$

7.06 $
14.24 $
16.69 $
15.72 $

9.16 $
9.40 $
7.92 $
6.98 $

5.71
6.54
11.98
10.02

7.14
6.92
5.10
4.85

We have not declared or paid cash dividends in the two most recent fiscal years. 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 and in each index (including reinvestment of dividends) was $100 on December 31, 2010 and tracks
it through December 31, 2015.

Builders FirstSource, Inc.
Russell 2000
S&P 600 Building Products Index

12/10

12/11

12/12

12/13

12/14

12/15

100.00
100.00
100.00

103.55
95.82
90.17

283.25
111.49
114.45

361.93
154.78
155.18

348.73
162.35
157.44

562.44
155.18
191.13

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 May 25, 2016 under the caption “Equity Compensation Plan
Information,” which information is incorporated herein by reference.

Item 6. Selected Financial Data

The following selected consolidated financial data for the years ended December 31, 2015, 2014 and 2013 and as of

December 31, 2015 and 2014 were derived from our consolidated financial statements that have been audited by
PricewaterhouseCoopers LLP, independent registered public accounting firm, and are included as Item 8 of this annual report on Form
10-K. Selected consolidated financial data as of December 31, 2013 and as of and for the years ended December 31, 2012 and 2011
were derived from our consolidated financial statements that have been audited by PricewaterhouseCoopers LLP, but are not included
herein.

The following data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” contained in Item 7 of this annual report on Form 10-K and with our consolidated financial statements and
related notes included as Item 8 of this annual report on Form 10-K.

2015

Year Ended December 31,
2013
(In thousands, except per share amounts)

2014

2012

2011

Statement of operations data:
Sales
Gross margin
Selling, general and administrative expenses
Income (loss) from continuing operations(1)(2)
Income (loss) from continuing operations per share — basic
Income (loss) from continuing operations per share — diluted
Balance sheet data (end of period):
Cash and cash equivalents
Total assets(3)
Total debt (including current portion) (3)
Stockholders’ equity
Other financial data:
Depreciation and amortization (excluding discontinued operations) $ 58,280 $

$
2,882,038
1,951,671
149,195

65,063 $

(22,969 )

$
$

$ 3,564,425 $ 1,604,096 $ 1,489,892 $ 1,070,676 $ 779,093
214,566 157,945
901,458
356,997
223,269 195,420
810,841 306,979
(64,631 )
(54,419 )
18,558
(0.68 )
(0.68 )

319,920
271,878
(42,365 )

(0.57 ) $
(0.57 ) $

(0.44 ) $
(0.44 ) $

(0.22 ) $
(0.22 ) $

0.19 $
0.18 $

17,773 $

574,065
374,903
40,200

54,696 $ 131,432 $ 146,833
548,369 491,146
358,483 294,862
48,096 101,224

505,436
343,567
15,368

9,519 $

9,305 $

11,120 $ 14,041

(1) Loss from continuing operations included a valuation allowance of $9.7 million against primarily all of our deferred tax assets
for the year ended December 31, 2015. Income from continuing operations included a reduction to our valuation allowance of
$7.2 million due to the utilization of net operating loss carryforwards to reduce taxable income for the year ended December 31,
2014. Loss from continuing operations included a valuation allowance of $15.3 million against primarily all of our deferred tax
assets for the year ended December 31, 2013, which is exclusive of $0.6 million related primarily to reversals of uncertain tax
positions due to statute expirations that affected our net operating loss carryforward and valuation allowance. Loss from
continuing operations included a valuation allowance of $19.6 million and $26.1 million against primarily all of our deferred tax
assets for the years ended December 31, 2012 and 2011, as discussed in Note 12 to the consolidated financial statements
included in Item 8 of this annual report on Form 10-K.

(2) Loss from continuing operations for the year ended December 31, 2015 includes $38.6 million of acquisition and transaction
related costs associated with the ProBuild acquisition, including $13.2 million in commitment fees related to bridge and
backstop financing facilities incurred in connection with the financing of the ProBuild acquisition. In addition, loss from
continuing operations for the current year also includes $10.3 million related to non-cash interest expense from the amortization
of debt discount and deferred loan costs, and fair value adjustments related to our warrants. Loss from continuing operations for
year ended December 31, 2013 included a $39.5 million prepayment penalty related to the early termination of our $225.0
million first-lien term loan due 2015.

(3) Total assets and total debt for all prior periods presented have been reclassified to conform to current period presentation. For all
years presented total assets and total debt reflect reclassification to present deferred loan costs associated with term debt as a
reduction to long-term debt. This reclassification decreased both total assets and total debt by $9.0 million, $10.4 million, $2.5
million and $2.6 million for December 31, 2014, 2013, 2012 and 2011, respectively.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with the selected
financial data and the consolidated financial statements and related notes contained in Item 6. Selected Financial Data and Item 8.
Financial Statements and Supplementary Data of this annual report on Form 10-K, respectively. See “Risk Factors” contained in
Item 1A. Risk Factors of this annual report on Form 10-K and “Cautionary Statement” contained in Item 1. Business of this annual
report on Form 10-K for a discussion of the uncertainties, risks and assumptions associated with these statements.

OVERVIEW

We are a leading supplier of building materials, manufactured components and construction services to professional contractors,
sub-contractors, and consumers. Following our acquisition of ProBuild in July 2015, the Company operates 399 locations in 40 states
across the United States. We offer an integrated solution to our customers 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 and stairs, vinyl windows, custom millwork and trim, as well as engineered wood that we design, cut, and assemble 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 includes professional installation, turn-key framing
and shell construction, and spans all our product categories.

We group our building products into six product categories:



Lumber & Lumber Sheet Goods. Lumber & lumber sheet goods include dimensional lumber, plywood, and OSB products
used in on-site house framing.

 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 trim, exterior
trim, columns and posts that we distribute, as well as custom exterior features that we manufacture under the Synboard ®
brand name.

 Manufactured Products. Manufactured products consist of wood floor and roof trusses, steel roof trusses, wall panels,

stairs, and engineered wood.



Gypsum, Roofing & Insulation. Gypsum, roofing, & insulation include wallboard, metal studs and trims, ceilings, joint
treatment and finishes, stucco and exteriors.

Siding, metal, and concrete. Siding, metal, and concrete includes vinyl, composite, and wood siding, other exteriors, and
cement.

Other Building Products & Services. Other building products & services are comprised of products such as cabinets and
hardware as well as services such as turn-key framing, shell construction, design assistance, and professional installation
spanning the majority of our product categories.

Our operating results are dependent on the following trends, events and uncertainties, some of which are beyond our control:

 Homebuilding Industry. Our business is driven primarily by the residential new construction market, which is in turn
dependent upon a number of factors, including demographic trends, interest rates, consumer confidence, employment
rates, foreclosure rates, and the health of the economy and mortgage markets. During the housing downturn, which began
in 2006, many homebuilders significantly decreased their starts because of lower demand and an excess of home
inventory. The housing market started to strengthen in 2011. According to the U.S. Census Bureau, annual U.S. single-
family housing starts were 714,700 in 2015. However, single-family housing starts remain well below the historical
average (from 1959 through 2015) of 1.0 million per year. Due to the lower levels in housing starts and increased
competition for homebuilder business, we have and will continue to experience pressure on our gross margins. We still
believe there are several meaningful trends that indicate U.S. housing demand will likely recover in the long term and that
the recent downturn in the housing industry is likely a trough in the cyclical nature of the residential construction industry.
These trends include relatively low interest rates, the aging of housing stock, and normal population growth due to
immigration and birthrate exceeding death rate. Industry forecasters, including the National Association of Homebuilders
(“NAHB”), expect to see continued improvement in housing demand over the next few years.

 Targeting Large Production Homebuilders. Over the past ten years, the homebuilding industry has undergone

consolidation, and the larger homebuilders have increased 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. We expect that our ability to maintain strong
relationships with the largest builders will be vital to our ability to expand into new markets as well as grow our market
share. Additionally, we have been successful in expanding our custom homebuilder base while maintaining acceptable
credit standards.

 Repair and remodel end market. Following the acquisition of ProBuild, the repair and remodel end market now
comprises a larger portion of our business. Although it 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, foreclosure
rates, and the health of the economy and home financing markets. We expect that our ability to remain competitive in this
space as well as grow our market share will depend on our continued ability to provide a high level of customer service
coupled with a broad product offering.

 Use of Prefabricated Components. Prior to the housing downturn, homebuilders were increasingly using prefabricated

components in order to realize increased efficiency and improved quality. Shortening cycle time from start to completion
was a key imperative of the homebuilders during periods of strong consumer demand. During the housing downturn, that
trend decelerated as cycle time had less relevance. Customers who traditionally used prefabricated components, for the
most part, still do. However, the conversion of customers to this product offering slowed during the downturn. We are
now seeing the demand for prefabricated components increase as the residential new construction market continues to
strengthen and the availability of skilled construction labor remains limited.

 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, competition, government regulation, trade policies and other factors that affect the
homebuilding industry such as demographic trends, interest rates, single-family housing starts, employment levels,
consumer confidence, and the availability of credit to homebuilders, contractors, and homeowners. Beginning in 2007, the
mortgage markets experienced substantial disruption due to increased defaults. This resulted in a stricter regulatory
environment and reduced availability of mortgages for potential homebuyers due to an illiquid credit market and tighter
standards to qualify for mortgages. Mortgage financing and commercial credit for smaller homebuilders continue to be
constrained, although there have been recent signs of easing. As the housing industry is dependent upon the economy as
well as potential homebuyers’ access to mortgage financing and homebuilders’ access to commercial credit, it is likely
that the housing industry will not fully recover to the historical average until conditions in the economy and the credit
markets further improve.

 Cost 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 of these materials, some of which are subject to
significant fluctuations, are sometimes passed on to our customers, but our pricing quotation periods 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. Our inability to pass on material price increases to our customers could adversely impact our operating results.
 Controlling Expenses. Another important aspect of our strategy is controlling costs and enhancing our status as a low-cost
building materials supplier in the markets we serve. We pay close attention to managing our working capital and operating
expenses. We have a “best practices” operating philosophy, which encourages increasing efficiency, lowering costs,
improving working capital, and maximizing profitability and cash flow. We constantly analyze our workforce productivity
to achieve the optimum, cost-efficient labor mix for our facilities. Further, we pay careful attention to our logistics
function and its effect on our shipping and handling costs.

•

Expand into Multi-Family and Light Commercial Business. Our primary focus has been, and continues to be, on single-
family residential new construction. However, we will continue to identify opportunities for profitable growth in the
multi-family and light commercial markets.

•

Successful integration of the ProBuild business: The acquisition of ProBuild has substantially increased the scale of our
company. Successfully integrating ProBuild will be critical to achieving our future objectives. Combining our two
companies may be more difficult, costly, or time consuming than expected, which could result in the acquisition not
achieving its intended results, including the expected operational synergies and cost savings. In addition, as a result of the
ProBuild acquisition we have substantially increased indebtedness. Reduction of our outstanding debt will be a key
imperative as we work to achieve the intended results of the acquisition.

RECENT DEVELOPMENTS

Acquisitions

On February 9, 2015, the Company acquired certain assets and the operations of Timber Tech Texas, Inc. and its affiliates

(“Timber Tech”) for $5.8 million in cash (including certain adjustments). Timber Tech is based in Cibolo, Texas, which is
approximately 25 miles northeast of downtown San Antonio. Timber Tech is a manufacturer of roof trusses, floor trusses, wall panels
and sub-components, as well as a supplier of glue laminated timber and veneer lumber beams.

On July 31, 2015, we acquired all of the operating affiliates of ProBuild through the purchase of all issued and outstanding

equity interests of ProBuild for $1.63 billion in cash, subject to certain adjustments. Previously headquartered in Denver, Colorado,
ProBuild is one of the nation’s largest professional building materials suppliers. We believe that the ProBuild acquisition will lead to
greater diversification and scale, an improved geographic footprint, and significant potential cost savings. In addition, we bring to
ProBuild significant sales expertise in value-added products, which we believe, when combined with ProBuild’s diverse customer
base, will result in enhanced sales growth of higher margin products for the Company.

The ProBuild purchase price was funded with the net cash proceeds from (i) the sale of $700.0 million in aggregate principal
amount of 10.75% senior unsecured notes due 2023 (“2023 notes”), (ii) the entry into a new $600.0 million term loan credit agreement
(“2015 term loan”), (iii) a $295.0 million draw on an amended and restated $800.0 million senior secured revolving credit facility
(“2015 facility”), and (iv) a public offering of 9.2 million new shares of our common stock at an offering price of $12.80 per share,
subject, in each case, to applicable discounts, commissions, fees, and expenses.

The ProBuild and Timber Tech transactions were accounted for by the acquisition method, and accordingly their results of
operations were included in the Company’s consolidated financial statements from the respective acquisition dates. The purchase price
has been allocated to the assets acquired based on estimated fair values at the acquisition date, with the excess of purchase price over
the estimated fair value of the net assets acquired recorded as goodwill.

CURRENT OPERATING CONDITIONS AND OUTLOOK

Though the level of housing starts remains below the historical average, the homebuilding industry has shown improvement

since 2011. According to the U.S. Census Bureau, actual U.S. single-family housing starts for 2015 were 714,700, an increase of
10.3% compared to 2014. U.S single-family units under construction increased 11.1% during this same time period. While the housing
industry has strengthened over the past few years, the limited availability of credit to smaller homebuilders and potential homebuyers
and the slow economic recovery, among other factors, have hampered a stronger recovery. A composite of third party sources,
including the NAHB, are forecasting 825,000 U.S. single-family housing starts for 2016, which is an increase of 15.4% from 2015.

Our net sales for the year ended December 31, 2015 were up 122.2% over the same period last year, 119.1% of which was due
to recent acquisitions, primarily the acquisition of ProBuild. Excluding the impact of recent acquisitions, which are described in Note
3 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K, net sales increased 3.1%. We
estimate net sales increased 8.5% due to increased volume, which was partially offset by a 5.4% decrease due to the impact of
commodity price deflation on net sales. Our gross margin percentage increased by 3.0% during the year ended December 31, 2015
compared to the year ended December 31, 2014. Excluding the impact of the ProBuild acquisition, our gross margin percentage
increased 1.7%, primarily due to improved customer pricing relative to our costs and a higher mix of value-added sales. We made
significant changes to our business during the downturn that have improved our operating efficiency and allowed us to better leverage
our operating costs against changes in sales volume. We intend to implement similar changes in ProBuild’s business activities to the
extent feasible. However, our selling, general and administrative expenses, as a percentage of net sales, were 22.7% for the year ended
December 31, 2015, a 3.6% increase from 19.2% in 2014. Excluding ProBuild, selling, general, and administrative expenses were
22.0% of net sales. The increase was primarily due to acquisition costs related to the ProBuild acquisition, an increase in facility
closure costs associated with location consolidations, and an increase in intangible asset amortization.

As a result of the ProBuild acquisition, we have substantially increased indebtedness. As such, reduction of our outstanding debt

is a key area of focus for the Company. During the year ended December 31, 2015, we repaid $235.0 million of the original $295.0
million borrowed under the 2015 facility at the closing of the acquisition. In addition, we repaid $1.4 million on the 2015 term loan
during the same period.

On February 12, 2016, we completed separate privately negotiated note exchange transactions in which $218.6 million in
aggregate principal amount of our 2023 notes was exchanged for $207.6 million in aggregate principal amount of our 7.625% senior
secured notes due 2021 (“2021 notes”). The 2021 notes were issued under the existing indenture dated as of May 29, 2013.

On February 29, 2016, we completed additional privately negotiated note exchange transactions in which $63.8 million in

aggregate principal amount of our 2023 notes was exchanged for $60.0 million in aggregate principal amount of our 7.625% senior
secured notes due 2021 (“2021 notes”). Following these transactions $617.6 million in aggregate principal amount of our 2021 notes
and $417.6 million in aggregate principal amount of our 2023 notes remain outstanding.

These transactions allowed the Company to reduce its long-term debt by approximately $14.8 million and reduce its annual cash

interest expense by approximately $10.0 million.

We still believe the long-term outlook for the housing industry is positive due to growth in the underlying demographics. We

feel we are well-positioned to take advantage of the construction activity in our markets and to continue 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 and by working with our vendors to improve our payment terms and pricing on our products. We will also continue to
work diligently to achieve the appropriate balance of short-term expense control while maintaining the expertise and capacity to grow
the business as market conditions improve. We want to create long-term shareholder value and avoid taking steps that will limit our
ability to compete.

RESULTS OF OPERATIONS

The following table sets forth the percentage relationship to sales of certain costs, expenses and income items for the years

ended December 31:

Sales
Cost of sales

Gross margin

Selling, general and administrative expenses

Income from operations

Interest expense, net
Income tax expense
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of tax
Net income (loss)

2015

2014

2013

100.0 %
74.7 %
25.3 %
22.7 %
2.6 %
3.1 %
0.1 %
(0.6 )%
0.0 %
(0.6 )%

100.0 %
77.7 %
22.3 %
19.2 %
3.1 %
1.9 %
0.1 %
1.1 %
(0.0 )%
1.1 %

100.0 %
78.5 %
21.5 %
18.3 %
3.2 %
6.0 %
0.1 %
(2.9 )%
(0.2 )%
(2.9 )%

2015 Compared with 2014

Sales. Sales for the year ended December 31, 2015 were $3,564.4 million, a 122.2% increase from sales of $1,604.1 million for

2014. Net sales increased $1,910.9 million, or 119.1%, due to recent acquisitions, primarily ProBuild. Excluding the impact of
acquisitions, net sales increased $49.4 million, or 8.5% due to increased volume, which was partially offset by a 5.4% decrease due to
the impact of commodity price deflation on net sales. According to the U.S. Census Bureau, actual U.S. single-family housing starts
increased 10.3% and single-family units under construction increased 11.1% in 2015 compared to 2014.

The following table shows sales classified by major product category (dollars in millions):

Lumber & lumber sheet goods
Windows, doors & millwork
Manufactured products
Gypsum, roofing & insulation
Siding, metal & concrete products
Other building products & services
Total sales

Sales
$ 1,151.7
868.8
644.4
265.9
269.2
364.4
$ 3,564.4

2015
% of Sales

2014
% of Sales

Sales

% Change

32.3 % $
24.3 %
18.1 %
7.5 %
7.6 %
10.2 %

563.4
505.5
333.6
46.9
41.8
112.9
100.0 % $ 1,604.1

35.1 %
31.5 %
20.8 %
2.9 %
2.6 %
7.1 %
100.0 %

104.4 %
71.9 %
93.2 %
466.5 %
544.2 %
222.8 %
122.2 %

Due to the ProBuild acquisition, we achieved increased net sales across all product categories. Our sales classification by
product categories has shifted as we diversified our product offerings to support a broader customer base across 40 states through the
ProBuild acquisition. Excluding ProBuild, net sales increased across all product categories, except lumber & lumber sheet goods,
which decreased $12.4 million. This decline in net sales of lumber and lumber sheet goods, excluding ProBuild, was largely due to an
11.1% decrease in market prices for such commodities in 2015 compared to 2014, which was mostly offset by an increase in sales
volume.

Gross Margin. Gross margin increased $544.5 million to $901.5 million. Of this increase, $493.3 million is due to the ProBuild
acquisition. Excluding ProBuild, gross margin increased $51.2 million. Our gross margin percentage increased to 25.3% in 2015 from
22.3% in 2014, a 3.0% increase. Excluding ProBuild, our gross margin percentage increased 1.7%, primarily due to improved
customer pricing relative to our costs and a higher mix of value-added sales from our manufactured products categories in 2015
compared to 2014.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $503.9 million, or
164.1%. Excluding ProBuild, our selling, general, and administrative expense increased $68.0 million or 22.2%. Excluding ProBuild,
our salaries and benefits expense, excluding stock compensation expense, was $218.4 million, an increase of $27.3 million from 2014,
largely due to a 6.2% increase in full-time equivalent employees related to increased sales volume and other recent acquisitions.
Office general and administrative expense increased $31.2 million, primarily due to a $30.2 million increase in professional service
fees largely attributable to acquisition and integration costs related to the ProBuild acquisition. Facility closure costs increased $3.6
million primarily due to costs associated with location consolidations following the ProBuild acquisition. Intangible asset amortization
increased $1.6 million due to other recent acquisitions. Delivery expense increased $1.7 million largely due to increased sales
volume.

As a percentage of net sales, selling, general and administrative expenses increased from 19.2% in 2014 to 22.7% in 2015.

Excluding ProBuild, selling, general and administrative expenses were 22.0% of net sales. As a percentage of net sales, salaries and
benefits expense, excluding stock compensation expense, increased 0.9%, office general and administrative expense increased 1.7%,
facility closure costs increased 0.2%, intangible asset amortization increased 0.1% and delivery expenses decreased 0.1%. The
increase in selling, general and administrative expenses, as a percentage of net sales, was primarily due to the factors discussed above,
and to a lesser degree, the negative impact of commodity price deflation on our net sales.

Interest Expense, net. Interest expense was $109.2 million in 2015, an increase of $78.9 million from 2014. Excluding interest
expense attributable to ProBuild, which is primarily related to interest expense associated with lease finance obligations, our interest
expense was $101.0 million, an increase of $70.7 million. The increase was primarily related to the financing transactions associated
with the acquisition of ProBuild. Of the $70.7 million increase, $49.5 million was attributable primarily to increased interest expense
related to our 2023 notes, 2015 term loan and 2015 facility, $13.2 million was due to commitment fees related to unutilized bridge and
backstop facilities, $8.3 million was related to non-cash interest expense from the amortization of debt discount and deferred loan
costs, and fair value adjustments related to our previously outstanding stock warrants in 2014.

Income Tax Expense. We recorded income tax expense of $4.4 million and $1.1 million during 2015 and 2014, respectively. We

recorded an increase in the after-tax, non-cash valuation allowance on our net deferred tax assets of $9.7 million in 2015 and a $7.2
million reduction in the after-tax, non-cash valuation allowance on our net deferred tax assets in 2014. Absent the valuation allowance,
our effective tax rate would have been 28.5% and 42.1% for 2015 and 2014, respectively.

2014 Compared with 2013

Sales. Sales for the year ended December 31, 2014 were $1,604.1 million, a 7.7% increase from sales of $1,489.9 million for

2013. Excluding the impact of recent acquisitions our sales grew 5.8% for the year ended December 31, 2014 compared to the prior

year. According to the U.S Census Bureau, actual U.S. single-family housing starts increased 4.8% in 2014 as compared to 2013. In
the South Region, actual single-family starts increased 6.0% compared to 2013, and single-family units under construction increased
14.0% over this same time period. Excluding the impact of recent acquisitions, we estimate sales increased 7.9% due to increased
volume, which was partially offset by a 2.1% decrease due to the impact of commodity price deflation on sales, while sales increased
an additional 1.9% due to recent acquisitions during the year ended December 31, 2014 compared to the prior year.

The following table shows sales classified by major product category (dollars in millions):

Lumber & lumber sheet goods
Windows, doors & millwork
Manufactured products
Gypsum, roofing & insulation
Siding, metal & concrete products
Other building products & services
Total sales

2014
% of Sales

Sales

2013
% of Sales

Sales

% Change

563.4
505.5
333.6
46.9
41.8
112.9
$ 1,604.1

35.1 % $
31.5 %
20.8 %
2.9 %
2.6 %
7.1 %

570.8
435.8
295.5
46.4
37.9
103.5
100.0 % $ 1,489.9

38.3 %
29.3 %
19.8 %
3.1 %
2.5 %
7.0 %
100.0 %

(1.3 )%
16.0 %
12.9 %
1.2 %
10.3 %
9.0 %
7.7 %

Increased sales were achieved across all product categories, except lumber and lumber sheet goods, primarily due to increased

volume. The decrease in sales for lumber and lumber sheet goods is primarily attributable to the impact of commodity price deflation,
which was mostly offset by an increase in volume, for the year ended December 31, 2014 compared to the prior year.

Gross Margin. Gross margin increased $37.1 million to $357.0 million. Our gross margin percentage increased from 21.5% in

2013 to 22.3% in 2014, a 0.8% increase. Our gross margin percentage increased primarily due to improved customer pricing and
lower volatility in commodity lumber prices during the year ended December 31, 2014 compared to the prior year.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $34.6 million, or 12.7%.
Our salaries and benefits expense, excluding stock compensation expense, was $191.1 million for 2014, an increase of $19.4 million
from 2013. Delivery expenses increased $5.9 million and office general and administrative expense increased $4.3 million primarily
due to increased sales volume. Occupancy expenses increased $3.0 million, primarily due to acquisitions and expansions at existing
facilities.

As a percentage of sales, selling, general and administrative expenses increased from 18.2% in 2013 to 19.1% in 2014. As a
percentage of sales, salaries and benefits expense, excluding stock compensation expense, increased 0.4%, delivery costs increased by
0.1%, our office general and administrative expense increased 0.1% and occupancy expenses increased by 0.1%. These increases were
primarily due to the negative impact of commodity lumber price deflation on our sales during 2014.

Interest Expense, net. Interest expense was $30.3 million in 2014, a decrease of $59.3 million from 2013. The decrease is

primarily related to our refinancing in the second quarter of 2013, which included $10.6 million of interest on our then outstanding
$225.0 million first-lien term loan due 2015 (“term loan”), the write-off of $6.8 million in unamortized debt discount and $2.1 million
of debt issuance costs, and a $39.5 million prepayment premium related to the early termination of the term loan.

Income Tax Expense. We recorded income tax expense of $1.1 million and $0.8 million during 2014 and 2013, respectively. We

recorded a $7.2 million reduction to our valuation allowance due to utilization of net operating loss carryforwards to reduce our
taxable income in 2014. We recorded an after-tax, non-cash valuation allowance of $15.3 million related to our net deferred tax assets
for 2013, which is exclusive of $0.6 million primarily related to reversals of uncertain tax positions due to statute expirations that
affected our net operating loss carryforward and valuation allowance. Absent this valuation allowance, our effective tax rate would
have been 42.1% and 35.0% for 2014 and 2013, respectively.

Results by Reportable Segment

The following tables show net sales and income from continuing operations before income taxes by reportable segment (dollars

in thousands):

Net sales

Income from continuing operations before income taxes

Year ended December 31,

% of net
sales

% change

% of net
sales

2014

% of net
sales

Northeast
Southeast
South
West

2015
630,486
917,022
1,098,359
789,275
$ 3,435,142

2014
229,998
18.3 % $
672,059
26.7 %
574,831
32.0 %
—
23.0 %
100.0 % $ 1,476,888

15.6 %
45.5 %
38.9 %
—

100.0 %

174.1 % $
36.4 %
91.1 %
—

2015
26,907
13,703
39,533
31,177
$ 111,320

4.3 % $
1.5 %
3.6 %
4.0 %
3.2 % $

3,464
5,465
13,832
—
22,761

% change
676.8 %
150.7 %
185.8 %
—

1.5 %
0.8 %
2.4 %
—
1.5 %

Northeast
Southeast
South
West

2014
229,998
672,059
574,831
—
$ 1,476,888

% of net
sales

Net sales

2013

% of net
sales

Income from continuing operations before income taxes

% change

2014

% of net
sales

2013

% of net
sales

% change

Year ended December 31,

15.6 % $ 239,860
649,654
45.5 %
492,344
38.9 %
—
100.0 % $ 1,381,858

—

17.4 %
47.0 %
35.6 %
—
100.0 %

(4.1 )% $
3.4 %

3,464
5,465
16.8 % 13,832
—
$ 22,761

—

1.5 % $
0.8 %
2.4 %
—
1.5 % $

5,715
9,199
10,061
—
24,975

2.4 %
1.4 %
2.0 %
—
1.8 %

(39.4 )%
(40.6 )%
37.5 %
—

As a result of our reorganization following the ProBuild acquisition on July 31, 2015, we now have four reportable segments

based on an aggregation of the geographic regions in which we operate: Northeast, Southeast, South and West. The West reportable
segment operations were acquired through the ProBuild acquisition. The other reportable segments represent a mix of legacy Builders
FirstSource and ProBuild locations.

Excluding the impact of recent acquisitions, net sales for the year ended December 31, 2015 compared to the year ended
December 31, 2014 increased 4.5% and 5.9% in our legacy Southeast and South reportable segments, respectively, primarily due to
volume increases, which were partially offset by commodity price deflation. According to the U.S Census Bureau, the actual U.S.
single-family housing starts increased 10.3% in 2015 as compared to 2014, with single family starts in the South region increasing
12.0% compared to 2014. Excluding ProBuild, net sales for our Northeast reportable segment decreased 2.7% for the year ended
December 31, 2015 compared to 2014 due to slower regional sales growth, which was not enough to overcome the impact of
commodity price deflation.

Excluding the impact of recent acquisitions, net sales for the year ended December 31, 2014 compared to the year ended
December 31, 2013 increased 3.4% and 11.2% in our Southeast and South reportable segments, respectively, due to volume increases
which outpaced the commodity price deflation offset. According to the U.S Census Bureau, the actual U.S. single-family housing
starts increased 4.8% in 2014 as compared to 2013, with single family starts in the South Region ahead of the national average
increasing 6.0% compared to 2013. Excluding ProBuild, net sales for our Northeast reportable segment decreased 4.1% for the year
ended December 31, 2014 compared to 2013 due to slower regional sales growth, which was not enough to overcome the commodity
price deflation impact.

LIQUIDITY AND CAPITAL RESOURCES

Our primary capital requirements are to fund working capital needs and operating expenses, meet required interest and principal

payments, and to fund capital expenditures and potential future acquisitions. Our capital resources at December 31, 2015 consist of
cash on hand and borrowing availability under our revolving credit facility.

Our 2015 facility will be primarily used for working capital, general corporate purposes, and funding acquisitions. In addition,
we may use the 2015 facility to facilitate debt consolidation. Availability under the 2015 facility is determined by a borrowing base.
Our borrowing base consists of trade accounts receivable, inventory, other receivables, including progress billings and credit card
receivables, and qualified cash that all meet specific criteria contained within the credit agreement, minus agent specified reserves. Net
excess borrowing availability is equal to the maximum borrowing amount minus outstanding borrowings and letters of credit.

The following table shows our borrowing base and excess availability as of December 31, 2015 (in millions):

Accounts Receivable Availability
Inventory Availability
Other Receivables Availability

Gross Availability

Less:

Agent Reserves

Plus:

Cash in Qualified Accounts

Borrowing Base
Aggregate Revolving Commitments
Maximum Borrowing Amount (lesser of Borrowing Base and

Aggregate Revolving Commitments)

Less:

Outstanding Borrowings
Letters of Credit

Net Excess Borrowing Availability on Revolving Facility

As of
December 31,
2015

384.5
314.3
27.0
725.8

(23.5 )

55.5
757.8
800.0

757.8

(60.0 )
(79.1 )
618.7

As of December 31, 2015, we had $60.0 million in outstanding borrowings under our 2015 facility and our net excess borrowing
availability was $618.7 million after being reduced by outstanding letters of credit of approximately $79.1 million. Excess availability
must equal or exceed a minimum specified amount, currently $80.0 million, or we are required to meet a fixed charge coverage ratio
of 1:00 to 1:00. We were not in violation of any covenants or restrictions imposed by any of our debt agreements at December 31,
2015.

Liquidity

Our liquidity at December 31, 2015 was $683.8 million, which consists of net borrowing availability under the 2015 facility and

cash on hand. We are expecting increased stability and continued improvement in the housing industry in 2016. Beyond 2016, it is
difficult for us to predict what will happen as our industry is dependent on a number of factors, including national economic
conditions, employment levels, the availability of credit for homebuilders and potential home buyers, the level of foreclosures,
existing home inventory, and interest rates.

We have substantially increased indebtedness following completion of the ProBuild acquisition in comparison to our
indebtedness on a recent historical basis, which will increase our interest expense and could have the effect of, among other things,
reducing our flexibility to respond to changing business and economic conditions. From time to time, based on market conditions and
other factors and subject to compliance with applicable laws and regulations, the Company may repurchase or call the 2021 notes or
2023 notes, repay debt, or otherwise enter into transactions regarding its capital structure.

Should the current industry conditions deteriorate or we pursue additional acquisitions, we may be required to raise additional
funds through the sale of common stock or debt in the public capital markets or in privately negotiated transactions. There can be no
assurance that any of these financing options would be available on favorable terms, if at all. Alternatives to help supplement our
liquidity position could include, but are not limited to, idling or permanently closing additional facilities, adjusting our headcount in
response to current business conditions, attempts to renegotiate leases, and divesting of non-core businesses. There are no assurances
that these steps would prove successful.

Consolidated Cash Flows

Cash provided by operating activities was $177.0 million and $27.5 million in 2015 and 2014, respectively. Our working capital
decreased $99.0 million in 2015 compared to an increase of $7.8 million in 2014. The decrease in working capital is primarily due to a
decrease in accounts receivable and an increase in accrued liabilities. The decrease in accounts receivable is due to increased
collections largely attributable to the ProBuild acquisition in the fourth quarter of 2015. The increase in accrued liabilities is largely
due to increased interest payable following the ProBuild acquisition financing transactions. The decrease in working capital was
partially offset by an increase in cash interest payments of $26.7 million in 2015 compared to 2014. In addition, during 2015 we had
$13.2 million in one-time cash interest payments attributable to commitment fees related to unutilized bridge and backstop financing

facilities. The remaining increase in cash provided by operations is primarily related to increased sales and profitability during 2015
as a result of higher sales volume and the acquisition of ProBuild.

Cash provided by operating activities was $27.5 million in 2014 compared to cash used in operating activities of $47.6 million
in 2013. The change of $75.1 million was primarily due to our refinancing in the second quarter of 2013 and our improved financial
performance in 2014. Cash interest payments were $28.3 million in 2014 compared to $78.2 million in 2013. The $78.2 million in
cash interest payments in 2013 included a $39.5 million prepayment penalty related to the termination of our term loan. In addition,
our working capital only increased $7.8 million compared to an increase in working capital of $31.8 million in 2013.

Cash used in investing activities increased $1,413.2 million in 2015 compared to 2014. The change is primarily due to the
$1,462.7 million ProBuild acquisition. In addition, we acquired Timber Tech for $5.8 million during 2015. In 2014, $69.3 million of
cash was used for acquisitions. Capital expenditures for 2015 were $43.8 million compared to $25.7 million in 2014. The increase in
capital expenditures primarily relates to purchasing machinery, equipment and vehicles to support sales growth and to increase
capacity at existing locations.

Cash used in investing activities increased $95.4 million in 2014 compared to 2013. The increase is primarily due to $69.3
million in cash used for acquisitions in 2014 and a $10.7 million increase in capital expenditures in 2014 compared to 2013. The
remaining change is primarily due to a decrease of $13.0 million in restricted cash related to the transfer of our outstanding letters of
credit from the previous facility to our new letter of credit sub-facility, which eliminated our cash collateral requirement for
outstanding letters of credit in 2013. The increase in capital expenditures during 2014 primarily relates to the purchase of facilities in
Greensboro, NC, Conroe, TX, and Schertz, TX, improvements related to the relocation of two facilities, as well as purchasing
machinery and equipment to support sales growth and to increase capacity at existing locations.

Cash provided by financing activities was $1,378.3 million and $30.4 million for 2015 and 2014, respectively. During 2015 cash

provided by financing activities was primarily due to financing activities related to the ProBuild acquisition, including $700.0 million
of proceeds from the issuance of notes, $594.0 million of proceeds from a new term loan agreement, $320.0 million of borrowings
under the revolving credit facilities, and $111.3 million of proceeds from the public offering of common stock, net of issuance costs.
Slightly offsetting this, we repaid $290.0 million under the revolving credit facilities during 2015. In addition, we paid $58.5 million
of deferred loan costs in 2015.

Cash provided financing activities for 2014 was $30.4 million compared to cash used in financing activities in 2013 of $29.7

million. Cash provided by financing activities for 2014 primarily relates to our $30.0 million borrowing under the 2013 facility. Cash
used in 2013 primarily relates to our refinancing in the second quarter of 2013. In the second quarter of 2013 we issued $350.0 million
of our 2021 notes and repaid our $225.0 million term loan and $139.7 million of our second priority senior secured floating rate notes
due 2016 (“2016 notes”). The remaining change is primarily due to $15.6 million in payments of deferred loan costs related to our
2013 facility and 2021 notes.

Capital Expenditures

Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions.
Historically, capital expenditures have for the most part remained at relatively low levels in comparison to the operating cash flows
generated during the corresponding periods. We expect our 2016 capital expenditures to be approximately $90-$100 million primarily
related to rolling stock, equipment and facility improvements to support our operations.

DISCLOSURES OF CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following summarizes our contractual obligations as of December 31, 2015 (in thousands):

Payments Due by Period

Contractual obligations
Long-term debt
Interest on long-term debt(1)
Lease finance obligations(2)
Capital lease obligations(2)
Operating leases
Uncertain tax positions(3)
Total contractual cash obligations

Total
$ 1,708,625 $
968,801
406,247
8,563
244,362
—

$ 3,336,598 $

Less than 1 year 1-3 years
5,500 $

11,000 $

3-5 years

71,000 $

142,247
21,814
7,180
59,680
—

283,083
41,755
920
93,479
—

236,421 $ 430,237 $ 439,357 $

280,252
41,613
463
46,029
—

More than 5 years
1,621,125
263,219
301,065
—
45,174
—
2,230,583

(1) We had $60.0 million in borrowings under the 2015 facility as of December 31, 2015. Borrowings under the 2015 facility bear
interest at a variable rate. Therefore, actual interest may differ from the amounts presented above due to interest rate changes or
any future borrowing activity under the 2015 facility. The 2015 term loan also bears interest at a variable rate, therefore actual
interest may differ from the amounts presented above due to interest rate changes.
(2) Future minimum commitments for lease finance obligations and capital lease obligations.
(3) We have $0.2 million of uncertain tax positions recorded in long-term liabilities or as a reduction to operating loss

carryforwards. We also have $0.3 million in interest and penalties accrued related to these uncertain tax positions. It is not
reasonably possible to predict at this time when (or if) any of these amounts will be settled.

The amounts reflected in the table above for operating leases represent future minimum lease payments under non-cancelable

operating leases with an initial or remaining term in excess of one year at December 31, 2015. Purchase orders entered into in the
ordinary course of business are excluded from the above table because they are payable within one year. Amounts for which we are
liable under purchase orders are reflected on our consolidated balance sheet as accounts payable and accrued liabilities. We plan to
lease additional delivery equipment during 2016 to support anticipated sales growth. These operating leases are not included in the
table above.

OTHER CASH OBLIGATIONS NOT REFLECTED IN THE BALANCE SHEET

In accordance with accounting principles generally accepted in the United States, commonly referred to as GAAP, our operating

leases are not recorded in our balance sheet. In addition to the lease obligations included in the above table, we have residual value
guarantees on certain equipment leases. Under these leases we have the option of (1) purchasing the equipment at the end of the lease
term, (2) arranging for the sale of the equipment to a third party, or (3) returning the equipment to the lessor to sell the equipment. If
the sales proceeds in either case are less than the residual value, then we are required to reimburse the lessor for the deficiency up to a
specified level as stated in each lease agreement. The guarantees under these leases for the residual values of equipment at the end of
the respective operating lease periods approximated $3.2 million as of December 31, 2015.

Based upon the expectation that none of these leased assets will have a residual value at the end of the lease term that is
materially less than the value specified in the related operating lease agreement or that we will purchase the equipment at the end of
the lease term, we do not believe it is probable that we will be required to fund any amounts under the terms of these guarantee
arrangements. Accordingly, no accruals have been recognized for these guarantees.

In addition, the Company is party to certain agreements related to its lease finance obligations which commit the Company to
perform certain repairs and maintenance obligations under the leases in a specified manner and timeframe that generally will occur
throughout the next year.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies are those that both are important to the accurate portrayal of a company’s financial condition and
results, and require subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that
are inherently uncertain.

In order to prepare financial statements that conform to GAAP, we make estimates and assumptions that affect the amounts

reported in our financial statements and accompanying notes. Certain estimates are particularly sensitive due to their significance to
the financial statements and the possibility that future events may be significantly different from our expectations.

We have identified the following accounting policies that require us to make the most subjective or complex judgments in order

to fairly present our consolidated financial position and results of operations.

Vendor Rebates. Many of our arrangements with our vendors provide for us to receive a rebate of a specified amount payable to

us when we achieve any of a number of measures, generally related to the volume of purchases from our vendors. We account for
these rebates as a reduction of the prices of the vendor’s products, which reduces inventory until we sell the product, at which time
these rebates reduce cost of sales. Throughout the year, we estimate the amount of rebates based upon our historical level of
purchases. We continually revise these estimates to reflect actual purchase levels.

If market conditions were to change, vendors may change the terms of some or all of these programs. Although these changes

would not affect the amounts which we have recorded related to product already purchased, it may impact our gross margins on
products we sell or sales earned in future periods.

Allowance for Doubtful Accounts and Related Reserves. We maintain an allowance for doubtful accounts for estimated losses

due to the failure of our customers to make required payments. We perform periodic credit evaluations of our customers and typically
do not require collateral. However, we have, in some cases, required customers to collateralize their debt with us. Consistent with
industry practices, we typically require payment from most customers within 30 days. As our business is seasonal in certain regions,
our customers’ businesses are also seasonal. Sales are lowest in the winter months, and our past due accounts receivable balance as a
percentage of total receivables generally increases during this time. Throughout the year, we record estimated reserves based upon our
historical write-offs of uncollectible accounts, taking into consideration certain factors, such as aging statistics and trends, customer
payment history, independent credit reports, and discussions with customers. Periodically, we perform a specific analysis of all
accounts past due and write off account balances when we have exhausted reasonable collection efforts and determined that the
likelihood of collection is remote. We charge these write-offs against our allowance for doubtful accounts. Any future decline in the
macroeconomic factors that affect the overall housing industry or our specific customers’ business could cause us to revise our
estimate of expected losses and increase our allowance for doubtful accounts.

Impairment of Long-Lived Assets. Long-lived assets, including property and equipment and intangible assets with finite lives,

are reviewed for possible impairment whenever events or circumstances indicate that the carrying amount of an asset may not be
recoverable. The carrying amount of a long-lived asset group is not recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset group. Our long-lived assets and liabilities are grouped at the
lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Our
facility related long-lived assets are grouped at a geographical location level, which is at a level below our operating segments. All of
our other long-lived assets are grouped at a geographical region level, which is the equivalent of our operating segments. Our
judgment regarding the existence of impairment indicators is based on market and operational performance. Determining whether
impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly
related to the potentially impaired asset group, the useful life over which cash flows will occur, their amount, and the asset group’s
residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best
information available.

We use internal cash flow estimates, quoted market prices when available and independent appraisals, as appropriate, to
determine fair value. We derive the required cash flow estimates from our historical experience and our internal business plans and
apply an appropriate discount rate. These cash flow estimates are over the remaining useful lives of the asset groups. Forecasted
housing starts are used to help estimate future revenue. Historical trends are then used to project gross margins and operating expenses
based upon various revenue levels. If these projected cash flows are less than the carrying amount, an impairment loss is recognized
based on the fair value of the asset group. Due to the uncertainties associated with these projections, actual results could differ from
projected results, and further impairment of long-lived assets could be recorded. Future non-cash impairment of long-lived assets
would have the effect of decreasing our earnings or increasing our losses in such period, but would not impact our current outstanding
debt obligations or compliance with covenants contained in the related debt agreements.

In continuing operations for the year ended December 31, 2015, we recorded asset impairment charges on held-for-use assets of
$1.4 million related to a customer relationship intangible assets associated with a location closure and recorded $0.7 million related to
fair value adjustments on held-for-sale assets during 2015. We recorded no significant asset impairment charges in continuing
operations in 2014 or 2013.

Goodwill. Goodwill represents the excess of the amount we paid to acquire businesses over the estimated fair value of tangible

assets and identifiable intangible assets acquired, less liabilities assumed. At December 31, 2015, our goodwill balance was $739.6
million, representing 25.7% of our total assets.

We test goodwill for impairment in the fourth quarter of each year or at any other time when impairment indicators exist by

comparing the estimated implied value of a reporting units’ goodwill to its book value. Examples of such indicators that could cause

us to test goodwill for impairment between annual tests include a significant change in the business climate, unexpected competition
or a significant deterioration in market share. We may also consider market capitalization relative to our net assets. Our industry
experienced a significant and severe downturn that began in mid-2006. As such, we have closely monitored the trends in economic
factors and their effects on operating results to determine if an impairment trigger was present that would warrant a reassessment of
the recoverability of the carrying amount of goodwill prior to the required annual impairment test and performed interim impairment
tests when warranted. Housing starts are a significant sales driver for us. If there is a significant decline or an expected decline in
housing starts, this could adversely affect our expectations for a reporting unit and the value of that reporting unit. We did not have
any goodwill impairments in continuing operations in 2015, 2014 or 2013.

The process of evaluating goodwill for impairment involves the determination of the fair value of our reporting units. As a result

of the reorganization following the ProBuild acquisition, our reporting units are now aligned with our nine geographic regions which
are also determined to be our operating segments. In evaluating goodwill for impairment, the Company first assesses qualitative
factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If it is
concluded that it is not more likely than not that the fair value of the reporting unit is less than its carrying value, then no further
testing of the goodwill is required.

However, if we determine that it is more likely than not that the fair value of the reporting unit is less than its carrying value,

then we evaluate goodwill for impairment using a two-step process. The first step is to identify potential impairment by comparing the
fair value of a reporting unit to the book value, including goodwill. If the fair value of a reporting unit exceeds the book value,
goodwill is not impaired. If the book value exceeds the fair value, the second step of the process is performed to measure the amount
of impairment. In step two, the estimated fair value of the reporting unit is allocated to all other assets and liabilities of that reporting
unit based on their respective fair values. The excess of the fair value of the reporting unit over the amount allocated to its assets and
liabilities is the implied fair value of goodwill. Goodwill impairment is measured as the excess of the carrying value over its implied
fair value. The fair value of a reporting unit is estimated based upon the projected discounted cash flow expected to be generated from
the reporting unit using a discounted cash flow methodology. Where available and appropriate, comparative market multiples are used
to corroborate the results of the discounted cash flow.

In performing our annual impairment tests at December 31, 2015, we developed a range of fair values for our reporting units
using a five-year discounted cash flow methodology. Inherent in such fair value determinations are estimates relating to future cash
flows, including revenue growth, gross margins, operating expenses and long-term growth rates, and our interpretation of current
economic indicators and market conditions and their impact on our strategic plans and operations. Due to the uncertainties associated
with such estimates, interpretations and assumptions, actual results could differ from projected results, and further impairment of
goodwill could be recorded.

Significant information and assumptions utilized in estimating future cash flows for our reporting units includes publicly
available industry information on projected single-family housing starts and lumber commodity prices which are used to project
revenue. Projected gross margins and operating expenses reflect current headcount levels and cost structure and are flexed in future
years based upon historical trends at various revenue levels. Long-term growth was based upon terminal value earnings before
interest, taxes, depreciation and amortization (EBITDA) multiples of 4.5x for all reporting units to reflect the relevant expected
acquisition price. A discount rate of 12.5% was used for all reporting units and is intended to reflect the weighted average cost of
capital for a potential market participant and includes all risks of ownership and the associated risks of realizing the stream of
projected future cash flows. Decreasing the long-term growth to an EBITDA multiple of 3.5x, or increasing the discount rate by 1.0%
to 13.5%, would not have changed the results of our impairment testing.

At December 31, 2015, the fair values of each our reporting units were substantially in excess of their respective carrying

values. The excess (or “cushion”) of the implied fair value of goodwill over the carrying value of goodwill for each of our six
reporting units which have remaining goodwill balances ranged from $75.0 million to $300.0 million. Factors that could negatively
impact the estimated fair value of our reporting units and potentially trigger additional impairment include, but are not limited to,
unexpected competition, lower than expected housing starts, an increase in market participant weighted average cost of capital,
increases in material or labor cost, and significant declines in our market capitalization. Future non-cash impairment of goodwill
would have the effect of decreasing our earnings or increasing our losses in such period, but would not impact our current outstanding
debt obligations or compliance with covenants contained in the related debt agreements.

Deferred Income Taxes. We evaluate our deferred tax assets on a quarterly basis to determine whether a valuation allowance is

required. In accordance with the Income Taxes topic of the Accounting Standards Codification (“Codification”) we assess whether it is
more likely than not that some or all of our deferred tax assets will not be realized. Significant judgment is required in estimating
valuation allowances for deferred tax assets. The realization of a deferred tax asset ultimately depends on the existence of sufficient
taxable income in the applicable carryback or carryforward periods. We consider nature, frequency, and severity of current and
cumulative losses, among other matters, the reversal of existing deferred tax liabilities, historical and forecasted taxable income, and
tax planning strategies in our assessment. Changes in our estimates of future taxable income and tax planning strategies will affect our
36

estimate of the realization of the tax benefits of these tax carryforwards. To the extent we generate sufficient taxable income in the
future to fully utilize the tax benefits of the net tax deferred assets on which a valuation allowance was recorded, our effective tax rate
may decrease as the valuation allowance is reversed.

Poor housing market conditions have contributed to our cumulative loss position for the past several years. While we generated

income in 2014, we still have a cumulative unadjusted loss for the three year period ending December 31, 2015. Further, taking into
consideration the historical ProBuild results on a proforma basis also results in a cumulative loss for the three year period ending
December 31, 2015. We believe the cumulative loss position, as well as uncertainty around the extent and timing of the housing
market recovery, represents significant negative evidence in considering whether our deferred tax assets are realizable. Further, we do
not believe that relying solely on projections of future taxable income to support the recovery of deferred tax assets is sufficient.
Based on an evaluation of positive and negative evidence, we concluded that the negative evidence regarding our ability to realize our
deferred tax assets outweighed the positive evidence as of December 31, 2015.

The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income
during the carryforward period are reduced or increased, or if objective negative evidence in the form of cumulative losses is no longer
present and additional weight may be given to subjective evidence such as our projections for growth. We currently estimate that we
will likely transition into a three year cumulative income position, including an evaluation of ProBuild’s historical results, on a rolling
three year period at some time during the year ending December 31, 2016. However, there continues to be uncertainty around housing
market projections and without continued improvement in housing activity, we may not reverse our cumulative loss position. Simply
coming out of a cumulative loss position is not viewed as a bright line and may not be considered sufficient positive evidence to
reverse some or all of the valuation allowance if there is other negative evidence. In upcoming quarters, we will closely monitor the
positive and negative evidence surrounding our ability to realize our deferred tax assets.

In 2015, we recorded a valuation allowance of $9.7 million related to our continuing operations. In 2014, we reduced our
valuation allowance by $7.2 million due to the utilization of net operating losses against federal and state taxable income. In 2013, we
recorded a valuation allowance of approximately $15.3 million related to our continuing operations, which is exclusive of $0.6 million
related primarily to reversals of uncertain tax positions due to statute expirations that affected our net operating loss carryforward and
valuation allowance.

We base our estimate of deferred tax assets and liabilities on current tax laws and rates. In certain cases, we also base our
estimate on business plan forecasts and other expectations about future outcomes. Changes in existing tax laws or rates could affect
our actual tax results, and future business results may affect the amount of our deferred tax liabilities or the valuation of our deferred
tax assets over time. Due to uncertainties in the estimation process, particularly with respect to changes in facts and circumstances in
future reporting periods, as well as the residential homebuilding industry’s cyclicality and sensitivity to changes in economic
conditions, it is possible that actual results could differ from the estimates used in previous analyses.

Accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes

of these future results could have a material impact on our consolidated results of operations or financial position.

Insurance. We are insured for general liability, auto liability and workers’ compensation exposures, subject to deductible
amounts. The expected liability for unpaid claims, including incurred but not reported losses, is determined using the assistance of a
third-party actuary and is reflected on our balance sheet as an accrued liability. The amount recoverable from our insurance provider is
reflected as an other asset. Our accounting policy includes an internal evaluation and adjustment of our reserve for all insured losses
on a quarterly basis. At least on an annual basis, we engage an external actuarial professional to independently assess and estimate the
total liability outstanding, which is compared to the actual reserve balance at that time and adjusted accordingly.

Stock-Based Compensation. Calculating stock-based compensation expense requires the input of subjective assumptions. We

determine the fair value of each option grant using the Black-Scholes option-pricing model with assumptions based primarily on
historical data. Specific inputs to the model include: the expected life of the stock-based awards, stock price volatility, dividend yield
and risk-free rate.

The expected life represents the period of time the options are expected to be outstanding. We have used the simplified method

for determining the expected life assumption due to limited historical exercise experience on our stock options. The expected volatility
is based on the historical volatility of our common stock over the most recent period equal to the expected life of the option. The
expected dividend yield is based on our history of not paying regular dividends in the past and our current intention to not pay regular
dividends in the foreseeable future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and has a
term equal to the expected life of the options. We record expense for the unvested portion of grants over the requisite service (i.e.,
vesting) periods.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 2016, the Financial Accounting Standards Board (“FASB”) issued an update to the existing guidance under Leases

topic. Under the new guidance, lessees will be required to recognize the following for all leases, with the exception of short-term
leases, at the commencement date: (1) a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease,
measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the
use of, a specified asset for the lease term. This update requires a modified retrospective transition as of the beginning of the earliest
comparative period presented in the financial statements. This update is effective for public companies for fiscal years beginning after
December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the
impact of this guidance on our financial statements.

In November 2015, the FASB issued an update to the existing guidance under the Income Taxes topic. The amendments in this

update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The
current requirement that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single
amount is not affected by these changes. This update is effective for periods beginning after December 15, 2016 with early
application permitted. The Company elected to adopt this guidance in the fourth quarter of 2015. This update was applied on a
prospective basis, as such prior year amounts have not been restated on a retrospective basis.

In September 2015, the FASB issued an update to the existing guidance under the Business Combinations topic. This update

simplifies the accounting for measurement-period adjustments. The amendments in this update require that an acquirer recognize
adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment
amounts are determined. This update will be effective for all annual and interim periods beginning after December 15, 2015. The
amendments in this update should be applied prospectively to adjustments to provisional amounts that occur after the effective date of
this update with earlier application permitted for financial statements that have not been issued. The Company elected to adopt this
guidance in the fourth quarter of 2015. As such, measurement period adjustments will be recognized in the period in which they are
identified.

In July 2015 the FASB issued an update to the existing guidance under the Inventory topic of the Codification. This update

changes the subsequent measurement of inventory from lower of cost or market to lower of cost and net realizable value. This
guidance is effective for interim and annual reporting periods beginning after December 15, 2016. Early adoption of this guidance is
permitted as of the beginning of an interim or annual reporting period. This guidance requires prospective application. We do not
expect the adoption of this guidance to have an impact on our financial statements.

In April 2015 the FASB issued an update to the existing guidance under the Interest topic of the Codification. This update

requires debt issuance costs to be presented on the balance sheet as a direct reduction from the carrying amount of the related debt
liability instead of a deferred charge. This guidance is effective for interim and annual reporting periods beginning after December 15,
2015. This guidance requires retrospective application. Early adoption is permitted for financial statements that have not been
previously issued. As described in Note 2 to the consolidated financial statements included in Item 8 of this annual report on Form
10-K the Company elected to adopt this guidance in the third quarter of 2015.

In January 2015 the FASB issued an update to the existing guidance under the Income Statement topic of the Codification. This

update eliminates the concept of extraordinary items and the requirement to assess whether an event or transaction is both unusual in
nature and infrequent in occurrence and to separately present any such items on the statement of operations after income from
continuing operations. Under the updated guidance such items will either be presented as a separate component of income from
continuing operations or disclosed in the notes to the financial statements. This guidance is effective for interim and annual periods
beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal
year of adoption, but not required. The guidance allows either prospective or retrospective methods of adoption. We do not currently
expect that the adoption of this update will have an impact on our financial statements.

In August 2014, the FASB issued an update to the existing guidance under the Presentation of Financial Statements topic of the

Codification. This update requires management to perform interim and annual assessments on whether there are conditions or events
that raise substantial doubt about the entity’s ability to continue as a going concern within one year of the date the financial statements
are issued and to provide related disclosures, if required. This new guidance is effective for the annual period ending after December
15, 2016, and for annual and interim periods thereafter. Early adoption is permitted, but not required. We are currently evaluating the
impact of this guidance on our financial statements.

In May 2014, the FASB issued an update to the existing guidance under the Revenue Recognition topic of the Codification
which is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. This new guidance was originally effective for annual reporting periods beginning after December 15, 2016.

However, in July 2015 the FASB approved an optional one year deferral of the effective date to annual reporting periods beginning
after December 15, 2017. As such, this guidance will be effective for us beginning on January 1, 2018. Early adoption is permitted;
however, this guidance cannot be adopted earlier than the original effective date. This guidance allows either full retrospective or
modified retrospective methods of adoption. We are currently evaluating the impact of this guidance on our financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

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 2021 notes and our 2023 notes bear interest at a fixed rate, therefore, our interest expense related to the 2021
notes and 2023 notes would not be affected by an increase in market interest rates. Borrowings under the 2015 facility and the 2015
term loan bear interest at either a base rate or eurodollar rate, plus, in each case, an applicable margin. At December 31, 2015, a 1.0%
increase in interest rates would result in approximately $0.6 million in additional interest expense annually as we had $60.0 million in
outstanding borrowings under the 2015 facility. The 2015 facility also assesses variable commitment and outstanding letter of credit
fees based on quarterly average loan utilization. At December 31, 2015, a 1.0% increase in interest rates on the 2015 term loan would
result in approximately $3.7 million in additional interest expense annually.

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. Our delayed
ability to pass on material price increases to our customers can adversely impact our operating results.

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2015, 2014 and

2013

Consolidated Balance Sheets at December 31, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013
Notes to Consolidated Financial Statements

42
43
44
45
46

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Builders FirstSource, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and

comprehensive income (loss), stockholders’ equity and cash flows present fairly, in all material respects, the financial position of
Builders FirstSource, Inc. and its subsidiaries at December 31, 2015 and December 31, 2014, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2015 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, 2015, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is
responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial
Reporting. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial
reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.

A company’s 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. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s 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 the policies or procedures may deteriorate.

As described in Management’s report on Internal Control over Financial Reporting, management has excluded ProBuild
Holdings, LLC from its assessment of internal control over financial reporting as of December 31, 2015 because it was acquired by
the Company in a purchase business combination during 2015. We have also excluded ProBuild Holdings, LLC from our audit of
internal control over financial reporting. ProBuild Holdings, LLC is a wholly-owned subsidiary whose total assets and total revenues
represent 56 percent and 52 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended
December 31, 2015.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas
March 11, 2016

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Sales
Cost of sales

Gross margin

Selling, general and administrative expenses

Income from operations

Interest expense, net

Income (loss) from continuing operations before income taxes

Income tax expense
Income (loss) from continuing operations
Income (loss) from discontinued operations (net of income tax expense of $0 in

2015, 2014 and 2013)

Net income (loss)
Comprehensive income (loss)
Basic net income (loss) per share:

Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss)

Diluted net income (loss) per share:

Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss)

Weighted average common shares outstanding:

Basic
Diluted

$
$

2013

Years Ended December 31,
2015
2014
(In thousands, except per share amounts)
3,564,425 $
2,662,967
901,458
810,841
90,617
109,199
(18,582 )
4,387
(22,969 )

1,604,096 $ 1,489,892
1,169,972
1,247,099
319,920
356,997
271,878
306,979
48,042
50,018
89,638
30,349
(41,596 )
19,669
1,111
769
(42,365 )
18,558

138

(22,831 ) $
(22,831 ) $

(408 )
18,150 $
18,150 $

(326 )
(42,691 )
(42,691 )

(0.22 ) $
0.00
(0.22 ) $

0.19 $
(0.00 )
0.19 $

0.18 $
(0.00 )
0.18 $

(0.44 )
(0.00 )
(0.44 )

103,190
103,190

98,050
100,522

96,449
96,449

The accompanying notes are an integral part of these consolidated financial statements.

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Current assets:

ASSETS

Cash and cash equivalents
Accounts receivable, less allowances of $8,049 and $3,153 for 2015 and 2014,

65,063 $

17,773

December 31,

2015

2014

(In thousands, except per share amounts)

respectively
Other receivables
Inventories, net
Other current assets

Total current assets

Property, plant and equipment, net
Assets held for sale
Goodwill
Intangible assets, net
Other assets, net

Total assets

Current liabilities:

LIABILITIES AND STOCKHOLDERS’ EQUITY

Checks outstanding
Accounts payable
Accrued liabilities
Current maturities of long-term debt and lease obligations

Total current liabilities

Long-term debt and lease obligations, net of current maturities, debt discount, and deferred

loan costs

Deferred income taxes
Other long-term liabilities
Total liabilities

Commitments and contingencies (Note 14)
Stockholders’ equity:

528,544
57,778
513,045
29,899
1,194,329
734,329
5,585
739,625
189,604
18,566
2,882,038 $

46,833 $

365,347
293,905
29,153
735,238

1,922,518
11,502
63,585
2,732,843

140,064
24,070
138,156
11,477
331,540
75,679
1,395
139,774
17,228
8,449
574,065

—
74,427
67,666
30,074
172,167

344,829
6,441
10,428
533,865

Preferred stock, $0.01 par value, 10,000 shares authorized; zero shares issued and

outstanding at December 31, 2015 and 2014

Common stock, $0.01 par value, 200,000 shares authorized; 109,726 and 98,226 shares

issued and outstanding at December 31, 2015 and 2014, respectively

Additional paid-in capital
Accumulated deficit

Total stockholders’ equity
Total liabilities and stockholders’ equity

—

1,097
511,802
(363,704 )
149,195
2,882,038 $

982
380,091
(340,873 )
40,200
574,065

The accompanying notes are an integral part of these consolidated financial statements.

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in)

(22,831 ) $

18,150 $

(42,691 )

2015

Years Ended December 31,
2014
(In thousands)

2013

operating activities:

Depreciation and amortization
Asset impairments
Amortization and write-off of deferred loan costs
Amortization and write-off of debt discount
Fair value adjustment of stock warrants
Deferred income taxes
Bad debt, net of recoveries
Net non-cash income from discontinued operations
Stock compensation expense
Net gain on sales of assets

Changes in assets and liabilities, net of assets acquired and liabilities

assumed:

Receivables
Inventories
Other current assets
Other assets and liabilities
Accounts payable and checks outstanding
Accrued liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Cash used for acquisitions, net
Decrease in restricted cash

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Borrowings under revolving credit facility
Payments under revolving credit facility
Proceeds from issuance of notes
Proceeds from term loan
Repayments of long-term debt and other loans
Payments of loan costs
Payment of recapitalization costs
Proceeds from public offering of common stock, net of issuance costs
Exercise of stock options
Repurchase of common stock

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

58,280
2,114
18,630
299
4,563
3,287
2,285
—
6,848
(801 )

74,089
46,854
(6,320 )
5,314
(45,286 )
29,709
177,034

(43,811 )
4,275
(1,468,511 )
—
(1,508,047 )

320,000
(290,000 )
700,000
594,000
(4,213 )
(58,525 )
—
111,309
6,718
(986 )
1,378,303
47,290
17,773
65,063 $

9,519
—
2,432
—
(456 )
524
(274 )
—
6,157
(114 )

1,113
(9,103 )
(4,791 )
(660 )
(5,410 )
10,406
27,493

(25,716 )
213
(69,337 )
—
(94,840 )

30,000
—
—
—
(67 )
(34 )
—
—
1,831
(1,306 )
30,424
(36,923 )
54,696
17,773 $

9,305
—
4,067
7,794
1,502
917
900
(195 )
4,245
(284 )

(25,592 )
(14,637 )
(1,116 )
(1,344 )
1,332
8,221
(47,576 )

(15,051 )
2,592
—
13,030
571

30,000
(30,000 )
350,000
—
(364,778 )
(15,634 )
(37 )
—
1,754
(1,036 )
(29,731 )
(76,736 )
131,432
54,696

The accompanying notes are an integral part of these consolidated financial statements.

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Common Stock

Amount

Additional Paid
in
Capital
(In thousands)

Accumulated

Deficit

Total

Balance at December 31, 2012
Issuance of restricted stock, net of forfeitures
Vesting of restricted stock
Stock compensation expense
Exercise of stock options
Exercise of stock warrants
Repurchase of common stock
Comprehensive loss:
Net loss

Total comprehensive loss
Balance at December 31, 2013
Vesting of restricted stock
Stock compensation expense
Exercise of stock options
Repurchase of common stock
Comprehensive income:
Net income

Total comprehensive income
Balance at December 31, 2014
Issuance of common stock from public

offering, net of issuance costs
Vesting of restricted stock units
Stock compensation expense
Exercise of stock options
Exercise of stock warrants
Repurchase of common stock
Comprehensive loss:
Net loss

Total comprehensive loss
Balance at December 31, 2015

96,916 $

32
—
—
543
579
(165 )

—
—
97,905
—
—
492
(171 )

—
—
98,226

9,200
495
—
1,388
569
(152 )

957 $
—
7
—
5
6
(2 )

—
—
973
6
—
5
(2 )

—
—
982

92
5
—
14
6
(2 )

363,471 $

(316,332 ) $

—
(7 )
4,245
1,749
4,994
(1,034 )

—
—
373,418
(6 )
6,157
1,826
(1,304 )

—
—
380,091

111,217
(5 )
6,848
6,704
7,931
(984 )

—
—
—
—
—
—

(42,691 )
—
(359,023 )
—
—
—
—

18,150
—
(340,873 )

—
—
—
—
—

—
—

109,726 $

—
—
1,097 $

—
—

(22,831 )
—

511,802 $

(363,704 ) $

48,096
—
—
4,245
1,754
5,000
(1,036 )

(42,691 )
(42,691 )
15,368
—
6,157
1,831
(1,306 )

18,150
18,150
40,200

111,309
—
6,848
6,718
7,937
(986 )

(22,831 )
(22,831 )
149,195

The accompanying notes are an integral part of these consolidated financial statements.

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of the Business

Builders FirstSource, Inc., a Delaware corporation formed in 1998, is a leading supplier of building materials, manufactured

components and construction services to professional contractors, sub-contractors, and consumers. Following our acquisition of
ProBuild Holdings LLC (“ProBuild”) in July 2015, the company operates locations in 40 states across the United States.

In this annual report, references to the “Company,” “we,” “our,” “ours” or “us” refer to Builders FirstSource, Inc. and its

consolidated subsidiaries (including ProBuild as of July 31, 2015), unless otherwise stated or the context otherwise requires.

2. Summary of Significant Accounting Policies

Balance Sheet Reclassification

Certain prior period amounts have been reclassified to conform to the current year presentation due to the ProBuild acquisition

and the adoption of updated accounting guidance.

The accompanying consolidated balance sheet as of December 31, 2014 has been recast to present deferred loan costs associated

with term debt as a reduction to long-term debt instead of a component of other assets. In the accompanying condensed consolidated
balance sheet as of December 31, 2014, $9.0 million has been reclassified from other assets to long-term debt. Deferred loan costs
associated with revolving debt arrangements continue to be presented as a component of other assets. Previously the Company
presented all deferred loan costs as a component of other assets. This change in accounting principle was made in accordance with the
updated guidance issued by the Financial Standards Accounting Board (“FASB”) described below under “Recently Issued Accounting
Pronouncements”. This update had no impact on guidance relating to the recognition and measurement of deferred loan costs.

Principles of Consolidation

The consolidated financial statements present the results of operations, financial position, and cash flows of Builders

FirstSource, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation.

Accounting Estimates

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 doubtful

accounts, employee compensation programs, depreciation and amortization periods, income taxes, inventory values, insurance
programs, goodwill, other intangible assets and long-lived assets.

Sales Recognition

We recognize sales of building products upon delivery to the customer. For contracts with service elements, sales are generally

recognized on the completed contract method as these contracts are usually completed within 30 days with the percentage of
completion method applied on a limited basis to certain contracts. Percentage of completion revenue represents less than 2% of our
consolidated sales for each year presented. Contract costs include all direct material and labor, equipment costs and those indirect
costs related to contract performance. Provisions for estimated losses on uncompleted contracts are recognized in the period in which
such losses are determined. Prepayments for materials or services are deferred until such materials have been delivered or services
have been provided. All sales recognized are net of allowances for discounts and estimated returns, based on historical experience. We
present all sales tax on a net basis in our consolidated financial statements. The Company records sales incentives provided to
customers as a reduction of revenue.

Cash and Cash Equivalents & Checks Outstanding

Cash and cash equivalents consist of cash on hand and all highly liquid investments with an original maturity date of three
months or less. Also included in cash and cash equivalents are proceeds due from credit card transactions that generally settle within

two business days. We maintain cash at financial institutions in excess of federally insured limits. Further, we maintain various
banking relationships with different financial institutions. Accordingly, when there is a negative book cash balance resulting from
outstanding checks that had not yet been paid by any single financial institution; they are reflected in checks outstanding on the
accompanying consolidated balance sheets.

Financial Instruments

We use financial instruments in the normal course of business as a tool to manage our assets and liabilities. We do not hold or

issue financial instruments for trading purposes.

We issued detachable warrants in 2011, which were measured at fair value on a recurring basis until exercised in 2015 as

discussed in Note 8.

Accounts Receivable

We extend credit to qualified professional homebuilders and contractors, in many cases on a non-collateralized basis. Accounts
receivable potentially expose us to concentrations of credit risk. Because our customers are dispersed among our various markets, our
credit risk to any one customer or state economy is not significant.

Our customer mix is a balance of large national homebuilders, regional homebuilders, local homebuilders and repair and
remodeling contractors. For the year ended December 31, 2015, our top 10 customers accounted for approximately 17.0% of our sales,
and no single customer accounted for more than 5% of sales.

The allowance for doubtful accounts is based on management’s assessment of the amount which may become uncollectible in

the future and is estimated using specific review of problem accounts, overall portfolio quality, current economic conditions that may
affect the borrower’s ability to pay, and historical experience. Accounts receivable are written off when deemed uncollectible. Other
receivables consist primarily of vendor rebates receivable.

We also establish reserves for credit memos and customer returns. The reserve balance was $3.8 million, $1.4 million, and $1.2
million at December 31, 2015, 2014, and 2013, respectively. The activity in this reserve was not significant for each year presented.

Accounts receivable consisted of the following at December 31:

Accounts Receivable
Less: allowance for returns and doubtful accounts

Accounts receivable, net

536,593 $
8,049
528,544 $

143,217
3,153
140,064

2015

2014

(In thousands)

The following table shows the changes in our allowance for doubtful accounts:

Balance at January 1,
Additions
Deductions (write-offs, net of recoveries)
Balance at December 31,

2015

2014
(In thousands)

2013

1,734 $
2,285
226
4,245 $

2,413 $
(274 )
(405 )
1,734 $

1,864
900
(351 )
2,413

Inventories

Inventories consist principally of materials purchased for resale, including lumber, sheet goods, windows, doors and millwork,
as well as certain manufactured products and are stated at the lower of cost or market. Cost is determined using the weighted average
method, the use of which approximates the first-in, first-out method. We accrue for shrink based on the actual historical shrink results
of our most recent physical inventories adjusted, if necessary, for current economic conditions. These estimates are compared with
actual results as physical inventory counts are taken and reconciled to the general ledger.

During the year, we monitor our inventory levels by market and record provisions for excess inventories based on slower

moving inventory. We define potential excess inventory as the amount of inventory on hand in excess of the historical usage,
excluding special order items purchased in the last six months. We then apply our judgment as to forecasted demand and other factors,
including liquidation value, to determine the required adjustments to net realizable value. Our inventories are generally not susceptible
to technological obsolescence.

Our arrangements with vendors provide for rebates of a specified amount of consideration, payable when certain measures,

generally related to a stipulated level of purchases, have been achieved. We account for estimated rebates as a reduction of the prices
of the vendor’s inventory until the product is sold, at which time such rebates reduce cost of sales in the accompanying consolidated
statements of operations and comprehensive loss. Throughout the year we estimate the amount of the rebates based upon the expected
level of purchases. We continually revise these estimates based on actual purchase levels.

We source products from a large number of suppliers. No materials purchased from any single supplier represented more than

7% of our total materials purchased in 2015.

Shipping and Handling Costs

Handling costs incurred in manufacturing activities are included in cost of sales. All other shipping and handling costs are

included in selling, general and administrative expenses in the accompanying consolidated statements of operations and
comprehensive income (loss) and totaled $171.9 million, $79.7 million and $71.1 million in 2015, 2014 and 2013, respectively.

Income Taxes

We account for income taxes utilizing the liability method described in the Income Taxes topic of the FASB Accounting
Standards Codification (“Codification”). Deferred income taxes are recorded to reflect consequences on future years of differences
between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which differences are expected to affect taxable earnings. We record a valuation
allowance to reduce deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be
realized.

Warranty Expense

We have warranty obligations with respect to most manufactured products; however, the liability for the warranty obligations is

not significant as a result of third-party inspection and acceptance processes.

Deferred Loan Costs and Debt Discount

Loan costs are capitalized upon the issuance of long-term debt and amortized over the life of the related debt. Loan costs
associated with term debt are presented as a reduction to long-term debt. Loan costs associated with revolving debt arrangements are
presented as a component of other assets. Loan costs incurred in connection with revolving debt arrangements are amortized using the
straight-line method. Loan costs incurred in connection with term debt are generally amortized using the effective interest method.
Debt discount is amortized over the life of the related debt using the effective interest method. Amortization of deferred loan costs and
the debt discount are included in interest expense. Upon changes to our debt structure, we evaluate debt issuance costs in accordance
with the Debt topic of the Codification. We adjust debt issuance costs as necessary based on the results of this evaluation, as discussed
in Note 8.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives

of the assets. The estimated lives of the various classes of assets are as follows:

Buildings and improvements

Machinery and equipment
Furniture and fixtures
Leasehold improvements

20 to 40 years
3 to 10 years
3 to 5 years
The shorter of the estimated useful life or the remaining lease term

Major additions and improvements are capitalized, while maintenance and repairs that do not extend the useful life of the

property are charged to expense as incurred. Gains or losses from dispositions of property, plant and equipment are recorded in the
period incurred. We also capitalize certain costs of computer software developed or obtained for internal use, including interest,
provided that those costs are not research and development, and certain other criteria are met. Internal use computer software costs are
included in machinery and equipment and generally depreciated using the straight-line method over the estimated useful lives of the
assets, generally three years.

We periodically evaluate the commercial and strategic operation of the land, related buildings and improvements of our
facilities. In connection with these evaluations, some facilities may be consolidated, and others may be sold or leased. Nonoperating
assets primarily related to land and building real estate assets associated with location closures that are actively being marketed for
sale within a year are classified as assets held for sale and recorded at fair value, usually the quoted market price obtained from an
independent third-party less the cost to sell. Until the assets are sold, an estimate of the fair value is reassessed at each reporting
period. Net gains or losses related to the sale of real estate and equipment or impairment adjustments related to assets held for sale are
recorded as selling, general and administrative expenses.

Long-Lived Assets

We evaluate our long-lived assets, other than goodwill, for impairment when events or changes in circumstances indicate, in our

judgment, that the carrying value of such assets may not be recoverable. The determination of whether or not impairment exists is
based on our estimate of undiscounted future cash flows before interest attributable to the assets as compared to the net carrying value
of the assets. If impairment is indicated, the amount of the impairment recognized is determined by estimating the fair value of the
assets based on estimated discounted future cash flows and recording a provision for loss if the carrying value is greater than estimated
fair value. The net carrying value of assets identified to be disposed of in the future is compared to their estimated fair value, usually
the quoted market price obtained from an independent third-party less the cost to sell, to determine if impairment exists. Until the
assets are disposed of, an estimate of the fair value is reassessed when related events or circumstances change. Asset impairment
charges are presented in the consolidated statements of operations and comprehensive income (loss) for the respective years.

Insurance

We have established insurance programs to cover certain insurable risks consisting primarily of physical loss to property,

business interruptions resulting from such loss, workers’ compensation, employee healthcare, and comprehensive general and auto
liability. Third party insurance coverage is obtained for exposures above predetermined deductibles as well as for those risks required
to be insured by law or contract. Provisions for losses are developed from valuations that rely upon our past claims experience, which
considers both the frequency and settlement of claims. We discount our workers’ compensation liability based upon estimated future
payment streams at our risk-free rate.

Net Income (Loss) per Common Share

Net income (loss) per common share, or earnings per share (“EPS”), is calculated in accordance with the Earnings per Share

topic of the Codification which requires the presentation of basic and diluted EPS. Basic EPS is computed using the weighted average
number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common
shares outstanding during the period, plus the dilutive effect of potential common shares.

The table below presents a reconciliation of weighted average common shares used in the calculation of basic and diluted EPS

for the years ended December 31:

Weighted average shares for basic EPS
Dilutive effect of options, warrants, and RSUs
Weighted average shares for diluted EPS

2015

2014
(In thousands)

103,190
—
103,190

98,050
2,472
100,522

2013

96,449
—
96,449

Our restricted stock shares include rights to receive dividends that are not subject to the risk of forfeiture even if the underlying

restricted stock shares on which the dividends were paid do not vest. In accordance with the Earnings Per Share topic of the
Codification, unvested share-based payment awards that contain non-forfeitable rights to dividends are deemed participating securities
and should be considered in the calculation of basic EPS. Since the restricted stock shares do not include an obligation to share in
losses, they will be included in our basic EPS calculation in periods of net income and excluded from our basic EPS calculation in
periods of net loss. Accordingly, there were 13,000 restricted stock shares excluded from the computation of basic EPS in 2015
because we generated a net loss. There were 27,000 restricted stock shares included in our basic EPS calculation for 2014 as we
generated net income. There were 610,000 restricted stock shares excluded from the computation of basic EPS in 2013 because we
generated a net loss.

For the purpose of computing diluted EPS, options to purchase 4,998,000 shares of common stock and 1,516,000 restricted
stock units (“RSUs”) were not included in the computation of diluted EPS for 2015 because their effect was anti-dilutive. Incremental
shares attributable to average warrants outstanding during 2015 were not included in the computation of diluted EPS for 2015 as their
effect was anti-dilutive. There were no warrants outstanding at December 31, 2015 as all of the remaining warrants were exercised in
April 2015. Weighted average shares outstanding have been adjusted for common shares underlying 6,246,000 options, 700,000
warrants, and 1,855,000 restricted stock units (“RSUs”) for 2014. In addition, $0.5 million of income due to fair value adjustments
related to the warrants was excluded from net income in the computation of diluted EPS for 2014. Options to purchase 4,933,000
shares of common stock were not included in the computations of diluted EPS in 2013 because their effect was anti-dilutive. Warrants
to purchase 700,000 shares of common stock were not included in the computations of diluted EPS in 2013 because their effect was
anti-dilutive.

Goodwill and Other Intangible Assets

Intangibles subject to amortization

We recognize an acquired intangible asset apart from goodwill whenever the intangible asset arises from contractual or other

legal rights, or whenever it can be separated or divided from the acquired entity and sold, transferred, licensed, rented, or exchanged,
either individually or in combination with a related contract, asset or liability. Impairment losses are recognized if the carrying value
of an intangible asset subject to amortization is not recoverable from expected future cash flows and its carrying amount exceeds its
estimated fair value.

Goodwill

We recognize goodwill as the excess cost of an acquired entity over the net amount assigned to assets acquired and liabilities

assumed. Goodwill is tested for impairment on an annual basis and between annual tests whenever impairment is indicated. This
annual test takes place as of December 31 each year. Impairment losses are recognized whenever the implied fair value of goodwill is
less than its carrying value.

Stock-based Compensation

We have four stock-based employee compensation plans, which are described more fully in Note 10. We issue new common

stock shares upon exercises of stock options, grants of restricted stock, and vesting of RSUs.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model with the

following weighted average assumptions for the year ended December 31:

Expected life
Expected volatility
Expected dividend yield
Risk-free rate

2015
6.0 years
75.2%
0.00%
1.75%

2014
5.8 years
92.1%
0.00%
1.83%

The expected life represents the period of time the options are expected to be outstanding. We used the simplified method for

determining the expected life assumption due to limited historical exercise experience on our stock options. The expected volatility is
based on the historical volatility of our common stock over the most recent period equal to the expected life of the option. The
expected dividend yield is based on our history of not paying regular dividends in the past and our current intention to not pay regular
dividends in the foreseeable future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and has a
term equal to the expected life of the options. We did not grant any stock option awards in 2013.

Fair Value

The Fair Value Measurements and Disclosures topic of the Codification provides a framework for measuring the fair value of

assets and liabilities and establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy can be summarized as follows:

Level 1 — unadjusted quoted prices for identical assets or liabilities in active markets accessible by us

Level 2 — inputs that are observable in the marketplace other than those inputs classified as Level 1

Level 3 — inputs that are unobservable in the marketplace and significant to the valuation

If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon

the lowest level of input that is significant to the fair value calculation. The only financial instruments measured at fair value on a
recurring basis were our warrants as discussed in Note 8.

We have elected to report the value of our 7.625% senior secured notes due 2021 (“2021 notes”), our 10.75% senior unsecured

notes due 2023 (“2023 notes”), and the $600.0 million term loan credit agreement (“2015 term loan”) at amortized cost. The fair
values of the 2021 notes, the 2023 notes, and the 2015 term loan at December 31, 2015 were approximately $372.3 million, $698.3
million and $591.1 million respectively, and were determined using Level 2 inputs based on market prices.

Supplemental Cash Flow Information

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

Cash payments for interest ..................................................... $
Cash payments for income taxes............................................

55,028 $
1,409

28,338 $
456

78,232
407

2015

2014
(In thousands)

2013

Discontinued Operations

When we exit a market entirely and have no continuing involvement in such operations, we classify the exit as discontinued

operations. In the second quarter of 2009, we announced our intent to exit the entire Ohio market based upon several factors,
including the unfavorable conditions that affected our industry and a poor competitive position which prevented us from generating
profitable results. Upon completing our exit plan in the second quarter of 2009 the cessation of these operations was treated as
discontinued operations as they had distinguishable cash flow and operations that have been eliminated from our ongoing operations.
There have been no additional exit activities that have been classified as discontinued operations in 2015, 2014, or 2013.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity (net assets) of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources. It consists of net income (loss) and other gains and losses
affecting stockholders’ equity that, under GAAP, are excluded from net income. We had no items of other comprehensive income
(loss) for the years ended December 31, 2015, 2014, and 2013.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued an update to the existing guidance under Leases topic. Under the new guidance, lessees will

be required to recognize the following for all leases, with the exception of short-term leases, at the commencement date: (1) a lease
liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-
of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. This
update requires a modified retrospective transition as of the beginning of the earliest comparative period presented in the financial
statements. This update is effective for public companies for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of this guidance on our
financial statements.

In November 2015, the FASB issued an update to the existing guidance under the Income Taxes topic. The amendments in this

In September 2015, the FASB issued an update to the existing guidance under the Business Combinations topic. This update

In July 2015 the FASB issued an update to the existing guidance under the Inventory topic of the Codification. This update

In April 2015 the FASB issued an update to the existing guidance under the Interest topic of the Codification. This update

requires debt issuance costs to be presented on the balance sheet as a direct reduction from the carrying amount of the related debt
liability instead of a deferred charge. This guidance is effective for interim and annual reporting periods beginning after December 15,
2015. This guidance requires retrospective application. Early adoption is permitted for financial statements that have not been
previously issued. We elected to adopt this guidance in the third quarter of 2015.

In January 2015 the FASB issued an update to the existing guidance under the Income Statement topic of the Codification. This

In August 2014, the FASB issued an update to the existing guidance under the Presentation of Financial Statements topic of the

after December 15, 2017. As such, this guidance will be effective for us beginning on January 1, 2018. Early adoption is permitted;
however, this guidance cannot be adopted earlier than the original effective date. This guidance allows either full retrospective or
modified retrospective methods of adoption. We are currently evaluating the impact of this guidance on our financial statements.

3. Acquisitions

On June 30, 2014 the Company acquired certain assets and the operations of Slone Lumber Company, Inc. (“Slone”) for $8.7

million in cash (including certain adjustments). Based in Houston, Texas, Slone is a full-line building materials supplier. Slone’s
product offerings include lumber, engineered beams, interior and exterior door units, moulding, trim, and cabinets. Slone also offers
installation services on exterior doors, shutters, and cabinets.

On July 31, 2014 the Company acquired certain assets and the operations of West Orange Lumber Company, Inc. (“West

Orange”) for $9.8 million in cash (including certain adjustments). Based in Groveland, Florida, West Orange supplies lumber, roof
and floor trusses, custom windows and doors, as well as installation services, to both residential homebuilders and commercial
contractors in central Florida.

On August 6, 2014 the Company acquired certain assets and the operations of Truss Rite, LLC (“Truss Rite”) for $14.6 million

in cash (including certain adjustments). Based in Sherman, Texas Truss Rite primarily manufactures wood roof and floor trusses for
large multi-family and commercial projects throughout Texas and parts of Oklahoma. Truss Rite predominately serves developers and
general contractors in the multi-family residential housing sector.

On October 1, 2014 the Company acquired certain assets and the operations of Trim Tech of Austin, Inc. (“Trim Tech”) for

$19.4 million in cash (including certain adjustments). Trim Tech is based in Hutto, Texas, which is approximately 30 miles north of
downtown Austin. Trim Tech is a turn-key supplier of custom cabinets, interior and exterior doors, stair parts, and custom millwork
and molding.

On December 22, 2014 the Company acquired certain assets and the operations of Empire Truss, Ltd. (“Empire”) for $16.8
million in cash (including certain adjustments). Empire is a Texas-based manufacturer of custom designed roof trusses and floor
trusses, and a distributor of engineered wood products with its primary operations located in Huntsville, Texas, approximately 65
miles north of downtown Houston. Empire’s primary focus is on multi-family and light commercial customers.

On February 9, 2015, the Company acquired certain assets and the operations of Timber Tech Texas, Inc. and its affiliates

On July 31, 2015, the Company acquired all of the operating affiliates of ProBuild through the purchase of all issued and
outstanding equity interests in ProBuild for $1.63 billion in cash, subject to certain adjustments. The purchase price was funded by the
net proceeds received from the financing transactions described in Note 8. Previously headquartered in Denver, Colorado, ProBuild is
one of the nation’s largest professional building materials suppliers. As a result of the ProBuild acquisition, the Company has a greater
diversification of products and services and a significantly improved geographic footprint.

These acquisitions were accounted for by the acquisition method, and accordingly the results of operations were included in the
Company’s consolidated financial statements from the acquisition date. The purchase price was allocated to the assets acquired based
on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets
acquired recorded as goodwill. All final purchase accounting adjustments related to these acquisitions, which primarily reflect
adjustments to the ProBuild acquisition for the final purchase price adjustment and other adjustments refining the methodology and
assumptions associated with the intangible asset valuations, have been recorded as of December 31, 2015. These adjustments did not
have a material impact in the accompanying consolidated statements of operations and comprehensive income (loss) for the current or
previous reporting periods. The fair value of acquired intangible assets of $184.5 million, primarily related to tradenames, customer
relationships and lease contract intangibles, was estimated by applying an income approach. That measure is based on significant
Level 3 inputs not observable in the market. Key assumptions developed based on the Company’s historical experience, future
projections and comparable market data include future cash flows, long-term growth rates, royalty rates, attrition rates and discount
rates.

We incurred acquisition related costs of $20.9 million and $0.6 million in costs related to these acquisitions during the years

ended December 31, 2015 and 2014, respectively. These costs include due diligence costs and transaction costs to complete the
acquisitions, and have been recognized in selling, general and administrative expense in the accompanying condensed consolidated
statements of operations and comprehensive income (loss).

The following table summarizes the aggregate fair values of the assets acquired and liabilities assumed for ProBuild and all

other acquisitions, net of cash (in thousands) for the year ended:

Accounts receivable
Other receivables
Inventory
Other current assets
Property, plant and equipment
Assets held for sale
Goodwill (Note 5)
Intangible assets (Note 6)
Other assets

Total assets acquired

Checks outstanding
Current maturities of long term debt and lease obligations
Accounts payable
Accrued liabilities
Other long-term liabilities
Long-term debt and lease obligations, net of current maturities

Total liabilities assumed
Total net assets acquired

2015

ProBuild

All Other

2014

All Other

470,105 $
34,718
411,160
12,101
658,540
10,911
602,690
184,509
2,016
2,386,750

(32,378 )
(25,456 )
(339,673 )
(210,436 )
(53,703 )
(262,390 )
(924,036 )
$
1,462,714

306 $
—
1,095
—
3,961
—
(2,839 )
3,311
—
5,834
—
—
—
(37 )
—
—
(37 )
5,797 $

9,544
—
5,417
—
8,580
—
28,581
17,467
34
69,623
—
—
—
(286 )
—
—
(286 )
69,337

All of the goodwill and intangible assets recognized from the ProBuild and all other acquisitions are expected to be deductible
for tax purposes, with the goodwill recognized from these acquisitions being amortized ratably over a 15 year period. The ProBuild
acquisition will be treated as an asset purchase for tax purposes.

The operating results of the acquisitions have been included in the consolidated statements of operations and comprehensive

income (loss) from their acquisition dates through December 31, 2015. Net sales and net income attributable to ProBuild were
$1,863.1 million and $48.5 million, respectively, for the period of August 1, 2015 through December 31, 2015. Net sales and net
income attributable to the other acquisitions are not material, individually or in the aggregate.

The following table reflects the pro forma operating results for the Company which gives effect to the acquisition of ProBuild as
if it had occurred on January 1, 2014. The pro forma results are based on assumptions that the Company believes are reasonable under
the circumstances. The pro forma results are not necessarily indicative of future results. The pro forma financial information includes
the historical results of the Company and ProBuild adjusted for certain items, which are described below, and does not include the
effects of any synergies or cost reduction initiatives related to the acquisition of ProBuild. Pro forma information for the other
acquisitions is not presented as it is not material, individually or in the aggregate.

Net sales
Net loss
Basic net loss per share
Diluted net loss per share

Year Ended
December 31,

2015

2014

(pro forma)
(in thousands, except per share amounts)

$
$
$
$

6,066,792 $
(10,433 ) $
(0.10 ) $
(0.10 ) $

6,082,819
(127,880 )
(1.19 )
(1.19 )

Pro forma net loss for the years ended December 31, 2015 and 2014 reflects adjustments primarily related to depreciation and

amortization, the conversion from last-in, first-out to first-in, first out inventory valuation, and interest expense. Pro forma net loss for
2015 was adjusted to exclude transaction-related expenses of $46.9 million ($34.6 million incurred by the Company and $12.3 million
incurred by ProBuild). Pro forma net loss for 2014 was adjusted to include these transaction-related expenses.

4. Property, Plant and Equipment

Property, plant and equipment consisted of the following at December 31:

Land
Buildings and improvements
Machinery and equipment
Furniture and fixtures
Construction in progress
Property, plant and equipment
Less: accumulated depreciation
Property, plant and equipment, net

2015

2014

(In thousands)

214,302 $
338,566
314,446
47,456
7,828
922,598
188,269
734,329 $

17,334
64,776
113,609
18,936
13,341
227,996
152,317
75,679

Depreciation expense was $46.3 million, $8.5 million and $8.9 million, of which $5.3 million, $2.5 million and $2.4 million was

included in cost of sales, in 2015, 2014, and 2013, respectively.

Included in property, plant and equipment are certain assets held under capital leases and lease finance obligations. These assets

are recorded at the present value of minimum lease payments and include land, buildings and equipment. Amortization charges
associated with assets held under capital leases and lease finance obligations are included in depreciation expense. The following
balances held under capital lease and lease finance obligations, net of accumulated amortization of $4.9 million and $1.2 million at
December 31, 2015 and 2014, respectively, are included on the accompanying combined balance sheet:

Land
Buildings and improvements
Machinery and equipment

2015

2014

(In thousands)

124,987 $
183,390
14,168
322,545 $

—
4,107
—
4,107

5. Goodwill

The following table sets forth the changes in the carrying amount of goodwill by reportable segment for the years ended

December 31, 2015 and 2014 (in thousands):

Northeast

Southeast

South

West

Total

Balance as of January 1, 2014

Goodwill
Accumulated impairment losses

Acquisitions and other purchase
price adjustments

Balance as of December 31, 2014

Goodwill
Accumulated impairment losses

Acquisitions and other purchase
price adjustments

Balance as of December 31, 2015

Goodwill
Accumulated impairment losses

13,609 $
(494 )
13,115

49,591 $
(615 )
48,976

92,629 $
(43,527 )
49,102

— $
—
—

155,829
(44,636 )
111,193

—

28,581

—

28,581

13,609 $
(494 )
13,115

49,591 $
(615 )
48,976

121,210 $
(43,527 )
77,683

— $
—
—

184,410
(44,636 )
139,774

83,493

11,100

208,452

296,806

599,851

97,102 $
(494 )
96,608 $

60,691 $
(615 )
60,076 $

329,662 $
(43,527 )
286,135 $

296,806 $
—
296,806 $

784,261
(44,636 )
739,625

In 2015, the change in the carrying amount of goodwill is attributable to our acquisitions of ProBuild and Timber Tech. In 2014

the change in the carrying amount of goodwill is attributable to our acquisitions of Slone, West Orange, Truss Rite, Trim Tech, and
Empire. The amount allocated to goodwill is attributable to the assembled workforce of the acquired companies as well as the
diversification of products and services, the significantly improved geographic footprint, and the synergies expected to arise as a result
of these acquisitions.

We closely monitor trends in economic factors and their effects on operating results to determine if an impairment trigger was

present that would warrant a reassessment of the recoverability of the carrying amount of goodwill prior to the required annual
impairment test in accordance with the Intangibles – Goodwill and Other topic of the Codification.

The process of evaluating goodwill for impairment involves the determination of fair value of our reporting units. Inherent in

such fair value determinations are certain judgments and estimates relating to future cash flows, including our interpretation of current
economic indicators and market valuations and assumptions about our strategic plans with regard to our operations. Due to the
uncertainties associated with such estimates, actual results could differ from such estimates resulting in further impairment of
goodwill.

In performing our impairment analysis, we developed a range of fair values for our reporting units using a discounted cash flow

methodology. The discounted cash flow methodology establishes fair value by estimating the present value of the projected future
cash flows to be generated from the reporting unit. The discount rate applied to the projected future cash flows to arrive at the present
value is intended to reflect all risks of ownership and the associated risks of realizing the stream of projected future cash flows. The
discounted cash flow methodology uses our projections of financial performance for a five-year period. The most significant
assumptions used in the discounted cash flow methodology are the discount rate, the terminal value and the expected future revenues,
gross margins and operating expenses, which vary among reporting units. Significant assumptions used in our financial projections
include housing starts, lumber commodity prices, and market share gains.

We recorded no goodwill impairment charges in 2015, 2014, and 2013.

6. Intangible Assets

The following table presents intangible assets as of December 31:

Customer relationships
Non-compete agreements
Trade names
Favorable lease intangibles
Total intangible assets

Unfavorable lease obligations (included in Accrued

liabilities and Other long-term liabilities)

2015

2014

Gross
Carrying
Amount

Accumulated
Amortization

Gross
Carrying
Amount

Accumulated
Amortization

148,910 $

766
51,361
6,408
207,445 $

(In thousands)

(12,968 ) $
(170 )
(4,155 )
(548 )
(17,841 ) $

18,423 $
392
1,234
—

20,049 $

(2,695 )
(31 )
(95 )
—
(2,821 )

(19,547 ) $

2,072 $

— $

—

In connection with the acquisition of ProBuild, we recorded intangible assets of $184.5 million, which includes $50.1 million of
trade names, $128.0 million of customer relationships and $6.4 million of favorable lease intangibles. We also recorded $19.5 million
of unfavorable lease obligations. The weighted average useful lives of the acquired assets are 9.7 years for trade names, 13.5 years for
customer relationships, and 10.0 years for both the favorable and unfavorable lease intangibles.

During the years ended December 31, 2015, 2014, and 2013, we recorded amortization expense in relation to the above-listed

intangible assets of $11.9 million, $1.1 million, and $0.4 million, respectively. In addition, as a result of the facility closure activities
following the ProBuild acquisition, we recorded a $1.4 million impairment charge against our intangible assets during 2015. We
recognized this impairment charge in selling, general, and administrative expense in the accompanying consolidated statement of
operations and comprehensive income (loss). The following table presents the estimated amortization expense for these intangible
assets for the years ending December 31 (in thousands):

2016
2017
2018
2019
2020
Thereafter
Total future net intangible amortization expense

22,495
20,652
19,504
18,457
15,274
75,747
172,129

7. Accrued Liabilities

Accrued liabilities consisted of the following at December 31:

2015

2014

(In thousands)

Accrued payroll and other employee related expenses
Accrued business taxes
Self-insurance reserves
Accrued interest
Facility closure reserves
Casualty claims in excess of retained loss limit
Customer obligations
Other
Total accrued liabilities

120,138 $
29,054
35,240
33,712
5,228
8,845
38,173
23,515
293,905 $

18,974
9,168
10,386
2,329
1,646
11,335
6,105
7,723
67,666

8. Long-Term Debt

Long-term debt consisted of the following at December 31:

2021 notes
2023 notes
2013 facility
2015 facility
2015 term loan
Lease finance obligations
Capital lease obligations (Note 9)

Unamortized debt discount and debt issuance costs

Less: current maturities of long-term debt and lease obligations

Long-term debt and lease obligations, net of current maturities $

December 31,
2015
350,000 $
700,000
—
60,000
598,625
280,909
8,159
1,997,693
(46,022 )
1,951,671
29,153
1,922,518 $

December 31,
2014
350,000
—
30,000
—
—
3,904
—
383,904
(9,001 )
374,903
30,074
344,829

2013 Refinancing

In May 2013 we completed a private offering of $350.0 million in aggregate principal amount of 7.625% senior secured notes
due 2021 (“2021 notes”) at a price equal to 100% of their face value. In conjunction with the offering, we also entered into a new 5-
year $175.0 million senior secured revolving credit facility agreement (“2013 facility”) provided by a syndicate of financial
institutions led by SunTrust Bank as administrative agent. The 2013 facility was used for working capital and general corporate
purposes with the available borrowing capacity, or borrowing base, derived primarily from a percentage of the Company’s eligible

receivables and inventory, as defined by the agreement, subject to certain reserves. In July 2015, we repaid the full $55.0 million then
outstanding under the 2013 facility as a part of the ProBuild acquisition financing transaction discussed below.

We used the net proceeds from the offering of the 2021 notes, together with cash on hand, to (i) redeem $139.7 million in
aggregate outstanding principal amount of our second priority senior secured floating rate notes due 2016 (“2016 notes”) at par plus
accrued and unpaid interest thereon to the redemption date, (ii) repay $225.0 million in borrowings outstanding under our existing
first-lien term (“2011 term loan”) loan plus a prepayment premium of approximately $39.5 million and accrued and unpaid interest
and (iii) pay the related commissions, fees and expenses. The repayment of the 2016 notes and the 2011 term loan was considered to
be an extinguishment. As such, we recognized a loss of $48.4 million, which was recorded as interest expense in the second quarter of
2013. Of this $48.4 million loss, $39.5 million was due to the prepayment premium on the term loan, $6.8 million was due to a write-
off of unamortized debt discount on the term loan and $2.1 million was due to a write-off of unamortized deferred loan costs on the
2016 notes and the term loan.

Upon the repayment of the outstanding borrowings and payment of the prepayment premium and accrued interest, we

terminated the 2011 term loan, which included the $15.0 million letter of credit sub-facility. The 2011 term loan also included
detachable warrants that allowed for the purchase of up to 1.6 million shares of our common stock at a price of $2.50 per share. The
$12.7 million of outstanding letters of credit under the sub-facility at the time were transferred to the 2013 facility. At the same time,
we also terminated our $10.0 million letter of credit stand-alone facility. There were no letters of credit outstanding under the stand-
alone facility at the time of termination.

In connection with the issuance of the 2021 notes and entering into the 2013 facility we incurred approximately $15.6 million of
various third-party fees and expenses. Of these costs, $11.2 million were allocated to the 2021 notes and $4.4 million were allocated to
the 2013 facility. These costs have been capitalized and are being amortized over the respective terms of the underlying facilities,
subject to modifications triggered by the ProBuild acquisition financing discussed below. The $0.9 million in remaining unamortized
deferred loan costs related to the sub-facility and stand-alone facility are being amortized over the term of the 2013 facility.

Senior Secured Notes due 2021

As of December 31, 2015, we have $350.0 million outstanding in aggregate principal amount of 2021 notes that mature on
June 1, 2021. The 2021 notes were issued pursuant to an indenture, dated as of May 29, 2013 (“Indenture”), by and between us,
certain of our subsidiaries, as guarantors (“Guarantors”), and Wilmington Trust, National Association, as trustee and notes collateral
agent (“Trustee”). Interest accrues on the 2021 notes at a rate of 7.625% per annum and is payable semi-annually in arrears on June 1
and December 1 of each year.

The 2021 notes, subject to certain exceptions, are guaranteed, jointly and severally, on a senior secured basis, by each of the

Guarantors. All obligations under the 2021 notes, and the guarantees of those obligations, will be secured by substantially all of our
assets and the assets of the Guarantors subject to certain exceptions and permitted liens, including a first-priority security interest in
such assets that constitute Notes Collateral (as defined therein) and a second-priority security interest in such assets that constitute
ABL Collateral (as defined therein). An intercreditor agreement (“ABL/Bond Intercreditor Agreement”), dated as of May 29, 2013,
among us, the Guarantors, SunTrust Bank, as ABL Collateral agent, and the Trustee, as Notes Collateral agent, will govern all
arrangements in respect of the priority of the security interest in the ABL Collateral and the Notes Collateral.

“ABL Collateral” includes substantially all presently owned and after-acquired accounts receivable, inventory, rights of an
unpaid vendor with respect to inventory, deposit accounts, investment property, cash and cash equivalents, and instruments and chattel
paper and general intangibles, books and records and documents related to and proceeds of each of the foregoing. “Notes Collateral”
includes substantially all collateral which is not ABL Collateral.

The Indenture contains certain restrictive covenants, which, among other things, relate to the payment of dividends, incurrence

of indebtedness, repurchase of common stock, distributions, asset sales and investments. At any time we can redeem some or all of the
2021 notes at a redemption price equal to par plus a specified premium that declines to par by 2019. In the event of a change of
control, we may be required to offer to purchase the 2021 notes at a purchase price equal to 101% of the principal, plus accrued and
unpaid interest.

ProBuild Acquisition Financing

As described in Note 3, we acquired all of the operating affiliates of ProBuild on July 31, 2015 through the purchase of all

issued and outstanding equity interests of ProBuild for $1.63 billion in cash, subject to certain adjustments. The purchase price was
funded with the net cash proceeds from (i) the sale of $700.0 million in aggregate principal amount of 10.75% senior unsecured notes
due 2023 (the “2023 notes”), (ii) entry into a $600.0 million term loan credit agreement (the “2015 term loan”) provided by a

syndicate of financial institutions led by Deutsche Bank AG, New York Branch, as administrative and collateral agent, (iii) a $295.0
million draw on an amended and restated $800.0 million senior secured revolving credit facility (the “2015 facility”) provided by a
syndicate of financial institutions led by SunTrust Bank as administrative and collateral agent, and (iv) a public offering of 9.2 million
new shares of our common stock at an offering price of $12.80 per share (the “equity offering”).

In connection with the financing transactions described above, we incurred approximately $65.0 million of various third-party
fees and expenses. Of these costs, $18.1 million were allocated to the 2023 notes, $16.0 million were allocated to the 2015 term loan,
$11.2 million were allocated to the 2015 facility and $6.5 million were allocated to the equity offering. The costs allocated to the
2023 notes and the 2015 term loan have been recorded as reductions to long-term debt and will be amortized over their respective
terms using the effective interest method. The costs allocated to the 2015 facility have been recorded as other assets and will be
amortized over its term on a straight-line basis. The costs allocated to the equity offering have been recorded as a reduction to
additional paid-in capital. In addition, $13.2 million in costs relate to commitment fees paid for bridge and backstop financing
facilities entered into in connection with these financing transactions, neither of which was utilized. As such, these fees were recorded
as interest expense in the third quarter of 2015. At the closing of these transactions, there were approximately $3.0 million in
unamortized debt issuance costs associated with the 2013 facility, of which, approximately $0.9 million were recorded as interest
expense in the third quarter of 2015. The remaining $2.1 million in unamortized costs associated with the 2013 facility are being
amortized over the term of the 2015 facility.

Senior Unsecured Notes due 2023

As of December 31, 2015, we have $700.0 million outstanding in aggregate principal amount of the 2023 notes that mature on

August 15, 2023. The 2023 notes were sold in a private offering at an issue price equal to 100% of their face value. Interest accrues on
the 2023 notes at a rate of 10.75% per annum and is payable semi-annually on March 1 and September 1 of each year, commencing on
March 1, 2016.

The terms of the notes are governed by an indenture and a supplemental indenture, each dated as of July 31, 2015, among the

Company, the guarantors named therein and Wilmington Trust, National Association, as trustee (the “trustee”). Pursuant to the
indenture and supplemental indenture, the company’s significant operating subsidiaries, including ProBuild and certain of its
subsidiaries, agreed to serve as guarantors of the 2023 notes. The 2023 notes are the Company’s senior unsecured obligations and will
rank equally with all of its existing and future senior unsecured debt and will be senior to all of its existing and future subordinated
debt.

The indenture contains certain restrictive covenants, which among other things, limit the ability of the Company to incur
additional debt, issue preferred stock, create liens, pay dividends, make certain investments, sell certain assets, enter into certain types
of transactions with affiliates, and effect mergers and consolidations. At any time prior to August 15, 2018, the Company may redeem
the 2023 notes in whole or in part at a redemption price equal to 100% of the principal amount of the 2023 notes plus a premium as
specified in the indenture. At any time on or after August 15, 2018, the Company may redeem the 2023 notes at the redemption prices
set forth in the indenture plus accrued and unpaid interest. In addition, the Company may redeem up to 40% of the aggregate principal
amount of the 2023 notes with the net cash proceeds of one or more equity offerings, as described in the indenture, at a price equal to
110.75% of the principal amount thereof, plus accrued and unpaid interest. In the event of a change in control, we may be required to
repurchase all or part of the 2023 notes at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest.

2015 Term Loan Credit Agreement

As of December 31, 2015, we have $598.6 million outstanding under the 2015 term loan, which matures on July 31, 2022. The
2015 term loan, which was issued at 99%, bears interest, at our option, at either a eurodollar rate or a base rate, plus, in each case an
applicable margin. The margin will be 5.0% per annum in the case of eurodollar rate loans and 4.0% per annum in the case of base
rate loans. The 2015 term loan has mandatory principal repayments of $1.375 million which are payable in March, June, September,
and December of each year provided that each such payment is subject to reduction as a result of certain prepayments of the loans in
accordance with the loan documentation. We repaid $1.375 million during the year ended December 31, 2015. The weighted average
interest rate of the term loan was 6.0% during the year ended December 31, 2015.

2015 Senior Secured Revolving Credit Facility

The 2015 facility provides for an $800.0 million revolving credit line to be used for working capital and general corporate

purposes. The available borrowing capacity, or borrowing base, is derived from a percentage of the Company’s eligible receivables
and inventory, as defined by the agreement, subject to certain reserves. As of December 31, 2015, the net borrowing availability under
the 2015 facility is $618.7 million after being reduced by outstanding letters of credit of $79.1 million and $60.0 million of borrowings
currently outstanding. During the year ended December 31, 2015, we borrowed $295.0 million and repaid $235.0 million at a
weighted average interest rate of 1.8%. The 2015 facility matures on July 31, 2020.

Borrowings under the 2015 facility bear interest, at our option, at either a eurodollar rate or a base rate, plus, in each case an
applicable margin. The applicable margin ranges from 1.25% to 1.75% per annum in the case of eurodollar rate loans and 0.25% to
0.75% per annum in the case of base rate loans. The margin in either case is based on a measure of availability under the 2015 facility.
A variable commitment fee, currently 0.375% per annum, is charged on the unused amount of the revolver based on quarterly average
loan utilization. Letters of credit under the 2015 facility are assessed at a rate equal to the applicable eurodollar margin, currently
1.5%, as well as a fronting fee at a rate of 0.125% per annum. These fees are payable quarterly in arrears at the end of March, June,
September, and December.

All obligations under the 2015 term loan and 2015 facility will be guaranteed jointly and severally by the Company and all other

subsidiaries that guarantee the 2021 notes. All obligations and the guarantees of those obligations will be secured by substantially all
of the assets of the Company and the guarantors subject to certain exceptions and permitted liens, including (i) with respect to the
2015 term loan, a first-priority security interest in such assets that constitute Notes Collateral (as defined below) and a second priority
security interest in such assets that constitute ABL Collateral (as defined below), and (ii) with respect to the 2015 facility, a first-
priority security interest in such assets that constitute ABL Collateral and a second-priority security interest in such assets that
constitute Notes Collateral.

“ABL Collateral” includes substantially all presently owned and after-acquired accounts receivable, inventory, rights of unpaid

vendors with respect to inventory, deposit accounts, commodity accounts, securities accounts and lock boxes, investment property,
cash and cash equivalents, and general intangibles, books and records, supporting obligations and documents and related letters of
credit, commercial tort claims or other claims related to and proceeds of each of the foregoing. “Notes Collateral” includes all
collateral which is not ABL collateral.

The 2015 term loan and the 2015 facility contain restrictive covenants which, among other things, limit the Company’s ability to

incur additional indebtedness, incur liens, engage in mergers or other fundamental changes, sell certain assets, pay dividends, make
acquisitions or investments, prepay certain indebtedness, change the nature of our business, and engage in certain transactions with
affiliates, respectively. In addition, the 2015 facility also contains a financial covenant requiring the satisfaction of a minimum fixed
charge ratio of 1.00 to 1.00 in the event that the Company does not meet a minimum measure of availability, currently the larger of
$80.0 million or 10% of the maximum borrowing amount under the 2015 facility.

As of December 31, 2015, we were not in violation of any covenants or restrictions imposed by any of our debt agreements.

Future maturities of long-term debt as of December 31, 2015 were as follows (in thousands):

Year ending December 31,
2016
2017
2018
2019
2020
Thereafter

5,500
5,500
5,500
5,500
65,500
1,621,125

Total long-term debt (including current maturities)

1,708,625

Warrants

As discussed above, the 2011 term loan included detachable warrants that allowed for the purchase of up to 1.6 million shares of

our common stock at a price of $2.50 per share. In April, 2015 the remaining 0.7 million of outstanding, detachable warrants were
exercised. The warrants were considered to be derivative financial instruments and were classified as liabilities. As such, they were
measured at fair value on a recurring basis. Our share price and, to a lesser extent, the historical volatility of our common stock were
the primary factors in the changes to our fair value measurements related to the warrants. All other inputs being equal, an increase or
decrease in our share price or volatility resulted in an increase or decrease in the fair value of our warrants and an increase or decrease
in interest expense.

Non-cash fair value adjustments related to our derivative financial instrument recorded as interest expense in the consolidated

statements of operations and comprehensive income (loss) for the years ended December 31 (in thousands) were as follows:

Derivative Not Designated
as Hedging Instruments
Warrants

Location of Gain (Loss) Recognized in Income

Interest expense, net

Amount of Gain (Loss)
Recognized in Income
2014

2013

456

(1,502 )

2015
(4,563)

We used the income approach to value our warrants by using the Black-Scholes option-pricing model. Using this model, the
risk-free interest rate was based on the U.S. Treasury yield curve in effect on the valuation date. The expected life was based on the
period of time until the expiration of the warrants. Expected volatility was based on the historical volatility of our common stock over
the most recent period equal to the expected life of the warrants. The expected dividend yield was based on our history of not paying
regular dividends in the past.

These techniques incorporated Level 1 and Level 2 inputs. Significant inputs to the derivative valuation for the warrants were

observable in the active markets and are classified as Level 2 in the hierarchy.

The following fair value hierarchy table presents information about our financial instrument measured at fair value on a

recurring basis using significant other observable inputs (Level 2) (in thousands):

Warrants (included in Other long-term liabilities)

— $

3,375 $

Carrying Value
As of December 31,
2015

Fair Value
Measurement as of
December 31, 2015

Carrying Value
As of December 31,
2014

Fair Value
Measurement as of
December 31, 2014
3,375

Lease Finance Obligations

As a result of the ProBuild acquisition, the Company is party to 171 individual property lease agreements with a single lessor as

of December 31, 2015. These lease agreements have initial terms ranging from nine to fifteen years (expiring from 2016 through
2021) and renewal options in five-year increments providing for up to approximately 30-year remaining total lease terms. A related
agreement between the lessor and the Company gives the Company the right to acquire a limited number of the leased facilities at fair
market value. As a result of these purchase rights, the Company treats all of the properties that it leases from this lessor as a financing
arrangement. The Company is also party to certain additional agreements with the same lessor which commit the Company to perform
certain repair and maintenance obligations under the leases in a specified manner and timeframe.

In 2006, we completed construction on a new multi-purpose facility. Based on the evaluation of the construction project in

accordance with the Leases topic of the Codification, we were deemed the owner of the facility during the construction period.
Effectively, a sale and leaseback of the facility occurred when construction was completed and the lease term began. This transaction
did not qualify for sale-leaseback accounting. As a result the Company treats the lease of this facility as a financing arrangement.

As of December 31, 2015, lease finance obligations consist of $280.9 million, with cash payments of $9.7 million for the year

ended December 31, 2015. These lease finance obligations are included on the consolidated balance sheet as a component of long-
term debt and lease obligations. The related assets are recorded as components of property, plant, and equipment on the consolidated
balance sheet.

Future minimum commitments for lease finance obligations as of December 31, 2015 were as follows (in thousands):

Year ending December 31,
2016
2017
2018
2019
2020
Thereafter

Total

21,814
20,908
20,847
20,847
20,766
301,065

406,247

9. Capital Lease Obligations

The Company leases certain property and equipment under capital leases expiring through 2020. These leases require monthly
payments of principal and interest, imputed at various interest rates. Future minimum lease payments as of December 31, 2015 are as
follows (in thousands):

Years ending December 31,
2016
2017
2018
2019
2020
Thereafter

Total minimum lease payments

Less: amount representing interest

Present value of net minimum payments

Less: current portion

Long-term capital lease obligations, net of current portion

7,180
624
296
296
167
—
8,563
(404 )
8,159
(6,876 )
1,283

10. Employee Stock-Based Compensation

2014 Incentive Plan

Under our 2014 Incentive Plan (“2014 Plan”), the Company is authorized to grant awards in the form of incentive stock options,

non-qualified stock options, restricted stock shares, restricted stock units, other common stock-based awards and cash-based awards.
The maximum number of common shares reserved for the grant of awards under the 2014 Plan is 5.0 million, subject to adjustment as
provided by the 2014 Plan. All 5.0 million shares under the Plan may be made subject to options, stock appreciation rights (“SARs”),
or stock-based awards. Stock options and SARs granted under the 2014 Plan may not have a term exceeding 10 years from the date of
grant. The 2014 Plan also provides that all awards will become fully vested and/or exercisable upon a change in control (as defined in
the 2014 Plan) if those awards (i) are not assumed or equitably substituted by the surviving entity or (ii) have been assumed or
equitably substituted by the surviving entity, and the grantee’s employment is terminated under certain circumstances. Other specific
terms for awards granted under the 2014 Plan shall be determined by our Compensation Committee (or the board of directors if so
determined by the board of directors). Awards granted under the 2014 Plan generally vest ratably over a three to four year period. As
of December 31, 2015, 3.5 million shares were available for issuance under the 2014 Plan.

2007 Incentive Plan

Under our 2007 Incentive Plan (“2007 Plan”), the Company is authorized to grant awards in the form of incentive stock

options, non-qualified stock options, restricted stock, other common stock-based awards and cash-based awards. In January
2010, our shareholders approved an amendment to our 2007 Plan which increased the number of shares of common stock that
may be granted pursuant to awards under the 2007 Plan from 2.5 million shares to 7.0 million shares. The maximum number of
common shares reserved for the grant of awards under the 2007 Plan is 7.0 million, subject to adjustment as provided by the
2007 Plan. No more than 7.0 million shares may be made subject to options or SARs granted under the 2007 Plan, and no more
than 3.5 million shares may be made subject to stock-based awards other than options or SARs. Stock options and SARs granted
under the 2007 Plan may not have a term exceeding 10 years from the date of grant. The 2007 Plan also provides that all awards
will become fully vested and/or exercisable upon a change in control (as defined in the 2007 Plan). Other specific terms for
awards granted under the 2007 Plan shall be determined by our Compensation Committee (or the board of directors if so
determined by the board of directors). Historically, awards granted under the 2007 Plan generally vest ratably over a three to
four-year period. As of December 31, 2015, 56,000 shares were available for issuance under the 2007 Plan, 56,000 of which
may be made subject to stock-based awards other than options or SARs.

2005 Equity Incentive Plan

Under our 2005 Equity Incentive Plan (“2005 Plan”), we were authorized to grant stock-based awards in the form of incentive
stock options, non-qualified stock options, restricted stock and other common stock-based awards. Stock options and SARs granted
under the 2005 Plan could not have a term exceeding 10 years from the date of grant. The 2005 Plan also provided that all awards
become fully vested and/or exercisable upon a change in control (as defined in the 2005 Plan). Historically, awards granted under the
2005 Plan generally vest ratably over a three-year period. As of June 27, 2015, no further grants will be made under the 2005 Plan.

1998 Stock Incentive Plan

Under the Builders FirstSource, Inc. 1998 Stock Incentive Plan (“1998 Plan”), we were authorized to issue shares of common

stock pursuant to awards granted in various forms, including incentive stock options, non-qualified stock options and other stock-
based awards. The 1998 Plan also authorized the sale of common stock on terms determined by our board of directors. Stock options
granted under the 1998 Plan generally cliff vest after a period of seven to nine years with certain option grants subject to acceleration
if certain financial targets were met. The expiration date is generally 10 years subsequent to date of issuance. As of January 1, 2005,
no further grants will be made under the 1998 Plan.

The following table summarizes our stock option activity:

Outstanding at December 31, 2014
Granted
Exercised
Forfeited
Outstanding at December 31, 2015
Exercisable at December 31, 2015

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Years

Aggregate
Intrinsic Value
(In thousands)

5.09
6.35
4.84
6.92
5.19
4.19

5.8 $
4.8 $

29,417
23,922

Options
(In thousands)
6,246 $
142 $
(1,388 ) $
(2 ) $
4,998 $
3,472 $

The outstanding options at December 31, 2015 include options to purchase 141,000 shares under the 2014 plan, 3,164,000
shares granted under the 2007 Plan, 927,000 shares granted under the 2005 Plan and 766,000 shares granted under the 1998 Plan. As
of December 31, 2015, options to purchase 2,190,000 shares under the 2007 Plan, 516,000 shares under the 2005 Plan and 766,000
shares under the 1998 Plan awards were exercisable. There were no options granted under the 2014 Plan which were exercisable as of
December 31, 2015. The weighted average grant date fair value of options granted during the years ended December 31, 2015 and
2014 were $4.20 and $5.71, respectively. No option awards were granted during 2013. The total intrinsic value of options exercised
during the years ended December 31, 2015, 2014, and 2013 were $12.8 million $2.0 million and $1.8 million, respectively. We
realized no tax benefits for stock options exercised during the years ended December 31, 2015, 2014 and 2013.

Outstanding and exercisable stock options at December 31, 2015 were as follows (shares in thousands):

Range of Exercise Prices
$3.15
$3.19 - $3.72
$6.35 - $6.70
$7.15- $7.67
$3.15 - $7.67

Outstanding
Weighted
Average
Exercise
Price

Exercisable

Weighted
Average
Remaining
Years

Weighted
Average
Exercise
Price

766 $
1,877 $
262 $
2,093 $
4,998 $

3.15
3.20
6.51
7.57
5.19

6.8
4.1
5.9
7.0
5.8

766 $
1,850 $
121 $
735 $
3,472 $

3.15
3.19
6.70
7.38
4.19

The following table summarizes restricted stock activity for the year ended December 31, 2015 (shares in thousands):

Nonvested at December 31, 2014

Granted
Vested
Forfeited

Nonvested at December 31, 2015

Weighted
Average Grant
Date Fair Value

27 $
— $
(14 ) $
— $
13 $

3.72
—
3.72
—
3.72

The outstanding restricted stock units (“RSUs”) at December 31, 2015 include 1,115,000 units granted under the 2014 Plan and

401,000 units granted under the 2007 Plan. The weighted average grant date fair value of RSUs granted during the years ended
December 31, 2015 and 2014 were $7.26 and $7.48, respectively. No RSUs were granted during 2013.

The following table summarizes restricted stock unit activity for the year ended December 31, 2015 (shares in thousands):

Nonvested at December 31, 2014

Granted
Vested
Forfeited

Nonvested at December 31, 2015

Weighted
Average Grant
Date Fair Value

1,855 $
159 $
(495 ) $
(3 ) $
1,516 $

7.48
7.26
7.38
6.85
7.49

Our results of operations include stock compensation expense of $6.9 million ($6.9 million net of taxes), $6.2 million ($6.2
million net of taxes) and $4.2 million ($4.2 million net of taxes) for the years ended December 31, 2015, 2014 and 2013, respectively.
The total fair value of options vested during the years ended December 31, 2015, 2014, and 2013 were $2.7 million, $3.0 million and
$3.0 million, respectively. The total fair value of restricted stock vested during the years ended December 31, 2015, 2014 and 2013
were $49,600, $2.0 million and $2.1 million, respectively. The total fair value of RSUs vested during the year ended December 31,
2015 was $3.7 million. There were no RSUs which vested in 2014 or 2013.

As of December 31, 2015, there was $13.3 million of total unrecognized compensation cost related to non-vested share-based

compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted-average period of 2.1
years.

11. Facility Closure Costs

In 2015, we closed certain facilities, primarily related to location consolidation initiatives following the ProBuild acquisition.

During 2015 we recognized $2.8 million in expense primarily related to the minimum future lease obligations over the remaining lease
terms on facility closures, net of estimated sub-rental income. In connection with this plan we also severed employees and recognized
employee severance costs of $1.4 million. We recognized this expense in selling, general, and administrative expense in the
accompanying consolidated statement of operations and comprehensive income (loss).

In 2014 and 2013, we recognized $0.5 million and $0.1 million in expense, respectively, related to the minimum future lease

obligations on facility closures, net of sub-rental income, as well as revisions of sub-rental income estimates on previously closed
facilities. We recognized this expense in selling, general and administrative expense in the accompanying consolidated statement of
operations and comprehensive income (loss).

An analysis of our facility closure reserves for the periods reflected is as follows:

Facility and other exit costs, net of

estimated sub-lease rental income $ 1,700 $

515 $ (1,068 ) $ 1,147 $ 2,836 $

12,494 $ (3,942 ) $ 12,535

2013

Additions Payments

2014

Additions

in Acquisition Payments

2015

Assumed

(In thousands)

Employee severance and termination

benefits

Total facility closure reserve

—
$ 1,700 $

—

— —
515 $ (1,068 ) $ 1,147 $ 4,270 $

1,434

—

253
12,494 $ (5,123 ) $ 12,788

(1,181 )

The Company assumed $12.5 million of exit cost reserves as part of the ProBuild acquisition during 2015. The facility and other
exit cost reserves of $12.8 million at December 31, 2015, of which $8.8 million is recorded as other long-term liabilities, are primarily
related to future minimum lease payments on vacated facilities.

As plans to close facilities are developed and executed, assets that can be used at other facilities are transferred and assets to be
abandoned or sold are written down to their net realizable value, including any long-lived assets. In situations where multiple facilities
serve the same market we may temporarily close, or idle, facilities with plans to reopen these facilities once demand returns to the
market. In these situations, finite lived assets continue to be depreciated and assessed for impairment. Should conditions in our
markets worsen, or recovery take significantly longer than forecasted, we may temporarily idle or permanently close additional
facilities, at which time we may incur additional facility closure costs or asset impairment charges. Future non-cash impairment
charges would have the effect of decreasing our earnings or increasing our losses in such period, but would not impact our current
outstanding debt obligations or compliance with covenants contained in the related debt agreements. We continuously monitor

economic conditions in all of our markets and changes in market conditions may warrant future closings or idling of facilities. In
addition, as we continue the integration of ProBuild we may close or idle other facilities.

12. Income Taxes

The components of income tax expense (benefit) included in continuing operations were as follows for the years ended

December 31:

Current:

Federal
State

Deferred:

Federal
State

Income tax expense

2015

2014
(In thousands)

2013

— $
1,100
1,100

2,530
757
3,287
4,387 $

— $
587
587

457
67
524
1,111 $

(594 )
446
(148 )

827
90
917
769

Temporary differences, which give rise to deferred tax assets and liabilities, were as follows as of December 31:

Deferred tax assets related to:
Accrued expenses
Insurance reserves
Facility closure reserves
Stock-based compensation expense
Accounts receivable
Inventories
Operating loss and credit carryforwards
Goodwill and other intangible assets
Property, plant and equipment
Other

Valuation allowance

Total deferred tax assets

Deferred tax liabilities related to:
Prepaid expenses
Goodwill and other intangible assets
Property, plant and equipment
Total deferred tax liabilities

Net deferred tax liability

2015

2014

(In thousands)

6,786 $
7,156
429
7,284
1,358
8,200
110,425
9,176
—
4,494
155,308
(136,548 )
18,760

(6,344 )
(11,502 )
(10,381 )
(28,227 )
(9,467 ) $

1,764
4,461
1,128
8,066
658
6,394
106,593
1,999
5,931
512
137,506
(133,183 )
4,323

(2,223 )
(8,281 )

—

(10,504 )
(6,181 )

A reconciliation of the statutory federal income tax rate to our effective rate for continuing operations is provided below for the

years ended December 31:

Statutory federal income tax rate
State income taxes, net of federal income tax
Valuation allowance
Permanent difference – 162(m) limitation
Permanent difference – Warrant mark to market
Permanent difference – Other
Other

2015

2014

2013

35.0 %

8.3
(52.1 )
(5.4 )
(8.6 )
(0.9 )
0.1
(23.6 )%

35.0 %

5.2
(36.5 )
0.7
(0.8 )
2.0
—
5.6 %

35.0 %
0.1
(36.9 )
—
(1.3 )
—
1.2
(1.9 )%

We have $414.6 million of state operating loss carry-forwards, which includes $2.6 million of state tax credit carry-forwards
expiring at various dates through 2035. We also have $281.2 million of federal net operating loss carry-forwards that will expire at
various dates through 2035. The federal and state operating loss carry-forwards include approximately $15.9 million of gross windfall
tax benefits from stock option exercises that have not been recorded as of December 31, 2015. These deferred tax assets will be
recorded as an increase to additional paid in capital when the related tax benefits are realized.

Section 382 of the Internal Revenue Code imposes annual limitations on the utilization of net operating loss (“NOL”)

carryforwards, other tax carryforwards, and certain built-in losses upon an ownership change as defined under that section. In general
terms, an ownership change may result from transactions that increase the aggregate ownership of certain stockholders in the
Company’s stock by more than 50 percentage points over a three year testing period (“Section 382 Ownership Change”). If the
Company were to experience a Section 382 Ownership Change, an annual limitation would be imposed on certain of the Company’s
tax attributes, including NOL and capital loss carryforwards, and certain other losses, credits, deductions or tax basis.

We evaluate our deferred tax assets on a quarterly basis to determine whether a valuation allowance is required. In accordance
with the Income Taxes topic of the Codification we assess whether it is more likely than not that some or all of our deferred tax assets
will not be realized. Significant judgment is required in estimating valuation allowances for deferred tax assets. The realization of a
deferred tax asset ultimately depends on the existence of sufficient taxable income in the applicable carryback or carryforward
periods. We consider nature, frequency, and severity of current and cumulative losses, among other matters, the reversal of existing
deferred tax liabilities, historical and forecasted taxable income, and tax planning strategies in our assessment. Changes in our
estimates of future taxable income and tax planning strategies will affect our estimate of the realization of the tax benefits of these tax
carryforwards. To the extent we generate sufficient taxable income in the future to fully utilize the tax benefits of the net tax deferred
assets on which a valuation allowance was recorded, our effective tax rate may decrease as the valuation allowance is reversed.

Poor housing market conditions have contributed to our cumulative loss position for the past several years. While we generated

The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income
during the carryforward period are reduced or increased, or if objective negative evidence in the form of cumulative losses is no longer
present and additional weight may be given to subjective evidence such as our projections for growth. We currently estimate that we
will likely transition into a three year cumulative income position, including an evaluation of ProBuild’s historical results, on a rolling
three year period at some time during the year ending December 31, 2016. However, there continues to be uncertainty around housing
market projections and without continued improvement in housing activity, we may not reverse our cumulative loss position. Simply
coming out of a cumulative loss position is not viewed as a bright line and may not be considered sufficient positive evidence to
reverse some or all of the valuation allowance if there is other negative evidence. In upcoming quarters, we will closely monitor the
positive and negative evidence surrounding our ability to realize our deferred tax assets.

Accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes

of these future results could have a material impact on our consolidated results of operations or financial position.

The following table shows the changes in our valuation allowance:

Balance at January 1,
Additions charged to expense:

Continuing operations
Discontinued operations

Reductions credited to expense:
Continuing operations
Discontinued operations
Deductions
Balance at December 31,

2015

2014
(In thousands)

2013

133,183 $

143,682 $

127,700

9,679
—

—
131

15,878
178

—
(55 )
(6,259 )
136,548 $

(7,178 )
—
(3,452 )
133,183 $

—
—
(74 )
143,682

We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. We accrued

no significant interest and penalties in 2015, 2014 or 2013. We had a total of $0.3 million and $0.3 million accrued for interest and
penalties for our uncertain tax positions as of December 31, 2015 and 2014, respectively.

The following table shows the changes in the amount of our uncertain tax positions (exclusive of the effect of interest and

penalties):

Balance at January 1,
Tax positions taken in prior periods:

Gross increases
Gross decreases

Tax positions taken in current period:

Gross increases

Settlements with taxing authorities
Lapse of applicable statute of limitations
Balance at December 31,

2015

2014
(In thousands)

2013

378 $

950 $

2,080

—
—

12
—
(182 )
208 $

2
—

13
—
(587 )
378 $

—
—

11
—
(1,141 )
950

The balance for uncertain tax positions was $0.2 million as of December 31, 2015 excluding penalties and interest. If this

balance were recognized, the tax provision would decrease by $0.1 million excluding the impact to the valuation allowance.

We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. Based on completed

examinations and the expiration of statutes of limitations, we have concluded all U.S. federal income tax matters for years through
2011. We report in 41 states with various years open to examination.

13. Employee Benefit Plans

As a result of the ProBuild acquisition we maintain two active defined contribution 401(k) plans. Our employees are eligible to

participate in the plans subject to certain employment eligibility provisions. Participants can contribute up to 15% of their annual
compensation, subject to federally mandated maximums. Participants are immediately vested in their own contributions. We match a
certain percentage of the contributions made by participating employees, subject to IRS limitations. Our matching contributions are
subject to a pro-rata five-year vesting schedule. We recognized expense of $6.5 million, $0.4 million and $0.4 million in 2015, 2014
and 2013, respectively, for contributions to the plan.

Through the ProBuild acquisition, the Company acquired a defined benefit plan, the ProBuild Retirement Plan, which was

terminated as of January 30, 2015. The Company has made all remaining plan benefit distributions and the plan has been fully
terminated and settled as of December 31, 2015.

The Company contributes to multiple collectively bargained union retirement plans including multiemployer plans. The
Company does not administer the multiemployer plans, and contributions are determined in accordance with the provisions of
negotiated labor contracts. The risks of participating in multiemployer plans are different from single-employer plans. Assets
contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating
employers. If a participating employer stops contributing to a multiemployer plan, the unfunded obligations of that multiemployer

plan may be borne by the remaining participating employers. If the Company chooses to stop participating in a multiemployer plan,
the Company may be required to pay that plan an amount (“withdrawal liability”) based on the plan’s formula and the underfunded
status of the plan attributable to the Company. Contributions to the plans for the period ended December 31, 2015 were not significant.

14. Commitments and Contingencies

We lease certain land, buildings and equipment used in operations. These leases are generally accounted for as operating leases

with initial terms ranging from one to 20 years and they generally contain renewal options. Certain operating leases are subject to
contingent rentals based on various measures, primarily consumer price index increases. We also lease certain properties from related
parties, including current employees and non-affiliate stockholders. Total rent expense under operating leases was approximately
$43.6 million, $25.4 million and $20.5 million for the years ended December 31, 2015, 2014, and 2013, respectively.

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. The guarantees under these leases for the residual values of equipment at
the end of the respective operating lease periods approximated $3.2 million as of December 31, 2015. Based upon the expectation that
none of these leased assets will have a residual value at the end of the lease term that is materially less than the value specified in the
related operating lease agreement or that we will purchase the equipment at the end of the lease term, we do not believe it is probable
that we will be required to fund any amounts under the terms of these guarantee arrangements. Accordingly, no accruals have been
recognized for these guarantees.

Future minimum commitments for noncancelable operating leases with initial or remaining lease terms in excess of one year are

as follows:

Year ending December 31,
2016
2017
2018
2019
2020
Thereafter

Related Party

Total*

(In thousands)

628 $
628
161
140
144
557
2,258 $

59,680
51,708
41,771
29,483
16,546
45,174
244,362

Includes related party future minimum commitments for noncancelable operating leases.

As of December 31, 2015, we had outstanding letters of credit totaling $79.1 million under our 2015 facility that principally

support our self insurance programs.

We are a party to various legal proceedings in the ordinary course of business. Although the ultimate disposition of these
proceedings cannot be predicted with certainty, management believes the outcome of any claim that is 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 costs would not be material to our results of operations or
liquidity for a particular period.

15. Segment and Product Information

We offer an integrated solution to our customers providing manufacturing, supply, and installation of a full range of structural
and related building products. We provide a wide variety of building products and services directly to homebuilder customers. We
manufacture floor trusses, roof trusses, wall panels, stairs, millwork, windows, and doors. We also provide a full range of construction
services. These product and service offerings are distributed across 399 locations operating in 40 states across the United States, which
have been reorganized into nine geographical regions following the ProBuild acquisition. Centralized financial and operational
oversight, including resource allocation and assessment of performance on an income (loss) from continuing operations before income
taxes basis, is performed by our CEO, whom we have determined to be our chief operating decision maker (“CODM”).

As a result of the reorganization following the ProBuild acquisition, the Company has nine operating segments aligned with its

nine geographical regions (Regions 1 through 9). While all of our operating segments have similar nature of products, distribution
methods and customers, certain of our operating segments have been aggregated due to also containing similar economic
characteristics, resulting in the following composition of reportable segments:

•

Regions 1 and 2 have been aggregated to form the “Northeast” reportable segment

Regions 3 and 5 have been aggregated to form the “Southeast” reportable segment

Regions 4 and 6 have been aggregated to form the “South” reportable segment

Region 7, 8 and 9 have been aggregated to form the “West” reportable segment

In addition to our reportable segments, our consolidated results include corporate overhead, other various operating activities

that are not internally allocated to a geographical region nor separately reported to the CODM, and certain reconciling items primarily
related to allocations of corporate overhead and rent expense, which have collectively been presented as “All Other”. The accounting
policies of the segments are consistent with those described in Note 2, except for noted reconciling items.

The following tables present Net sales, Income (loss) from continuing operations before income taxes and certain other
measures for the reportable segments, reconciled to consolidated total continuing operations, for the years ended December, 31, (in
thousands):

Reportable segments
Northeast
Southeast
South
West

Total reportable segments

All other

Total consolidated

Reportable segments
Northeast
Southeast
South
West

Total reportable segments

All other

Total consolidated

2015

Net Sales

Depreciation &
Amortization

Interest

Income (loss)
from continuing
operations
before income
taxes

630,486 $
917,022
1,098,359
789,275
3,435,142
129,283
3,564,425 $

6,126 $
6,200
13,633
10,111
36,070
22,210
58,280 $

2014

7,531 $

14,598
13,272
6,217
41,618
67,581
109,199 $

26,907
13,703
39,533
31,177
111,320
(129,902 )
(18,582 )

Net Sales

Depreciation &
Amortization

Interest

Income (loss)
from continuing
operations
before income
taxes

229,998 $
672,059
574,831
—
1,476,888
127,208
1,604,096 $

1,068 $
2,743
2,963
—
6,774
2,745
9,519 $

3,634 $

11,925
7,761
—
23,320
7,029
30,349 $

3,464
5,465
13,832
—
22,761
(3,092 )
19,669

Reportable segments

Northeast
Southeast
South
West

Total reportable segments

All other

Total consolidated

2013

Net Sales

Depreciation &
Amortization

Interest

Income (loss)
from continuing
operations
before income
taxes

239,860 $
649,654
492,344
—
1,381,858
108,034
1,489,892 $

1,313 $
3,356
1,991
—
6,660
2,645
9,305 $

3,813 $

11,214
7,247
—
22,274
67,364
89,638 $

5,715
9,199
10,061
—
24,975
(66,571 )
(41,596 )

Asset information by segment is not reported internally or otherwise reviewed by the CODM nor does the company earn

revenues or have long-lived assets located in foreign countries. The Company’s net sales by product category for the periods
indicated were as follows (in thousands):

Sales by product category were as follows for the years ended December 31:

Lumber & lumber sheet goods
Windows, doors & millwork
Manufactured products
Gypsum, roofing & insulation
Siding, metal & concrete products
Other building & product services

Total sales

2015

2014
(In thousands)

2013

$ 1,151,657 $
868,835
644,391
265,867
269,236
364,439
$ 3,564,425 $

563,392 $
505,501
333,589
46,934
41,794
112,886
1,604,096 $

570,830
435,779
295,481
46,362
37,890
103,550
1,489,892

16. Related Party Transactions

An affiliate of JLL Partners, Inc. was a principal beneficial owner of PGT, Inc. until late 2013. Floyd F. Sherman, our chief
executive officer, serves on the board of directors for PGT, Inc. We purchased windows from PGT, Inc. totaling $9.3 million, $6.3
million and $5.0 million in 2015, 2014 and 2013, respectively. We had accounts payable to PGT, Inc. in the amounts of $1.1 million
and $0.8 million as of December 31, 2015 and 2014, respectively.

In 2015, 2014 and 2013, we paid approximately $1.0 million, $0.9 million and $0.8 million, respectively, in rental expense to

employees or our non-affiliate stockholders for leases of land and buildings.

17. Unaudited Quarterly Financial Data

The following tables summarize the consolidated quarterly results of operations for 2015 and 2014 (in thousands, except per

share amounts):

2015

Net sales
Gross margin
Income (loss) from continuing operations
Income (loss) from discontinued operations, net of tax
Net income (loss)
Basic net income (loss) per share

Income (loss) from continuing operations
Loss from discontinued operations
Net income (loss)

Diluted net income (loss) per share

Income (loss) from continuing operations
Loss from discontinued operations
Net income (loss)

Net sales
Gross margin
Income (loss) from continuing operations
Loss from discontinued operations, net of tax
Net income (loss)
Basic net income (loss) per share

Income (loss) from continuing operations
Loss from discontinued operations
Net income (loss)

Diluted net income (loss) per share

Income (loss) from continuing operations
Loss from discontinued operations
Net income (loss)

First Quarter
$ 370,986
83,733
(7,162 )(1)
92
(7,070 )

Second Quarter
$

Third Quarter
461,521 $ 1,276,063
110,614
324,774
3,566 (2)
10
3,576

(8,757 )(3)
—
(8,757 )

Fourth Quarter
$ 1,455,855
382,337
(10,616 )(4)
36
(10,580 )

(0.07 )(1) $
(0.00 )
(0.07 )

0.04 (2) $
(0.00 )
$
0.04

0.03 (2) $
(0.00 )
$
0.03

2014

(0.08 )(3) $
(0.00 )
(0.08 )

(0.10 )(4)
0.00
(0.10 )

Second Quarter
$

Third Quarter

Fourth Quarter
396,737
90,636

First Quarter
$ 345,909
74,915
(3,312 )(5)
(72 )
(3,384 )

(0.03 )(5) $
(0.00 )
(0.03 )

426,543 $
93,799
10,620 (6)
(11 )

10,609

0.11 (6) $
(0.00 )
$
0.11

0.09 (6) $
(0.00 )
$
0.09

434,907 $
97,647
8,739 (7)
(235 )
8,504

0.09 (7) $
(0.00 )
$
0.09

0.07 (7) $
(0.00 )
$
0.07

2,511 (8)
(90 )
2,421

0.02 (8)
(0.00 )
0.02

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

Includes acquisition costs of $5.5 million as discussed in Note 3, fair value adjustments for the warrants of $0.2 million as
discussed in Note 8 and a valuation allowance of $3.1 million as discussed in Note 12.

Includes acquisition costs of $6.4 million as discussed in Note 3, fair value adjustments for the warrants of $4.7 million as
discussed in Note 8 and a valuation allowance of $(1.3) million as discussed in Note 12.

Includes acquisition costs of $8.8 million as discussed in Note 3, financing costs of $13.2 million as discussed in Note 8 and a
valuation allowance of $1.1 million as discussed in Note 12.

Includes acquisition costs of $0.2 million as discussed in Note 3 and a valuation allowance of $6.8 million as discussed in Note
12.

Includes fair value adjustments for the warrants of $1.2 million as discussed in Note 8 and a valuation allowance of $1.0 million
as discussed in Note 12.

Includes fair value adjustments for the warrants of $(1.2) million as discussed in Note 8, and a valuation allowance of $(4.1)
million as discussed in Note 12.

Includes fair value adjustments for the warrants of $(1.3) million as discussed in Note 8, facility closure costs of $0.1 million as
discussed in Note 11, and a valuation allowance of $(3.3) million as discussed in Note 12.

Includes fair value adjustments for the warrants of $0.9 million as discussed in Note 8, facility closure costs of $0.2 million as
discussed in Note 11, and a valuation allowance of $(0.9) million as discussed in Note 12.

Earnings per share is computed independently for each of the quarters presented; therefore, the sum of the quarterly earnings per

share may not equal the annual earnings per share.

18. Subsequent Event

On February 12, 2016, we completed separate privately negotiated note exchange transactions in which $218.6 million in
aggregate principal amount of our 2023 notes was exchanged for $207.6 million in aggregate principal amount of our 2021 notes. The
2021 notes were issued under the existing indenture dated as of May 29, 2013.

On February 29, 2016, we completed additional privately negotiated note exchange transactions in which $63.8 million in
aggregate principal amount of our 2023 notes was exchanged for $60.0 million in aggregate principal amount of our 2021 notes.

Following these transactions $617.6 million in aggregate principal amount of our 2021 notes and $417.6 million in aggregate

principal amount of our 2023 notes remain outstanding.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

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, 2015, 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.

We excluded ProBuild Holdings, LLC (“ProBuild”) from our assessment of internal control over financial reporting as of
December 31, 2015 because on July 31, 2015, the Company acquired Probuild and its subsidiaries in a purchase business combination.
ProBuild’s total assets and sales represented approximately 56% and 52%, respectively, of the consolidated financial statement
amounts as of and for the year ended December 31, 2015.

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, 2015.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015, 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 quarter ended December 31, 2015, there were no changes in

our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

Item 9B. Other Information

Disclosure pursuant to Section 13(r) of the Securities Exchange Act of 1934

Pursuant to Section 13(r) of the Securities Exchange Act of 1934, we may be required to disclose in our annual and quarterly
reports to the SEC whether we or any of our “affiliates” knowingly engaged in certain activities, transactions or dealings relating to
Iran or with certain individuals or entities targeted by U.S. economic sanctions. Disclosure is generally required even where the
activities, transactions or dealings were conducted in compliance with applicable law. Because the SEC defines the term “affiliate”
broadly, it includes any entity under common “control” with us (and the term “control” is also construed broadly by the SEC).

The description of the activities below has been provided to us by Warburg Pincus LLC (“WP”), affiliates of which: (i)

beneficially own more than 10% of our outstanding common stock and are members of our board of directors and (ii) beneficially own
more than 10% of the equity interests of, and have the right to designate members of the board of directors of, each of Santander Asset
Management Investment Holdings Limited (“SAMIH”) and Endurance International Group Holdings, Inc. (“Endurance”). Each of
SAMIH and Endurance may therefore be deemed to be under common “control” with us. However, this statement is not meant to be
an admission that common control exists.

The disclosure below relates solely to activities conducted by SAMIH, Endurance and their respective affiliates. The disclosure
does not relate to any activities conducted by us or by WP and does not involve our or WP’s management. Neither we nor WP has had
any involvement in or control over the disclosed activities. Neither we nor WP has independently verified or participated in the
preparation of the disclosure. Neither we nor WP is representing as to the accuracy or completeness of the disclosure, nor do we or
WP undertake any obligation to correct or update it.

We understand that each of SAMIH’s SEC-reporting affiliates intends to disclose in its next annual or quarterly SEC report that:

(a) Santander UK plc (“Santander UK”) holds frozen savings accounts and one current account for two customers resident in the

United Kingdom (“U.K.”) who are currently designated by the United States (“U.S.”) for terrorism. The accounts held by each
customer were blocked after the customer’s designation and have remained blocked and dormant throughout 2015. Revenue generated
by Santander UK on these accounts is negligible.

(b) An Iranian national, resident in the U.K., who is currently designated by the U.S. under the Iranian Financial Sanctions
Regulations and the Weapons of Mass Destruction Proliferators Sanctions Regulations (“NPWMD”), holds a mortgage with Santander
UK that was issued prior to any such designation. No further drawdown has been made (or would be allowed) under this mortgage
although Santander UK continues to receive repayment installments. In 2015, total revenue in connection with the mortgage was
approximately £3,876 while net profits were negligible relative to the overall profits of Santander UK. Santander UK does not intend
to enter into any new relationships with this customer, and any disbursements will only be made in accordance with applicable
sanctions. The same Iranian national also holds two investment accounts with Santander ISA Managers Limited. The funds within
both accounts are invested in the same portfolio fund. The accounts have remained frozen during 2015. The investment returns are
being automatically reinvested, and no disbursements have been made to the customer. Total revenue for the Santander group in
connection with the investment accounts was approximately £188 while net profits in 2015 were negligible relative to the overall
profits of Banco Santander, S.A.

(c) During the third quarter of 2015, two additional Santander UK customers were designated. First, a U.K. national designated

by the U.S. under the Specially Designated Global Terrorist (“SDGT”) sanctions program who is on the U.S. Specially Designated
National (“SDN”) list. This customer holds a bank account which generated revenue of approximately £180 during the third and
fourth quarter of 2015. The account is blocked. Net profits in the third and fourth quarter of 2015 were negligible relative to the
overall profits of Santander. Second, a U.K. national also designated by the U.S. under the SDGT sanctions program who is on the
U.S. SDN list, held a bank account. No transactions were made in the third and fourth quarter of 2015 and the account is blocked and
in arrears.

(d) In addition, during the fourth quarter of 2015, Santander UK has identified one additional customer. A U.K. national
designated by the U.S. under the SDGT sanctions program who is on the U.S. SDN list, held a bank account which generated
negligible revenue during the fourth quarter of 2015. The account was closed during the fourth quarter of 2015. Net profits in the
fourth quarter of 2015 were negligible relative to the overall profits of Banco Santander, S.A.

We understand that Endurance intends to disclose in its next annual or quarterly SEC report that:

On December 2, 2015, Endurance terminated a subscriber account (the “Subscriber Account”) that Endurance believes to be

associated with Issam Shammout and Sky Blue Bird Aviation (“Shammout”) identified by the Office of Foreign Assets Control
(“OFAC”), as a Specially Designated National (“SDN”), on May 21, 2015, pursuant to 31 C.F.R. Part 594. The Subscriber Account
was inadvertently migrated to Endurance’s servers following its acquisition of the assets of Arvixe LLC (“Arvixe”) on October 31,
2014. Pursuant to the terms of the asset purchase agreement between Endurance and Arvixe, any customer accounts prohibited by
OFAC were expressly excluded from the acquisition. Accordingly, Endurance does not believe it took legal ownership of the
Subscriber Account, and no revenue was collected by Endurance in connection with the Subscriber Account since the date on which
Shammout was added to the SDN list. Nonetheless, upon identifying that the Subscriber Account had been migrated to its servers,
Endurance promptly suspended all services and terminated the Subscriber Account. Endurance reported the Subscriber Account to
OFAC as potentially the property of a SDN subject to blocking pursuant to Executive Order 13224. As of January 25, 2016,
Endurance has not received any correspondence from OFAC regarding this matter.

Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be
held May 25, 2016 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 controller) 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, our chief financial officer or controller; 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 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. as required by the listing standards of the NASDAQ Stock Market LLC.

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 May 25, 2016 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.

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 May 25, 2016 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 May 25, 2016 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 May 25, 2016 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

Item 15. Exhibits and Financial Statement Schedules

(a) (1) See the index to consolidated financial statements provided in Item 8 for a list of the financial statements filed as part of

this report.

(2) Financial statement schedules are omitted because they are either not applicable or not material.

(3) The following documents are filed, furnished or incorporated by reference as exhibits to this report as required by Item 601

of Regulation S-K.

Exhibit
Number

Description

2.1

3.1

3.2

4.1

4.2

4.3

4.4

4.5

10.1

10.2

10.3

Securities Purchase Agreement, dated as of April 13, 2015, by and among Builders FirstSource, Inc. and ProBuild Holdings
LLC (incorporated by reference to Exhibit 2.1 to Amendment No. 1 to the Registration Statement of the Company on Form
S-3, filed with the Securities and Exchange Commission on May 28, 2015, File Number 333-203824)

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 333-122788)

Amended and Restated By-Laws of Builders FirstSource, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s
Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 5, 2007, File Number 0-51357)

Registration Rights Agreement, dated as of January 21, 2010, among Builders FirstSource, Inc., JLL Partners Fund V, L.P.,
and Warburg Pincus Private Equity IX, L.P. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K, filed with the Securities and Exchange Commission on January 22, 2010, File Number 0-51357)

Indenture, dated as of May 29, 2013, among Builders FirstSource, Inc., the guarantors party thereto, and Wilmington Trust
Company, as trustee (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 Exchange Commission on June 3, 2013, File Number 0-51357)

Supplemental Indenture to the Indenture dated as of May 29, 2013, dated as of July 31, 2015, among the Company, the
Guaranteeing Subsidiaries (as defined therein) and Wilmington Trust, National Association, as trustee (incorporated by
reference to Exhibit 4.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed with
the Securities and Exchange Commission on August 7, 2015, File Number 0-51357)

Indenture, dated as of July 31, 2015, among the Company, the Guarantors (as defined therein), and Wilmington Trust,
National Association, as trustee (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 August 6, 2015, File Number 0-
51357)

Supplemental Indenture to the Indenture dated as of July 31, 2015, dated as of July 31, 2015, among the Company, the
Guaranteeing Subsidiaries (as defined therein) and Wilmington Trust, National Association, as trustee (incorporated by
reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange
Commission on August 6, 2015, File Number 0-51357)

Term Loan Credit Agreement, dated as of July 31, 2015, among the Company, Deutsche Bank AG, New York Branch, as
administrative agent and collateral agent, and the lenders and financial institutions party thereto (incorporated by reference
to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities Exchange Commission on August
6, 2015, File Number 0-51357)

Amended and Restated Senior Secured Revolving Credit Facility, dated as of July 31, 2015, among the Company, 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 0-51357)

ABL/Bond Intercreditor Agreement, dated as of May 29, 2013, among Builders FirstSource, Inc. and certain of its
subsidiaries, as grantors, SunTrust Bank, as ABL agent, and Wilmington Trust, National Association, as notes collateral
agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities
Exchange Commission on June 3, 2013, File Number 0-51357)

Exhibit
Number

Description

10.4

10.5

10.6

10.7

10.8

10.9

10.10+

10.11+

10.12+

10.13+

10.14+

10.15+

10.16+

10.17+

10.18+

Notes Collateral Agreement, dated as of May 29, 2013, by and among Builders FirstSource, Inc. and certain of its
subsidiaries, as grantors, and Wilmington Trust, National Association, as collateral agent (incorporated by reference to
Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Securities Exchange Commission on June 3,
2013, File Number 0-51357)

Collateral Agreement, dated as of July 31, 2015, among the Company, certain of its subsidiaries and Deutsche Bank AG,
New York Branch (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the
Securities Exchange Commission on August 6, 2015, File Number 0-51357)

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 0-51357)

Guarantee Agreement, dated as of July 31, 2015, among the Guarantors (as defined therein) and Deutsche Bank AG, New
York Branch (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed with the
Securities Exchange Commission on August 6, 2015, File Number 0-51357)

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 0-51357)

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 0-51357)

Builders FirstSource, Inc. 1998 Stock Incentive Plan, as amended, effective March 1, 2004 (incorporated by reference to
Exhibit 10.4 to Amendment No. 1 to the Registration Statement of the Company on Form S-1, filed with the Securities and
Exchange Commission on April 27, 2005, File Number 333-122788)

Amendment No. 7 to Builders FirstSource, Inc. 1998 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange
Commission on March 12, 2007, File Number 0-51357)

2004 Form of Builders FirstSource, Inc. 1998 Stock Incentive Plan Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 10.5 to Amendment No. 1 to the Registration Statement of the Company on Form S-1, filed with the
Securities and Exchange Commission on April 27, 2005, File Number 333-122788)

Builders FirstSource, Inc. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.14 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 333-122788)

2006 Form of Builders FirstSource, Inc. 2005 Equity Incentive Plan Nonqualified Stock Option Agreement (incorporated
by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange
Commission on February 17, 2006, File Number 0-51357)

2007 Form of Builders FirstSource, Inc. 2005 Equity Incentive Plan Nonqualified Stock Option Agreement for Employee
Directors (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 5, 2007, File Number 0-51357)

Builders FirstSource, Inc. 2007 Incentive Plan (incorporated by reference to Annex D of the Company’s definitive Proxy
Statement on Schedule 14A, filed with the Securities and Exchange Commission on December 15, 2009, File Number 0-
51357)

2008 Form of Builders FirstSource, Inc. 2007 Incentive Plan Nonqualified Stock Option Agreement (incorporated by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, filed
with the Securities and Exchange Commission on May 1, 2008, File Number 0-51357)

2008 Form of Builders FirstSource, Inc. 2007 Incentive Plan Restricted Stock Award Agreement (incorporated by reference
to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, filed with the
Securities and Exchange Commission on May 1, 2008, File Number 0-51357)

Exhibit
Number

Description

10.19+

10.20+

10.21+

10.22+

10.23+

10.24+

10.25+

10.26+

10.27+

10.28+

10.29+

10.30+

10.31+

10.32+

10.33+

10.34+

2010 Form of Builders FirstSource, Inc. 2007 Incentive Plan Nonqualified Stock Option Agreement for Employee
Directors (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2009, filed with the Securities and Exchange Commission on March 4, 2010, File Number 0-51357)

2014 Form of Builders FirstSource, Inc. 2007 Incentive Plan 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 June 30, 2014, filed with
the Securities and Exchange Commission on August 1, 2014, File Number 0-51357)

2014 Form of Builders FirstSource, Inc. 2007 Incentive Plan Director 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
September 30, 2014, filed with the Securities and Exchange Commission on November 5, 2014, File Number 0-51357)

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 0-51357)

2014 Form of Builders FirstSource, Inc. 2014 Incentive Plan Restricted Stock Unit Award Certificate (incorporated by
reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, filed with
the Securities and Exchange Commission on August 1, 2014, File Number 0-51357)

2015 Form of Builders FirstSource, Inc. 2014 Incentive Plan Non-Statutory Stock Option Award Certificate (incorporated
by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed
with the Securities and Exchange Commission on March 3, 2015, File Number 0-51357)

Builders FirstSource, Inc. Amended and Restated Director Compensation Policy (incorporated by reference to Exhibit
10.18 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and
Exchange Commission on February 28, 2014, File Number 0-51357)

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 333-122788)

Employment Agreement, dated September 1, 2001, between Builders FirstSource, Inc. and Floyd F. Sherman (incorporated
by reference to Exhibit 10.9 to Amendment No. 1 to the Registration Statement of the Company on Form S-1, filed with the
Securities and Exchange Commission on April 27, 2005, File Number 333-122788)

Amendment to Employment Agreement, dated June 1, 2005, between Builders FirstSource, Inc. and Floyd F. Sherman
(incorporated by reference to Exhibit 10.15 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 333-122788)

Second Amendment to Employment Agreement, dated October 29, 2008, between Builders FirstSource, Inc. and Floyd F.
Sherman (incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, filed with the Securities and Exchange Commission on March 2, 2009, File Number 0-51357)

Employment Agreement, dated February 23, 2010, between Builders FirstSource, Inc. and M. Chad Crow (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 26, 2010, File Number 0-51357)

Employment Agreement, dated January 15, 2004, between Builders FirstSource, Inc. and Morris E. Tolly (incorporated by
reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, filed
with the Securities and Exchange Commission on March 5, 2008, File Number 0-51357)

Amendment to Employment Agreement, dated October 29, 2008, between Builders FirstSource, Inc. and Morris E. Tolly
(incorporated by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, filed with the Securities and Exchange Commission on March 2, 2009, File Number 0-51357)

Employment Agreement, dated January 15, 2004, between Builders FirstSource, Inc. and Donald F. McAleenan
(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005, filed with the Securities Exchange Commission on November 2, 2005, File Number 0-51357)

Amendment to Employment Agreement, dated October 29, 2008, between Builders FirstSource, Inc. and Donald F.
McAleenan (incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008, filed with the Securities and Exchange Commission on March 2, 2009, File Number 0-51357)
81

Exhibit
Number

Description

14.1

14.2

Builders FirstSource, Inc. Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2005, filed with the Securities and Exchange
Commission on March 13, 2006, File Number 0-51357)

Builders FirstSource, Inc. Supplemental Code of Ethics (incorporated by reference to Exhibit 14.2 to the Company’s
Annual Report on Form 10-K for the year ended December 31, 2005, filed with the Securities and Exchange Commission
on March 13, 2006, File Number 0-51357)

21.1*

Subsidiaries of the Registrant

23.1*

Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm

24.1*

Power of Attorney (included as part of signature page)

31.1*

31.2*

32.1**

101*

Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by Floyd F. Sherman as Chief Executive Officer

Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by M. Chad Crow as Chief Financial Officer

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Floyd F. Sherman as Chief Executive Officer and M.
Chad Crow as Chief Financial Officer

The following financial information from Builders FirstSource, Inc.’s Form 10-K filed on March 11, 2016, formatted in
eXtensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Operations and Comprehensive
Income (Loss) for the years ended December 31, 2015, 2014 and 2013, (ii) Consolidated Balance Sheets at December 31,
2015 and 2014, (iii) Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013, (iv)
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013, and
(v) the Notes to Consolidated Financial Statements.

Filed herewith

** Builders FirstSource, Inc. is furnishing, but not filing, the written statement pursuant to Title 18 United States Code 1350, as

added by Section 906 of the Sarbanes-Oxley Act of 2002, of Floyd F. Sherman, our Chief Executive Officer, and M. Chad Crow,
our Chief Financial Officer.

Indicates a management contract or compensatory plan or arrangement

(b) A list of exhibits filed, furnished or incorporated by reference with this Form 10-K is provided above under Item 15(a)(3) of

this report. Builders FirstSource, Inc. will furnish a copy of any exhibit listed above to any stockholder without charge upon
written request to Donald F. McAleenan, Senior Vice President and General Counsel, 2001 Bryan Street, Suite 1600, Dallas,
Texas 75201.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this

report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 11, 2016

BUILDERS FIRSTSOURCE, INC.

/s/ FLOYD F. SHERMAN
Floyd F. Sherman
Chief Executive Officer
(Principal Executive Officer)

The undersigned hereby constitute and appoint Donald F. McAleenan and his substitutes our true and lawful attorneys-in-fact
with full power to execute in our name and behalf in the capacities indicated below any and all amendments to this report and to file
the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and
hereby ratify and confirm all that such attorney-in-fact or his substitutes shall lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons

on behalf of the registrant and in the capacities and on the dates indicated.

Signature

/s/ FLOYD F. SHERMAN
Floyd F. Sherman

/s/ M. CHAD CROW
M. Chad Crow

/s/ JAMI COULTER
Jami Coulter

/s/ PAUL S. LEVY
Paul S. Levy

/s/ DAVID A. BARR
David A. Barr

/s/ CLEVELAND A. CHRISTOPHE
Cleveland A. Christophe

/s/ DANIEL AGROSKIN
Daniel Agroskin

/s/ MICHAEL GRAFF
Michael Graff

/s/ ROBERT C. GRIFFIN
Robert C. Griffin

/s/ KEVIN J. KRUSE
Kevin J. Kruse

/s/ BRETT N. MILGRIM
Brett N. Milgrim

/s/ CRAIG A. STEINKE
Craig A. Steinke

Title

Chief Executive Officer and Director
(Principal Executive Officer)

Date

March 11, 2016

President, Chief Operating Officer and Chief Financial
Officer (Principal Financial Officer)

March 11, 2016

Vice President and Chief Accounting Officer
(Principal Accounting Officer)

March 11, 2016

Chairman and Director

March 11, 2016

Director