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
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-40620
BUILDERS FIRSTSOURCE, INC.
(Exact name of registrant as specified in its charter)
Delaware
52-2084569
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
6031 Connection Drive, Suite 400
Irving, Texas
75039
(Address of principal executive offices)
(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
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share
BLDR
New York Stock Exchange
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☑
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error
to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in 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, 2024, was approximately $15.8 billion based on the closing price per share
on that date of $138.41 as reported on the New York Stock Exchange.
The number of shares of the registrant’s common stock, par value $0.01, outstanding as of February 14, 2025, was 113,621,373.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its annual meeting of stockholders to be held on May 27, 2025, are incorporated by reference into Part II and Part III of this Form
10-K.
2
BUILDERS FIRSTSOURCE, INC.
Table of Contents to Form 10-K
Page
PART I
Item 1.
Business
3
Item 1A.
Risk Factors
11
Item 1B.
Unresolved Staff Comments
22
Item 1C.
Cybersecurity
22
Item 2.
Properties
23
Item 3.
Legal Proceedings
24
Item 4.
Mine Safety Disclosures
24
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
25
Item 6.
Reserved
26
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
27
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
34
Item 8.
Financial Statements and Supplementary Data
35
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
64
Item 9A.
Controls and Procedures
64
Item 9B.
Other Information
65
Item 9C.
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
65
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
66
Item 11.
Executive Compensation
66
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
67
Item 13.
Certain Relationships and Related Transactions, and Director Independence
67
Item 14.
Principal Accountant Fees and Services
67
PART IV
Item 15.
Exhibits and Financial Statement Schedules
68
Item 16
Form 10-K Summary
71
3
PART I
Item 1. Business
CAUTIONARY STATEMENT
Statements in this report and the schedules hereto that are not purely historical facts or that necessarily depend upon future events, including statements about
expected market share gains, forecasted financial performance or other statements about anticipations, beliefs, expectations, hopes, intentions or strategies for the future,
may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Readers are cautioned not to place undue
reliance on forward-looking statements. In addition, oral statements made by our directors, officers and employees to the investor and analyst communities, media
representatives and others, depending upon their nature, may also constitute forward-looking statements. All forward-looking statements are based upon currently
available information and the Company’s current assumptions, expectations and projections about future events. Forward-looking statements are by nature inherently
uncertain, and actual results or events may differ materially from the results or events described in the forward-looking statements as a result of many factors. The
Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Any
forward-looking statements involve risks and uncertainties, many of which are beyond the Company’s control or may be currently unknown to the Company, that could
cause actual events or results to differ materially from the events or results described in the forward-looking statements, including the risks or uncertainties discussed in
Item 1A of this annual report on Form 10-K and which may also be described from time to time in the other reports the Company files with the Securities and Exchange
Commission (“SEC”). Consequently, all forward-looking statements in this report are qualified by the factors, risks and uncertainties contained therein.
OVERVIEW
We are a leading supplier and manufacturer of building materials, manufactured components and construction services to professional homebuilders, sub-
contractors, remodelers and consumers. The Company operates approximately 590 locations in 43 states across the United States (“U.S.”), which are internally organized
into geographic operating divisions. Due to the similar economic characteristics, categories of products, distribution methods and customers, our operating divisions are
aggregated into one reportable segment.
We offer an integrated solution to our customers by providing manufacturing, supply and installation of a full range of structural and related building products.
Our manufactured products include our factory-built roof and floor trusses, wall panels, vinyl windows, custom millwork and trim, as well as engineered wood that we
design, cut, and assemble specifically for each home. We also assemble interior and exterior doors into pre-hung units. Additionally, we supply our customers with a
broad offering of professional grade building products not manufactured by us, such as dimensional lumber and lumber sheet goods and various window, door and
millwork lines along with other specialty building products. Our full range of construction-related services include professional installation, turn-key framing and shell
construction, spanning all of our product categories. Further, through our Paradigm subsidiary, we offer software solutions and services for the building products
industry.
Builders FirstSource, Inc. is a Delaware corporation formed in 1998 as BSL Holdings, Inc. On October 13, 1999, our name changed to Builders FirstSource, Inc.
Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “BLDR”.
OUR INDUSTRY
We operate in the professional segment (“Pro Segment”) of the U.S. residential building products supply market. Customers in the Pro Segment primarily include
production and custom homebuilders, remodeling contractors, and multi-family builders. The industry remains highly fragmented with competition from large national
dealers, specialty dealers, large building supply retailers, regional and local material distributors and smaller privately owned suppliers, truss manufacturers and
lumberyards. As such, the industry presents significant opportunities for growth and attractive acquisition opportunities.
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, housing trends including the size
of new homes, interest rates, employment levels, availability of credit, foreclosure rates, consumer confidence, the availability of qualified tradesmen, and the state of the
economy in general.
The residential building products industry is characterized by several key trends, including greater utilization of manufactured components, an expanding role of
the distributor in providing turn-key services and a consolidation of suppliers by homebuilders, as
4
described in more detail below. Additionally, there is increasing interest in using digital solutions to help drive end-to-end efficiencies throughout the construction
industry.
•
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.
•
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.
According to the U.S. Census Bureau, the single-family residential construction market was an estimated $428.9 billion in 2024, which was 7.1% higher than
2023. Further, according to the Home Improvement Research Institute (“HIRI”) in its September 2024 semi-annual forecast, the professional repair and remodel end
market was an estimated $172.6 billion in 2024, which was 0.1% higher than 2023.
OUR CUSTOMERS
We serve a broad customer base across the U.S. We have a diverse geographic footprint, as we have operations in 48 of the top 50 and 91 of the top 100 U.S.
Metropolitan Statistical Areas (“MSAs”), as ranked by single family housing permits based on available 2024 U.S. Census data. 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, 2024, our top 10 customers accounted for 15% of net sales, with our largest
customer accounting for 4% of net sales. Our top customers are comprised primarily of the largest national production homebuilders, including D.R. Horton, Inc., Dream
Finders Homes, Inc., Lennar Corporation, Pulte Homes, Inc., Meritage Homes, Taylor Morrison Home Corporation, and Toll Brothers Inc.
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 and multi-family builders. These customers require high levels of service and a broad product offering. Our sales team works 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. Servicing a broad range of homebuilders,
including single-family and multi-family builders, and remodeling contractors allows us to more effectively manage market conditions that may have an outsized adverse
impact on a specific customer segment.
OUR PRODUCTS AND SERVICES
We group our building products and services into four product categories:
Manufactured Products. Manufactured products are factory-built substitutes for job-site framing and include wood floor and roof trusses, wall panels, and
engineered wood that we design, cut, and assemble for each home. Manufactured products also include our proprietary whole-house framing solution, Ready-Frame®,
which designs, pre-cuts, labels, and bundles lumber into customized framing packages, saving builders both time and money and improving job-site safety. Our
manufactured products allow builders to build higher quality homes more efficiently and produce less waste. Roof trusses, floor trusses, and wall panels 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 and open-web floor trusses are also stronger and straighter than conventionally framed floors. Some
5
products in this category are constructed using lumber and lumber sheet goods, therefore this category does have limited exposure to commodity price fluctuations.
Windows, Doors and Millwork. Windows and doors are comprised of the manufacturing, assembly and distribution of windows, and the assembly and
distribution of interior and exterior door units. We manufacture a portion of the vinyl windows that we distribute in our Houston, Texas plant 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 and custom features, including those 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.
Specialty Building Products and Services. Specialty building products and services consist of various products, including vinyl, composite and wood siding,
exterior trim, metal studs, cement, roofing, insulation, wallboard, ceilings, cabinets and hardware. This category also includes services such as turn-key framing, shell
construction, design assistance and professional installation of products spanning all of 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 can reduce 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 to meet
current and forthcoming energy codes. We believe these services require scale, capital and sophistication that smaller competitors do not possess. We also offer software
products through our Paradigm subsidiary, including drafting, estimating, quoting, and virtual home design services, which provide software solutions to retailers,
distributors, manufacturers and homebuilders that help them boost sales, reduce costs, and become more competitive. We believe that the homebuilding and remodeling
industries are increasingly adopting digital solutions and that we are well-positioned to take advantage of these trends because of our scale and continuous investments in
digital technologies through our Paradigm business.
Lumber and Lumber Sheet Goods. Lumber and lumber sheet goods include dimensional lumber, plywood and oriented strand board (“OSB”) products used in on-
site house framing. The products in this category are highly sensitive to fluctuations in market prices for such commodities.
We compete in a highly competitive and fragmented marketplace. We believe 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 and sourcing challenges, we expect such benefits will also be increasingly valued and demanded by our customers
operating under normal market conditions.
MANUFACTURING
Our manufacturing facilities utilize industry leading technology and high-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 and 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. We maintain an electronic master file of trusses and wall panels for each builder’s prototype
houses. For custom builders, the components are designed individually for each house. 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, before shipping the finished components by house to the job site. In addition, we
offer our Ready-Frame® framing system which uses specialty software to calculate project-specific lumber needs to provide pre-cut and labeled packages delivered and
ready to assemble on the jobsite.
Manufactured Products — Engineered Wood. As with trusses and wall panels, engineered wood components have design and fabrication steps. 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 design and fabricate engineered wood at many of our distribution locations.
6
Custom Millwork. Our manufactured custom millwork consists primarily of interior and exterior pre-hung door systems, intricate interior and exterior mouldings,
custom and premium windows, finish hardware, stair parts, mantels and columns units.
Windows. We manufacture a full line of traditional vinyl windows at a 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 manufacture pre-hung 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
By pursuing the Company’s clear strategic pillars as outlined below, we intend to build on our advantaged market position to create value for our shareholders by
increasing profits and net cash flow generation, while making us a more valuable partner to our customers. The resulting cash flow should provide meaningful
opportunities for increased investment in organic and acquisitive growth that preserve our balance sheet strength, grow our return on invested capital and return capital to
our shareholders.
Organic Growth of Value-added Products and Services
Maximize our share of wallet by capturing above-market growth in our higher margin value-added products. We believe our national manufacturing footprint
and differentiated capabilities will allow us to capture growth in our higher margin value-added products, including trusses, wall panels and millwork. We believe our
value-added products address the growing demand for ways to build homes more efficiently, addressing labor constraints and rising costs. We plan to accelerate this
growth by further expanding our national manufacturing footprint to serve locations that do not currently have adequate access to these higher margin products. By
focusing on our differentiated platform and broad product mix, we are able to offer a complete array of products and services that would otherwise need to be sourced
from various distributors, providing us an opportunity to capture a greater share of wallet. This operational platform often will make us a preferred distributor for large-
scale national homebuilders as well as local and custom homebuilders looking for more efficient ways to build a home. We have also made significant investments in
digital solutions that we believe position us to take advantage of long-term digitization trends in the homebuilding and remodel industries. We believe that customers
continue to place an increased value on these capabilities, which further differentiates us from our competitors.
Leverage our competitive strengths to capitalize on housing market share. We intend to leverage our core business strengths including local market presence,
national footprint, unmatched scale in manufacturing capability, breadth of product portfolio, and end market exposure to expand our sales and profit margins. Our
customers continue to emphasize the importance of local access, competitive pricing, a broad product portfolio, sales force knowledge, labor-saving manufactured
products, on-site services and overall “ease of use” with their building products suppliers. Our comprehensive product offering, experienced sales force, strong strategic
vendor relationships, location coverage in important markets, and tenured senior management team position us well to capitalize on demand in the new home
construction market and the repair and remodel segment. Our large delivery fleet, professional drivers, well-positioned locations, and comprehensive inventory
management enable us to provide “just-in-time” product delivery, ensuring a smoother and faster production cycle for the homebuilder. Our comprehensive network of
products, services and facilities provides a strategically advantaged service model which enhances our value to our customers and provides a strong platform to drive
growth. We have also expanded our operational footprint in the multi-family and light commercial markets to position us for further growth in these end markets.
Invest in Innovation and Drive Operational Excellence
Optimize our highly scalable cost structure with operational excellence initiatives. We continue to focus on standardizing and automating processes and
technology-based workflows to minimize costs, streamline our operations and enhance working capital efficiency. We are implementing operational excellence
initiatives that are designed to further improve efficiency, as well as customer service. These initiatives, including distribution and logistics, pricing and margin
management, back-office efficiencies, customer integration and systems-enabled process improvements, should yield significant cost savings. The scope and scale of our
existing
7
infrastructure, customer base, and logistical capabilities mean that improvements in efficiency, when replicated across our network, can yield substantial profit margin
expansion.
Continue to Build our High-Performing Culture
Strong emphasis on putting our people first. Our team members are a critical resource, and every single one makes a difference. Enhancing talent acquisition,
employee development and retention will ensure we continue to attract and retain this valuable component of our business. Our team members are the face of the
Company to our customers and the communities in which we operate. Their contributions in serving our customers are a fundamental component in our success. We care
about our team members and strive to have a strong environmental, health and safety program that drives world-class safety results and ensures our team members leave
their workplace safely, every day. We have developed programs to help progress our people’s careers, such as our all-encompassing learning platform, 1-Team
University, and our Leadership Development Program, and we strive to maintain a performance-based culture.
Corporate social responsibility (“CSR”) strategy. We are also committed to making informed choices that improve our corporate governance, financial strength,
operational efficiency, environmental stewardship, community engagement and resource management. Consistent with our core values, our goal is to be recognized by
our customers as the preferred supplier, by our employees as a safe, diverse and inclusive workforce, by the industry as being at the forefront of innovation, by our
stakeholders as an ethical company and by the communities in which we serve as a good corporate citizen. We recognize that the environmental sustainability of our
products is important to both us as a company and to our customers. We prioritize purchasing and supplying sustainable wood products led by the Sustainable Forestry
Initiative. Helping homebuilders become more productive, more efficient and safer is fundamental to what we do, and we are passionate about building this future
together.
Disciplined Capital Allocation
Pursue strategic acquisitions. The highly fragmented nature of the Pro Segment of the U.S. residential new construction building products supply market presents
substantial acquisition opportunities. Our long-term acquisition strategy is focused on pursuing potential acquisitions that present opportunities to add manufacturing
capabilities in a relatively short period of time, or that provide opportunities to advance our position in desirable geographies or key product segments. We believe that
our proven operating model can be successfully adapted to these markets and where homebuilders, many of whom we currently serve elsewhere, would value our broad
product and service offering, professional expertise, and superior customer service. When entering a new market, our strategy is to acquire market-leading distributors
and subsequently expand their product offerings or add manufacturing facilities while integrating their operations into our centralized platform. This strategy allows us to
quickly achieve the scale required to better serve our customers and leverage existing customer relationships in the local market. Our management has shown the
capability to effectively and efficiently integrate newly acquired businesses, increase productivity, and drive value. We have successfully integrated over 75 acquisitions
since 1998, including the company-transforming BMC and ProBuild transactions.
Consistent capital allocation priorities. In addition to our acquisition strategy, we continue to focus on disciplined capital allocation to drive value creation. We
actively monitor our working capital to align our needs with market demand signals and the size of our top-line. We allocate capital to opportunities that we believe
maximize returns on investment, including value-added products, digital solutions, and automation. Additionally, our focus remains on maintaining a strong balance
sheet, with a low net leverage ratio, providing multiple paths for capital deployment, including returning excess capital to shareholders through opportunistic share
repurchases at an attractive long-term cost basis.
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 total project costs, faster project completion and higher quality. We believe by executing this strategy 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
8
and generates significant customer loyalty. At December 31, 2024, we employed approximately 2,600 sales representatives, who are generally paid a commission based
on gross margin dollars collected, and worked with approximately 2,600 sales coordinators and product specialists.
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, OSB and plywood, engineered wood, windows, doors, millwork, and siding. Our largest suppliers are national companies such as Boise Cascade Company,
Weyerhaeuser Company, West Fraser Timber Co. Ltd., Specialty Building Products, James Hardie Industries plc, and Louisiana-Pacific Corp. We believe marketplace
supply allows us to competitively source most of our requirements without reliance on any particular supplier and that our diversity of suppliers affords us purchasing
flexibility. Due to our centralized procurement platform for commodity wood products and corporate oversight of purchasing programs, we believe we are able to
maximize the advantages of both our and our suppliers’ broad geographic footprints and negotiate purchases across multiple markets to achieve more favorable contracts
with respect to price, terms of sale, and supply. Additionally, for certain customers, we institute purchasing programs on commodity wood products, such as OSB and
lumber to align portions of our procurement costs with our customer pricing commitments. We balance our OSB and lumber purchases with a mix of contract and spot
market purchases to ensure consistent supply 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 thousands of suppliers in order to reduce our dependence on any single company and to maximize purchasing leverage. While
our largest single supplier represents only 8% of our total materials purchases for the year ended December 31, 2024, 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 which would further enhance our margins
and cash flow.
COMPETITION
We have and will continue to experience robust competition for homebuilder business due to the highly fragmented nature of the Pro Segment and the relatively
low costs of entry into the market. We face competition from other large national dealers that focus on the Pro Segment, including U.S. LBM, 84 Lumber and Carter
Lumber; specialty dealers, such as roofing building supply companies; regional and local building supplies dealers; single and multi-site lumber yards; framing
contractors; component manufacturers, including UFP Construction and Stark Truss; and millwork operators, such as American Cedar and Millwork, and Western
Pacific. The Home Depot, Inc., through its acquisition of SRS Distribution Inc., and Lowe’s Companies Inc. continue to reposition themselves to gain market share in the
Pro Segment. We believe that we have competitive advantages over our competitors due to our long-standing customer relationships, local market knowledge,
competitive pricing, superior service, broad product offering and large-scale procurement capabilities. We cultivate long-term relationships with professional builders
and work to retain our customers by delivering a full range of high-quality products on time, and offering trade credit, competitive pricing and integrated service and
product packages, such as turn-key framing and shell construction, as well as manufactured components and installation. We believe that our local market knowledge,
strong customer relationships, superior service, and operational efficiencies allow us to cost-effectively supply our customers, which both enhances profitability and
reduces the risk of losing customers to competitors. There are also several competitors who are developing digital solutions for the homebuilding industry that may
compete with our existing digital tools suite. We believe that our scale and continuous investments in digital technologies through our Paradigm business uniquely
position us to transform our industry through the deployment of our digital solutions.
HUMAN CAPITAL
At December 31, 2024, we had approximately 29,000 employees. Less than 1% of employees are covered by collective bargaining agreements, and we believe
we have generally good relations with these labor unions. Employee levels are managed to align with the pace of business and management believes it has sufficient
human capital to operate its business successfully.
Our people are the key to our success and our continued focus on delivering exceptional customer service and innovative solutions. In managing our human
capital, our goal is to ensure team member safety, growth and development in an inclusive and team-based environment. By participating in regular surveys and focus
groups, we place a strong emphasis on enhancing and
9
increasing the retention and engagement level of our team members. Key areas of the Company’s human capital focus include the following:
Workplace Health and Safety
We care about our team members and anyone who enters our workplace. We strive to have a strong environmental, health and safety program that focuses on
implementing policies and training programs. We also perform self-audits and site visits by our Internal Audit department to ensure our team members follow best
practices and leave their workplace safely, every day. Over the past several years, we have developed and implemented programs designed to promote workplace safety,
with the goal of reducing the frequency and severity of employee injuries. We review and monitor our performance closely by updating our executive team monthly on
progress.
During 2024, our experience and continuing focus on workplace safety enabled us to preserve business continuity without sacrificing our commitment to keeping
our team members and workplace visitors safe. We aim to reduce lost time and recordable injuries each year, and in 2024 we reduced our Total Recordable Incident Rate
for the ninth consecutive year with a 10% reduction over the prior year.
We also broadly provide accessible safety training to our employees in a number of formats to accommodate the learner’s style, pace, location, and access to
technology.
Respectful and Inclusive Culture
Our team members are the face of the Company to our customers and the communities in which we operate. Their contributions in serving our customers are a
fundamental component in our success, and every single team member makes a difference.
Our Company strives to foster a culture that encourages collaboration, flexibility and fairness to enable all team members to contribute to their full potential. We
are committed to enhancing our efforts to promote a respectful and inclusive environment across all aspects of our organization, including providing equal opportunities
for professional development and advancement based solely on merit. To further these efforts, we conduct both in-person and online training through our online learning
management system. We continue to create greater awareness, eliminate unconscious bias and foster more open and honest communication through our Corporate
Inclusion Council.
The Company’s employee survey to assess and improve our efforts finds that the majority of employees feel welcome, safe and included, treated fairly with
opportunities to reach full potential, supported professionally, emotionally and socially and are comfortable sharing experiences and opinions, and valued as a team
member. We’ve identified four key priorities through our surveys: enhance awareness, broaden workforce representation, improve communication, and increase
inclusion and engagement. With these priorities in mind, we host quarterly town halls and engage in regular Company-wide communications, offer leadership
development opportunities and sales trainings, and continue to establish regional and local employee resource groups.
Learning and Development
In order to attract and retain top talent, we provide several resources in a variety of formats that promote the ongoing learning and development of our team
members. We offer leadership development training for new and existing leaders in topics such as: Effective Communication, Conducting Performance Management,
Developing Successful and Productive Teams, Conflict Resolution and Management, Providing Exceptional Customer Service, Hiring for Fit and Building a Diverse and
Inclusive Team. We have maintained our commitment to learning and development through our online learning management system and on-site courses facilitated by
our training and development team. Our online course catalog offers approximately 14,000 courses which are available to all team members.
INFORMATION TECHNOLOGY SYSTEMS
Our operations are dependent upon our information technology systems, which encompass all of our major business functions. Our primary enterprise resource
planning (“ERP”) systems, which we currently use for operations representing the majority of our sales, are proprietary systems that have been highly customized by our
computer programmers. 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 hundreds of 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 payment speed.
10
We have a customized financial reporting system that consolidates financial, sales and workforce data from our ERP systems and our human resource
information system, delivering standardized enterprise key performance indicators. 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 various aspects of our business, such as analyzing blueprints, generating material lists, purchasing lumber products at the lowest cost, delivery
management, resource planning and scheduling, and financial planning and analysis.
In 2022, we announced the decision to move the Company to a new ERP system. During 2024, we continued our detailed planning and design efforts and
initiated testing within our ERP test environments. We expect the program to require continued design, build, configuration and testing during 2025, followed by several
years of deployment across our broad network of operating sites. As part of this program, we intend to utilize technology-enabled opportunities to enhance our operating
model and transform our business creating further value for all our stakeholders.
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. 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;
•
Housing trends, including the size of new homes;
•
General economic conditions in the markets in which we compete;
•
The pricing policies of our competitors;
•
Disruptions in our supply chain;
•
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 first and second quarters of the year due to higher sales during the peak residential construction season. These increases may result in
negative operating cash flows during this peak season, which historically have been financed through available cash and borrowing availability under credit facilities.
Generally, collection of receivables and reduction in inventory levels following the peak building and construction season positively impact 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 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 “Financials.” Our website 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, 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.
11
Item 1A. Risk Factors
Risks associated with our business, any 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 the risk factors described below. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business operations. Any of these risks, whether known or unknown, could cause our actual
results to differ materially from expectations and could have a material adverse effect on our business, financial condition or results of operations, and we may not
succeed in addressing these challenges and risks. You should read these Risk Factors in conjunction with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Item 8.
Industry 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 multi-family construction as well as repair and remodel, which in turn are dependent upon a
number of factors, outside of our control, 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, including rising mortgage and other
interest rates, consumer confidence, household incomes, inflation, housing affordability, or housing inventory levels and occupancy, or a weakening of the U.S. economy
or of any regional or local 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 multi-family buildings may also decline because of shortages of qualified tradesmen, reliance on inadequately capitalized
builders and sub-contractors, shortages of suitable building lots and material, and lack of financing or more expensive financing available to homebuilders. In addition,
the building industry is subject to various local, state, and federal statutes, ordinances, 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 customers’ 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 building 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, including
inflation and interest rates, labor costs, competition, market speculation, government regulation, and trade policies, as well as from periodic delays in the delivery of
lumber and other products, all of which are outside our control. The prices of wood products 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. Our lumber and lumber sheet goods product category
represented 26% of total net sales for the year ended December 31, 2024. As such, if lumber or structural panel prices were to significantly decline from current levels,
our sales and profits could be negatively affected. 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. Excess capacity in the industry can result in significant declines in prices for those
building products, often within a short period of time. Such price fluctuations can adversely affect our financial condition, operating results and cash flows.
In addition, the building products industry is cyclical in nature. An economic downturn in the homebuilding industry could have an adverse effect on our
operating results, financial condition or cash flows. We are not able to predict the timing, severity or duration of any future downturns in the housing market.
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, regional and
other national building materials chains, as well as from privately-owned single site enterprises and new entrants into the market, due to the low barrier to, and cost of,
entry. Any of these competitors may (1) foresee the course of market development more accurately than we do, (2) develop products that are superior to our products, (3)
have the ability to produce or supply similar products at a lower cost, (4) develop stronger relationships with local homebuilders or commercial builders or (5) adapt
more quickly to new technologies or evolving customer requirements than we do. 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
12
and small contractors, have expanded their efforts into the professional homebuilders in recent years, including through the use of enhanced e-commerce offerings and
acquisitions, 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, and 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 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.
Homebuyer demand may shift towards smaller homes creating fluctuations in demand for our products.
Home affordability can be a key driver in demand for our products and home prices have increased meaningfully over the past several years. Home affordability
is influenced by a number of economic factors, such as the level of employment, consumer confidence, consumer income, supply of houses, the availability of financing
and interest rates. Changes in the inventory of available homes as well as economic factors relative to home prices may result in homes becoming less affordable.
Furthermore, consumer preferences could shift to smaller homes in the future. This could cause homebuyer demand to soften or shift substantially which could have an
adverse impact on our financial condition, operating results and cash flows if we are unable to respond to the new market demands effectively.
A range of factors may make our quarterly revenues, earnings and cash flows variable.
We have historically experienced, and in the future will continue to experience, variability in revenues, earnings and cash flows 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 markets 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 suppliers, (6) the effects of the weather and (7) labor costs, labor shortages and available
capacity to meet customer demand for our products. These factors, among others, make it difficult to project our operating results and cash flows on a consistent basis,
which may affect the price of our stock.
Operational and Strategic Risks
We may be unable to successfully implement our growth strategy, which includes increasing sales of our prefabricated components and other value-added products,
pursuing strategic acquisitions, opening new facilities, implementing operational excellence, pursuing digitization opportunities and initiatives, and maintaining a
balanced debt level.
Our long-term strategy depends in part on growing our sales of prefabricated components and other value-added products, increasing our market share, and
implementing various initiatives to increase our operational efficiency, improve our margins, optimize our pricing strategies, and streamline the customer experience. 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, our liquidity position, or the requirements of our debt instruments could prevent us from obtaining the capital required to effect new acquisitions or
expand our existing facilities. Our failure to make successful acquisitions or to build or expand needed facilities, including manufacturing facilities, produce saleable
product, or meet customer demand in a timely manner could adversely affect our financial condition, operating results, and cash flows. A negative impact on our
financial condition, operating results and cash flows, or our decision to invest in strategic acquisitions or new facilities, could adversely affect our ability to maintain a
balanced debt level.
Furthermore, we have made significant investments, and intend to continue to invest, in technology solutions designed to increase the efficiency of the
homebuilding process. There is no guarantee that such solutions will be effective, will be adopted by our customers, will be able to compete with alternative technology
solutions, including from start-up and more well-established technology companies or our competitors, or that we will realize the anticipated benefits from our
investments in these solutions. As a result, we may suffer losses on these investments or lose market share if competing technology solutions are more widely adopted
than the technology solutions we are developing.
We have consummated a number of strategic acquisitions as part of our growth strategy and intend to continue to pursue strategic acquisitions in the future as part
of our growth strategy. Strategic acquisitions involve risks and if we are unable to realize the
13
anticipated benefits of these transactions or identify suitable acquisition candidates in the future, our growth, financial condition and results of operations could be
materially and adversely affected.
Strategic acquisitions are an important part of our growth strategy and we seek to identify attractive acquisition opportunities that we believe will be accretive and
result in increased sales and earnings before interest, taxes, depreciation and amortization (“EBITDA”), cost savings, synergies and various other benefits. Assessing the
viability and realizing the benefits of these transactions is subject to significant uncertainty. Additionally, the evaluation and consummation of strategic transactions is a
time-consuming and costly process that can divert resources away from our operations and result in the incurrence of meaningful transaction expenses. Furthermore,
multiples for acquisition targets have generally increased over the past few years and we face increased competition from other acquirors for attractive acquisition
opportunities. As a result, we may not be able to consummate acquisitions on favorable terms, if at all. We may also not be able to obtain necessary approvals, including
regulatory or shareholder approvals, to consummate acquisitions. An inability to continue to identify and consummate attractive acquisitions could adversely affect our
growth.
If we complete an acquisition, we need to successfully integrate the target company’s products, services, associates and systems into our business operations in
order to realize the anticipated benefits from an acquisition. Integration can be a complex and time-consuming process, and if the integration is not fully successful or is
delayed for a material period of time, we may not achieve the anticipated synergies or benefits of the acquisition. Although we have been successful in the past with the
integration of numerous acquisitions, we may not be able to successfully integrate the operations of any future acquired businesses with our own in an efficient and cost-
effective manner or without significant disruption to our or the acquired companies’ existing operations. Furthermore, even if a target company is successfully integrated,
an acquisition may fail to further our business strategy as anticipated, expose us to increased competition or challenges with respect to our products or services, and
expose us to additional liabilities. Any impairment of goodwill or other intangible assets acquired in a strategic transaction may reduce our earnings. Moreover,
acquisitions 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 or issue additional shares of our common stock in order to consummate
acquisitions in the future. Potential new debt may be substantial and may limit our flexibility in using our cash flow from operations. The issuance of new shares of our
common stock could dilute the equity value of our existing stockholders. Our failure to fully integrate future acquired businesses effectively or to manage other
consequences of our acquisitions, including increased indebtedness, could prevent us from remaining competitive and, ultimately, could adversely affect our financial
condition, operating results and cash flows.
We are subject to competitive pricing pressure from our customers.
Production homebuilders and multi-family builders historically have exerted and will continue to exert significant pressure on their outside suppliers, including
on us, to keep prices low because of their market share and their ability to leverage such market share in the highly fragmented building products supply industry. Given
this pricing pressure, we may not be able to pass along price increases for lumber, wood products, other building products, or related labor costs to our customers, which
could impact our margins. In addition, continued consolidation among production homebuilders or multi-family and commercial builders, or changes in such builders’
purchasing policies or payment practices, could result in additional pricing pressure, and our financial condition, operating results and cash flows may be adversely
affected.
Furthermore, in periods of economic downturn these pricing pressures tend to increase. As a result, we may face heightened pricing pressures in the event of an
economic downturn, and our financial condition, operating results and cash flows may be adversely affected.
The loss of any of our significant customers or a reduction in the quantity of products they purchase could affect our financial health.
Our ten largest customers generated 15% of our net sales for the year ended December 31, 2024. We cannot guarantee that we will maintain or improve our
relationships with these customers or that we will supply these customers at historical levels. Moreover, in the event of any downturn, some of our homebuilder
customers may exit or severely curtail building activity in certain of our markets.
In addition, production homebuilders, multi-family 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 quantity of product
14
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.
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. Historically, our products were obtainable from various sources and in sufficient quantities. However, the loss of, or an ongoing substantial decrease in the
availability of products from our suppliers or the loss of key supplier arrangements could adversely impact our financial condition, operating results, and cash flows.
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 oftentimes, 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.
Furthermore, the inability of our suppliers to meet our supply needs in a timely manner or our quality standards could cause delays to delivery date requirements
of our customers. Such failures could result in the cancellation of orders, customers’ refusal to accept deliveries, a reduction in purchase prices, and ultimately,
termination of customer relationships, any of which could have a material adverse effect on our business, financial condition, results of operations and liquidity. In that
case, we may be required to seek alternative sources of materials or products. Our inability to identify and secure alternative sources of supply could have a material and
adverse effect on our ability to satisfy customer orders. While we have largely been able to manage these supply chain disruptions to date, there is no guarantee that we
will be able to do so in the future.
Failure to attract and retain our key employees may adversely impact our ability to successfully execute our business strategies.
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.
In addition, continued competition for non-management employees has resulted in higher labor costs and labor shortages at our facilities. Consequently, we may
continue to face higher operating expenses and may lose revenue opportunities if we lack capacity to meet customer demands due to labor shortages While only a small
percentage of our workforce is unionized, there can be no assurance that additional employees will not conduct union organization campaigns or become union members
in the future and a failure to renew existing collective bargaining agreements on favorable terms could lead to further labor shortages and higher labor costs.
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 primary ERP systems are
proprietary systems that have been highly customized by our computer programmers. Our centralized financial reporting system currently draws data from our ERP
systems. We are also currently implementing a new ERP system and there is no guarantee that such implementation will be successful or that we will not experience
disruptions in connection with the new ERP system. We rely upon our information technology systems to run critical accounting and financial information systems,
process receivables, manage and replenish inventory, fill and ship customer orders on a timely basis, and coordinate our sales activities across all products and services.
A substantial disruption in our information technology systems for any prolonged time period could result in problems and delays in generating critical financial and
operational information, processing receivables, receiving inventory and supplies and filling customer orders. These disruptions could adversely affect our operating
results as well as our customer service and relationships. Our systems, or those of our significant customers or suppliers, 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.
15
In addition, we rely on a number of third-party service providers to execute certain business processes and maintain certain information technology systems and
infrastructure, and any breach of security or disruption in their systems could impair our ability to operate effectively. Such disruptions, delays, problems, or associated
costs relating to our systems or those of our significant customers, suppliers or third-party providers could have a material adverse effect on our financial condition,
operating results and cash flows.
Furthermore, advances in computer and software capabilities, encryption technology, and other discoveries increase the complexity of our technological
environment, including how each interacts with our various software platforms. Such advances could delay or hinder our ability to process transactions or could
compromise the integrity of our data, resulting in a material adverse impact on our financial condition and results of operations. The risk of system disruption is
increased when significant system changes are undertaken. If we fail to timely integrate and update our information technology systems and processes, including our new
ERP system, we may fail to realize the cost savings or operational benefits anticipated to be derived from these initiatives.
We are subject to cybersecurity risks and expect to incur increasing costs in an effort to minimize those risks.
Our business employs systems that allow for the secure storage and transmission of customers’, vendors’ and employees’ proprietary information. Security
breaches could expose us to a risk of loss or misuse of this information, litigation and potential liability. We may not have the resources or technical sophistication to
anticipate or prevent rapidly evolving types of cyber-attacks. Any compromise of our security could result in a violation of applicable privacy and other laws, significant
legal and financial exposure, damage to our reputation and a loss of confidence in our security measures, which could harm our business. The regulatory environment
related to information security and privacy is increasingly rigorous, with new and constantly changing requirements applicable to our business, and compliance with
those requirements could result in additional costs. Our computer systems have been, and will likely continue to be, subjected to computer viruses or other malicious
codes, unauthorized access attempts and cyber- or phishing-attacks. Additionally, we may be impacted by intrusions or failures of critical infrastructure such as the
power grid or communications systems. These events could compromise ours’ and our customers’ and suppliers’ confidential information, impede or interrupt our
business operations, and could result in other negative consequences, including remediation costs, loss of revenue, litigation and reputational damage. While we have not
experienced any material losses relating to cyber-attacks or other information security breaches to date, we have been the subject of attempted hacking and cyber-attacks
and there can be no assurance that we will not suffer such significant losses in the future. As cyber-attacks become more sophisticated, we expect to incur increasing
costs to strengthen our systems from outside intrusions. While we have implemented administrative and technical controls and have taken other preventive actions, such
as deploying company-wide cybersecurity training and conducting threat simulations to reduce the risk of cyber incidents and protect our information technology, they
may be insufficient to prevent physical and electronic break-ins, cyber-attacks or other security breaches to our computer systems.
Changes in our customer or product sales mix affect our operating results.
Our operating results vary according to the amount and type of products we sell to each of our primary customer types: single-family homebuilders, remodeling
contractors, and multi-family, commercial and other contractors. Gross margins on sales to single-family, multi-family, commercial and other contractors vary based on a
variety of factors, including the purchase volumes of the individual customer, the mix of products sold to that customer, the cost to serve that customer, the size and
selling price of the project being constructed and the number of upgrades added to the project before or during its construction.
We generate significant business from the large single-family homebuilders; however, our gross margins on sales to them tend to be lower than our gross margins
on sales to other market segments. A shift in our sales mix towards the larger homebuilders could negatively impact our gross margins.
In addition, we typically realize higher gross margins on more highly engineered and customized products, or ancillary products that are often purchased based
on convenience and are therefore less price sensitive to our customers. For example, sales of lumber and lumber sheet goods tend to generate lower gross margins due to
their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors and
windows often generate higher gross margins relative to other products due to their increased complexity and opportunity for efficiency gains. A shift in our sales mix
towards the lumber and lumber sheet goods product category could negatively impact our gross margins.
The implementation of our supply chain and technology initiatives could disrupt our operations, and these initiatives might not provide the anticipated benefits or
might fail.
We have made, and we plan to continue to make, significant investments in our supply chain and technology. These initiatives are designed to streamline our
operations to allow our employees to continue to provide high quality service to our customers, while simplifying customer interaction and providing our customers with
a more interconnected purchasing experience. The cost and
16
potential problems and interruptions associated with the implementation of these initiatives, including those associated with managing third-party service providers and
employing new web-based tools and services, could disrupt or reduce the efficiency of our operations. In the event that we continue to grow, there can be no assurance
that we will be able to keep up, expand or adapt our IT infrastructure to meet evolving demand on a timely basis and at a commercially reasonable cost, or at all. In
addition, our improved supply chain and new or upgraded technology might not provide the anticipated benefits, it might take longer than expected to realize the
anticipated benefits or the initiatives might fail altogether.
Furthermore, our customers are continuing to increasingly demand and rely on increased technology in their operations. We anticipate digitization trends in the
home-building industry to continue and have made significant investments in technology solutions to further drive digitization of the home-building industry. While we
believe such trends present opportunities for our business, we may be unsuccessful in keeping pace with the development of such technologies, which could result in loss
of customers.
We regularly invest resources to update and improve our internal information technology systems and software platforms. Should our investments not succeed, or if
delays or other issues with new or existing internal technology systems and software platforms disrupt our operations, our business could be harmed.
We rely on our network infrastructure, ERP systems, data hosting, public cloud and software-as-a-service providers, and internal technology systems for many of
our development, marketing, operational, support, sales, accounting and financial reporting activities. We are continually investing resources to update and improve these
systems and environments in order to meet existing needs, as well as the growing and changing requirements of our business and customers. For example, we are in the
process of implementing a new ERP system. The new ERP system is intended to transform areas such as manufacturing, supply chain, procurement, warehouse
management, delivery, quote to cash, financial reporting, and analytics, and position us to better leverage automation and process efficiency and enable productivity
enhancements. An implementation of this scale is a major financial undertaking and has required, and will continue to require, substantial time and attention of
management and key employees. Furthermore, we may not realize the anticipated benefits from the implementation of the new ERP system. We anticipate full
integration of the new ERP system to take many years. If we experience prolonged delays or unforeseen difficulties in updating and upgrading our systems and
architecture, including our new ERP system, we may experience outages and may not be able to deliver certain offerings or develop new offerings and enhancements that
we need to remain competitive. Improvements, upgrades and, to a greater extent, system conversions, are often complex, costly and time consuming. In addition, such
improvements can be challenging to integrate with our existing technology systems or may uncover problems with our existing technology systems. Unsuccessful
implementation of hardware or software updates and improvements could result in outages, disruption in our business operations, loss of revenue or damage to our
reputation. Additionally, the effectiveness of our internal control over financial reporting could be adversely affected if the new ERP system is not successfully
implemented. Any of these items, along with any failure to effectively manage data governance risks prior to or during ERP implementation, could adversely affect our
results of operations, cash flows and financial condition, and the trading price of our common stock.
We occupy most of our 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 for similar 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. We have 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, 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 former operation.
Financial and Liquidity Risks
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, 2024, our debt totaled $3.7 billion, which includes $0.2 billion of finance lease and other finance obligations. We have a $1.8 billion
revolving credit facility with a maturity date of January 17, 2028 (“Revolving Facility”), under
17
which we had no outstanding borrowings and $0.1 billion of letters of credit outstanding as of December 31, 2024. In addition, we also have $0.6 billion in obligations
under operating leases.
Our level of indebtedness could have important consequences to us, including:
•
make it more difficult for us to satisfy our obligations with respect to our other indebtedness, resulting in possible defaults on and acceleration of such
indebtedness;
•
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, future business opportunities, share repurchases and
retirement of debt;
•
exposing us to the risk of increased interest rates, and corresponding increased interest expense, because borrowings under the Revolving Facility 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;
•
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; and
•
limiting our attractiveness as an investment opportunity for potential investors.
In addition, our debt instruments 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 possible that we would not be able to satisfy our obligations under all of such
accelerated indebtedness simultaneously.
Our financial condition and operating performance, including 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.
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 Revolving Facility, which totaled $1.8 billion at December 31, 2024, to provide
working capital and fund our operations. Our working capital requirements are likely to grow as we continue to grow organically and through acquisitions. Our inability
to renew, amend or replace our debt instruments 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.
Significant 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, financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations
under indebtedness outstanding from time to time. The agreements governing our debt instruments, 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.
18
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 our debt
instruments. 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 our debt instruments, 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 Revolving Facility contains a financial covenant requiring the satisfaction of a minimum fixed charge ratio of 1.00 to 1.00 if our
excess availability falls below the greater of $80.0 million or 10% of the maximum borrowing amount, which was $171.4 million as of December 31, 2024.
These provisions may restrict our ability to expand or fully pursue our business strategies or return capital to our shareholders through share repurchases. Our
ability to comply with the agreements governing our debt instruments 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 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.
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 Revolving Facility could be higher or lower than current levels. As of December 31,
2024, we had no 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. The Revolving Facility also assesses variable commitment and outstanding letter of credit fees based on quarterly average loan utilization. Further, an increase
in interest rates could also trigger a limitation on the deductibility of those interest costs, increasing our tax expense and further decreasing our net income and cash
flows. In recent years, the Company has executed several debt transactions designed to optimize our debt structure and extend maturities. The Company is likely to
execute similar debt transactions in the future. However, there can be no assurance that we will be successful in anticipating the direction of interest rates or changes in
market conditions, which could result in future debt transactions having a material adverse impact on our financial condition, operating results and cash flows.
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.
If conditions in the housing industry continue to 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 markets. Widespread facility closures could have a significant adverse effect on our financial condition,
operating results and cash flows.
19
Our inability to effectively deploy our excess capital may negatively affect return on equity and stockholder value.
Throughout 2024, we generated significant excess cash flows. Our business plan calls for us to execute a variety of strategies to deploy excess capital including,
but not limited to, continued organic balance sheet growth and the consideration of potential acquisition opportunities to further deploy our excess capital when we
expect such opportunities to significantly enhance long-term stockholder value. We have also repurchased approximately $7.6 billion of our shares since January 2021
through the date of this filing and intend to continue repurchasing shares pursuant to share repurchase authorization approved by our board of directors in August 2024.
Our inability to effectively and timely deploy our excess capital through these strategies may constrain growth in earnings and return on equity and thereby diminish
potential growth in stockholder value.
Legal and Compliance Risks
The nature of our business exposes us to product liability, product warranty, casualty, construction defect, asbestos, vehicle, workplace safety and injury and other
claims and legal proceedings.
We are involved in product liability, product warranty, casualty, construction defect, asbestos, vehicle, workplace safety and injury and other claims relating to
the products we manufacture and distribute, services we provide or have provided and our operations 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. The Company has a number of known and threatened construction defect legal claims. 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. We are also subject to workplace safety and injury claims from our
employees and contractors. Product liability, product warranty, casualty, construction defect, asbestos, vehicle, workplace safety and injury 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, such as workers’ compensation 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.
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, including immigration and work-authorization laws and regulations promulgated by the United States Equal Employment Opportunity
Commission, tariff regulations on imported products promulgated by the Federal government, accounting standards issued by the Financial Accounting Standards Board
(“FASB”) or similar entities, state and local regulations relating to our escrow business, and state and local zoning restrictions and building codes. In addition, changes to
global trade policies may adversely impact our business. Significant changes 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 and damage our reputation.
Future changes to tax laws and regulations could have an adverse impact on our business.
We are primarily subject to income and other taxes in the U.S., and on a very limited basis in certain foreign jurisdictions. We are subject to ongoing tax audits in
various jurisdictions. We regularly assess the likely outcome of these audits in order to determine the appropriateness of our tax provision. However, there can be no
assurance that we will accurately predict the outcome of these audits, and the amounts ultimately paid upon resolution of audits could be materially different from the
amounts previously included in our income tax expense and therefore could have a material impact on our tax provision, net income and cash flows. In addition, our
effective tax rate in the future could be adversely affected by changes to our operating structure, changes in the valuation of deferred tax assets and liabilities, changes in
tax laws, and the discovery of new information in the course of our tax return preparation. Any future changes in federal and state tax laws and regulations could have an
adverse direct impact on our corporate taxes and/or an adverse indirect impact such as making purchasing a home less attractive, which could reduce demand for homes.
Adverse impacts
20
from any future changes in federal and state laws and regulations on our business could include an adverse impact on our financial condition, operating results and cash
flows.
A measure of our success is dependent on maintaining our safety record, and an injury to, or death of, any of our employees, customers, or members of the general
public related to our business activities could result in material liabilities and reputational injury.
Our business activities include an inherent risk of safety incidents that could result in injuries and deaths. The activities we conduct at our facilities present a risk
of injury or death to our employees, customers, or visitors, notwithstanding our compliance with safety regulations. We may be unable to avoid material liabilities for an
injury or death, and our workers’ compensation and other insurance policies may not be adequate or may not continue to be available on terms acceptable to us, or at all,
which could result in material liabilities to us.
Further, as a leading supplier and manufacturer of building materials, manufactured components and construction services, we operate a fleet of commercial
motor vehicles, including semi-tractor trailer trucks, flatbed trucks, and forklifts. Accordingly, a safety incident involving our commercial fleet could result in material
economic damages, as well as injuries and/or death, for our employees and any other parties involved. Although we believe our aggregate insurance limits should be
sufficient to cover our historic claims amounts, participants in commercial distribution and transportation activities (i.e., trucking and transportation) have experienced
large verdicts, including some instances in which juries have awarded significant amounts.
In addition, our brand’s reputation is an important asset to our business; as a result, anything that damages our brand’s reputation could materially harm our
business, results of operations, and financial condition. For example, negative media reports, whether or not accurate, can materially and adversely affect or reputation.
Moreover, social media has dramatically increased the rate at which negative publicity can be disseminated before there is any meaningful opportunity to respond to or
address an issue to protect our reputation.
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.
General Risks
Unstable global economic conditions and geopolitical conflicts may have serious adverse consequences on our business, financial condition, and operations.
We are operating in an uncertain economic environment. The global credit and financial markets have experienced extreme volatility and disruptions, including
severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, high rates of
inflation, and uncertainty about economic stability and a potential recession. While our management team continually monitors market conditions and economic factors
throughout our footprint, we are unable to predict the duration or severity of such conditions or factors. If conditions were to worsen nationally, regionally or locally,
then we could see a decrease in housing starts, which would adversely affect our business, financial condition, operating results, and cash flows.
In addition, the financial markets and the global economy may also be adversely affected by ongoing geopolitical conflicts, including those in Ukraine and the
Middle East. These conflicts have impacted, and may continue to impact, commodity and energy prices, global supply chains and financial markets. In addition,
sanctions imposed by the U.S. and other countries in response to the conflict in Ukraine could further adversely impact the financial markets and the global economy,
and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. The specific consequences of these geopolitical
conflicts on our business are difficult to predict at this time, but in addition to inflationary pressures affecting our operations, any shortages of fuel or significant fuel cost
increases could seriously disrupt our ability to distribute products to our customers.
21
There can be no assurance that further deterioration in markets and confidence in economic conditions will not occur. Our general business strategy may be
adversely affected by any such economic downturn or recession, volatile business environment, hostile third-party action or continued unpredictable and unstable market
conditions. The effects of any economic downturn or recession could continue for many years after the downturn or recession is considered to have ended.
We may be adversely affected by any natural or man-made disruptions to our operations and 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 operations resulting
from fire, earthquake, weather-related events (such as tornadoes, hurricanes, flooding and other storms), other natural disasters, an act of terrorism, intrusions or failures
of critical infrastructure such as the power grid or communications systems or any other cause could damage multiple facilities and a significant portion of our inventory
and could materially impair our ability to distribute our products to customers. Moreover, we could incur significantly higher costs and longer lead times associated with
distributing our products to our customers during the time that it retakes for us to reopen or replace a damaged facility. If any of these events were to occur, our financial
condition, operating results and cash flows could be materially adversely affected.
In addition, general weather patterns affect our operating results throughout the year, with adverse weather historically reducing construction activity in the first
and fourth quarters in the markets in which we primarily operate. Adverse weather events, natural disasters or similar events, including as a result of climate change,
could generally reduce or delay construction activity, which could adversely impact our financial condition, operating results and cash flows. Furthermore, if certain
markets where we have made significant investments become less desirable for new home building due to the frequency of adverse weather events or climate change, we
could incur significant losses at our facilities throughout these markets.
Risks relating to corporate responsibility and sustainability could adversely affect our reputation and shareholder, employee, customer and third-party relationships
and may negatively affect our stock price.
Our business faces increasing public scrutiny related to corporate responsibility and sustainability activities. We risk damage to our brand and reputation if we
fail to act responsibly or meet any commitments that we may set in a number of areas, including with respect to climate change, human capital management, support for
our local communities, corporate governance and transparency, or fail to consider such factors in our business operations.
Additionally, investors and shareholder advocates are placing an increasing emphasis on how corporations address corporate responsibility and sustainability
issues in their business strategy when making investment decisions and when developing their investment theses and proxy recommendations. We may incur meaningful
costs with respect to our corporate responsibility and sustainability efforts and if such efforts are negatively perceived, our reputation and stock price may suffer.
Climate change could adversely affect our business and damage our reputation.
Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts.
Consumers and businesses are also changing their behavior and business preferences as a result of these concerns. New governmental regulations or guidance relating to
climate change, as well as changes in consumers’ and businesses’ behaviors and business preferences, may affect whether and on what terms and conditions we will
engage in certain activities or offer certain products or services. The governmental and supervisory focus on climate change could also result in our becoming subject to
new or heightened regulatory requirements. Any such new or heightened requirements could result in increased regulatory, compliance or other costs. Our business,
reputation and ability to attract and retain employees may also be harmed if our response to climate change is perceived to be ineffective or insufficient.
The price of our common stock is volatile and may decline.
The market price of our common stock historically has experienced and may continue to experience significant price fluctuations similar to those experienced by
the broader stock market in recent years. For example, between January 1, 2024, and December 31, 2024, the closing price of our common stock on the NYSE ranged
from $132.60 to $211.12 per share. In addition, the price of our common stock may fluctuate significantly in response to various factors, including:
•
actual or anticipated fluctuations in our results of operations;
•
announcements by us or our competitors of significant business developments, changes in customer relationships, acquisitions, or expansion plans;
22
•
changes in the prices of products we sell;
•
involvement in litigation;
•
our sale or repurchases of common stock or other securities in the future;
•
market conditions in our industry;
•
changes in key personnel;
•
changes in market valuation or earnings of our competitors;
•
the trading volume of our common stock;
•
changes in the estimation of the future size and growth rate of our markets; and
•
general economic and market conditions.
Broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance. In the past, following
periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company.
If we were involved in any similar litigation, we could incur substantial costs and our management’s attention and resources could be diverted, which could
adversely affect our financial condition, results of operations and cash flows. As a result, it may be difficult for you to resell your shares of common stock in the future.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy
The Company maintains robust and comprehensive processes, procedures and controls to protect and secure its information systems and data infrastructure from
cybersecurity threats. The Company’s cybersecurity program is led by its Chief Information Security Officer (“CISO”). The Company’s cybersecurity program
interfaces with other functional areas within the Company, including but not limited to the Company’s business segments and information technology, legal, risk
management, human resources and internal audit departments, as well as external third-party partners, to identify and understand potential cybersecurity threats. The
Company regularly assesses and updates its processes, procedures and management techniques in light of ongoing cybersecurity developments.
Internally, the CISO coordinates oversight of reviewing security alerts, identifying and monitoring ongoing and potential cybersecurity threats, evaluating
strategic business impacts of cybersecurity threats and developing programs and initiatives to educate the Company’s employees regarding cybersecurity. The CISO also
manages the Company’s Security Incident Response Plan (the “Incident Response Plan”), which outlines action steps for the preparation, identification, triage, analysis,
containment, eradication, recovery and reflection stages of a cybersecurity incident. The Incident Response Plan serves as the charter for the Company’s Security
Incident Response Team (the “Incident Response Team”), which includes a strategic team comprised of executives from various cross-functional management teams, as
well as a tactical team comprised of internal technical support roles and external third-party service providers. The Incident Response Plan provides how the Incident
Response Team will analyze and, as necessary, escalate cybersecurity incidents both internally and with third-party service providers based on type and severity of the
specific incident.
The Company also requires cybersecurity training for all active employees, focusing on the appropriate protection and security of confidential company and
third-party information. Additionally, the Company provides quarterly cybersecurity awareness training that covers a broad range of security topics, including secure
access practice, phishing schemes, remote work and response to suspicious activities. In addition to online training, employees are educated through several methods,
including event-triggered awareness campaigns, recognition programs, security presentations, company intranet articles, videos, system-generated communications,
email publications and various simulation exercises.
The Company has engaged a third-party managed detection and response company to monitor the security of its information systems around-the-clock, including
intrusion detection, and to provide instantaneous alerting should a cybersecurity event occur. The
23
Company also maintains a cybersecurity insurance policy and has engaged a third-party digital forensics and incident response consultant and legal counsel on retainer.
The Company does not believe that any risks from cybersecurity threats, nor any previous cybersecurity incidents, have materially affected the Company.
However, the sophistication of cyber threats continues to increase, and the preventative actions the Company has taken and continues to take to reduce the risk of cyber
incidents and protect its systems and information may not successfully protect against all cyber incidents. For more information on how cybersecurity risk may
materially affect the Company’s business strategy, results of operations, or financial condition, please refer to Item 1A Risk Factors.
Governance
The Company’s Audit Committee and board of directors provide ultimate oversight of the Company’s cybersecurity risk management. The Audit Committee
regularly reviews and discusses with management the strategies, processes, procedures and controls pertaining to the management of the Company’s information
technology operations, including cyber risks and cybersecurity. The Company’s CISO and Chief Information Officer (“CIO”) provide quarterly reports to the Audit
Committee regarding the evolving cybersecurity risk landscape, including emerging risks, as well as the Company’s processes, program and initiatives for managing
these risks.
The Company’s CISO reports directly to the CIO, who in turn reports to the CEO. The CISO has over 20 years of experience in IT and cybersecurity. Under the
direction of the CISO, the Company’s cybersecurity department continuously analyzes cybersecurity and resiliency risks to our business, considers industry trends and
implements preventive and detective controls, as appropriate, to mitigate these risks. The cybersecurity team consists of cybersecurity professionals holding multiple
certifications such as CISSP (Certified Information Systems Security Professional), CEH (Certified Ethical Hacker), GSOM (GIAC Security Operations Manager),
CISM (Certified Information Security Manager), CISA (Certified Information Systems Auditor), among others. This analysis drives the Company’s short- and long-term
cybersecurity strategies, which are executed through a collaborative effort within the IT department and are communicated to the board of directors regularly.
Item 2. Properties
We have a broad network of distribution and manufacturing facilities in 43 states throughout the U.S. Based on available 2024 U.S. Census data, we have
operations in 48 of the top 50 and 91 of the top 100 U.S. MSAs, as ranked by single family housing permits in 2024.
Distribution centers typically include 10 to 15 useable acres of outside storage, a 45,000 square foot warehouse, 6,000 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, and other specialty building products. The distribution centers are usually located in industrial areas with easy access to freeways to maximize distribution
efficiency and convenience. Many of our distribution centers are situated on rail lines for efficient receipt of goods.
Our manufacturing facilities produce trusses, wall panels, engineered wood, windows, pre-hung doors and custom millwork. Where efficient, they are located on
the same premises as our distribution facilities. Truss and panel manufacturing facilities vary in size from 60,000 square feet to 100,000 square feet with 10 to 15 useable
acres of outside storage for materials and for finished goods. Our window manufacturing facility in Houston, Texas is approximately 840,000 square feet.
We own approximately 190 actively operating facilities, including our recent acquisition of Alpine Lumber, and contractually lease 400 actively operating
facilities. These leases typically have an initial lease term of five to 15 years and most provide options to renew for specified periods of time. A majority of our leases
provide for fixed annual rentals. Certain of our leases include provisions for escalating rent, as an example, based on changes in the consumer price index. Most of the
leases require us to pay taxes, insurance and common area maintenance expenses associated with the properties. As described in Note 9 to the consolidated financial
statements included in Item 8 of this annual report on Form 10-K, 115 of our leased facilities are subject to a sales-lease back transaction that is accounted for in our
financial statements as owned assets with offsetting financing obligations.
In addition, we operate a fleet of approximately 19,000 rolling stock units which includes trucks, forklifts, and trailers used to deliver products from our
distribution and manufacturing centers to our customers’ job sites. Through our emphasis on local market flexibility and strategically placed locations, we minimize
shipping and freight costs while maintaining a high degree of local market expertise. Through knowledge of local homebuilder needs, customer coordination and rapid
restocking ability, we reduce working capital requirements and guard against out-of-stock products. We believe that this reliability is highly valued by our customers and
reinforces customer relationships.
24
Item 3. Legal Proceedings
The Company has a number of known and threatened construction defect legal claims. While these claims are generally covered under the Company’s existing
insurance programs to the extent any loss exceeds the deductible, there is a reasonable possibility of loss that is not able to be estimated at this time because (i) many of
the proceedings are in the discovery stage, (ii) the outcome of future litigation is uncertain, and/or (iii) the complex nature of the claims. Although the Company cannot
estimate a reasonable range of loss based on currently available information, the resolution of these matters could have a material adverse effect on the Company's
financial position, results of operations or cash flows.
In addition, we are involved in various other claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in
such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in
respect of such claims and lawsuits. Although the ultimate disposition of these other proceedings cannot be predicted with certainty, management believes the outcome
of any such claims that are pending or threatened, either individually or on a combined basis, will not have a material adverse effect on our consolidated financial
position, cash flows or results of operations. However, there can be no assurances that future adverse judgments and costs would not be material to our results of
operations or liquidity for a particular period.
Although our business and facilities are subject to federal, state and local environmental regulation, environmental regulation does not have a material impact on
our operations. We believe that our facilities are in material compliance with such laws and regulations. As owners and lessees of real property, we can be held liable for
the investigation or remediation of contamination on such properties, in some circumstances without regard to whether we knew of or were responsible for such
contamination. Our current expenditures with respect to environmental investigation and remediation at our facilities are minimal, although no assurance can be provided
that more significant remediation may not be required in the future as a result of spills or releases of petroleum products or hazardous substances or the discovery of
unknown environmental conditions.
Item 4. Mine Safety Disclosures
Not applicable.
25
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 NYSE under the symbol “BLDR”. The approximate number of stockholders of record of our common stock as of February
14, 2025, was 64.
We currently do not pay dividends. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend
on a number of factors, including restrictions in our debt instruments, as well as our future earnings, capital requirements, financial condition, prospects and other factors
that our board of directors may deem relevant. Our debt agreements currently restrict our ability to pay dividends. See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Liquidity and Capital Resources” contained in Item 7 of this annual report on Form 10-K.
The graph compares Builders FirstSource, Inc.’s cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the S&P 500
index and the S&P 600 Building Products index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment
of all dividends) from December 31, 2019, to December 31, 2024.
12/19
12/20
12/21
12/22
12/23
12/24
Builders FirstSource, Inc.
100.00
160.61
337.31
255.33
656.99
562.50
S&P 500
100.00
118.40
152.39
124.79
157.59
197.02
S&P 600 Building Products
100.00
127.17
158.74
132.74
200.45
225.97
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
26
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 27, 2025, under the caption “Equity Compensation Plan Information,” which information is incorporated herein by reference.
Company Stock Repurchases
The following table provides information with respect to our purchases of Builders FirstSource, Inc. common stock during the fourth quarter of fiscal year 2024:
Period
Total Number of Shares
Purchased
Average Price Paid per
Share
(including fees and taxes)
Total Number of Shares
Purchased as Part of Publicly
Announced Plans or
Programs
Approximate Dollar Value
of Shares That May Yet be
Purchased Under the Plans
or Programs
October 1, 2024 — October 31, 2024
481,640 $
191.88
478,807 $
750,860,446
November 1, 2024 — November 30, 2024
429,106
180.82
389,349
680,880,229
December 1, 2024 — December 31, 2024
1,178,414
155.04
1,178,414
500,000,146
Total
2,089,160 $
168.83
2,046,570 $
500,000,146
(1)
On August 6, 2024, the Company announced the board of directors’ approval of a share repurchase authorization in the amount of $1.0 billion.
In the fourth quarter of 2024, 2,046,570 shares were repurchased and retired pursuant to share repurchase plans authorized by our board of directors. The
remaining 42,590 shares presented in the table above represent shares tendered in order to meet tax withholding requirements for restricted stock units vested. Share
repurchases under the program may be made through a variety of methods, which may include open market purchases, block trades, accelerated share repurchases,
trading plans in accordance with Rule 10b-5 or Rule 10b-18 under the Exchange Act, or any combination of such methods. The program does not obligate the Company
to acquire any particular amount of its common stock, and the share repurchase program may be suspended or discontinued at any time at the Company’s discretion.
Item 6. Reserved
(1)
(1)
27
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 consolidated financial statements and related
notes contained in Item 8. Financial Statements and Supplementary Data of this annual report on Form 10-K. 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 and manufacturer of building materials, manufactured components and construction services to professional contractors, sub-
contractors and consumers. The Company operates approximately 590 locations in 43 states across the U.S. Given the span and depth of our geographical reach, our
locations are organized into three geographical divisions (East, Central, and West), which are also our operating segments. All of our segments have similar customers,
products and services, and distribution methods. Due to the similar economic characteristics, categories of products, distribution methods and customers, our operating
segments are aggregated into one reportable segment.
We offer an integrated solution to our customers by providing manufacturing, supply, and installation of a full range of structural and related building products.
Our manufactured products include our factory-built roof and floor trusses, wall panels, vinyl windows, custom millwork and trim, as well as engineered wood that we
design, cut, and assemble 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, various window, door and millwork lines along
with other various building products. Our full range of construction-related services includes professional installation, turn-key framing and shell construction, and spans
all of our product categories. We also offer digital solutions through our Paradigm subsidiary, including drafting, estimating, quoting, and virtual home design services.
We group our building products into four product categories:
•
Manufactured Products. Manufactured products consist of wood floor and roof trusses, wall panels, engineered wood and our Ready-Frame® framing
system.
•
Windows, Doors and Millwork. Windows and doors are comprised of the manufacturing, assembly, and distribution of windows and the assembly and
distribution of interior and exterior door units. Millwork includes interior trim and custom features that we manufacture, such as intricate mouldings, stair
parts, and columns.
•
Specialty Building Products and Services. Specialty building products and services consist of various products, including vinyl, composite and wood
siding, exterior trim, metal studs, cement, roofing, insulation, wallboard, ceilings, cabinets, and hardware. This category also includes services such as
turn-key framing, shell construction, design assistance and professional installation of products spanning all of our product categories. We also offer
software products through our Paradigm subsidiary, including drafting, estimating, quoting, and virtual home design services, which provide digital
solutions to retailers, distributors, manufacturers and homebuilders that help them boost sales, reduce costs, and become more competitive.
•
Lumber and Lumber Sheet Goods. Lumber and lumber sheet goods include dimensional lumber, plywood, and OSB products used in on-site house
framing.
Our operating results are dependent on the following trends, strategies, events and uncertainties, some of which are beyond our control:
•
Homebuilding Industry and Market Competition. Our business is driven primarily by the residential new construction market and the residential repair
and remodel market, which are in turn dependent upon a number of factors, including demographic trends, interest rates, consumer confidence,
employment rates, housing affordability, household formation, land development costs, the availability of skilled construction labor, rising inflationary
pressures, mortgage markets and the health of the economy. Many factors have impacted and may continue to impact our sales and gross margins,
including continued consolidation within the building products supply industry, increased competition for homebuilder business, supply chain constraints
and cyclical fluctuations in commodity prices. Moreover, our industry remains highly fragmented and competitive, and we will continue to face
significant competition from local and regional suppliers. As various current market dynamics, including inflationary pressures, mortgage rates and
housing affordability shift, industry forecasters, including the National Association of Home Builders (“NAHB”), expect to see housing demand increase
in the near-term. Despite recent tempered market conditions, we believe the housing industry remains underbuilt and that there are several meaningful
trends that indicate U.S. housing demand will continue to be strong over the long-term, including the aging of housing stock and normal population
growth due to immigration and birthrate exceeding death rate.
28
•
Targeting Large Production Homebuilders. The homebuilding industry continues to undergo consolidation, and the larger homebuilders continue to
increase their market share. We expect that trend to continue as larger homebuilders have better liquidity and land positions relative to the smaller, less
capitalized homebuilders. Our focus is on maintaining relationships and market share with these customers while balancing the competitive pressures we
face in servicing large homebuilders with certain profitability expectations. Additionally, we continue to focus on expanding our custom homebuilder
base while maintaining acceptable credit standards.
•
Multi-family and Light Commercial Business. Our primary focus has been on single-family residential new construction and the repair and remodel end
market. However, through recent acquisitions we have expanded our operational footprint in the multi-family market, predominantly five-story and
smaller, wood construction, and the light commercial market, growing our value-added components and millwork product offerings in this end market.
We will continue to identify opportunities for profitable growth in these areas.
•
Repair and remodel end market. While influenced by housing starts to a lesser degree than the homebuilding market, the repair and remodel market is
still dependent upon some of the same factors, including demographic trends, interest rates, consumer confidence, employment rates, the health of the
economy and home financing markets. As a result of these pressures, we may experience reduced sales demand, challenges in the supply chain, increased
margin pressures and/or increased operating costs in this area of our business. We expect that our ability to remain competitive in this space will depend
on our continued ability to provide a high level of customer service coupled with a broad product offering.
•
Use of Prefabricated Components. Homebuilders are increasingly using prefabricated components in order to realize increased efficiency, overcome
skilled construction labor shortages and improve quality. Shortening cycle times from start to completion is a key imperative of the homebuilders during
periods of strong consumer demand. As the availability of skilled construction labor remains limited, we continue to see the demand for prefabricated
components increasing within the residential new construction market.
•
Economic Conditions. Economic changes both nationally and locally in our markets impact our financial performance. The building products supply
industry is highly dependent upon new home construction and, to a lesser extent, repair and remodel activities, and is subject to cyclical market changes.
Our operations are subject to fluctuations arising from changes in supply and demand, national and local economic conditions, labor costs and
availability, competition, government regulation, trade policies (including with respect to tariffs on imported goods), inflation and other factors that affect
the homebuilding industry, such as demographic trends, interest rates, housing starts, the high cost of land development, employment levels, consumer
confidence, and the availability of credit to homebuilders, contractors, and homeowners. Disruptions and uncertainties as a result of a number of
unforeseen environmental, social, economic or other factors, may have a significant impact on our future operating results.
•
Housing Affordability. The affordability of housing can be a key driver in demand for our products. Home affordability is influenced by a number of
economic factors, such as the level of employment, consumer confidence, consumer income, supply of houses, the availability of financing and interest
rates. Changes in the inventory of available homes and other economic factors relative to home prices could result in changes to the affordability of
homes. As a result, homebuyer demand may shift toward smaller or larger homes creating fluctuations in demand for our products.
•
Cost and/or Availability of Materials. Prices of building materials, including wood products, are subject to cyclical market fluctuations, which may
adversely impact operating income when prices rapidly rise or fall within a relatively short period of time. We purchase materials which are then sold to
customers as well as used as direct production inputs for our manufactured and prefabricated products. Short-term changes in the cost and/or availability
of these materials, some of which are subject to significant fluctuations, are often passed on to our customers, but our pricing quotation periods and
market competition may limit our ability to pass on such price changes. We may also be limited in our ability to pass on increases on in-bound freight
costs on our products. We may also experience challenges sourcing suitable products for our customers and may be forced to provide alternative materials
as substitution for contracted orders. Our inability to pass on material price increases to our customers could adversely impact our operating results.
•
Controlling Expenses. Another important aspect of our strategy is controlling costs and striving to be a low total-cost building materials supplier in the
markets we serve. We closely manage our working capital and operating expenses, and we pay careful attention to our logistics function and its effect on
our shipping and handling costs. However, we do have significant fixed costs and declines in our customer demand could have an adverse impact on our
operating results.
29
•
Capital Structure. We strive to optimize our capital structure to ensure that our financial needs are met in light of economic conditions, business
activities, organic investments, opportunities for growth through acquisition and the overall risk characteristics of our underlying assets. In addition to
these factors, we also evaluate our capital structure on the basis of our leverage ratio, our liquidity position, our debt maturity profile, our market
capitalization, and market interest rates. As such, we may enter into various debt or equity transactions to appropriately manage and optimize our capital
structure and liquidity needs.
RECENT DEVELOPMENTS
Business Combinations
During 2024 we completed a number of acquisitions for a combined $345.4 million purchase price, net of cash acquired, including the acquisitions of (i) Quality
Door & Millwork, Inc. (“Quality Door”), (ii) Hanson Truss Components, Inc. (“Hanson Truss”), (iii) RPM Wood Products, Inc. (“RPM”), (iv) Schoeneman Bros.
Company (“Schoeneman”), (v) TRSMI, LLC (“TRSMI”), (vi) Western Truss & Components (“Western Truss”), (vii) CRi SoCal (“CRi”), (viii) Wyoming Millwork Co.
(“Wyoming Millwork”), (ix) Sunrise Wood Designs, LLC (“Sunrise Wood Designs”), (x) Reno Truss, Inc. (“Reno Truss”), (xi) High Mountain Door and Trim, Inc.
(“High Mountain”), (xii) Douglas Lumber, Kitchens and Home Center (“Douglas Lumber”), and (xiii) Kleet Lumber (“Kleet Lumber”).
On January 2, 2025, we completed our previously announced acquisition of Alpine Lumber Company, the largest independently operated supplier of building
materials in Colorado and northern New Mexico. Alpine serves the Colorado Front Range, western Colorado and northern New Mexico through its 21 operating
locations and provides a broad product range, including prefabricated trusses and wall panels and millwork. On February 3, 2025, we completed the acquisition of O.C.
Cluss Lumber, a lumber and building supplies provider in southwestern Pennsylvania, western Maryland and northern West Virginia.
These acquisitions further expand our market footprint and provide additional operations in our value-added product categories and are further described in Notes
3 and 16 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K.
Company Shares Repurchases
On February 21, 2024, the Company’s board of directors authorized the repurchase of up to $1.0 billion of the Company’s outstanding shares of common stock,
inclusive of the approximately $200 million remaining outstanding in the prior share repurchase plan authorized in April 2023. Share repurchases under this program
were completed in May 2024.
On August 5, 2024, the Company’s board of directors authorized a new repurchase plan of up to $1.0 billion of the Company’s outstanding shares of common
stock.
Under share repurchase programs authorized by the board of directors since August 2021, the Company has repurchased a total of 95.9 million shares of common
stock, or 46.5% of the Company’s total shares outstanding, at an average price of $79.56, inclusive of fees and taxes, including 8.9 million shares of common stock at an
average price of $170.74, inclusive of fees and taxes, in 2024. As of December 31,2024, the Company had $500.0 million authorization remaining under its current share
repurchase program.
Debt Transactions
On February 29, 2024, the Company completed a private offering of $1.0 billion in aggregate principal amount of 6.375% senior unsecured notes due 2034
(“6.375% 2034 notes”) at an issue price equal to 100% of par value. The net proceeds from the offering were used to pay related transaction fees and expenses, repay
indebtedness outstanding under the Revolving Facility and for general corporate purposes.
This transaction is described further in Note 8 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K. 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 our notes, repay debt,
repurchase shares of our common stock or otherwise enter into transactions regarding its capital structure.
Executive Officer Transition
On September 19, 2024, the Company’s board of directors appointed Peter Jackson as the Company’s next President & Chief Executive Officer and member of
its board of directors, effective November 6, 2024. Mr. Jackson previously served as Executive Vice President and Chief Financial Officer of the company since January
2021 and as Senior Vice President and Chief Financial Officer since November 2016. Mr. Jackson succeeded Dave Rush, who served as President and Chief Executive
Officer since November 2022 and retired after 25 years of dedicated service to the Company, effective November 6, 2024. Mr. Rush will remain on the Company’s
30
board of directors and continue as a special advisor to the Company to ensure a smooth transition. Additionally, the Company’s board of directors appointed Pete
Beckmann, Senior Vice President, as Chief Financial Officer to succeed Mr. Jackson, effective November 6, 2024. Mr. Beckmann previously served as Senior Vice
President, Financial Planning &Analysis of the Company since January 2021 and has been with the Company and legacy companies since 1999, serving in finance roles
of increasing responsibility.
CURRENT OPERATING CONDITIONS AND OUTLOOK
According to the U.S. Census Bureau, actual U.S. total housing starts for the year ended December 31, 2024, were 1.4 million, a decrease of 3.9% compared to
the year ended December 31, 2023. Actual U.S. single-family housing starts for the year ended December 31, 2024, were 1.0 million, an increase of 6.5% compared to
the year ended December 31, 2023. A composite of third-party sources, including the NAHB, are forecasting 1.4 million U.S. total housing starts and 1.0 million U.S.
single-family housing starts for 2025, which are relatively flat from 2024. In addition, in its September 2024 semi-annual forecast, the HIRI forecasted sales in the
professional repair and remodel end market to increase 3.2% in 2025 compared to 2024.
We believe the long-term outlook for the housing industry is positive and that the housing industry remains underbuilt due to growth in the underlying
demographics compared to historical new construction levels. However, uncertainty around interest rates and inflation may continue to pressure near-term housing
industry demand as homes are less affordable for consumers, investors and builders. We believe we are well-positioned to take advantage of the construction activity in
our markets and to increase our market share, which may include strategic acquisitions. We will continue to focus on working capital by closely monitoring the credit
exposure of our customers, remaining focused on maintaining the right level of inventory and by working with our vendors to improve payment terms. We strive to
achieve the appropriate balance of short-term expense control while maintaining the expertise and capacity to grow the business as market conditions expand.
RESULTS OF OPERATIONS
A discussion regarding our financial condition and results of operations for the year ended December 31, 2024, compared to the year ended December 31, 2023,
is presented below. A discussion regarding our financial condition and results of operations for the year ended December 31, 2023, compared to the year ended
December 31, 2022, can be found under Item 7 of Part II of our annual report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on
February 22, 2024.
2024 Compared with 2023
The following table sets forth the percentage relationship to net sales of certain costs, expenses and income items for the years ended December 31:
2024
2023
Net sales
100.0 %
100.0 %
Cost of sales
67.2 %
64.8 %
Gross margin
32.8 %
35.2 %
Selling, general and administrative expenses
23.1 %
22.4 %
Income from operations
9.7 %
12.8 %
Interest expense, net
1.3 %
1.1 %
Income tax expense
1.9 %
2.6 %
Net income
6.5 %
9.1 %
Net Sales. Net sales for the year ended December 31, 2024, were $16.4 billion, a 4.1% decrease from net sales of $17.1 billion for 2023. Net sales decreased
primarily as a result of a core organic sales decrease of 5.1% due to a continued normalization in the multi-family customer segment and declines in the single-family
customer segment as home size and complexity decrease, while commodity price deflation decreased net sales by another 1.8%. These decreases were partially offset by
increases in net sales from acquisitions and increased selling days of 2.1% and 0.7%, respectively.
31
The following table shows net sales classified by major product category for the years ended December 31:
2024
2023
($ amounts in millions)
Net Sales
% of Net Sales
Net Sales
% of Net
Sales
% Change
Manufactured products (1)
$
3,931.6
24.0 % $
4,669.1
27.3 %
(15.8 )%
Windows, doors and millwork (1)
4,226.9
25.7 %
4,310.1
25.2 %
(1.9 )%
Specialty building products and services
4,050.1
24.7 %
3,992.1
23.4 %
1.5 %
Lumber and lumber sheet goods
4,191.9
25.6 %
4,126.0
24.1 %
1.6 %
Total net sales
$
16,400.5
100.0 % $
17,097.3
100.0 %
(4.1 )%
(1) Manufactured products and windows, doors and millwork are collectively referred to as total value-added products.
We experienced decreased net sales in our manufactured products categories primarily due to a continued normalization in multi-family and commodity
deflation. Our windows, doors, and millwork sales declined primarily due to price normalization. For the comparable period, specialty building products and services and
lumber and lumber sheet goods sales remained relatively consistent.
Gross Margin. Gross margin decreased $0.6 billion to $5.4 billion due to decreased sales. Our gross margin percentage decreased to 32.8% in 2024 from 35.2%
in 2023, a 2.4% decrease. This decrease was attributable to single-family and multi-family margin normalization.
Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $48.2 million, or 1.3%. This decrease in expenses was
primarily due to decreased variable compensation costs related to decreased sales and profitability, and reduced intangible amortization expense, partially offset by
additional operating expenses from locations acquired within the last twelve months and asset write-offs.
As a percentage of net sales, selling, general and administrative expenses increased to 23.1% from 22.4% in 2023. This increase was primarily due to decreased
cost leverage on lower net sales during the period.
Interest Expense, Net. Interest expense, net was $207.7 million in 2024, an increase of $15.6 million from 2023. Interest expense increased primarily due to
higher debt balances and average interest rates in 2024 compared to 2023, partially offset by interest income received in 2024.
Income Tax Expense. We recorded income tax expense of $309.6 million during the year ended December 31, 2024, compared to income tax expense of $443.6
million during the year ended December 31, 2023, a decrease of $134.0 million, driven by a decrease in income before income taxes in the current period. Our effective
tax rate was 22.3% in 2024 which was relatively flat compared to the 22.4% in 2023.
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 growth opportunities. Our capital resources at December 31, 2024, consist of cash on hand and borrowing availability under our
Revolving Facility.
Our Revolving Facility will be primarily used for working capital, general corporate purposes, and funding capital expenditures and growth opportunities. In
addition, we may use the Revolving Facility to assist debt consolidation. Availability under the Revolving Facility is determined by a borrowing base. Our borrowing
base consists of trade accounts receivable, inventory, other receivables which include 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.
32
The following table shows our borrowing base and excess availability as of December 31, 2024, and 2023:
December 31,
2024
December 31,
2023
(in millions)
Accounts receivable availability
$
721.9
$
923.8
Inventory availability
891.7
920.8
Other receivables availability
51.5
65.1
Gross availability
1,665.1
1,909.7
Less:
Agent reserves
(39.3 )
(39.8 )
Plus:
Cash in qualified accounts
88.5
13.3
Borrowing base
1,714.3
1,883.2
Aggregate revolving commitments
1,800.0
1,800.0
Maximum borrowing amount (lesser of borrowing base and
aggregate revolving commitments)
1,714.3
1,800.0
Less:
Outstanding borrowings
—
(464.0 )
Letters of credit
(83.3 )
(70.3 )
Net excess borrowing availability on revolving facility
$
1,631.0
$
1,265.7
As of December 31, 2024, we had no outstanding borrowings under our Revolving Facility and our net excess borrowing availability was $1.6 billion after being
reduced by outstanding letters of credit of $0.1 billion. Excess availability must equal or exceed a minimum specified amount, currently $171.4 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, 2024.
Liquidity
Our liquidity at December 31, 2024, was $1.8 billion, which consists of net borrowing availability under the Revolving Facility and cash on hand.
Our level of indebtedness results in significant 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 our 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 capital
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, managing our working capital and/or divesting of non-core businesses.
There are no assurances that these steps would prove successful or materially improve our liquidity position.
Consolidated Cash Flows
A discussion regarding our consolidated cash flows for the year ended December 31, 2024, compared to the year ended December 31, 2023, is presented below.
A discussion regarding our consolidated cash flows for the year ended December 31, 2023, compared to the year ended December 31, 2022, can be found under Item 7
of Part II of our annual report on Form 10-K filed with the SEC on February 22, 2024.
2024 Compared with 2023
Cash provided by operating activities was $1.9 billion in 2024 compared to cash provided by operating activities of $2.3 billion in 2023. The decrease in cash
provided by operating activities was largely the result of a decrease in net income in 2024 of $0.5 billion.
33
For the year ended December 31, 2024, the Company used $42.4 million more cash to invest compared to the prior year ended December 31, 2023, primarily due
to $97.8 million more spent on acquisitions, offset by $63.0 million less as a net investment in property, plant and equipment.
Cash used in financing activities was $1.1 billion in 2024 which consisted primarily of $1.5 billion for repurchases of common stock and $0.5 billion net
payments on the Revolving Facility, offset by a net $1.0 billion received for the issuance of the 6.375% 2034 notes. Cash used in financing activities was $1.7 billion for
2023 which consisted primarily of $1.8 billion in repurchases of common stock, partially offset by $0.2 billion in net borrowings on the Revolving Facility.
These debt transactions are described in Note 8 to the consolidated financial statements included in Item 8 of this annual report on Form 10-K.
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 2025 capital
expenditures to be in the range of $350 million to $450 million primarily related to rolling stock, equipment and facility expansion and improvements to support our
operations.
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 generally accepted accounting principles (“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 policy that requires us to make the most subjective or complex judgments in order to fairly present our consolidated
financial position and results of operations.
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, 2024, our goodwill balance was $3.7 billion, representing 34.8% 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. 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. 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.
The process of evaluating goodwill for impairment involves the determination of the fair value of our reporting units. Our reporting units are aligned with our
three geographical divisions 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 amount. If we conclude that it is more likely than
not that the fair value of the reporting unit is not less than its carrying amount, 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 amount, we perform a quantitative
goodwill impairment test. This test identifies both the existence of and the amount of goodwill impairment by comparing the fair value of a reporting unit to its carrying
amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired. If the carrying amount of a reporting unit exceeds
its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the amount of goodwill allocated to that reporting unit.
We assessed our goodwill balance at December 31, 2024, using a quantitative assessment. In performing the quantitative impairment test at December 31, 2024,
we developed the fair value using a discounted cash flow methodology. Inherent in such fair
34
value determinations are significant assumptions relating to future cash flows, expected future revenues, expected future profitability, the discount rate, the terminal
value, 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, which could result in impairment of goodwill being
recorded.
Significant information and assumptions utilized in estimating future cash flows for quantitative goodwill impairment analyses include projections of revenue
growth utilizing publicly available industry information such as lumber commodity prices and housing start forecasts developed by industry forecasters, including the
NAHB. Expected future profitability reflects 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 on terminal value EBITDA multiples to reflect the relevant expected acquisition prices. The discount rate used 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 EBITDA multiple or increasing the discount rate would not have changed the results of our impairment testing.
At December 31, 2024, the fair values of each of our reporting units were substantially in excess of their respective carrying amounts. Factors that could
negatively impact the estimated fair value of our reporting units and potentially trigger 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/or significant declines in our market
capitalization. Future 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. We did not have any goodwill impairments in 2024, 2023 or 2022.
RECENTLY ISSUED ACCOUNTING STANDARDS
Information regarding recent accounting pronouncements is discussed in Note 2 to the consolidated financial statements included in Item 8 of this annual report
on Form 10-K.
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 5.00%
unsecured senior notes due 2030 (“5.00% 2030 notes”), 4.25% senior unsecured notes due 2032 (“4.25% 2032 notes,”), 6.375% senior unsecured notes due 2032
(“6.375% 2032 notes”), and 6.375% 2034 notes bear interest at a fixed rate, and therefore our interest expense related to these notes would not be affected by an increase
in market interest rates. Borrowings under the Revolving Facility bear interest at either a base rate or secured overnight financing rate (“SOFR”), plus, in each case, an
applicable margin. Therefore, we are exposed to interest rate risk under the Revolving Facility. We did not have any outstanding borrowings on the Revolving Facility as
of December 31, 2024. The Revolving Facility also assesses variable commitment and outstanding letter of credit fees based on quarterly average loan utilization.
We purchase certain materials, including lumber products, which are then sold to customers as well as used as direct production inputs for our manufactured
products that we deliver. Short-term changes in the cost of these materials and the related in-bound freight costs, some of which are subject to significant fluctuations, are
sometimes, but not always, passed on to our customers. Delays in our ability to pass on material price increases to our customers can adversely impact our operating
results.
35
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm – PCAOB ID 238
36
Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022
38
Consolidated Balance Sheets at December 31, 2024, and 2023
39
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
40
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024, 2023 and 2022
41
Notes to Consolidated Financial Statements
42
36
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Builders FirstSource, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Builders FirstSource, Inc. and its subsidiaries (the “Company”) as of December 31, 2024 and 2023,
and the related consolidated statements of operations, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31,
2024, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial
reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,
2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 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, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated 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 appearing
under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial
reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. 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.
Definition and Limitations of Internal Control over Financial Reporting
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.
37
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or
required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Distribution Sales
As described in Note 2 to the consolidated financial statements, the Company recognized consolidated net sales of $16.4 billion for the year ended December 31, 2024, a
majority of which pertains to distribution sales. Revenue is recognized as performance obligations are satisfied by transferring control of a promised good or service to a
customer in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Distribution sales typically consist of the sale of
building products the Company manufactures and the resale of purchased building products. The Company recognizes revenue related to distribution sales at a point in
time upon delivery of the ordered goods to their customers. Payment terms related to distribution sales are not significant as payment is generally received shortly after
the point of sale.
The principal consideration for our determination that performing procedures relating to revenue recognition for distribution sales is a critical audit matter is a high
degree of auditor effort in performing procedures related to the Company’s distribution sales.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process. These procedures also included, among others (i)
testing, on a sample basis, revenue recognized by obtaining and inspecting source documents, such as purchase orders, invoices, proof of delivery, and cash receipts or
third party confirmations and (ii) testing, on a sample basis, outstanding accounts receivable balances as of December 31, 2024 by obtaining and inspecting source
documents, such as purchase orders, invoices, proof of delivery or services performed, and subsequent cash receipts.
/s/ PricewaterhouseCoopers LLP
Dallas, Texas
February 20, 2025
We have served as the Company’s auditor since 1999
38
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
(in thousands, except per share amounts)
2024
2023
2022
Net sales
$
16,400,492
$
17,097,330
$
22,726,418
Cost of sales
11,017,448
11,084,996
14,982,039
Gross margin
5,383,044
6,012,334
7,744,379
Selling, general and administrative expenses
3,787,795
3,836,015
3,974,173
Income from operations
1,595,249
2,176,319
3,770,206
Interest expense, net
207,724
192,115
198,373
Income before income taxes
1,387,525
1,984,204
3,571,833
Income tax expense
309,627
443,649
822,464
Net income
$
1,077,898
$
1,540,555
$
2,749,369
Net income per share:
Basic
$
9.13
$
12.06
$
16.98
Diluted
$
9.06
$
11.94
$
16.82
Weighted average common shares:
Basic
118,038
127,777
161,960
Diluted
118,980
128,998
163,481
The accompanying notes are an integral part of these consolidated financial statements.
39
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
153,624 $
66,156
Accounts receivable, less allowances of $41,233 and $42,488, respectively
1,163,147
1,436,917
Other receivables
344,342
290,310
Inventories, net
1,212,375
1,228,265
Contract assets
151,095
165,677
Other current assets
116,656
113,403
Total current assets
3,141,239
3,300,728
Property, plant and equipment, net
1,961,731
1,803,824
Operating lease right-of-use assets, net
594,301
502,184
Goodwill
3,678,504
3,556,556
Intangible assets, net
1,103,634
1,298,173
Other assets, net
103,677
37,987
Total assets
$
10,583,086 $
10,499,452
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
868,054 $
881,384
Accrued liabilities
634,045
717,528
Contract liabilities
168,208
162,659
Current portion of operating lease liabilities
103,499
98,217
Current maturities of long-term debt
3,470
3,649
Total current liabilities
1,777,276
1,863,437
Noncurrent portion of operating lease liabilities
525,213
434,081
Long-term debt, net of current maturities, discounts and issuance costs
3,700,643
3,177,411
Deferred income taxes
148,167
167,199
Other long-term liabilities
135,317
124,973
Total liabilities
6,286,616
5,767,101
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000 shares authorized; zero shares issued and outstanding
—
—
Common stock, $0.01 par value, 300,000 shares authorized; 113,578 and 121,857 shares issued and outstanding,
respectively
1,136
1,219
Additional paid-in capital
4,271,269
4,270,948
Retained earnings
24,065
460,184
Total stockholders' equity
4,296,470
4,732,351
Total liabilities and stockholders' equity
$
10,583,086 $
10,499,452
The accompanying notes are an integral part of these consolidated financial statements.
40
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
(in thousands)
2024
2023
2022
Cash flows from operating activities:
Net income
$
1,077,898 $
1,540,555 $
2,749,369
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
561,929
558,275
497,140
Amortization of debt discount, premium and issuance costs
5,591
4,685
4,837
Loss on extinguishment of debt
—
728
27,387
Deferred income taxes
(19,033 )
(102,461 )
(92,461 )
Stock-based compensation expense
63,111
48,522
31,337
Credit loss expense (benefit)
10,419
(11,488 )
38,921
Non-cash net loss (gain) on assets
16,972
(7,072 )
(1,965 )
Changes in assets and liabilities, net of assets acquired and liabilities assumed:
Receivables
249,197
(12,641 )
381,223
Inventories
51,475
231,457
271,889
Contract assets
15,036
18,023
24,051
Other current assets
(2,828 )
10,941
15,173
Other assets and liabilities
(54,429 )
(5,311 )
15,189
Accounts payable
(28,600 )
75,750
(314,004 )
Accrued liabilities
(78,350 )
(9,704 )
(15,766 )
Contract liabilities
4,304
(33,387 )
(33,089 )
Net cash provided by operating activities
1,872,692
2,306,872
3,599,231
Cash flows from investing activities:
Cash used for acquisitions, net of cash acquired
(336,458 )
(238,673 )
(628,014 )
Purchases of property, plant and equipment
(380,569 )
(476,335 )
(340,152 )
Proceeds from sale of property, plant and equipment
13,994
46,715
10,687
Cash used for equity investments
(7,686 )
—
—
Net cash used in investing activities
(710,719 )
(668,293 )
(957,479 )
Cash flows from financing activities:
Borrowings under revolving credit facility
954,000
5,128,000
5,881,000
Repayments under revolving credit facility
(1,418,000 )
(4,928,000 )
(6,205,000 )
Proceeds from long-term debt and other loans
1,000,000
—
1,001,500
Repayments of long-term debt and other loans
(3,397 )
(4,221 )
(616,222 )
Payments of debt extinguishment costs
—
—
(20,672 )
Payments of loan costs
(12,829 )
(1,897 )
(16,797 )
Payment of acquisition-related deferred and contingent consideration
(14,364 )
—
—
Tax withholdings on and exercises of equity awards
(62,784 )
(35,233 )
(34,330 )
Repurchase of common stock
(1,517,131 )
(1,811,517 )
(2,593,389 )
Net cash used in financing activities
(1,074,505 )
(1,652,868 )
(2,603,910 )
Net change in cash and cash equivalents
87,468
(14,289 )
37,842
Cash and cash equivalents at beginning of period
66,156
80,445
42,603
Cash and cash equivalents at end of period
$
153,624 $
66,156 $
80,445
Supplemental disclosures of cash flow information:
Cash paid for interest
$
188,453 $
186,497 $
169,390
Cash paid for income taxes
373,059
578,734
936,424
Supplemental disclosures of non-cash activities:
Accrued purchases of property, plant and equipment
$
14,491 $
9,322 $
10,797
Right-of-use assets obtained in exchange for operating lease obligations
175,418
104,512
100,843
Amounts accrued related to repurchases of common stock
13,929
16,988
44,447
Accrued consideration for acquisitions
8,974
13,797
11,270
The accompanying notes are an integral part of these consolidated financial statements.
41
BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Additional
Common Stock
Paid-in
Retained
(in thousands)
Shares
Amount
Capital
Earnings
Total
Balance at December 31, 2021
179,820 $
1,798 $
4,260,670 $
540,013 $
4,802,481
Vesting of restricted stock units
1,329
13
(13 )
—
—
Stock-based compensation expense
—
—
31,337
—
31,337
Repurchase of common stock (1)
(41,853 )
(418 )
—
(2,585,872 )
(2,586,290 )
Exercise of stock options
60
1
588
—
589
Shares withheld for restricted stock units vested
(492 )
(5 )
(34,915 )
—
(34,920 )
Net income
—
—
—
2,749,369
2,749,369
Balance at December 31, 2022
138,864
1,389
4,257,667
703,510
4,962,566
Vesting of restricted stock units
1,074
11
(11 )
—
—
Stock-based compensation expense
—
—
48,522
—
48,522
Repurchase of common stock (2)
(17,753 )
(178 )
—
(1,783,881 )
(1,784,059 )
Exercise of stock options
73
1
658
—
659
Shares withheld for restricted stock units vested
(401 )
(4 )
(35,888 )
—
(35,892 )
Net income
—
—
—
1,540,555
1,540,555
Balance at December 31, 2023
121,857
1,219
4,270,948
460,184
4,732,351
Vesting of restricted stock units
901
9
(9 )
—
—
Stock-based compensation expense
—
—
63,111
—
63,111
Repurchase of common stock (3)
(8,868 )
(89 )
—
(1,514,017 )
(1,514,106 )
Exercise of stock options
32
—
286
—
286
Shares withheld for restricted stock units vested
(344 )
(3 )
(63,067 )
—
(63,070 )
Net income
—
—
—
1,077,898
1,077,898
Balance at December 31, 2024
113,578 $
1,136 $
4,271,269 $
24,065 $
4,296,470
(1)
During the year ended December 31, 2022, we repurchased and retired 41.9 million shares of our common stock at an average price of $61.79 per share, for $2.6
billion, inclusive of fees, pursuant to the repurchase program authorized by our board of directors in February 2022, and further expanded by our board of
directors in May 2022 and November 2022. The primary purpose of the repurchase program was to offset dilution from the merger with BMC.
(2)
During the year ended December 31, 2023, we repurchased and retired 17.8 million shares of our common stock at an average price of $100.49 per share, for
$1.8 billion, inclusive of fees and taxes, pursuant to the repurchase program authorized by our board of directors in November 2022 and further expanded by our
board of directors in April 2023. The primary purpose of the repurchase program was to offset dilution from the merger with BMC.
(3)
During the year ended December 31, 2024, we repurchased and retired 8.9 million shares of our common stock at an average price of $170.74 per share, for $1.5
billion, inclusive of fees and taxes, pursuant to the repurchase programs authorized by our board of directors in February 2024 and August 2024.
The accompanying notes are an integral part of these consolidated financial statements.
42
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. The company operates approximately 590 locations in 43 states across the U.S.
In this annual report, references to the “Company,” “we,” “our,” “ours” or “us” refer to Builders FirstSource, Inc. and its consolidated subsidiaries, unless
otherwise stated or the context otherwise requires.
2. Summary of Significant Accounting Policies
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 intercompany transactions have been eliminated in consolidation.
Accounting Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
Estimates are used when accounting for items such as revenue, vendor rebates, allowance for returns, discounts and credit losses, employee compensation
programs, depreciation and amortization periods, income taxes, inventory values, insurance programs, goodwill, other intangible assets and long-lived assets.
Equity Investments
The Company’s equity investments are accounted for using equity method accounting and are recorded as other assets, net in the accompanying Consolidated
Balance Sheets and are not considered significant to the Company.
Reclassifications
Certain prior periods’ amounts have been reclassified to conform to the current year presentation, including changing the composition of our product categories,
and amounts presented as repurchases of common stock and tax withholdings on and exercises of equity awards. Prior period amounts related to product categories as
disclosed in this Note 2 under Revenue Recognition have been reclassified to conform to the current year presentation.
The prior period amounts related to tax withholdings on equity awards have been reclassified from repurchases of common stock and combined with exercises of
stock options to conform to the present year presentation. Reclassifications had no impact on net income, total assets and liabilities, stockholders’ equity, financing cash
flows, or total cash flows as previously reported.
Segments
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, millwork, windows,
and doors. We also provide a full range of construction services.
Given the span and depth of our geographical reach, our locations are organized into three geographical divisions (East, Central, and West), which are also our
operating segments. Our operating segments are organized on a geographical basis to facilitate a disaggregated management of the Company and to respond to the local
needs of the customers in the markets we serve. All of our operating segments have similar customers, products and services, and distribution methods.
43
Due to these similarities, along with the similar economic profitability achieved across all our operating segments, we aggregate our three operating segments
into one reportable segment in accordance with GAAP. Centralized financial and operational oversight, including resource allocation and assessment of performance, is
performed by our principal executive officer (“CEO”), whom we have determined to be our chief operating decision maker (“CODM”).
Business Combinations
When they meet the requirements under ASC 805, Business Combinations, merger and acquisition transactions are accounted for using the acquisition method,
and accordingly the results of operations of the acquiree are included in the Company’s consolidated financial statements from the acquisition date. The consideration
transferred is allocated to the identifiable assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with any excess recorded as
goodwill. Transaction-related costs are expensed in the period the costs are incurred. During the measurement period, which may be up to one year from the acquisition
date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill.
Revenue Recognition
We recognize revenue as performance obligations are satisfied by transferring control of a promised good or service to a customer in an amount that reflects the
consideration we expect to be entitled to in exchange for those goods or services. We generally classify our revenues into two types: (i) distribution sales; or (ii) sales
related to contracts with service elements.
Distribution sales typically consist of the sale of building products we manufacture and the resale of purchased building products. We recognize revenue related
to distribution sales at a point in time upon delivery of the ordered goods to our customers. Payment terms related to distribution sales are not significant as payment is
generally received shortly after the point of sale.
Our contracts with service elements primarily relate to installation and construction services. We evaluate whether multiple contracts should be combined and
accounted for as a single contract and whether a single or combined contract should be accounted for as a single performance obligation or multiple performance
obligations. If a contract is separated into more than one performance obligation, we allocate the transaction price to each performance obligation generally based on
observable standalone selling prices of the underlying goods or services. Revenue related to contracts with service elements is generally recognized over time based on
the extent of progress towards completion of the performance obligation because of continuous transfer of control to the customer. We consider costs incurred to be
indicative of goods and services delivered to the customer. As such, we use a cost-based input method to recognize revenue on our contracts with service elements as it
best depicts the transfer of assets to our customers. Payment terms related to sales for contracts with service elements are specific to each customer and contract.
However, they are considered to be short-term in nature as payments are normally received either throughout the life of the contract or shortly after the contract is
complete.
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 determinable. 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. The
Company records sales incentives provided to customers as a reduction of revenue. We present all sales tax on a net basis in our consolidated financial statements.
Costs to obtain contracts are expensed as incurred as our contracts are typically completed in one year or less, and where applicable, we generally would incur
these costs whether or not we ultimately obtain the contract. We do not disclose the value of our remaining performance obligations on uncompleted contracts as our
contracts generally have a duration of one year or less.
The timing of revenue recognition, invoicing and cash collection results in accounts receivable, contract assets and contract liabilities. Contract assets include
unbilled amounts when the revenue recognized exceeds the amount billed to the customer, and amounts representing a right to payment from previous performance that
is conditional on something other than passage of time, such as retainage. Contract liabilities consist of customer advances and deposits, and deferred revenue.
44
The following table disaggregates our net sales by product category for the years ended December 31:
2024
2023
2022
(in thousands)
Manufactured products
$
3,931,647
$
4,669,088
$
5,678,570
Windows, doors and millwork
4,226,871
4,310,061
4,651,250
Specialty building products and services
4,050,027
3,992,132
4,311,123
Lumber and lumber sheet goods
4,191,947
4,126,049
8,085,475
Total net sales
$
16,400,492
$
17,097,330
$
22,726,418
As our product alignment continues to be refined, we have reclassified prior periods net sales by product category to conform to the current period presentation.
The impact to each of the prior periods’ net sales for each product category was less than 1% for 2023 and 2022.
Net sales from installation and construction services represents less than 10% of the Company’s net sales for each period presented.
Through December 31, 2024, 2023 and 2022, we recognized as revenue substantially all of the contract liabilities balance at December 31, 2023, 2022 and 2021,
respectively.
Cash and Cash Equivalents and 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 net book cash
balance resulting from outstanding checks that had not yet been paid by any single financial institution, they are reflected in accounts payable in the accompanying
consolidated balance sheets.
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 geographic economy is not
significant. Other receivables consist primarily of vendor rebates receivables and income tax receivables.
Our customer mix is a balance of large national homebuilders, regional homebuilders, local and custom homebuilders and repair and remodeling contractors as
well as multi-family builders. For the year ended December 31, 2024, our top 10 customers accounted for 15% of our net sales, with our largest customer accounting for
4% of net sales.
The allowance for credit losses 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 and forecasted economic conditions that may affect the customer’s ability to pay, and historical experience.
Accounts receivable are written off when deemed uncollectible.
We also establish reserves for credit memos and customer returns. The reserve balance was $14.4 million and $14.8 million at December 31, 2024, and 2023,
respectively. The activity in this reserve was not material for each year presented.
The following table shows the changes in our allowance for credit losses:
2024
2023
2022
(in thousands)
Balance at January 1,
$
27,691 $
50,383 $
21,761
Net additions (reversals) to provision
10,419
(11,488 )
38,921
Write-offs, net of recoveries
(11,276 )
(11,204 )
(10,299 )
Balance at December 31,
$
26,834 $
27,691 $
50,383
45
Inventories
Inventories consist principally of materials purchased for resale, including lumber and lumber sheet goods, windows, doors and millwork, and other building
products, as well as certain manufactured products and are stated at the lower of cost or net realizable value. 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 at defined intervals, generally related to a stipulated level of
purchases. 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. Throughout the year we estimate the amount of the rebates based upon the expected level of purchases.
We continually evaluate and revise these estimates, as necessary, based on actual purchase levels.
We source products from a large number of suppliers. Materials purchased from our largest single supplier represented 8% of our total materials purchased in
2024.
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 totaled $654.0 million, $656.0 million and $641.8 million in 2024, 2023 and
2022, respectively.
Income Taxes
We account for income taxes utilizing the asset and 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 material as a result of third-
party inspection and acceptance processes.
Debt Issuance Costs and Debt Discount/Premium
Loan costs are capitalized upon the issuance of long-term debt and amortized over the life of the related debt. Debt issuance costs associated with term debt are
presented as a reduction to long-term debt. Debt issuance costs associated with revolving debt arrangements are presented as a component of other assets. Debt issuance
costs incurred in connection with revolving debt arrangements are amortized using the straight-line method. Debt issuance costs, discounts and premiums incurred in
connection with term debt are amortized over the life of the related debt using the effective interest method. Amortization of debt issuance costs, discounts and premiums
are included in interest expense. Upon changes to our debt structure, we evaluate debt issuance costs, discounts and premiums in accordance with the Debt topic of the
Codification. We adjust debt issuance costs, discounts and premiums as necessary based on the results of this evaluation, as discussed in Note 8.
46
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
10 to 40 years
Machinery and equipment
7 to 10 years
Information technology, furniture and fixtures
3 to 5 years
Leasehold improvements
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 information technology, furniture and fixtures, and generally depreciated using the straight-line method over the estimated useful
lives of the assets, generally three years.
Cloud Computing Arrangements
We assess cloud computing arrangements to determine whether the contract meets the definition of a service contract or conveys a software license. When cloud
computing arrangements meet the definition of a service contract, we capitalize expenditures for implementation, set-up, and other upfront costs incurred. Once the
implementation of a cloud computing arrangement is complete and ready for its intended use, the Company amortizes the costs over the expected term of the hosting
arrangement using the straight-line method to the same income statement line as the associated cloud operating expenses. As of December 31, 2024 and 2023, we had
capitalized costs, net of amortization, of $9.3 million and $1.3 million included in Other current assets, respectively. As of December 31, 2024, we had capitalized costs,
net of amortization, of $52.7 million included in Other assets, net. We did not have any non-current amounts recorded related to these agreements as of December 31,
2023. Amortization expense for these costs was $1.3 million and $1.4 million for the years ended December 31, 2024 and 2023, respectively, and is included in Selling,
general and administrative expenses within the Consolidated Statements of Operations. We did not have any amortization expense related to these costs during the year
ended December 31, 2022.
Leases
We lease certain land, buildings, rolling stock and other types of equipment for use in our operations. These leases typically have initial terms ranging from five
to 15 years. Many of our leases contain renewal options which are exercisable at our discretion. These renewal options generally have terms ranging from one to five
years.
Under the Leases topic of the Codification, lessees are 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.
We determine if an arrangement is a lease at the inception of the arrangement. Lease liabilities are recognized based on the present value of lease payments over
the lease term at the arrangement’s commencement date. Right-of-use assets are recognized based on the amount of the measurement of the lease liability adjusted for
any lease payments made to the lessor at or before the commencement date, minus any lease incentives received and any initial direct costs incurred. Renewal options
are included in the calculation of our right-of-use assets and lease liabilities when it is determined that they are reasonably certain of exercise based on an analysis of the
relevant facts and circumstances. As the implicit rate of return of our lease agreements is usually not readily determinable, we generally use our incremental borrowing
rate in determining the present value of lease payments. We determine our incremental borrowing rate based on information available to us at the lease commencement
date. Certain of our lease arrangements contain lease and non-lease components. We have elected to account for non-lease components as a part of the related lease
components for all of our leases. Leases with an initial term of 12 months or less are not recognized on our balance sheet. We recognize the expense for these leases on a
straight-line basis over the lease term.
We have certain lease agreements that are subject to changes based on the Consumer Price Index or another referenced index. In the event of changes to the
relevant index, lease liabilities are not remeasured and incremental costs are treated as variable lease payments and recognized in the period in which the obligation for
those payments is incurred.
47
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
amount 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 amount 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 amount is greater than
estimated fair value. The net carrying amount 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.
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. On a quarterly basis, we engage an external actuarial professional to
independently assess and estimate the total liability outstanding. Provisions for losses are developed from these valuations which rely upon our past claims experience,
which considers both the frequency and settlement of claims. The legal costs associated with these claims are included in these developed provisions. We discount our
worker’s compensation, general liability, and auto liability insurance reserves based upon estimated future payment streams at our risk-free rate. Our total insurance
reserve balances were $206.3 million and $190.0 million as of December 31, 2024, and 2023, respectively. Of these balances, $103.4 million and $100.0 million were
recorded as other long-term liabilities as of December 31, 2024, and 2023, respectively. Included in these reserve balances as of December 31, 2024, and 2023, were
$17.1 million and $13.7 million, respectively, of claims that exceeded stop-loss limits and are expected to be recovered under insurance policies which are also recorded
as other receivables and other assets in the accompanying consolidated balance sheets.
Net Income per Common Share
Net income 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 the calculation of basic and diluted EPS for the years ended December 31:
Years Ended December 31,
2024
2023
2022
(in thousands, except per share amounts)
Numerator:
Net income
$
1,077,898 $
1,540,555 $
2,749,369
Denominator:
Weighted average shares outstanding, basic
118,038
127,777
161,960
Dilutive effect of options and RSUs
942
1,221
1,521
Weighted average shares outstanding, diluted
118,980
128,998
163,481
Net income per share:
Basic
$
9.13 $
12.06 $
16.98
Diluted
$
9.06 $
11.94 $
16.82
Antidilutive and contingent RSUs excluded from diluted EPS
147
3
99
48
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 amounts 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 carrying amount of a reporting unit exceeds its fair 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 and vesting of restricted stock units (“RSU”). We recognize the effect of pre-vesting forfeitures in the period they actually occur.
The fair value of RSU awards which are subject to or contain market conditions is estimated on the date of grant using the Monte Carlo simulation model with
the following weighted average assumptions for the years ended December 31:
2024
2023
2022
Expected volatility (company)
43.8 %
46.5 %
53.0 %
Expected volatility (peer group median)
30.5 %
32.1 %
34.6 %
Correlation between the company and peer group median
0.5
0.5
0.6
Expected dividend yield
0.0 %
0.0 %
0.0 %
Risk-free rate
4.5 %
3.8 %
1.7 %
The expected volatilities and correlation are based on the historical daily returns of our common stock and the common stocks of the constituents of the
Company’s peer group over the most recent period equal to the measurement period. 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 measurement period.
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.
49
As of December 31, 2024, and 2023, the Company does not have any material financial instruments which are measured at fair value on a recurring basis. We
have elected to report the value of our 5.00% 2030 notes, 4.25% 2032 notes, 6.375% 2032 notes, 6.375% 2034 notes, and Revolving Facility at amortized cost. The fair
values of the 5.00% 2030 notes, 4.25% 2032 notes, 6.375% 2032 notes, and 6.375% 2034 notes at December 31, 2024, were $523.6 million, $1,149.2 million, $697.4
million and $988.8 million respectively, and were determined using Level 2 inputs based on market prices.
Comprehensive Income
Comprehensive income 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 and other gains and losses affecting stockholders’ equity that, under GAAP, are excluded from net
income. Comprehensive income is equal to net income for the years ended December 31, 2024, 2023 and 2022.
Recently Issued Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the
transparency and decision usefulness of income tax disclosures. This amendment modifies the rules on income tax disclosures to require entities to disclose: (i) specific
categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold; (ii) the amount of income taxes paid (net of
refunds received) disaggregated by federal, state, and foreign taxes, as well as individual jurisdictions in which income taxes paid is equal to or greater than five percent
of total income taxes paid net of refunds; (iii) the income or loss from continuing operations before income tax expense, or benefit, disaggregated between domestic and
foreign; and (iv) income tax expense or benefit from continuing operations disaggregated by federal, state and foreign. The guidance is effective for annual periods
beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, though retrospective application is permitted. We are
currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.
In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued Accounting
Standards Update No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective
Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific
types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for annual reporting
periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The requirements will be
applied prospectively with the option for retrospective application and early adoption is permitted. We are currently evaluating the potential impact of adopting this new
guidance on our consolidated financial statements and related disclosures.
3. Business Combinations
During 2024 we completed a number of acquisitions for a combined $345.4 million purchase price, net of cash acquired, including the acquisitions of (i) Quality
Door & Millwork, Inc. (“Quality Door”), (ii) Hanson Truss Components, Inc. (“Hanson Truss”), (iii) RPM Wood Products, Inc. (“RPM”), (iv) Schoeneman Bros.
Company (“Schoeneman”), (v) TRSMI, LLC (“TRSMI”), (vi) Western Truss & Components (“Western Truss”), (vii) CRi SoCal (“CRi”), (viii) Wyoming Millwork Co.
(“Wyoming Millwork”), (ix) Sunrise Wood Designs, LLC (“Sunrise Wood Designs”), (x) Reno Truss, Inc. (“Reno Truss”), (xi) High Mountain Door and Trim, Inc.
(“High Mountain”), (xii) Douglas Lumber, Kitchens and Home Center (“Douglas Lumber”), and (xiii) Kleet Lumber (“Kleet Lumber”).
Quality Door is a millwork distributor, serving Idaho markets in the Boise and Idaho Falls areas. Hanson Truss produces trusses, serving the areas of northern
California and western Nevada. RPM provides a diverse product mix of lumber, windows, doors, millwork and trusses in northeastern Florida. Schoeneman
manufacturers trusses and provides building materials and products to eastern South Dakota, and western Iowa. TRSMI manufactures and distributes trusses around the
Detroit, Michigan area. Western Truss manufactures roof and floor trusses, serving central Arizona. CRi installs windows and doors in the southern California area.
Wyoming Millwork serves custom and semi-custom builders with lumber and lumber sheet goods, windows, doors, millwork, trusses and other building products in
Delaware. Sunrise Wood Designs is a custom cabinet manufacturer and installer to production and custom builders in North Texas. Reno Truss is a manufacturer and
distributor of roof and floor trusses to single-family and multi-family markets in the Nevada area. High Mountain distributes and installs doors, windows and millwork to
single-family and multi-family markets in the northern Nevada area. Douglas Lumber provides building materials to Rhode Island, Massachusetts and Connecticut, while
Kleet Lumber provides lumber and building materials in the Long Island area.
50
During 2023 we completed a number of acquisitions for a combined $252.5 million purchase price, net of cash acquired, including the acquisitions of (i) Noltex
Truss and its affiliates (“Noltex”), (ii) Builders Millwork and Supply, Inc. (“BMS”) (iii) J.B. Millworks, LLC (“JBM”), (iv) Church and Church, Inc. (“Church’s”), (v)
Franks Cash and Carry, Inc. (“FCC”), (vi) Standale Lumber, LLC and Granville Lumber Co., LLC (“Standale”), and (vii) Encore Performance, LLC (“Encore”). These
acquisitions further expanded our market footprint and provide additional operations in our value-added product categories and our multi-family customer segment.
Each of these acquisitions were funded with a combination of cash on hand and borrowings under our Revolving Facility. These transactions were accounted for
using the acquisition method, and accordingly the results of operations have been included in the Company’s consolidated financial statements from the acquisition date.
The purchase price was allocated to the assets acquired and liabilities assumed 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.
Pro forma financial information for the acquisitions discussed above for 2024 and 2023 are not presented as these acquisitions did not have a material impact on
our results of operations, individually or in the aggregate for each respective period.
The following table summarizes the aggregate fair values of the assets acquired and liabilities assumed for acquisitions during the years ended December 31,
2024, and 2023:
Total Acquisitions
2024
2023
(in thousands)
Cash and cash equivalents
$
9,730
$
—
Accounts receivable
39,749
25,751
Other receivables
127
—
Inventories
35,585
36,789
Contract assets
454
—
Other current assets
426
70
Property, plant and equipment
55,385
15,053
Operating lease right-of-use assets
19,183
20,449
Finance lease right-of-use assets
—
528
Intangible assets
110,848
82,942
Other assets
134
138
Total assets
271,621
181,720
Accounts payable
8,842
3,122
Accrued liabilities
9,138
1,985
Contract liabilities
1,244
2,868
Operating lease liabilities
19,183
20,449
Finance lease liabilities
—
528
Total liabilities
38,407
28,952
Goodwill
121,948
99,702
Total purchase consideration
355,162
252,470
Accrued contingent consideration and purchase price adjustments
(8,974 )
(13,797 )
Less: cash acquired
(9,730 )
—
Total cash consideration
$
336,458
$
238,673
51
4. Property, Plant and Equipment
Property, plant and equipment consisted of the following at December 31:
2024
2023
(in thousands)
Land and improvements
$
401,374
$
369,574
Buildings and improvements
834,773
714,767
Machinery and equipment
1,530,119
1,303,312
Information technology, furniture and fixtures
256,095
213,066
Construction in progress
141,864
207,826
Finance lease right-of-use assets
3,479
7,268
Property, plant and equipment
3,167,704
2,815,813
Less: accumulated depreciation
1,205,973
1,011,989
Property, plant and equipment, net
$
1,961,731
$
1,803,824
Depreciation expense was $256.5 million, $222.6 million and $194.6 million, of which $78.7 million, $63.5 million, and $48.7 million was included in cost of
sales, for the years ended December 31, 2024, 2023 and 2022, respectively.
Included in property, plant and equipment are certain assets held under other finance obligations. These assets are recorded at the present value of the lease
payments and include land, buildings and equipment. Amortization charges associated with assets held under other finance obligations are included in depreciation
expense.
The following balances held under other finance obligations are included in the accompanying consolidated balance sheet as of December 31:
2024
2023
(in thousands)
Land and improvements
$
105,833
$
106,163
Buildings and improvements
115,020
115,970
Assets held under other finance obligations
220,853
222,133
Less: accumulated amortization
34,718
31,246
Assets held under other finance obligations, net
$
186,135
$
190,887
5. Goodwill
The following table sets forth the changes in the carrying amount of goodwill for the years ended December 31, 2024, and 2023:
(in thousands)
Balance as of December 31, 2022 (1)
$
3,456,854
Acquisitions
99,702
Balance as of December 31, 2023 (1)
$
3,556,556
Acquisitions
121,948
Balance as of December 31, 2024 (1)
$
3,678,504
(1)
Goodwill is presented net of accumulated impairment losses of $44.6 million.
The change in the carrying amount of goodwill during 2024 is attributable to acquisitions. The amount allocated to goodwill is attributable to the assembled
workforces acquired, expected synergies, and expected growth from the new markets which the Company has entered. The goodwill recognized from the TRSMI
business combination will not be deductible for tax purposes. The $121.2 million of goodwill recognized from the other current year acquisitions is expected to be
deductible and amortized ratably over a 15-year period for tax purposes.
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.
52
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 more likely than not that the fair value of the reporting unit is not 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
amount, we perform a quantitative goodwill impairment test. This test identifies both the existence of and the amount of goodwill impairment by comparing the fair
value of a reporting unit to its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount goodwill is not impaired. If the
carrying amount of a reporting unit exceeds its fair value an impairment loss is recognized in an amount equal to that excess, limited to the amount of goodwill allocated
to that reporting unit.
The process of evaluating goodwill for impairment involves the determination of the fair value of our reporting units. Our reporting units are aligned with our
three geographic operating segments. 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 evaluating goodwill for impairment at December 31, 2024, we developed the fair value 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 significant assumptions used in the
discounted cash flow methodology are the discount rate, the terminal value and the expected future revenues and profitability.
We recorded no goodwill impairment charges in 2024, 2023 or 2022.
6. Intangible Assets
The following table presents intangible assets as of December 31:
2024
2023
Gross
Carrying Amount
Accumulated
Amortization
Gross
Carrying Amount
Accumulated
Amortization
(in thousands)
Customer relationships
$
2,216,578 $
(1,198,125 ) $
2,105,730 $
(912,865 )
Trade names
64,500
(43,483 )
64,500
(36,459 )
Non-compete agreements
13,050
(8,599 )
13,050
(6,223 )
Developed technology
95,600
(35,887 )
95,600
(25,160 )
Total intangible assets
$
2,389,728 $
(1,286,094 ) $
2,278,880 $
(980,707 )
During the years ended December 31, 2024, 2023 and 2022, we recorded amortization expense in relation to the above-listed intangible assets of $305.4 million,
$335.7 million and $302.6 million, respectively. We recorded no intangible asset impairment charges for those same years.
During 2023 we derecognized certain customer relationships, trade names, non-compete agreements and subcontractor relationships assets as they were fully
amortized, resulting in a decrease in the gross carrying amount of the intangible assets and the related accumulated amortization.
In connection with the current year acquisitions, we recorded customer relationships intangible assets of $110.8 million. The weighted average useful life of the
acquired customer relationships intangible assets is 2.8 years. The fair value of acquired customer relationships intangible assets was primarily estimated by applying the
multiperiod excess earnings method, which involved the use of significant estimates and assumptions primarily related to forecasted revenue growth rates, gross margin,
contributory asset charges, customer attrition rates, and market-participant discount rates. These measures are 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, attrition rates and discount rates.
53
The following table presents the estimated amortization expense for intangible assets for the years ending December 31:
(in thousands)
2025
$
252,871
2026
220,642
2027
164,988
2028
124,052
2029
71,710
Thereafter
269,371
Total future net intangible amortization expense
$
1,103,634
7. Accrued Liabilities
Accrued liabilities consisted of the following:
December 31,
2024
December 31,
2023
(in thousands)
Accrued payroll and other employee related expenses
$
310,073 $
383,157
Self-insurance reserves
102,876
89,987
Accrued business and other taxes
72,944
76,098
Accrued contingent consideration & purchase price adjustments
6,974
43,127
Accrued rebates payable
35,404
35,921
Accrued interest
55,454
34,537
Other
50,320
54,701
Total accrued liabilities
$
634,045 $
717,528
8. Long-Term Debt
Long-term debt consisted of the following:
December 31,
2024
December 31,
2023
(in thousands)
Revolving credit facility (1)
$
— $
464,000
4.25% 2032 notes
1,300,000
1,300,000
6.375% 2034 notes
1,000,000
—
6.375% 2032 notes
700,000
700,000
5.00% 2030 notes
550,000
550,000
Other finance obligations
190,312
193,048
Finance lease obligations
1,078
2,297
3,741,390
3,209,345
Unamortized debt discount/premium and debt issuance costs
(37,277 )
(28,285 )
3,704,113
3,181,060
Less: current maturities of long-term debt
3,470
3,649
Long-term debt, net of current maturities, discounts and issuance costs
$
3,700,643 $
3,177,411
(1)
The weighted average interest rate was 7.1% as of December 31, 2023.
2022 Debt Transactions
Notes Offering Transactions
On January 21, 2022, the Company completed a private offering of an additional $300.0 million in aggregate principal amount of 4.25% 2032 notes at an issue
price equal to 100.50% of par value. The net proceeds from the offering were used to repay indebtedness outstanding under the Revolving facility and pay related
transaction fees and expenses. The 4.25% 2032 notes issued in January 2022 form part of the same series of notes as the $1.0 billion of 4.25% 2032 notes issued in July
2021.
The additional $1.5 million in proceeds received in excess of par value represents a debt premium which has been recorded as an increase to long-term debt. In
connection with the offering, we incurred $4.4 million of various third-party fees and expenses which
54
have been recorded as a reduction to long-term debt. The debt premium and third-party costs will be amortized over the contractual life of the 4.25% 2032 notes using
the effective interest method.
On June 15, 2022, the Company completed a private offering of $700.0 million in aggregate principal amount of 6.375% 2032 notes at an issue price equal to
100% of par value. Subsequently, on June 16, 2022, the Company redeemed the remaining $612.5 million of the 6.75% senior secured notes due 2027 (“2027 notes”).
In connection with the issuance of the 6.375% 2032 notes, we incurred $10.4 million of various third-party fees and expenses. These costs have been recorded as
a reduction to long-term debt and are being amortized over the contractual life of the 6.375% 2032 notes using the effective interest method.
The Company concluded the redemption of the 2027 notes was a debt extinguishment and recorded a loss on debt extinguishment of $27.4 million in interest
expense in the second quarter of 2022. Of this loss, $20.7 million was attributable to the payment of the redemption premium on the extinguished notes and $6.7 million
was attributable to the write-off of unamortized debt issuance costs and debt premium.
Revolving Credit Facility Amendments
On February 4, 2022, we amended our revolving credit facility to increase the total commitments by an aggregate amount of $400.0 million, resulting in a total
$1.8 billion revolving credit facility. All other material terms of the credit facility remained unchanged from those of the previous agreement. Effective with this
amendment, the eurodollar rate loans and related interest rate benchmark were changed to term SOFR. The applicable margin ranges for term SOFR loans were amended
to be from 1.35% to 1.60% and there are no changes to base rate loan borrowings. In connection with this amendment, we incurred $2.0 million of new debt issuance
costs which have been recorded as other assets and will be amortized straight-line through December 2026.
2023 Debt Transactions
Revolving Credit Facility Amendments
On January 17, 2023, the Company amended the Revolving Facility to extend the maturity of $1,620.0 million, and $180.0 million commitments of the total
$1,800.0 million commitments to January 17, 2028, and December 17, 2026, respectively. Subsequently, on April 3, 2023, the company further amended the Revolving
Facility to extend the maturity of the $180.0 million commitments to January 17, 2028. These amendments included additional interest pricing tiers for borrowings,
which range from 1.10% to 1.60% in the case of loans using SOFR, and 0.00% to 0.50% in the case of base rate loans.
In connection with these amendments, we expensed $0.7 million of unamortized debt issuance costs related to exiting lenders to interest expense, and we incurred
$1.9 million of new debt issuance costs which, together with the previous unamortized debt issuance costs, have been deferred and amortized over the remaining
contractual life.
2024 Debt Transactions
On February 29, 2024, the Company completed a private offering of $1.0 billion in aggregate principal amount of the 6.375% 2034 notes at an issue price equal
to 100% of par value. The net proceeds from the offering were used to repay indebtedness outstanding under the Revolving Facility and for general corporate purposes.
In connection with the issuance of the 6.375% 2034 notes, we incurred $12.8 million of various third-party fees and expenses. These costs have been recorded as
a reduction to long-term debt and are being amortized over the contractual life of the 6.375% 2034 notes using the effective interest method.
Revolving Credit Facility
As of December 31, 2024, the Revolving Facility provides for a $1.8 billion revolving credit line to be used for working capital, general corporate purposes and
funding capital expenditures and growth opportunities. In addition, we may use the Revolving Facility to facilitate debt repayment and consolidation. 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, 2024, we had no outstanding borrowings under our Revolving Facility and our net excess borrowing availability was $1.6 billion after
being reduced by outstanding letters of credit of $83.3 million.
55
As of December 31, 2024, borrowings under the Revolving Facility bear interest, at our option, at either the SOFR or a base rate, plus, in each case, an applicable
margin. The applicable margin ranges from 1.10% to 1.60% per annum in the case of term SOFR loans and 0.00% to 0.50% per annum in the case of base rate loans. A
commitment fee, currently 0.20% per annum, is charged on the unused amount of the Revolving Facility based on quarterly average loan utilization. Letters of credit
under the Revolving Facility are assessed at a rate equal to 1.25% or 1.50%, based on the average excess availability, 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 Revolving Facility are guaranteed jointly and severally by the Company and all other subsidiaries that guarantee our 5.00% 2030 notes,
our 4.25% 2032 notes, our 6.375% 2032 notes and our 6.375% 2034 notes (such subsidiaries, the “Debt Guarantors”). All obligations and the guarantees of those
obligations are secured by substantially all of the assets of the Company and the Debt Guarantors, subject to certain exceptions and permitted liens, including, with
respect to the Revolving Facility, a first-priority security interest in such assets that constitute Revolving Collateral (as defined below) and a second-priority security
interest in such assets that constitute Notes Collateral (as defined below).
“Revolving 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 that is not ABL Collateral.
The Revolving Facility contains 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. In addition, the Revolving Facility also contains a financial covenant requiring the satisfaction of a minimum
fixed charge ratio of 1.00 to 1.00 if our excess availability falls below the greater of $80.0 million or 10% of the maximum borrowing amount, which was $171.4 million
as of December 31, 2024.
Senior Secured Notes due 2030
As of December 31, 2024, we have $550.0 million outstanding in aggregate principal amount of the 5.00% 2030 notes, which mature on March 1, 2030. Interest
accrues on the 5.00% 2030 notes at a rate of 5.00% per annum and is payable semi-annually on March 1 and September 1 of each year, commencing on September 1,
2020.
The terms of the 5.00% 2030 notes are governed by the indenture, dated February 11, 2020 (the “2030 Indenture”), among the Company, the guarantors named
therein and Wilmington Trust, National Association, as trustee. The 5.00% 2030 notes, subject to certain exceptions, are guaranteed, jointly and severally, on a senior
unsecured basis, by the Debt Guarantors. Subject to certain exceptions, future subsidiaries that guarantee the Revolving Facility, the 2032 notes or certain other
indebtedness will also guarantee the 5.00% 2030 notes.
The 5.00% 2030 notes constitute senior unsecured obligations of the Company and the Debt Guarantors, pari passu in right of payment with all of the existing
and future senior indebtedness of the Company, including indebtedness under the Revolving Facility, and the 2032 notes. The 5.00% 2030 notes are also (i) effectively
subordinated to all existing and future secured indebtedness of the Company and the Debt Guarantors to the extent of the value of the assets securing such indebtedness,
(ii) senior to all of the future subordinated indebtedness of the Company and the Debt Guarantors, and (iii) structurally subordinated to any existing and future
indebtedness and other liabilities, including preferred stock, of the Company’s subsidiaries that do not guarantee the 5.00% 2030 notes.
At any time prior to March 1, 2025, the Company may redeem the 5.00% 2030 notes in whole or in part at a redemption price equal to 100% of the principal
amount of the 5.00% 2030 notes plus the “applicable premium” set forth in the 2030 Indenture. At any time on or after March 1, 2025, the Company may redeem the
5.00% 2030 notes at the redemption prices set forth in the 2030 Indenture, plus accrued and unpaid interest, if any, to the redemption date. If the Company experiences
certain change of control events, holders of the 5.00% 2030 notes may require it to repurchase all or part of their 5.00% 2030 notes at 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the repurchase date.
Senior Secured Notes due 2032
As described above, during 2022, the Company issued $300.0 million of 4.25% 2032 notes, which form part of the same series of notes as the $1.0 billion of
4.25% 2032 notes issued in July 2021, and $700.0 million of 6.375% 2032 notes (collectively, the “2032
56
notes”). The 4.25% 2032 notes mature on February 1, 2032, with interest accruing at a rate of 4.25% per annum and interest payable semi-annually on February 1 and
August 1 of each year. The 6.375% 2032 notes mature on June 15, 2032, with interest accruing at a rate of 6.375% per annum and interest payable semi-annually on June
15 and December 15 of each year.
The terms of the 4.25% 2032 notes and the 6.375% 2032 notes are governed by the indentures, dated as of July 23, 2021, and June 15, 2022 (collectively the
“2032 Indentures”), respectively, contain consistent terms and are among the Company, the guarantors named therein and Wilmington Trust, National Association, as
trustee.
The 2032 notes, subject to certain exceptions, are guaranteed, jointly and severally, on a senior unsecured basis, by the Debt Guarantors. Subject to certain
exceptions, future subsidiaries that guarantee the Revolving Facility, the 5.00% 2030 notes or certain other indebtedness will also guarantee the 2032 notes.
The 2032 notes constitute senior unsecured obligations of the Company and Debt Guarantors, pari passu in right of payment, with all of the existing and future
senior indebtedness of the Company, including indebtedness under the Revolving Facility and the 5.00% 2030 notes, effectively subordinated to all existing and future
secured indebtedness of the Company and the Debt Guarantors (including indebtedness under the Revolving Facility and 2032 notes) to the extent of the value of the
assets securing such indebtedness, senior to all of the future subordinated indebtedness of the Company and the Debt Guarantors and structurally subordinated to any
existing and future indebtedness and other liabilities, including preferred stock, of the Company’s subsidiaries that do not guarantee the 2032 notes.
The Company may redeem the 2032 notes within five years from the date of issuance, in whole or in part, at a redemption price equal to 100% of the principal
amount of each of the 2032 notes plus the “applicable premium” set forth in the 2032 Indentures. The Company may, within three years of the date of issuance, redeem
up to 40% of the aggregate principal amount of each of the 2032 notes with the net cash proceeds of one or more equity offerings at a premium of the principal amount
thereof, as described in the 2032 Indentures, plus accrued and unpaid interest, if any, to the redemption date. After the five-year period from original issuance, the
Company may redeem each of the 2032 notes at the redemption prices set forth in the 2032 Indentures, plus accrued and unpaid interest, if any, to the redemption date. If
the Company experiences certain change of control triggering events, holders of each of the 2032 notes may require it to repurchase all or part of their notes at 101% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.
Senior Secured Notes due 2034
The 6.375% 2034 notes mature on March 1, 2034, with interest accruing at a rate of 6.375% per annum and interest payable semi-annually on March 1 and
September 1 of each year.
The terms of the 6.375% 2034 Notes are governed by the indenture, dated as of February 29, 2024 (“2034 Indenture”). The 2034 Indenture contains consistent
terms and are among the Company, the guarantors named therein and Wilmington Trust, National Association, as trustee.
The 6.375% 2034 notes, subject to certain exceptions, are guaranteed, jointly and severally, on a senior unsecured basis, by each of the Company’s direct and
indirect wholly owned subsidiaries (the “Guarantors”) that guarantee the Revolving Facility, the 5.00% 2030 notes, and the 2032 notes (collectively with the 5.00% 2030
notes, the “Existing notes”).
The 6.375% 2034 notes constitute senior unsecured obligations of the Company and Guarantors, pari passu in right of payment, with all of the existing and future
senior indebtedness of the Company, including indebtedness under the Revolving Facility and the Existing notes effectively subordinated to all existing and future
secured indebtedness of the Company and the Guarantors (including indebtedness under the Revolving Facility) to the extent of the value of the assets securing such
indebtedness, senior to all of the future subordinated indebtedness of the Company and the Guarantors and structurally subordinated to any existing and future
indebtedness and other liabilities, including preferred stock, of the Company’s subsidiaries that do not guarantee the 6.375% 2034 notes.
The Company may redeem the 6.375% 2034 notes within five years from the date of issuance, in whole or in part, at a redemption price equal to 100% of the
principal amount of the 6.375% 2034 notes plus the “applicable premium” set forth in the 2034 Indenture. The Company may, within three years of the date of issuance,
redeem up to 40% of the aggregate principal amount of the 6.375% 2034 notes with the net cash proceeds of one or more equity offerings at 106.375% of the principal
amount thereof plus accrued and unpaid interest, if any, to the redemption date. After the five-year period from original issuance, the Company may redeem the 6.375%
2034 notes at the redemption prices set forth in the 2034 Indenture, plus accrued and unpaid interest, if any, to the redemption date. If the Company experiences certain
change of control triggering events, holders of the 6.375% 2034 notes may require it to repurchase all or part of their notes at 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the repurchase date.
57
Each of the 2030 Indenture, the 2032 Indenture and the 2034 Indenture contains restrictive covenants that limit the ability of the Company and its restricted
subsidiaries to, among other things, incur additional debt or issue preferred stock, create liens, create restrictions on the Company’s subsidiaries’ ability to make
payments to the Company, pay dividends and make other distributions in respect of the Company’s and its subsidiaries’ capital stock, make certain investments or certain
other restricted payments, guarantee indebtedness, designate unrestricted subsidiaries, sell certain kinds of assets, enter into certain types of transactions with affiliates,
and effect mergers and consolidations.
As of December 31, 2024, 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, 2024, were as follows:
(in thousands)
2025
$
—
2026
—
2027
—
2028
—
2029
—
Thereafter
3,550,000
Total long-term debt
$
3,550,000
9. Leases and Other Finance Obligations
Right-of-use assets and lease liabilities consisted of the following as of December 31:
2024
2023
(in thousands)
Assets
Operating lease right-of-use assets, net
$
594,301
$
502,184
Finance lease right-of-use assets, net (included in property, plant and equipment, net)
1,318
2,714
Total right-of-use assets
$
595,619
$
504,898
Liabilities
Current
Current portion of operating lease liabilities
$
103,499
$
98,217
Current portion of finance lease liabilities (included in current maturities of long-term debt)
470
1,184
Noncurrent
Noncurrent portion of operating lease liabilities
525,213
434,081
Noncurrent portion of finance lease liabilities (included in long-term debt, net of current
maturities)
608
1,113
Total lease liabilities
$
629,790
$
534,595
Total lease costs consisted of the following for the years ended December 31:
2024
2023
2022
(in thousands)
Operating lease costs (1)
$
143,878 $
144,243 $
144,755
Finance lease costs:
Amortization of finance lease right-of-use assets
1,120
2,089
1,876
Interest on finance lease liabilities
95
201
179
Variable lease costs
34,781
34,408
30,590
Total lease costs
$
179,874 $
180,941 $
177,400
(1)
Includes short-term lease costs and sublease income which were not material for all periods presented.
58
Future maturities of lease liabilities as of December 31, 2024, were as follows:
Finance
Leases
Operating
Leases
(in thousands)
2025
$
512
$
136,195
2026
257
127,053
2027
210
112,578
2028
130
100,534
2029
55
80,167
Thereafter
—
218,774
Total lease payments
1,164
775,301
Less: amount representing interest
(86 )
(146,589 )
Present value of lease liabilities
1,078
628,712
Less: current portion
(470 )
(103,499 )
Long-term lease liabilities, net of current portion
$
608
$
525,213
Weighted average lease terms and discount rates as of December 31 were as follows:
2024
2023
Weighted average remaining lease term (years)
Operating leases
7.0
6.6
Finance leases
3.0
2.8
Weighted average discount rate
Operating leases
6.0 %
6.0 %
Finance leases
5.7 %
6.1 %
The following table presents cash paid for amounts included in the measurement of lease liabilities for the years ended December 31:
2024
2023
2022
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
132,989 $
127,562 $
125,311
Operating cash flows from finance leases
95
201
179
Financing cash flows from finance leases
1,182
2,214
1,844
Our lease agreements do not impose any significant restrictions or covenants on us. As of December 31, 2024, we do not have any material leases that have been
signed but have not yet commenced and are not reflected on our consolidated balance sheet. Leases with related parties are not significant as of and for the years ended
December 31, 2024, 2023 and 2022.
Other Finance Obligations
In addition to the operating and finance lease arrangements described above, the Company is party to 115 individual property lease agreements with a single
lessor as of December 31, 2024. These lease agreements had initial terms ranging from nine to 15 years with renewal options in five-year increments providing for up to
approximately 30-year 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. These purchase rights represent a form of continuing involvement with these properties, which precluded sale-leaseback accounting. As a
result, the Company treats all of the properties that it leases from this lessor as a financing arrangement.
We were deemed the owner of certain of our facilities during their construction period based on an evaluation made in accordance with the Leases topic of the
Codification. Effectively, a sale and leaseback of these facilities occurred when construction was completed and the lease term began. These transactions did not qualify
for sale-leaseback accounting. As a result, the Company treats the lease of these facilities as a financing arrangement.
As of December 31, 2024, other finance obligations consist of $190.3 million, with cash payments of $20.6 million for the year ended December 31, 2024. These
other finance obligations are included on the consolidated balance sheets as part of long-term debt. The related assets are recorded as components of property, plant, and
equipment on the consolidated balance sheets.
59
Future maturities for other finance obligations as of December 31, 2024, were as follows:
(in thousands)
2025
$
16,272
2026
15,939
2027
15,874
2028
15,887
2029
15,907
Thereafter
103,127
Total
$
183,006
10. Employee Stock-Based Compensation
2014 Incentive Plan
Under our 2014 Incentive Plan (“2014 Plan”), as amended, 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. As of December 31, 2024, the Company had reserved
15.1 million shares of common stock for the grant of awards under the 2014 Plan, subject to adjustment as provided by the 2014 Plan. All 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 or cliff vest after a period of three to four years. As of December 31, 2024, 7.6 million shares were available for issuance under the 2014 Plan. If it is
assumed that shares will be issued at the target vesting amount for outstanding RSUs with variable payout provisions, an additional 0.4 million shares would be included
in the shares available for future issuance under the 2014 Plan.
Previous Incentive Plans
We were authorized to issue shares of common stock pursuant to awards granted in various forms under our 1998 Stock Incentive Plan, 2005 Equity Incentive
Plan, and 2007 Incentive Plan. No further grants will be made under these plans and all remaining awards granted under these plans are fully vested and exercisable.
Stock Options
The following table summarizes our stock option activity:
Weighted
Weighted
Average
Average
Exercise
Remaining
Aggregate
Options
Price
Years
Intrinsic Value
(in thousands)
(in thousands)
Outstanding at December 31, 2023
57 $
9.88
Exercised
(32 )
8.87
Forfeited
—
—
Outstanding at December 31, 2024
25
11.17
1.0 $
3,303
Exercisable at December 31, 2024
$
25 $
11.17
1.0 $
3,303
The outstanding options at December 31, 2024, are options granted under the 2014 plan and are exercisable. There were no outstanding options at December 31,
2024, under the 2007 Plan, the 2005 Plan, and the 1998 Plan. There were no options granted and no options vested during the years ended December 31, 2024, 2023 or
2022. The total intrinsic value of options exercised during the years ended December 31, 2024, 2023 and 2022 were $5.4 million, $9.0 million and $3.6 million,
respectively.
Restricted Stock Units
The total outstanding RSUs at December 31, 2024, include 1.0 million units granted under the 2014 Plan.
60
Time Based Restricted Stock Unit Grants
The Company grants RSUs to employees under our 2014 Incentive Plan for which vesting is based solely on continuous employment over the requisite service
period. The following table summarizes activity for RSUs subject solely to service conditions for the year ended December 31, 2024:
Weighted
Average Grant
Shares
Date Fair Value
(in thousands)
Nonvested at December 31, 2023
1,118
$
68.35
Granted
280
186.61
Vested
(716 )
62.46
Forfeited
(46 )
105.95
Nonvested at December 31, 2024
636
$
124.37
The weighted average grant date fair value of RSUs for which vesting is subject solely to service conditions granted during the years ended December 31, 2024,
2023 and 2022 was $186.61, $87.05, and $62.46, respectively.
Performance, Market and Service Condition Based Restricted Stock Unit Grants
The Company grants RSUs to employees under our 2014 Incentive Plan, that generally vest based on the Company’s level of achievement of performance goals
relating to return on invested capital over a three-year period (“performance condition”) as well as continued employment during the performance period (“service
condition”). The total number of shares of common stock that may be earned from the performance condition ranges from zero to 200% of the RSUs granted. The
number of shares earned from the performance condition may be further increased or decreased by 10% based on the Company’s total shareholder return relative to a
peer group during the performance period (“market condition”). The following table summarizes activity for these RSUs for the year ended December 31, 2024:
Weighted
Average Grant
Shares
Date Fair Value
(in thousands)
Nonvested at December 31, 2023
406
$
72.22
Granted
86
201.97
Performance & market achievement adjustment (1)
73
47.85
Vested
(185 )
47.85
Forfeited
(22 )
105.81
Nonvested at December 31, 2024
358
$
108.87
(1)
Represents RSUs granted prior to 2024 for which the performance and market achievement period was completed in 2024, resulting in incremental unit
awards granted. These incremental awards are also included in the amount vested in 2024.
The weighted average grant date fair value of RSUs for which vesting is subject to performance, market and service conditions granted during the years ended
December 31, 2024, 2023 and 2022 was $201.97, $88.48 and $70.77, respectively.
Our results of operations include stock compensation expense of $63.1 million, $48.5 million and $31.3 million for the years ended December 31, 2024, 2023 and
2022, respectively. We recognized excess tax benefits for stock options exercised and RSUs vested of $27.6 million, $16.3 million and $16.2 million for the years ended
December 31, 2024, 2023 and 2022, respectively. The total fair value of RSUs vested during the years ended December 31, 2024, 2023 and 2022 was $53.6 million,
$37.6 million and $29.0 million, respectively.
As of December 31, 2024, there was $64.6 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 1.9 years.
61
11. Income Taxes
The components of income tax expense were as follows for the years ended December 31:
2024
2023
2022
(in thousands)
Current:
Federal
$
287,131 $
468,635 $
789,465
State
41,528
77,475
125,460
328,659
546,110
914,925
Deferred:
Federal
(16,453 )
(82,150 )
(73,016 )
State
(2,579 )
(20,311 )
(19,445 )
(19,032 )
(102,461 )
(92,461 )
Income tax expense
$
309,627 $
443,649 $
822,464
Temporary differences, which give rise to deferred tax assets and liabilities, were as follows as of December 31:
2024
2023
(in thousands)
Deferred tax assets related to:
Operating lease liabilities
$
148,376
$
125,622
Insurance reserves
37,840
34,556
Accrued expenses
17,703
36,719
Operating loss and credit carryforwards
12,308
13,408
Stock-based compensation expense
10,931
8,643
Inventories
10,435
13,132
Accounts receivable
10,006
10,338
Other
312
7,813
Total deferred tax assets
247,911
250,231
Deferred tax liabilities related to:
Property, plant and equipment
(179,862 )
(166,799 )
Operating lease right-of-use assets
(140,255 )
(118,515 )
Goodwill and other intangible assets
(66,263 )
(121,052 )
Prepaid expenses
(9,698 )
(11,064 )
Total deferred tax liabilities
(396,078 )
(417,430 )
Net deferred tax liability
$
(148,167 )
$
(167,199 )
A reconciliation of the statutory federal income tax rate to our effective rate is provided below for the years ended December 31:
2024
2023
2022
Statutory federal income tax rate
21.0 %
21.0 %
21.0 %
State income taxes, net of federal income tax
2.4
2.3
2.3
Stock-based compensation windfall benefit
(2.0 )
(0.8 )
(0.5 )
Permanent difference - 162(m) limitation
0.8
0.5
0.3
Permanent difference - credits
(0.5 )
(0.6 )
(0.2 )
Permanent difference - other
0.2
0.2
—
Other
0.4
(0.2 )
0.1
22.3 %
22.4 %
23.0 %
We have $34.5 million of state net operating loss carryforwards and $0.7 million of state tax credit carryforwards expiring at various dates through 2036. We also
have $48.6 million of federal net operating loss carryforwards expiring at various dates through 2034. 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 and in making this
determination, we consider all available positive and negative evidence and make certain assumptions. The realization of a deferred tax asset ultimately depends on the
existence of sufficient taxable income in the applicable carryforward period. Changes in our
62
estimates of future taxable income and tax planning strategies will affect our estimate of the realization of the tax benefits of these tax carryforwards. As of December 31,
2024, or 2023, we carried no valuation allowances against our net deferred tax assets.
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.
The balance for uncertain tax positions, excluding penalties and interest, was $19.7 million and $19.2 million as of December 31, 2024, and 2023, respectively,
with $0.5 million, $2.9 million and $1.8 million recorded in the Company’s consolidated statements of operations for the years ended December 31, 2024, 2023 and
2022. 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 2024, 2023 or 2022.
We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions and in very limited situations, foreign 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 2018. We are currently
under IRS audit for various aspects of our 2019 and 2020 tax years. We report income-based tax in 41 states with various years open to examination.
In December 2021, the Organization for Economic Co-operation and Development (“OECD”) released Model Global Anti-Base Erosion rules under Pillar Two.
These rules provide for the taxation of large multinational corporations at a minimum rate of 15%, calculated on a jurisdictional basis. Countries in which we operate
enacted legislation to implement aspects of the Pillar Two rules beginning in 2024, with certain remaining impacts to be effective from January 1, 2025. The items
enacted in 2024 did not have a material impact on our consolidated financial statements and we do not expect the items effective in 2025 to have a material impact on our
consolidated financial statements.
12. Employee Benefit Plans
We maintain active defined contribution 401(k) plans under which our employees are eligible to participate in the plan subject to certain employment eligibility
provisions. Participants can contribute up to 75% 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 $37.6 million, $36.5 million and $36.4 million in 2024, 2023 and 2022, respectively, for
contributions to the plan.
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 and subject to the normal risks of participating in
these types of plans, including potentially being required to pay that plan an amount to stop participating (“withdrawal liability”). Contributions to the plans for the years
ended December 31, 2024, 2023 and 2022 were not material.
13. Commitments and Contingencies
As of December 31, 2024, we had outstanding letters of credit totaling $83.3 million under our Revolving Facility that principally support our self-insurance
programs.
The Company has a number of known and threatened construction defect legal claims. While these claims are generally covered under the Company’s existing
insurance programs to the extent any loss exceeds the deductible, there is a reasonable possibility of loss that is not able to be estimated at this time because (i) many of
the proceedings are in the discovery stage, (ii) the outcome of future litigation is uncertain, and/or (iii) the complex nature of the claims. Although the Company cannot
estimate a reasonable range of loss based on currently available information, the resolution of these matters could have a material adverse effect on the Company's
financial position, results of operations or cash flows.
In addition, we are involved in various other claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in
such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in
respect of such claims and lawsuits. Although the ultimate disposition of these other proceedings cannot be predicted with certainty, management believes the outcome
of any such claims that are pending or threatened, either individually or on a combined basis, will not have a material adverse effect on our consolidated financial
position, cash flows or results of operations. However, there can be no assurances that future adverse judgments and costs would not be material to our results of
operations or liquidity for a particular period.
63
14. Related Party Transactions
A member of the Company’s board of directors was an executive officer of one of our customers, Ashton Woods USA, L.L.C., during 2022. Total net sales to
Ashton Woods USA, L.L.C. were approximately 1% of our total net sales for the year ended December 31, 2022. For the years ended December 31, 2024 and 2023
there are no related party transactions.
15. Significant Segment Expenses
The accounting policies of our reportable segment are consistent with the accounting policies described in Note 2 to these consolidated financial statements. The
primary measures reviewed by the CODM, including revenue, gross margin and income before income taxes, are shown in these consolidated financial statements. The
CODM uses these measures to assess performance for the reportable segment and to decide how to allocate resources. Gross margin and income before income taxes are
driven by the segment’s significant expense items of cost of sales and compensation and benefits, as well as other segment items. Cost of sales is shown in these
consolidated financial statements. Compensation and benefits were $2.3 billion, $2.3 billion and $2.5 billion for the years ended December 31, 2024, 2023 and 2022,
respectively, and are reported within selling, general, and administrative expenses in these consolidated financial statements. Other segment items are substantially all the
remaining selling, general, and administrative expenses reported in these consolidated financial statements. The measure of segment assets is reported on the balance
sheet as total consolidated assets.
16. Subsequent Events
Business Combinations
On January 2, 2025, we completed our previously announced acquisition of Alpine Lumber Company, the largest independently operated supplier of building
materials in Colorado and northern New Mexico. Alpine serves the Colorado Front Range, western Colorado and northern New Mexico through its 21 operating
locations and provides a broad product range, including prefabricated trusses and wall panels and millwork.
On February 3, 2025, we completed the acquisition of O.C. Cluss Lumber, a lumber and building supplies provider in southwestern Pennsylvania, western
Maryland and northern West Virginia.
The accounting for these business combinations has not been completed at the date of this filing given the proximity of the acquisition date.
64
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 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 and in our annual report on Form 10-K. 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, 2024, 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 GAAP. Internal
control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
existing policies or procedures may deteriorate.
65
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, 2024.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, has been audited by PricewaterhouseCoopers LLP, an
independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control over Financial Reporting. During the period covered by this report there were no changes in our internal control over financial
reporting identified in connection with the evaluation described above that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
Not applicable.
66
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item, other than the information regarding the Code of Business Conduct and Ethics and Insider Trading Policy set forth below,
appears in our definitive proxy statement for our annual meeting of stockholders to be held May 27, 2025 under the captions “Proposal 1 — Election of Directors,”
“Continuing Directors,” “Information Regarding the Board and Its Committees,” “Corporate Governance,” “Delinquent Section 16(a) Reports,” and “Executive Officers
of the Registrant,” which information is incorporated herein by reference.
Code of Business Conduct and Ethics
Builders FirstSource, Inc. and its subsidiaries endeavor to do business according to the highest ethical and legal standards, complying with both the letter and
spirit of the law. Our board of directors approved a Code of Business Conduct and Ethics that applies to our directors, officers (including our principal executive officer,
principal financial officer and principal accounting officer) and employees. Our Code of Business Conduct and Ethics is administered by a compliance committee made
up of representatives from our legal, human resources, finance and internal audit departments.
Our employees are encouraged to report any suspected violations of laws, regulations and the Code of Business Conduct and Ethics, and all unethical business
practices. We provide continuously monitored hotlines for anonymous reporting by employees.
Our board of directors has also approved a Supplemental Code of Ethics for the Chief Executive Officer, President, and Senior Financial Officers of Builders
FirstSource, Inc., which is administered by our general counsel.
Both of these policies are listed as exhibits to this annual report on Form 10-K and can be found in the “Investors” section of our corporate website at:
www.bldr.com.
Stockholders may request a free copy of these policies by contacting the Corporate Secretary, Builders FirstSource, Inc., 6031 Connection Drive, Suite 400,
Irving, Texas 75309, United States of America.
In addition, within four business days of:
•
Any amendment to a provision of our Code of Business Conduct and Ethics or our Supplemental Code of Ethics for Chief Executive Officer, President
and Senior Financial Officers of Builders FirstSource, Inc. that applies to our chief executive officer, chief financial officer or chief accounting officer as
it relates to one or more of the items set forth in Item 406(b) of Regulation S-K; or
•
The grant of any waiver, including an implicit waiver, from a provision of one of these policies to one of these officers that relates to one or more of the
items set forth in Item 406(b) of Regulation S-K,
We will provide information regarding any such amendment or waiver (including the nature of any waiver, the name of the person to whom the waiver was
granted and the date of the waiver) on our website at the Internet address above, and such information will be available on our website for at least a 12-month period. In
addition, we will disclose on our website at the Internet address above any amendments and waivers to our Code of Business Conduct and Ethics or our Supplemental
Code of Ethics for Chief Executive Officer, President and Senior Financial Officers of Builders FirstSource, Inc. that relate to any element of the definition of “code of
ethics” enumerated in Item 406(b) of Regulation S-K under the Securities Exchange Act of 1934, as amended.
Insider Trading Policy
We have an Insider Trading Policy governing the purchase, sale and other dispositions of our securities that applies to all of our personnel, including directors,
officers and employees and other covered persons. The Insider Trading Policy is reasonably designed to promote compliance with insider trading laws, rules and
regulations, as well as applicable listing standards. A copy of the Insider Trading Policy is filed as Exhibit 19.1 to this report.
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 27, 2025, under the
captions “Executive Compensation and Other Information,” “Director Compensation — Compensation of Directors,” and “Compensation Committee Interlocks and
Insider Participation,” which information is incorporated herein by reference.
67
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 27, 2025, under the
caption “Securities Owned by Directors, Executive Officers, and Certain Beneficial Owners” and “Equity Compensation Plan Information,” which information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item appears in our definitive proxy statement for our annual meeting of stockholders to be held May 27, 2025, 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 27, 2025, under the
caption “Ratification of Selection of Independent Registered Public Accounting Firm — Fees Paid to PricewaterhouseCoopers LLP,” which information is incorporated
herein by reference.
68
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
Agreement and Plan of Merger, dated August 26, 2020, by and among Builders FirstSource, Inc., BMC Stock Holdings, Inc., and Boston Merger Sub I
Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on
August 27, 2020, File Number 0-51357)
3.1
Amended and Restated Certificate of Incorporation of Builders FirstSource, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 4 to the
Registration Statement of the Company on Form S-1, filed with the Securities and Exchange Commission on June 6, 2005, File Number 333-122788)
3.2
Amendment to Amended and Restated Certificate of Incorporation of Builders FirstSource, Inc. (incorporated by reference to Exhibit 3.1 to the
Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 4, 2021, File Number 0-51357)
3.3
Amended and Restated By-Laws of Builders FirstSource, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K,
filed with the Securities and Exchange Commission on April 28, 2022, File Number 001-40620)
4.1
Indenture, dated as of February 11, 2020, among the Company, the guarantors named therein and Wilmington Trust, National Association, as trustee
(incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on
February 11, 2020, File Number 0-51357)
4.2
Indenture, dated as of July 23, 2021, among Builders FirstSource, Inc., the guarantors named therein and Wilmington Trust, National Association, as
trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on
July 23, 2021, File Number 001-40620)
4.3
Second Supplemental Indenture, dated as of January 21, 2022, among Builders FirstSource, Inc., the guarantors named therein and Wilmington Trust,
National Association, as trustee (form of Note included therein) (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-
K, filed with the Securities and Exchange Commission on January 21, 2022, File Number 001-40620)
4.4
Indenture, dated as of June 15, 2022, among Builders FirstSource, Inc., the guarantors named therein and Wilmington Trust, National Association, as
trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on
June 16, 2022, File Number 001-40620)
4.5
Indenture, dated as of February 29, 2024, among Builders FirstSource, Inc., the guarantors named therein and Wilmington Trust, National Association,
as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission
on February 29, 2024, File Number 001-40620)
4.6* Description of Capital Stock
10.1+
Amended and Restated ABL Credit Agreement, dated as of July 31, 2015, among Builders FirstSource, Inc., SunTrust Bank, as administrative agent
and collateral agent, and the lenders and financial institutions party thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
on Form 8-K, filed with the Securities Exchange Commission on August 6, 2015, File Number 0-51357)
10.2
Amendment No. 1 to Credit Agreement, dated as of March 22, 2017, among Builders FirstSource, Inc., SunTrust Bank, as administrative agent and
collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the
Securities and Exchange Commission on March 28, 2017, File Number 0-51357)
69
10.3
Amendment No. 2 to Credit Agreement, dated as of April 24, 2019, among Builders FirstSource, Inc., Truist Bank (as successor by merger to SunTrust
Bank), as administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K, filed with the Securities and Exchange Commission on April 30, 2019, File Number 0-51357)
10.4
Amendment No. 3 to Credit Agreement, dated as of January 29, 2021, among Builders FirstSource, Inc., SunTrust Bank, as administrative agent and
collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the
Securities and Exchange Commission on February 3 2021, File Number 0-51357)
10.5
Amendment No. 4 to Credit Agreement, dated as of December 17, 2021, among the Company, Truist Bank (as successor by merger to SunTrust Bank),
as administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K, filed with the Securities and Exchange Commission on December 22, 2021, File Number 001-40620)
10.6
Amendment No. 5 to Credit Agreement, dated as of February 4, 2022, among the Company, Truist Bank (as successor by merger to SunTrust Bank), as
administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K, filed with the Securities and Exchange Commission on February 8, 2022, File Number 001-40620)
10.7
Amendment No. 6 to Credit Agreement, dated as of January 17, 2023, among the Company, Truist Bank (as successor by merger to SunTrust Bank), as
administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K, filed with the Securities and Exchange Commission on January 23, 2023, File Number 001-40620)
10.8
Amendment No. 7 to Credit Agreement, dated as of April 3, 2023, among the Company, Truist Bank (as successor by merger to SunTrust Bank), as
administrative agent and collateral agent, and the lenders party thereto (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q, filed with the Securities and Exchange Commission on May 3, 2023, File Number 001-40620)
10.9
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)
10.10
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)
10.10
Notes Collateral Agreement, dated as of May 30, 2019, among Builders FirstSource, Inc., certain of its subsidiaries, and Wilmington Trust, National
Association, as trustee (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and
Exchange Commission on May 31, 2019, File Number 0-51357)
10.12
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)
10.13
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)
10.14+
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)
10.15+
Amendment to the Builders FirstSource, Inc. 2014 Incentive Plan (incorporated by reference to Appendix A of the Company’s Definitive Proxy
Statement on Schedule 14A, filed with the Securities and Exchange Commission on April 14, 2016, File Number 0-51357)
10.16+
Second Amendment to the Builders FirstSource, Inc. 2014 Incentive Plan (incorporated by reference to Exhibit 10.14 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 26, 2021, File Number 0-51351)
70
10.17+
2019 Form of Builders FirstSource, Inc. 2014 Incentive Plan Restricted Stock Unit Award Certificate (incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, filed with the Securities and Exchange Commission on May 3, 2019,
File Number 0-51357)
10.19
Builders FirstSource, Inc. Director Compensation Policy (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K
for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 22, 2024, File Number 001-40620)
10.20+
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)
10.21+
Builders FirstSource, Inc. Executive and Key Employee Severance Plan (incorporated by reference to Exhibit 10.34 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 28, 2023, File Number 001-
40620)
10.22*+ Special Advisor Agreement, dated as of November 6, 2024, between Builders FirstSource, Inc. and Dave Rush
14.1
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, 2021, filed with the Securities and Exchange Commission on March 1, 2022, File Number 001-40620)
14.2
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)
19.1* Insider Trading Policy
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*
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 Peter M. Jackson as Chief Executive Officer
31.2*
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 Pete Beckmann as Chief Financial Officer
32.1**
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 Peter M. Jackson as Chief Executive Officer and Pete Beckmann as Chief Financial Officer
97.1*
Compensation Recoupment Policy (incorporated by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2023, filed with the Securities and Exchange Commission on February 22, 2024, File Number 001-40620)
101*
The following financial information from Builders FirstSource, Inc.’s Form 10-K filed on February 20, 2025, formatted in Inline eXtensible Business
Reporting Language (“Inline XBRL”): (i) Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2024,
2023 and 2022, (ii) Consolidated Balance Sheets at December 31, 2024 and 2023, (iii) Consolidated Statements of Cash Flows for the years ended
December 31, 2024, 2023 and 2022, (iv) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2024, 2023
and 2022, and (v) the Notes to Consolidated Financial Statements.
104* The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, has been formatted in Inline XBRL.
* 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 Peter M. Jackson, our Chief Executive Officer, and Pete Beckmann, 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
71
written request to Timothy D. Johnson, Executive Vice President, General Counsel and Corporate Secretary, 6031 Connection Drive, Suite 400, Irving, Texas
75039.
(c) Not applicable
Item 16. Form 10-K Summary
None.
72
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.
February 20, 2025
BUILDERS FIRSTSOURCE, INC.
/s/ PETER M. JACKSON
Peter M. Jackson
Chief Executive Officer and Director
The undersigned hereby constitute and appoint Timothy D. Johnson 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
Title
Date
/s/ PETER M. JACKSON
Chief Executive Officer and Director
February 20, 2025
Peter M. Jackson
(Principal Executive Officer)
/s/ PETE R. BECKMANN
Executive Vice President and Chief Financial Officer
February 20, 2025
Pete R. Beckmann
(Principal Financial Officer)
/s/ MATTHEW TRESTER
Vice President and Controller
February 20, 2025
Matthew Trester
(Principal Accounting Officer)
/s/ PAUL S. LEVY
Chairman and Director
February 20, 2025
Paul S. Levy
/s/ MARK ALEXANDER
Director
February 20, 2025
Mark Alexander
/s/ CORY J. BOYDSTON
Director
February 20, 2025
Cory J. Boydston
/s/ DIRKSON R. CHARLES
Director
February 20, 2025
Dirkson R. Charles
/s/ CLEVELAND A. CHRISTOPHE
Director
February 20, 2025
Cleveland A. Christophe
/s/ WILLIAM B. HAYES
Director
February 20, 2025
William B. Hayes
/s/ BRETT N. MILGRIM
Director
February 20, 2025
Brett N. Milgrim
/s/ JAMES O’LEARY
Director
February 20, 2025
James O’Leary
/s/ CRAIG A. STEINKE
Director
February 20, 2025
Craig A. Steinke
/s/ DAVE RUSH
Director
February 20, 2025
Dave Rush
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock does not purport to be complete and is subject to, and qualified in its entirety by, our amended
and restated certificate of incorporation and amended and restated bylaws, which are incorporated by reference into this Description of Capital Stock, and
by the Delaware General Corporation Law (the “DGCL”).
General Matters
Our certificate of incorporation, as amended, provides that we are authorized to issue 300,000,000 shares of common stock, par value $0.01 per
share, and 10,000,000 shares of undesignated preferred stock, par value $0.01 per share.
Common Stock
Shares of our common stock have the following rights, preferences, and privileges:
•
Voting rights. Each outstanding share of common stock entitles its holder to one vote on all matters submitted to a vote of our stockholders,
including the election of directors. There are no cumulative voting rights. Generally, all matters to be voted on by stockholders must be
approved by a majority of the votes entitled to be cast by all shares of common stock present or represented by proxy.
•
Dividends. Holders of common stock are entitled to receive dividends as, when, and if dividends are declared by our board of directors out of
assets or funds legally available for the payment of dividends, subject to any preferential dividend rights of any outstanding preferred stock.
•
Liquidation. In the event of a liquidation, dissolution, or winding up of our affairs, whether voluntary or involuntary, after payment of our
liabilities and obligations to creditors, our remaining assets will be distributed ratably among the holders of shares of common stock on a per
share basis.
•
Rights and preferences. Our common stock has no preemptive, redemption, conversion or subscription rights. The rights, powers, preferences
and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series
of preferred stock that we may designate and issue in the future.
•
Listing. Our common stock is listed on the New York Stock Exchange under the symbol “BLDR.”
•
Transfer Agent and Registrar. The transfer agent and registrar for our common stock is Computershare Shareowner Services LLC, and its
telephone number is (877) 219-7020.
Preferred Stock
Under our certificate of incorporation, without further stockholder action, the board of directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of the shares of preferred stock in one or more series, to establish from time to
time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof.
Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws
Our certificate of incorporation and bylaws contain provisions that are intended to enhance the likelihood of continuity and stability in the
composition of the board of directors and that may have the effect of delaying, deferring or preventing a future takeover or change in control of our
company unless the takeover or change in control is approved by our board of directors. These provisions include the following:
Staggered board of directors. Our certificate of incorporation and bylaws provide for a staggered board of directors, divided into three classes,
with our stockholders electing one class each year. Between stockholders’ meetings, the board of directors will be able to appoint new directors to fill
vacancies or newly created directorships so that no more than the number of directors in any given class could be replaced each year and it would take
three successive annual meetings to replace all directors.
Elimination of stockholder action through written consent. Our certificate of incorporation and bylaws provide that stockholder action can be
taken only at an annual or special meeting of stockholders and cannot be taken by written consent in lieu of a meeting.
Elimination of the ability to call special meetings. Our certificate of incorporation and bylaws provide that, except as otherwise required by law,
special meetings of our stockholders can only be called pursuant to a resolution adopted by a majority of our board of directors, a committee of the board
of directors that has been duly designated by the board of directors and whose powers and authority include the power to call such meetings or by our
chief executive officer or the chairman of our board of directors. Stockholders are not permitted to call a special meeting or to require our board to call a
special meeting.
Advance notice procedures for stockholder proposals. Our bylaws establish an advance notice procedure for stockholder proposals to be
brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board. Stockholders at our annual
meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board
or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to our
secretary timely written notice, in proper form, of the stockholder’s intention to bring that business before the meeting.
Proxy Access. Our bylaws contain provisions which provide that a stockholder, or group of up to 20 stockholders, that has owned continuously
for at least three years shares of common stock representing an aggregate of at least 3% of our company’s outstanding shares of common stock, may
nominate and include in our proxy materials a specified number of director nominees, provided that the stockholder(s) and nominee(s) satisfy the
requirements in our bylaws. The maximum number of stockholder nominees is generally the greater of (x) two or (y) 20% of the total number of our
directors in office as of the last day on which notice of a nomination may be submitted or, if such amount is not a whole number, the closest whole
number below 20%.
Removal of directors; board of directors vacancies. Our certificate of incorporation and bylaws provide that members of our board of directors
may not be removed without cause and the affirmative vote of holders of at least a majority of the voting power of our then-outstanding capital stock
entitled to vote on the election of directors. Our bylaws further provide that only our board of directors may fill vacant directorships, except in limited
circumstances. These provisions would prevent a stockholder from gaining control of our board of directors by removing incumbent directors and filling
the resulting vacancies with such stockholder’s own nominees.
Amendment of certificate of incorporation and bylaws. The DGCL provides generally that the affirmative vote of a majority of the outstanding
shares entitled to vote is required to amend or repeal a corporation’s certificate of incorporation or bylaws, unless the certificate of incorporation requires
a greater percentage. Our certificate of incorporation requires the approval of the holders of at least two-thirds of the voting power of the issued and
outstanding shares of our capital stock entitled to vote in connection with the election of directors to amend certain provisions of our certificate of
incorporation relating to the directors, including their authority to amend our by-laws, the size of our board of directors, provision for a staggered board of
directors, the removal of directors, and vacancies on the board of directors, as well as our authority to provide indemnification for our directors and
officers. Our bylaws provide that a majority of our board of directors or, in most cases, the holders of at least a majority of the voting power of the issued
and outstanding shares of our capital stock entitled to vote thereon have the power to amend or repeal our bylaws, except that, in the case of amendments
or repeals approved by stockholders, the affirmative vote of holders of at least two-thirds of the voting power of the issued and outstanding shares of our
capital stock entitled to vote thereon shall be required to amend or repeal provisions of our bylaws relating to meetings of stockholders, including the
provision that stockholders may not take action by written consent in lieu of a meeting, the nomination and election of directors, vacancies on the board of
directors, and our authority to provide indemnification for our directors and officers.
The foregoing provisions of our certificate of incorporation and bylaws could discourage potential acquisition proposals and could delay or
prevent a change in control. These provisions are intended to enhance the likelihood of continuity and stability in the composition of our board of
directors and in the policies formulated by our board of directors and to discourage certain types of transactions that may involve an actual or threatened
change of control. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to
discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender
offers for our shares, and, as a consequence, they also may inhibit fluctuations in the market price of the common stock that could result from actual or
rumored takeover attempts. Such provisions also may have the effect of preventing changes in our management or delaying or preventing a transaction
that might benefit you or other minority stockholders.
Limitations on Liability and Indemnification of Officers and Directors
Our certificate of incorporation and bylaws provide indemnification for our directors and officers to the fullest extent permitted by the DGCL.
We have entered into indemnification agreements with each of our directors that are, in some cases, broader than the specific indemnification provisions
contained under Delaware law. In addition, as permitted by Delaware law, our certificate of incorporation includes provisions that eliminate the personal
liability of our directors for monetary damages resulting from breaches of certain fiduciary duties as a director. The effect of this provision is to restrict
our rights and the rights of our stockholders in derivative suits to recover monetary damages against a director for breach of fiduciary duties as a director,
except that a director will be personally liable for:
•
any breach of his duty of loyalty to us or our stockholders;
•
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•
any transaction from which the director derived an improper personal benefit; or
•
improper distributions to stockholders.
These provisions may not be held to be enforceable for violations of the federal securities laws of the United States.
6031 Connection Drive, Suite 400
Irving, TX 75039
Phone 214.880.3500
Fax 214.880.3599
Execution Version
SPECIAL ADVISOR AGREEMENT
This Special Advisor Agreement and Release (“Agreement”) is entered into as of November 6, 2024 (the “Effective Date”), by and
between Dave Rush (“Advisor”) and Builders FirstSource, Inc., a Delaware corporation, and its affiliates and subsidiaries (collectively, the
“Company”).
RECITALS
WHEREAS, the Company and Advisor desire to enter into this Agreement in order to define the terms of Advisor’s relationship with the
Company from and after the Effective Date.
NOW, THEREFORE, in consideration of the mutual promises hereinafter contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1.
Special Advisor Engagement.
(a)
Employment as a Special Advisor. The Company hereby employs Advisor, and Advisor hereby accepts such
employment, upon the terms and conditions set forth in this Agreement, for the period starting on November 6, 2024, and ending on
March 31, 2025 (the “Special Advisor Period”). Advisor shall have the title of Special Advisor effective November 6, 2024, and to the
extent he is currently an officer, Advisor shall be deemed to have resigned an officer of the Company including any of its subsidiaries or
affiliated entities as of 11:59 p.m. CT on November 5, 2024. For the avoidance of doubt, Advisor shall continue to serve on the
Company’s Board of Directors upon completion of the Special Advisor Period, which shall be deemed Continuous Service under the
Company’s 2014 Incentive Plan (the “Incentive Plan”).
(b)
Advisory Services. Unless otherwise agreed to in writing by the parties, Advisor shall perform and provide executive-level
advisory services and advice (the “Advisory Services”) to the Company as requested by the Company’s Board of Directors or by the
Company’s President and CEO. Advisor shall perform the Advisory Services in a professional and competent manner. Additionally,
during the Advisory Period, Advisor agrees to promote the best interest of the Company and to take no actions that in any way damage
the public image or reputation of the Company or its affiliates.
2.
Compensation and Related Matters.
(a)
Compensation. During the Special Advisor Period, Advisor shall be compensated fifty thousand dollars ($50,000.00) per
month, less applicable taxes and withholdings, payable during regular payroll periods. Further, for the full duration of the Advisor Period,
Advisor will continue health
and welfare benefits. Advisor will be eligible for a 2024 bonus and Advisor’s target bonus amount will be the sum of his base salary
earned between January 1, 2024 and through November 5, 2024 and any special advisor fees earned from November 6, 2024 through
December 31, 2024. Advisor’s target bonus percentage used to calculate his 2024 bonus shall continue to be 150%. Advisor will not be
eligible for a 2025 bonus or equity award grants.
(b)
Expenses. The Company shall reimburse Advisor for meals, lodging, and other reasonable expenses that are (a) incurred
by Advisor in the course of providing Special Advisory Services in accordance this Agreement, and (b) pre-approved by the Company.
(c)
Treatment of Outstanding Stock Awards. Given Advisor’s Continuous Service, all outstanding stock awards granted
under the Incentive Plan and held by Advisor as of the Effective Date will continue to remain outstanding and shall vest in accordance
with the terms of the original award agreements.
3.
Termination. This Agreement may be terminated by the Company for “Cause” (as defined in the Company’s Executive and Key
Employee Severance Plan (the “Severance Plan”) or due to Advisor’s death or incapacity. Should termination of the Agreement ensue due to
death or incapacity, the Company’s obligations hereunder shall cease thirty (30) days following the triggering event. Notwithstanding the
foregoing, the termination of the relationship and/or any termination of this Agreement, for whatever reason, shall not reduce or terminate the
parties’ covenants and agreements as set forth herein. “Cause” shall mean the following events or conditions, as determined by the Company in
its reasonable judgment: (a) the Advisor's refusal or failure to perform (other than by reason of disability), or material negligence in the
performance of his or her duties and responsibilities to the Company; (b) the material breach by the Advisor of any provision of any material
agreement between the Advisor and the Company; (c) fraud, embezzlement, theft or other dishonesty by the Advisor with respect to the
Company; or (d) Advisor’s violation of a Company policy, rule or code of conduct that could expose the Company to civil or criminal liability or
pose a risk of damaging the Company’s business or reputation.
4.
Severance Plan; Ongoing Obligations.
(a)
Severance Plan. Advisor hereby acknowledges and agrees that as of the Effective Date, Advisor shall no longer be
eligible for the benefits provided pursuant to the Company’s Executive and Key Employee Severance Plan (the “Severance Plan”).
(b)
Ongoing Obligations. Notwithstanding anything in this Agreement to the contrary, Advisor continues to be bound by the
terms and conditions stated in the Restrictive Covenant Agreement executed by Advisor and the Company on February 24, 2023, and
incorporated herein for all intents and purposes. Continued compliance with the Restrictive Covenant Agreement is a condition to
receiving the consideration set forth in this Agreement.
5.
Code Section 409A. This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable
hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”) and applicable Internal Revenue Service guidance and Treasury Regulations issued
thereunder. The tax treatment of the benefits provided under the Agreement is not warranted or guaranteed to Advisor, who is
responsible for all taxes assessed on any payments made pursuant to this Agreement, whether under Section 409A of the Code or otherwise.
Neither the Company nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary
amounts owed by Advisor as a result of the application of Section 409A of the Code. Advisor’s right to receive any installment payments shall be
treated as a right to receive separate and distinct payments for purposes of Section 409A of the Code.
6.
Headings. The heading references herein are for convenience purposes only, do not constitute a part of this Agreement and shall
not be deemed to limit or affect any of the provisions hereof.
7.
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, except for
any arbitration agreement, which is governed by the Federal Arbitration Act, without giving any effect to any choice or conflict of law provision or
rule that would cause the application of the laws of any other jurisdiction except where preempted by Federal law.
8.
Notices. All notices, demands and other communications to be given or delivered to the Company or Advisor under or by reason of
the provisions of this Agreement will be in writing and will be deemed to have been given when personally delivered, one (1) Business Day after
being sent by reputable overnight courier or when transmitted by telecopy (transmission confirmed), or e-mail, in each case as appropriate to the
addresses indicated below (unless another address is so specified by the applicable party in writing):
(a)
If to Special Advisor:
Dave Rush
9808 Riva Ridge Lane
Waxhaw, NC 28173
Email: D.Rush@bldr.com
(b)
If to the Company:
Builders FirstSource, Inc.
6031 Connection Drive, Suite 400
Irving, TX 75039
ATTN: Tim Johnson
Email: Tim.Johnson@bldr.com
9.
Entire Agreement. This Agreement constitutes the entire agreement between Advisor and the Company which includes its
successors, assigns, heirs and transferees, and supersedes all prior and contemporaneous agreements and understandings, written or oral,
concerning Advisor’s employment, its termination and all related matters, excluding only any arbitration agreement, equity agreements (etc.) and
any obligations that Advisor has to the Company concerning protection of confidential information, assignment of rights to inventions or other
intellectual property, or covenants against competition or solicitation of advisors, independent contractors, customers, vendors, suppliers,
distributors or others, any
outstanding loans or other financial obligations that Advisor has to the Company or any of under any benefit plan maintained by the Company, and
obligations, if any, with respect to the securities of the Company all of which shall remain in full force and effect in accordance with their terms.
10.
Amendment; Waiver. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by the Company and Advisor, or in the case of a waiver, by the party against whom the waiver is
to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.
11.
Assignment. No approval shall be required for the Company to assign this Agreement to any affiliate or successor in interest to the
Company’s business. Advisor shall not assign his obligations under this Agreement, and any assignment made by Advisor in contravention of this
Section 11 shall be null and void for all purposes.
12.
Parties in Interest. Subject to the provisions of Section 11, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, beneficiaries, legatees, legal representatives, successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any person or entity other than Advisor, the Company, or their heirs, beneficiaries,
legatees, legal representatives, successors or permitted assigns, any rights or remedies under or by reason of this Agreement.
13.
Voluntary Agreement. Advisor has read this Agreement carefully, has had the opportunity to seek advice of counsel and
understands and accepts the obligations that it imposes upon Advisor without reservation. No other promises or representations have been made
to Advisor to induce Advisor to sign this Agreement. Advisor is signing this Agreement voluntarily and finely.
14.
Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which shall constitute one and the same agreement.
[The remainder of the page was intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
Company:
Builders FirstSource, Inc.
By: /s/ Tim Johnson
Name: Tim Johnson
Title: EVP, General Counsel
Special Advisor:
By: /s/ Dave Rush
Name: Dave Rush
BUILDERS FIRSTSOURCE, INC.
POLICY ON INSIDER TRADING
(as of May 3, 2022)
In the course of conducting the business of Builders FirstSource, Inc., including its subsidiaries (collectively, the “Company”), you
may come into possession of material information about the Company or other entities that is not available to the investing public (“material
non-public information”). You must maintain the confidentiality of material non-public information and may not use it in connection with
the purchase or sale of Company securities or the securities of any other entity to which the information relates. The Company has adopted
this policy on insider trading (the “Policy”) in order to ensure compliance with the law and to avoid even the appearance of improper conduct
by anyone associated with the Company.
Applicability
The restrictions set forth in this Policy apply to all Company officers, directors, and employees, wherever located, and to their
spouses, minor children, adult family members sharing the same household, and any other person over whom the officer, director, or
employee exercises substantial control over his securities trading decisions. This Policy also applies to any trust or other estate in which a
director, officer, or employee has a substantial beneficial interest or as to which he serves as trustee or in a similar fiduciary capacity. This
policy will continue to apply to these persons even after they have terminated employment with the Company for so long as any such person
is in possession of material non-public information.
To avoid even the appearance of impropriety, additional restrictions on trading Company securities apply to directors, executive
officers, and certain designated officers and employees. These policies are set forth in the Company’s Addendum to Insider Trading Policy
that applies to directors, executive officers, and certain designated officers and employees of the Company who have access to material non-
public information about the Company on a periodic basis. The Company will notify you if you are subject to the Addendum. The
Addendum generally prohibits those covered by it from trading in the Company’s securities during blackout periods and requires pre-
clearance for all transactions in Company securities.
Material Non-Public Information
Company policy and Federal law strictly prohibit any director, officer, or employee of the Company, whenever and in whatever
capacity employed, from trading Company securities (including equity securities, convertible securities, options, bonds, and derivatives
thereon) while in possession of material non-public information. This includes the sale of Company shares acquired upon the exercise of
options and any exercise of other derivative securities.
2
If you become aware of any material non-public information, you may not execute any trade in Company securities and you should
treat the information as strictly confidential. This prohibition applies to Company securities as well as the securities of any other company
about which you acquire material non-public information in the course of your duties for the Company. It also applies to transactions for any
Company account, employee account, or account over which the director, officer, or employee has investment discretion. You are
responsible for reviewing this Policy and ensuring that your actions do not violate it.
What Is Material Information?
Under Company policy and Federal law, information is material if:
•
there is a substantial likelihood that a reasonable investor would consider the information important in determining
whether to trade in a security; or
•
the information, if made public, would likely affect the market price of a company’s securities.
Information may be material even if it relates to future, speculative, or contingent events and even if it is significant only when
considered in combination with publicly available information. Either positive or negative information may be material.
Depending on the facts and circumstances, information that may be considered material includes, but is not limited to:
•
earnings information and quarterly results;
•
guidance on earnings estimates;
•
other unpublished financial results;
•
major litigation or government actions;
•
significant mergers, acquisitions, tender offers, joint ventures, or changes in assets;
•
major developments regarding operations or lending banks;
•
changes in control of the Company or in management;
•
changes in auditors or auditor notification that the issuer may no longer rely on an audit report;
•
events regarding the Company’s securities (e.g., defaults on senior securities, calls of securities for redemption,
repurchase plans, stock splits
3
or changes in dividends, changes to the rights of securityholders, public or private sales of additional securities, or
information related to any additional funding);
•
extraordinary borrowing; and
•
liquidity problems, bankruptcies, or receiverships.
What Is Non-Public Information?
Information is considered to be non-public unless it has been adequately disclosed to the public, which means that the information
has been publicly disseminated and sufficient time has passed for the securities markets to digest the information.
It is important to note that information is not necessarily public merely because it has been discussed in the press, which will
sometimes report rumors. You should presume that information is non-public unless you can point to its official release by the Company in
at least one of the following ways:
•
public filings with securities regulatory authorities;
•
issuance of press releases;
•
open meetings with members of the press and the public; or
•
information contained in proxy statements, SEC filings, and prospectuses.
You may not attempt to “beat the market” by trading simultaneously with, or shortly after, the official release of material
information. Although there is no fixed period for how long it takes the market to absorb information, out of prudence, a person aware of
material non-public information should refrain from any trading activity for approximately two full trading days following its official
release; shorter or longer waiting periods might be warranted based upon the liquidity of the security and the nature of the information.
Twenty-Twenty Hindsight
If securities transactions are scrutinized, they are likely to be viewed after-the-fact with the benefit of hindsight. As a result, before
engaging in any transaction, you must carefully consider how the transaction might be construed in the bright light of hindsight. If you have
any questions or uncertainties about this Policy or a proposed transaction, please ask the General Counsel.
Prohibition on Providing Material Non-public Information to Others
4
Not only is it illegal and a violation of this Policy to trade while in possession of material non-public information, it is also illegal
and a violation of this Policy, as well as the Company’s policy on confidential information as set forth in the Company’s Code of Business
Conduct and Ethics, to convey material non-public information to someone else (“tipping”) if you know or have reason to believe that the
person will misuse such information by trading in securities or passing such information to others who trade. Tipping is illegal regardless of
whether the “tippee” is related to the insider or is an entity, such as a trust or a corporation, and regardless of whether you receive any
monetary or other benefit from the tippee.
Prohibition on Speculation
You may not trade in options, warrants, puts and calls, or similar instruments on Company securities, hold Company securities in
margin accounts, or sell Company securities “short” without the prior written approval of the General Counsel. A short sale has occurred if
the seller: (i) does not own the securities sold or (ii) does own the securities sold, but does not deliver them within 20 days or place them in
the mail within 5 days of the sale. You may not enter into any other hedging transaction involving Company securities or pledge Company
securities as collateral for a loan or other obligation without the prior written approval of the General Counsel. Investing in Company
securities provides an opportunity to share in the future growth of the Company. Investment in the Company and sharing in the growth of
the Company, however, do not mean short-range speculation based on fluctuations in the market. Such activities may put the personal gain
of the director, officer, employee, or other person in conflict with the best interests of the Company and its securityholders. Anyone may, of
course, exercise any options granted to him or her by the Company and, subject to the restrictions discussed in this Policy and other
applicable Company policies, sell shares acquired through exercise of options.
Confidential Information
If material information relating to the Company or its business has not been disclosed to the general public, such information must
be kept in strict confidence and should be discussed only with persons who have a “need to know” the information for a legitimate business
purpose. The utmost care and circumspection must be exercised at all times in order to protect the Company’s confidential information. The
following practices should be followed to help prevent the misuse of confidential information:
•
Do not discuss confidential information in places where you may be overheard by people who do not have a valid need to
know such information, such as on elevators, in restaurants, and on airplanes.
•
Take great care when discussing such information on speaker phones, cellular phones, and on two-way radios. Do not
discuss such information with relatives or social acquaintances.
5
•
Do not give your computer passwords to any other person. Password protect computers and log off when not using them.
•
Put confidential documents away when they are not in use and, based upon the sensitivity of the material, keep such
documents in a locked desk or office. Do not leave documents containing confidential information where they may be
seen by persons who do not have a need to know the content of the documents.
•
Be aware that the internet and other external electronic mail carriers are not secure environments for the transmission of
confidential information. Use Company-authorized encryption software to protect confidential electronic
communications where appropriate.
•
Comply with the specific terms of any confidentiality agreements to which you are a party.
•
Upon termination of your employment, you must return to the Company all physical (including electronic) copies of
confidential information, as well as all other material embodied in any physical or electronic form that is based on or
derived from such information, without retaining any copies. You may not use any such information for your benefit or
the benefit of any future employer.
•
You may not bring the confidential information of any former employer to the Company.
Responding to Requests for Information
You may find yourself the recipient of questions concerning various activities of the Company. Such inquiries may come from the
media, securities analysts, and others regarding the Company’s business, rumors, trading activity, current and future prospects and plans,
acquisition or divestiture activities, and other similar important information. Under no circumstances should you attempt to handle these
inquiries without prior authorization. Only Company individuals specifically authorized to do so may answer questions about, or disclose
information concerning, the Company.
•
Refer requests for information regarding the Company from the financial community, such as securities analysts, brokers
or investors, to the Chief Executive Officer, President, Chief Financial Officer, or General Counsel.
•
Refer requests for information regarding the Company from the media or press to the Company’s Chief Executive Officer,
President, Chief Financial Officer, or General Counsel.
6
•
Refer requests for information from the Securities Exchange Commission or other regulators to the General Counsel.
Nothing in this policy shall limit your right to make disclosures to, or participate in communications with, the Securities and Exchange
Commission or any other government agency regarding possible violations of law, without prior notice to the Company.
Reporting Violations/Seeking Advice
You should report suspected violations of this policy in person, by telephone, or in writing to the Compliance Committee or by
using the Hotline (described in the Company’s Code of Business Conduct and Ethics), which can be reached by calling (888) 811-BLDR
(2537). The Hotline is available 24 hours a day, seven days a week. The members of the Compliance Committee are Tim Johnson,
Executive Vice President and General Counsel; Peter Jackson, Executive Vice President and Chief Financial Officer; Amy Messersmith,
Chief People Officer; and Tom Keils, Vice President – Internal Audit. You may contact any member of the Compliance Committee (by
phone, e-mail or interoffice, regular or overnight mail). The general contact information for the Compliance Committee at Company
Headquarters is: Builders FirstSource, Inc., 6031 Connection Dr., Ste. 400, Irving, Texas 75039, phone (214) 880-3500 and fax (214) 880-
3577.
In addition, if you:
•
receive material non-public information that you are not authorized to receive or that you do not legitimately need to
know to perform your employment responsibilities, or
•
receive confidential information and are unsure if it is within the definition of material non-public information or whether
its release might be contrary to a fiduciary or other duty or obligation,
you should not share it with anyone. To seek advice about what to do under those circumstances, you should contact the Compliance
Committee. Consulting your colleagues can have the effect of exacerbating the problem. Containment of the information, until the legal
implications of possessing it are determined, is critical.
Penalties for Violations of the Insider Trading Policy and Laws
The personal consequences to you of illegally trading securities while in possession of material non-public information can be
severe. Certain securities laws provide that an individual is subject to possible imprisonment and significant fines. These laws apply to all
employees – not just officers and directors. Subject to applicable law, Company employees who violate this policy may also be subject to
discipline by the Company, up to and including termination of employment.
Builders FirstSource, Inc.
Subsidiaries
Alpine Lumber Company (Colorado)
BFS Asset Holdings LLC (Delaware)
BFS Design Services LLC (Delaware)
BFS Foundation, Inc. (Delaware)
BFS Group LLC (Delaware)
BFS Operations LLC (Delaware)
BFS Procurement LLC (Delaware)
BFS Pay, LLC (Maryland)
BFS Real Estate LLC (Delaware)
BFS Texas Sales LLC (Delaware)
Builders FirstSource – Dallas, LLC (Delaware)
Builders FirstSource – Texas Installed Sales, LLC (Texas)
CCWP, Inc. (South Carolina)
Dixieline Builders Fund Control, Inc. (California)
East Campus, LLC (Colorado)
Kleet Lumber Co., LLC (New York)
NETAppsID, Inc. (Canada)
Schoeneman Bros. Company (Iowa)
Spenard Builders Supply LLC (Alaska)
Sunrise Wood Designs, LLC (Delaware)
Timber Roots, LLC (Washington)
TRSMI, LLC (Michigan)
WTS Paradigm, LLC (Wisconsin)
360 Innovations, s.a.r.l. (France)
1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-128430, 333-147107, 333-169001, 333-
196363, 333-216400 and 333-251880) of Builders FirstSource, Inc. of our report dated February 20, 2025 relating to the financial statements and the
effectiveness of internal control over financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Dallas, Texas
February 20, 2025
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Peter M. Jackson, certify that:
1.
I have reviewed this report on Form 10-K of Builders FirstSource, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, 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;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
/s/ PETER M. JACKSON
Peter M. Jackson
President and Chief Executive Officer
Date: February 20, 2025
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Pete R. Beckmann, certify that:
1.
I have reviewed this report on Form 10-K of Builders FirstSource, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, 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;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
/s/ PETE R. BECKMANN
Pete R. Beckmann
Executive Vice President and Chief Financial Officer
Date: February 20, 2025
Exhibit 32.1
Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350
(Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the annual report of Builders FirstSource, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2024 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), we, Peter M. Jackson, as President and Chief Executive Officer of the Company, and Pete R. Beckmann, as
Executive Vice President and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that, to the best of our knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ PETER M. JACKSON
Peter M. Jackson
President and Chief Executive Officer
/s/ PETE R. BECKMANN
Pete R. Beckmann
Executive Vice President and Chief Financial Officer
Date: February 20, 2025
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.