DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

 

 

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under § 240.14a-12

Builders FirstSource, Inc.

(Name of registrant as specified in its charter)

(Name of person(s) filing proxy statement, if other than the registrant)

Payment of Filing Fee (Check all boxes that apply):

 

No fee required

 

Fee paid previously with preliminary materials

 

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

 


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LOGO

 

Notice of Annual Meeting

of Stockholders and

2022 Proxy Statement

 

The Annual Meeting of Stockholders

of Builders FirstSource, Inc. will be held:

Tuesday, June 14, 2022 at 1:00 p.m. local time

Sheraton Dallas Hotel

400 Olive Street

Dallas, Texas 75201


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LOGO

 

 

LOGO              LOGO

A MESSAGE TO OUR STOCKHOLDERS

To our Fellow Stockholders,

You are cordially invited to attend the annual meeting of stockholders of Builders FirstSource, Inc., which will take place at the Sheraton Dallas Hotel, 400 Olive Street, Dallas, Texas 75201 on Tuesday, June 14, 2022, at 1:00 p.m., local time. Details of the business to be conducted at the annual meeting are given in the Notice of Annual Meeting of Stockholders, Proxy Statement, Notice Regarding the Availability of Proxy Materials, and form of proxy.

2021 was an exceptional year for our company. We delivered record financial performance by helping our customers become more productive, managing supply chain constraints and strengthening our geographic positions around the nation. Our integration of BMC Stock Holdings, Inc. (“BMC”) following the completion of the merger on January 1, 2021 outpaced our early targets and realized our planed cost synergy and productivity savings over two years ahead of our initial expectations. It has become increasingly clear that the BMC merger has brought us closer to our mission to be the leading supplier of building materials and services to homebuilders by promoting a people-first culture that delivers exceptional customer service and innovative solutions to help build more efficiently, thereby creating superior value for stakeholders. We want to thank our more than 28,000 team members for an incredible year and we are extremely proud of their outstanding results.

We are also excited about our recent investments in our digital strategy. In August 2021, we acquired WTS Paradigm, LLC (“Paradigm”), a software solutions and services provider for the building products industry. The acquisition is an important step forward in our strategy to invest in innovative digital solutions that will help our customers build more efficiently. Our management team is committed to streamlining the home buying experience and providing the digital tools to better align and integrate the homebuilding project lifecycle for our customers and supply partners.

Delivering long-term value to our stockholders remains a top priority for our Board of Directors and our management team. We completed over $1.2 billion worth of acquisitions in 2021. We also repurchased $2.0 billion of our common stock through the beginning of 2022, and our Board of Directors recently authorized the repurchase of an additional $1.0 billion of our common stock on February 17, 2022, demonstrating the financial strength of our company and our continued commitment to deploy our robust free cash flow.

Your vote is important to us. Even if you intend to join us in person, we encourage you to vote in advance so we will know we have a quorum of stockholders for the meeting. When you vote in advance, please indicate your intention to personally attend the annual meeting. Please see the Question and Answer section on page 3 of the Proxy Statement for instructions if you plan to personally attend the annual meeting.

On behalf of the Board of Directors and the executive management team, we would like to express our appreciation for your continued interest in the affairs of Builders FirstSource, Inc.

 

Sincerely,   Sincerely,
LOGO   LOGO

Paul S. Levy

Chairman of the Board

 

David E. Flitman

Chief Executive Officer and President


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LOGO

2001 Bryan Street, Suite 1600, Dallas, Texas 75201

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To our Stockholders:

The annual meeting of stockholders of Builders FirstSource, Inc. will take place at the Sheraton Dallas Hotel, 400 Olive Street, Dallas, Texas 75201(1) on Tuesday, June 14, 2022, at 1:00 p.m., local time, for the purpose of considering and acting upon the following:

 

(1)

The election of directors;

 

(2)

An advisory vote on the compensation of the named executive officers;

 

(3)

The ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year 2022;

 

(4)

To consider a stockholder proposal, if properly presented at the meeting, requesting that the Corporation adopt greenhouse gas emissions reduction targets; and

 

(5)

Any other business that may properly be brought before the annual meeting or any adjournment thereof.

Only stockholders of record at the close of business on April 22, 2022 will be entitled to vote at the meeting.

Directions to be able to attend the meeting and vote in person may be obtained by contacting the Corporation’s legal department at (214) 880-3500.

By Order of the Board of Directors,

 

 

LOGO

Timothy D. Johnson

Corporate Secretary

April 28, 2022

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on June 14, 2022: The Proxy Statement and the 2021 Annual Report on Form 10-K are available at www.proxydocs.com/BLDR and at www.bldr.com.

IMPORTANT:

Please see the Question and Answer section on page 3 of this Proxy Statement for instructions on what you need to do to attend the annual meeting in person. Please note that the doors to the annual meeting will open at 12:30 p.m. and will close promptly at 1:00 p.m. Whether or not you expect to personally attend, we urge you to vote your shares at your earliest convenience to ensure the presence of a quorum at the meeting. Promptly voting your shares via the internet, by telephone via toll-free number, or, if you elect to receive your proxy materials by mail, by completing, signing, dating, and returning the enclosed proxy card in the postage-paid envelope provided, will save us the expense and extra work of additional proxy solicitation. Because your proxy is revocable at your option, submitting your proxy now will not prevent you from voting your shares at the meeting if you desire to do so. Please refer to the voting instructions included on the Notice Regarding the Availability of Proxy Materials, proxy card, or voting instructions forwarded by your bank, broker, or other stockholder of record, as applicable.

 

1.

As part of the Corporation’s precautions regarding COVID-19, the Corporation is planning for the possibility that the annual meeting may be held by means of remote communication only (i.e., a virtual meeting). If the Corporation takes this step, or if the time, date, or place of the annual meeting will be changing, the Corporation will announce the decision to do so in advance via press release, and details on how to participate will be available on the investor relations page of the Corporation’s website (https://investors.bldr.com).


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TABLE OF CONTENTS

 

Solicitation and Ratification of Proxies         1  
General Information about Proxies and Voting     2  

Outstanding Stock

    2  

Internet Availability of Proxy Materials

    2  

Voting Matters and Board Recommendations

    2  
Questions and Answers about the Meeting and Voting     3  
Proposal 1 — Election of Directors     7  

Class II — Directors with Terms Expiring in 2022

    8  
Continuing Directors     9  

Class I — Directors with Terms Expiring in 2024

    9  

Class III — Directors with Terms Expiring in 2023

    11  
Director Compensation     14  

Compensation of Directors

    14  

Director Compensation Program

    15  
Information Regarding the Board and its Committees     16  

Board Purpose and Structure

    16  

Director Independence

    16  

Board Meetings and Attendance

    17  

Board Leadership Structure and Role in Risk Oversight

    17  

Audit Committee

    18  

Compensation Committee

    18  

Nominating and Corporate Governance Committee

    19  

Stock Ownership Guidelines for Executives and Directors

    20  
Report of the Audit Committee     21  
Corporate Governance     23  

Code of Business Conduct and Ethics

    23  

By-law Provisions on Stockholder Nominations of Director Candidates

    23  

Policy on Stockholder Recommendations for Director Candidates

    24  

Proxy Access for Director Nominations

    24  

Corporate Governance Guidelines

    24  

Communication with Directors

    25  

Auditor Services Pre-Approval Policy

    25  

Policy Regarding Hedging and Pledging

    25  

2021 Sustainability Highlights

    26  
Executive Officers of the Registrant     28  
Executive Compensation and Other Information     30  

Compensation Discussion and Analysis

    30  

Compensation Committee Report

    42  

Summary Compensation Table

    43  

2021 Grants of Plan-Based Awards

    44  

Employment Agreements

    45  

2021 Outstanding Equity Awards at Year-End

    46  

2021 Option Exercises and Stock Vested

    48  

Potential Payments Upon Termination or Change in Control

    48  

Summary of Termination Payments and Benefits

    49  

Chief Executive Officer Pay Ratio Disclosure

    50  
Proposal 2 — Advisory Vote on Executive Compensation     51  
Compensation Committee Interlocks and Insider Participation     52  
Certain Relationships and Related Party Transactions     53  
Securities Owned by Directors, Executive Officers, and Certain Beneficial Owners     54  
Delinquent Section 16(a) Reports     57  
Equity Compensation Plan Information     58  
Proposal 3 — Ratification of Selection of Independent Registered Public Accounting Firm     59  

Fees Paid to PricewaterhouseCoopers LLP

    59  
Proposal 4 — Adopt Greenhouse Gas Emissions Reduction Targets     61  
Stockholder Proposals     63  
Reduce Printing and Mailing Costs     64  
Other Matters     65  
 

 

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LOGO

2001 Bryan Street, Suite 1600, Dallas, Texas 75201

PROXY STATEMENT

Annual Meeting of Stockholders

June 14, 2022

This Proxy Statement is being furnished by Builders FirstSource, Inc. (the “Corporation,” the “Company,” or “Builders FirstSource”) in connection with a solicitation of proxies by its Board of Directors (the “Board of Directors” or the “Board”) to be voted at the annual meeting of the Corporation’s stockholders to be held on June 14, 2022 (the “annual meeting” or “meeting”). Whether or not you personally attend, it is important that your shares be represented and voted at the annual meeting. Most stockholders have a choice of voting over the internet, by using a toll-free telephone number, or, for stockholders who elect to receive their proxy materials by mail, by completing a proxy card and mailing it in the postage-paid envelope provided. Check the Notice Regarding the Availability of Proxy Materials, your proxy card, or the information forwarded by your bank, broker, or other stockholder of record, as applicable, to determine which voting options are available to you. The internet voting and telephone voting facilities for stockholders of record will be available until 12:00 p.m. Central Time on June 14, 2022. The Notice Regarding the Availability of Proxy Materials will first be mailed on or about May 5, 2022.

SOLICITATION AND RATIFICATION OF PROXIES

If a proxy card is signed and returned, it will be voted as specified on the proxy card, or, if no vote is specified, it will be voted “FOR” all nominees presented in Proposal 1, “FOR” Proposals 2 and 3, and “ABSTAIN” for Proposal 4. At any time before it is exercised, you may revoke your proxy by timely delivery of written notice to the Corporate Secretary, by timely delivery of a properly executed, later-dated proxy (including by internet or telephone vote), or by voting via ballot at the annual meeting. Voting in advance of the annual meeting will not limit your right to vote at the annual meeting if you decide to attend in person. If you are a beneficial owner, and your shares are registered in the name of a bank, broker, or other stockholder of record, to be able to vote in person at the annual meeting you must obtain, from the stockholder of record, a legal proxy and submit it together with your ballot at the meeting. See “Questions and Answers about the Meeting and Voting” in this Proxy Statement for an explanation of the term “beneficial owner.”

The proxy accompanying this Proxy Statement is being solicited by the Board of Directors. The Corporation will bear the entire cost of this solicitation, including the preparation and delivery of this Proxy Statement, the proxy, and any additional information furnished to stockholders. The Corporation has retained Innisfree M&A Incorporated (“Innisfree”) to perform various proxy solicitation services in connection with the solicitation of proxies for the annual meeting. The Corporation will pay Innisfree a fee not to exceed $25,000, plus out-of-pocket expenses, for such services. In addition to using the mail and the internet, proxies may be solicited by directors, executive officers, and other employees of Builders FirstSource or its subsidiaries, in person or by telephone. No additional compensation will be paid to directors, executive officers, or other employees for their services in this regard. Builders FirstSource will also request banks, brokers, and other stockholders of record to forward proxy materials, at the Corporation’s expense, to the beneficial owners of the Corporation’s shares.

If you have questions or need assistance voting your shares, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th floor

New York, New York 10022

Stockholders may call toll free: (877) 825-8964

Banks and Brokers may call collect: (212) 750-5833

 

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General Information about Proxies and Voting

 

GENERAL INFORMATION ABOUT PROXIES AND VOTING

Outstanding Stock

 

 

The stockholders of record of Builders FirstSource, Inc. Common Stock (“Common Stock”) at the close of business on April 22, 2022 will be entitled to vote in person or by proxy at the annual meeting. At that time, the Corporation had 173,987,893 outstanding shares of its Common Stock. Each stockholder will be entitled to one vote in person or by proxy for each share of Common Stock held. A quorum for the transaction of business shall be constituted by the presence at the annual meeting, in person or by proxy, of a majority of the outstanding shares of Common Stock entitled to vote thereat. All shares for which proxies or voting instructions are returned are counted as present for purposes of determining the existence of a quorum at the annual meeting.

Internet Availability of Proxy Materials

 

 

As permitted by federal securities laws, Builders FirstSource is making this Proxy Statement and 2021 Annual Report on Form 10-K (the “2021 Annual Report”) available to its stockholders primarily via the internet instead of mailing printed copies of these materials to each stockholder. On or about May 5, 2022, we will mail to our stockholders (other than those who previously requested electronic or paper delivery) a Notice Regarding Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access the Proxy Statement and accompanying 2021 Annual Report. These proxy materials will be made available to our stockholders on or about May 5, 2022. The Notice provides instructions regarding how to vote through the internet. The Proxy Statement and 2021 Annual Report are also available on our website at www.bldr.com.

If you received a Notice by mail, you will not receive a printed copy of the proxy materials by mail unless you request printed materials. If you wish to receive printed proxy materials, you should follow the instructions for requesting such materials contained on the Notice.

If you receive more than one Notice, it means your shares are registered differently and are held in more than one account. To ensure all shares are voted, please either vote each account over the internet or by telephone or sign and return by mail all proxy cards.

Voting Matters and Board Recommendations

 

 

At this year’s annual meeting, we are asking our stockholders to vote on the following matters:

 

    

 

Proposal

   Board Recommendation      Page Number  

1.

 

Election of Directors

   FOR each nominee    7

2.

 

Advisory vote on the compensation of the named executive officers

   FOR    51

3.

 

Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm

   FOR    59

4.

 

Stockholder proposal, if properly presented at the meeting, requesting that the Corporation adopt greenhouse gas emissions reduction targets

   NO RECOMMENDATION    61

 

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE OF THIS PROXY STATEMENT.

 

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Questions and Answers about the Meeting and Voting

 

QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING

 

 

What is a proxy?

A proxy is your legal designation of another person, called a proxy holder, to vote the shares that you own. We designated Timothy D. Johnson, our Executive Vice President, General Counsel, and Corporate Secretary, and Peter M. Jackson, our Executive Vice President and Chief Financial Officer, to act as proxy holders at the annual meeting as to all shares for which proxy cards are returned or voting instructions are provided by internet or telephone.

 

 

 

 

 

What is a proxy statement?

A proxy statement is a document that the Securities and Exchange Commission (the “SEC”) regulations require us to give you when we ask you to provide a proxy (by voting by phone or internet or, if applicable, by returning a proxy card by mail) designating the proxy holders described above to vote on your behalf.

 

 

 

 

 

What is the difference between a stockholder of record and a stockholder who holds stock in street name, also called a “beneficial owner?”

If your shares are registered in your name at our transfer agent, Computershare Investor Services, you are a stockholder of record.

If your shares are held through a broker, bank, trustee, nominee, or other similar stockholder of record on your behalf, your shares are held in street name and you are the beneficial owner of the shares.

 

 

 

 

 

How do you obtain admission to the annual meeting?

Stockholders of Record. Stockholders of record must bring a current government-issued photo identification card to gain admission to the annual meeting.

Street Name Holders. To obtain admission to the annual meeting, a street name holder must (i) bring a current government-issued photo identification card and (ii) ask his or her broker or bank for a legal proxy and must bring that legal proxy with him or her to the meeting. If you do not receive the legal proxy in time, bring your most recent brokerage statement with you to the meeting. We can use that to verify your ownership of Common Stock and admit you to the meeting. However, you will not be able to vote your shares at the meeting without a legal proxy. Please note that if you own shares in street name, and you are issued a legal proxy, any previously executed proxy will be revoked, and your vote will not be counted unless you appear at the meeting and vote in person.

 

 

 

 

 

Could COVID-19 or related developments affect the Corporation’s ability to hold an in-person meeting?

We are actively monitoring the COVID-19 situation. In the event that it is inadvisable or not possible to hold our annual meeting in person, we may decide instead to hold a virtual annual meeting that is accessible only through the internet. If we decide to use that format, we will announce the decision to do so in advance via press release, and details on how to participate will be available on the investor relations page of the Corporation’s website (https://investors.bldr.com).

 

 

 

 

 

What different methods can you use to vote?

By Written Proxy. Stockholders who elect to receive their proxy materials by mail may vote by mailing the written proxy card.

 

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Questions and Answers about the Meeting and Voting

 

By Telephone and Internet Proxy. All stockholders of record may also vote by telephone from the U.S., using the toll-free telephone number provided on the proxy card or in the website listed on the Notice, or by the internet, using the procedures and instructions described in the Notice or proxy card. Street name holders may vote by telephone or the internet if their bank, broker, or other stockholder of record makes those methods available. If that is the case, the bank, broker, or other stockholder of record will enclose the instructions with the Proxy Statement or other notice of the meeting. The telephone and internet voting procedures, including the use of control numbers, are designed to authenticate stockholders’ identities, allow stockholders to vote their shares, and confirm that their instructions have been properly recorded.

In Person. All stockholders may vote in person at the meeting (unless they are street name holders without a legal proxy, as described in the foregoing question).

If you have questions or need assistance voting your shares, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th floor

New York, New York 10022

Stockholders may call toll free: (877) 825-8964

Banks and Brokers may call collect: (212) 750-5833

 

 

 

 

 

 

What is the record date and what does it mean?

The record date for the annual meeting is April 22, 2022. The record date is established by the Board of Directors as required by Delaware law. Stockholders of record at the close of business on the record date are entitled to receive notice of the annual meeting and to vote their shares at the meeting.

 

 

 

 

 

What are your voting choices for director nominees, and what vote is needed to elect directors?

For the vote on the election of the Class II director nominees to serve until the 2025 annual meeting, stockholders may:

 

   

vote in favor of all nominees,

   

vote against all nominees, or

   

vote in favor of specified nominees and against other specified nominees, or abstain from voting on all or certain specified nominees.

At the annual meeting in 2022, directors will be elected by a majority of the votes cast in person or by proxy at the annual meeting. Each director nominee in 2022 has submitted an irrevocable resignation that will be effective upon the occurrence of (i) the failure of such director nominee to receive a majority of the votes cast and (ii) the acceptance of that resignation by the Board. Abstentions from voting have no effect on the outcome of such vote because the election of directors is determined on the basis of votes cast and abstentions are not counted as votes cast.

 

 

 

 

 

THE BOARD RECOMMENDS A VOTE “FOR” EACH OF THE DIRECTOR NOMINEES.

 

 

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Questions and Answers about the Meeting and Voting

 

 

What are your voting choices on the advisory vote to approve the 2021 compensation of the Corporation’s named executive officers, including the Corporation’s compensation practices and principles and their implementation?

In the non-binding vote to approve the 2021 compensation of the Corporation’s named executive officers, including the Corporation’s compensation practices and principles and their implementation, as discussed and disclosed in this Proxy Statement, stockholders may:

 

   

vote in favor of the proposal,

   

vote against the proposal, or

   

abstain from voting on the proposal.

This proposal requires the affirmative vote of a majority of the votes represented and entitled to vote at the annual meeting. Accordingly, abstentions have the effect of a vote “against” Proposal 2. This is an advisory vote, and, as such, is not binding on the Board or the Compensation Committee. However, the Board and the Compensation Committee will consider the results of the vote when setting the compensation of the Corporation’s executive officers in the future.

 

 

 

 

 

THE BOARD RECOMMENDS A VOTE “FOR” PROPOSAL 2.

 

 

 

What are your voting choices on the ratification of the appointment of PricewaterhouseCoopers LLP as the Corporation’s independent registered public accounting firm, and what vote is needed to ratify their appointment?

On the vote on the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year 2022, stockholders may:

 

   

vote in favor of the ratification,

   

vote against the ratification, or

   

abstain from voting on the ratification.

The proposal to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm will require the affirmative vote of a majority of the shares represented and entitled to vote at the annual meeting. Accordingly, abstentions will have the effect of a vote “against” Proposal 3. This vote is not binding on the Board or the Audit Committee.

 

 

 

 

 

THE BOARD RECOMMENDS A VOTE “FOR” PROPOSAL 3.

 

 

 

What are your voting choices on the stockholder proposal, if properly presented at the meeting, requesting that the Corporation adopt greenhouse gas emissions reduction targets?

On the vote on the stockholder proposal, if properly presented at the meeting, requesting that the Corporation adopt greenhouse gas emissions reduction targets, stockholders may:

 

   

vote in favor of the stockholder proposal,

   

vote against the stockholder proposal, or

   

abstain from voting on the stockholder proposal.

The proposal to consider a stockholder proposal, if properly presented at the meeting, requesting that the Corporation adopt greenhouse gas emissions reduction targets, will require the affirmative vote of a majority of the shares represented and entitled to vote at the annual meeting. Accordingly, abstentions will have the effect of a vote “against” Proposal 4.

 

 

 

 

 

THE BOARD DOES NOT MAKE A RECOMMENDATION FOR PROPOSAL 4.

 

 

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Questions and Answers about the Meeting and Voting

 

 

What if a stockholder does not specify a choice for a matter when returning a proxy card?

Stockholders should specify their choice for each proposal described on the proxy card, if they receive one. However, proxy cards that are signed and returned, but for which no specific instruction is given, will be voted “FOR” all the director candidates listed in Proposal 1, “FOR” Proposals 2 and 3, and “ABSTAIN” for Proposal 4.

If any matters not specifically set forth in this Proxy Statement properly come to a vote at the meeting, either of the members of the Proxy Committee, comprised of Timothy D. Johnson and Peter M. Jackson, will vote regarding those matters in accordance with their best judgments.

 

 

 

 

 

What are broker non-votes and how are they counted?

Although your broker is the record holder of any shares that you hold in street name, it must vote those shares pursuant to your instructions. If you do not provide instructions, your broker may exercise discretionary voting power over your shares for “routine” items but not for “non-routine” items. All matters described in this Proxy Statement, except for the ratification of the appointment of our independent auditor, are considered to be non-routine matters. “Broker non-votes” occur with respect to a non-routine matter when shares held of record by a broker are not voted on such matter because the beneficial owner has not provided voting instructions and the broker either lacks or declines to exercise the authority to vote the shares in its discretion.

Broker non-votes will be counted as present for purposes of establishing a quorum. Broker non-votes will not have any effect on Proposal 1, since broker non-votes are not votes cast. Broker non-votes will have the effect of a vote “AGAINST” on Proposal 2 and Proposal 4, since broker non-votes are entitled to vote at the annual meeting but are not entitled to vote on “non-routine” items. Brokers have discretionary authority to vote on Proposal 3.

 

 

 

 

 

Can I change my mind and revoke or change my proxy?

Yes. A stockholder of record may revoke a proxy or change its vote prior to its exercise at the annual meeting by:

 

   

submitting a later-dated vote by telephone or Internet no later than 12:00 p.m. Central Time on June 14, 2022;

   

signing a valid, later-dated proxy card and submitting it so that it is received before the annual meeting in accordance with the instructions included in the proxy card;

   

before the annual meeting, signing a written notice of revocation dated later than the date of the proxy and submitting it to our Corporate Secretary so that it is received before the annual meeting; or

   

attending the annual meeting and voting in person.

Note that attendance at the annual meeting, by itself, will not revoke your proxy.

A street name holder may revoke a proxy given pursuant to this solicitation by following the instructions of the bank, broker, trustee, or other nominee who holds his or her shares.

 

 

 

 

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Proposal 1 — Election of Directors

 

PROPOSAL 1 — ELECTION OF DIRECTORS

On January 1, 2021 (the “Merger Effective Date”), the Corporation completed its previously announced all stock merger transaction with BMC Stock Holdings, Inc., a Delaware corporation (“BMC”). The merger between the Corporation and BMC is referred to as the “Merger” throughout this Proxy Statement.

Pursuant to the Corporation’s By-laws, the Board is “classified,” which means it is divided into three classes of directors based on the expiration of their terms. Under the classified Board arrangement, directors are elected to terms that expire on the annual meeting date three years following the annual meeting at which they were elected and the terms are “staggered” so that the terms of approximately one-third of the directors expire each year.

There are currently 12 members of the Board of Directors. Three of the 12 directors, Daniel Agroskin, David Bullock, and Floyd Sherman, whose terms all expire in 2022, are retiring from the Board and not standing for election at the annual meeting. Only one of the three vacancies will be filled at the annual meeting, and, as a result, the size of the Board will be reduced from 12 to 10 directors and the number of Class II directors will be reduced from four to two. Accordingly, Proposal 1 seeks the election of two directors to fill the continuing directorships whose terms expire in 2022.

The term of the other Class II director, Mark A. Alexander, will expire at the annual meeting in 2022. The Board of Directors has nominated Mark A. Alexander and Dirkson R. Charles for election to a term that will expire at the annual meeting in 2025.

 

           

Nominee

Age Position Held Independent Audit
Committee
Compensation
Committee
Nominating and Corporate
Governance Committee
           

Mark A. Alexander

63 Director X X
           

Dirkson R. Charles

58 Director X

Unless otherwise indicated, all proxies that authorize the proxy holders to vote for the election of directors will be voted “FOR” the election of the nominees listed below. If a nominee becomes unavailable for election as a result of unforeseen circumstances, it is the intention of the proxy holders to vote for the election of such substitute nominee, if any, as the Board of Directors may propose. As of the date of this Proxy Statement, each of the nominees has consented to serve and the Board is not aware of any circumstances that would cause a nominee to be unable to serve as a director.

 

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Proposal 1 — Election of Directors

 

The background and business affiliations of the director nominees, as well as the qualifications that led the Board to conclude that each nominee should serve as a director of the Corporation, are set forth below:

Class II — Directors with Terms Expiring in 2022

 

Mark A.

Alexander

 

   

 

LOGO

 

Director since 2021

 

Independent

 

63 years old

 

Audit Committee (Member)

 

 

Mr. Alexander is a member of the Audit Committee. Mr. Alexander served as a director of BMC from 2017 through the Merger, including as the Chair of BMC’s Audit Committee prior to the Merger. He currently serves as Founder, Chairman and Chief Executive Officer of Landmark Property Group, a property management and real estate redevelopment company, since its founding in 2009. Mr. Alexander previously served as Chief Executive Officer, President, and a director of Suburban Propane Partners, a multibillion-dollar publicly-traded energy services company, from March 1996 to September 2009. Prior to Suburban Propane Partners, he was Senior Vice President, Business Development of Hanson Industries, the U.S. arm of Hanson plc, from 1984 to 1996. He holds a Bachelor of Business Administration from the University of Notre Dame, and is a Certified Public Accountant (currently inactive) in the State of New Jersey. In the last five years, he served on the board of the following public company: W.P. Carey Inc. (current).

 

 

Qualifications: Mr. Alexander possesses significant executive and financial expertise and experience gained from previous management positions. Additionally, his current service on another public company board and its audit committee enables him to provide invaluable guidance and knowledge to our Board and its committees.

 

 

Dirkson R.

Charles

 

   

 

LOGO

 

Director Nominee

 

Independent

 

58 years old

 

 

 

Mr. Charles currently serves as Founder and Chief Executive Officer of Loar Group, Inc., a business specializing in the design and manufacture of aerospace components. He has served in such role since Loar Group’s inception in January 2012. Prior to his founding of Loar Group, Mr. Charles served as executive vice president of McKechnie Aerospace since the fall of 2007. Before joining McKechnie Aerospace, Mr. Charles held a similar position as executive vice president and chief financial officer with K&F Industries, a leading manufacturer of aviation wheels, brakes, fuel tanks and brake control systems that was acquired by Meggitt-USA in May 2007. In addition, Mr. Charles was with Arthur Andersen and Company during the mid-1980s for five years. Mr. Charles holds an undergraduate degree in public accounting and a M.B.A. in finance from Pace University and is a certified public accountant in the State of New York. Since March 2020, Mr. Charles has served as the Chairman of Doncasters Group Limited, a privately-held leading international manufacturer of high-precision alloy components.

 

 

Qualifications: Mr. Charles has significant corporate executive experience through his current roles as a CEO and chairman and in prior high-level leadership positions. Additionally, he possesses critical accounting skills as a licensed C.P.A. and from his prior experience in public accounting. Mr. Charles’s qualifications and accomplishments will provide a crucial perspective for the Board.

 

 

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Continuing Directors

 

CONTINUING DIRECTORS

The background and business affiliations of the Corporation’s other directors, whose terms of service continue beyond 2022, as well as the qualifications that led the Board to conclude that such directors should serve as a director of the Corporation, are set forth below:

Class I — Directors with Terms Expiring in 2024

 

Cleveland A.

Christophe

 

   

 

LOGO

 

Director since 2005

 

Independent

 

76 years old

 

Compensation Committee (Chair)

 

Nominating and Corporate Governance Committee (Member)

 

 

Mr. Christophe is the Chair of the Compensation Committee and a member of the Nominating and Corporate Governance Committee. In January 2013, Mr. Christophe retired from US&S, Inc., a supplier of services and materials primarily to various agencies of the U.S. Government. He had been President of US&S, Inc. since 2009. Mr. Christophe was the Managing Partner of TSG Capital Group, a private equity investment firm, which he founded in 1992. Previously, Mr. Christophe was Senior Vice President of TLC Group, L.P. From 1971 to 1987, Mr. Christophe held numerous senior positions with Citibank, N.A. He has been a Chartered Financial Analyst since 1975.

 

 

Qualifications: Mr. Christophe has substantial financial and management expertise from his long tenure in the investment and banking industries. He also has significant senior management experience in the commercial and industrial service industry. Additionally, Mr. Christophe’s prior service on other public company boards and audit committees positions him to make valuable contributions to the governance and operation of the Board and its committees.

 

 

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Continuing Directors

 

David E.

Flitman

 

   

 

LOGO

 

Director since 2021

 

57 years old

 

 

 

Mr. Flitman was elected the Corporation’s Chief Executive Officer on April 1, 2021. Additionally, on the Merger Effective Date, Mr. Flitman was appointed to the Board of Directors of the Corporation and elected the Corporation’s President. Prior to the Merger, he had served on the Board of Directors and as the Chief Executive Officer and President of BMC since September 2018. Prior to BMC, Mr. Flitman served as Executive Vice President of Performance Food Group Company, a family of leading foodservice distributors, and President and Chief Executive Officer of its Performance Foodservice division from January 2015 to September 2018. Prior to Performance Food Group, Mr. Flitman served as Chief Operating Officer and President, USA & Mexico of Univar Corporation, a global chemical distributor, from January 2014 to December 2014 after joining Univar in December 2012 as President USA with additional responsibility for Univar’s Global Supply Chain & Export Services teams. He had also served as Executive Vice President and President, Water and Process Services at Ecolab Inc., the global leader in water, hygiene and energy technologies and services, from November 2011 to September 2012, and previously Senior Executive Vice President of Nalco Holding Company from August 2008 until it was acquired by Ecolab in November 2011. From February 2005 to July 2008, Mr. Flitman served as President of Allegheny Power System, an electric utility that served customers in Pennsylvania, West Virginia, Virginia, and Maryland. Prior to this, he had nearly 20 years in operational, commercial, and global business leadership positions at DuPont, a science and technology-based company. Mr. Flitman received his B.S. degree in Chemical Engineering from Purdue University. In the last five years, he served on the board of the following public company: Vertiv Corporation (current).

 

 

Qualifications: Mr. Flitman has a proven track record and demonstrated leadership ability from his extensive operational, commercial, and supply chain experience and over three decades of experience leading distribution businesses across multiple industries. In addition, his in-depth knowledge of our corporate strategy and day-to-day operations as our Chief Executive Officer provides our Board with an important resource in understanding our business and strategy.

 

 

W. Bradley

Hayes

 

   

 

LOGO

 

Director since 2019

 

Independent

 

56 years old

 

Audit Committee (Chair)

 

 

Mr. Hayes is the Chair of the Audit Committee. He served as Executive Vice President, Chief Financial Officer, and Treasurer of Laboratory Corporation of America Holdings (“LabCorp”), a NYSE listed life sciences company, from June 2005 until his retirement in June 2014. He was Senior Vice President, Investor Relations for LabCorp from June 2004 to June 2005. Mr. Hayes joined LabCorp in September 1996 and was responsible for the day-to-day operations of the revenue cycle function. Prior to joining LabCorp, Mr. Hayes was in the audit department at KPMG for nine years. Mr. Hayes holds a Bachelor of Science in Accounting from the University of North Carolina at Greensboro. In the last five years, he served on the boards of the following public companies: Indaptus Therapeutics, Inc. (current) and Patheon, N.V. (previous).

 

 

Qualifications: Mr. Hayes has significant public company financial experience. He has over 15 years of experience in senior and executive management and practiced as a C.P.A. for three decades. Through his previous experience as chief financial officer and chairman of the audit committee of publicly-traded companies, Mr. Hayes brings valuable knowledge to the Board and the Audit Committee of the Corporation.

 

 

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Continuing Directors

 

Brett N.

Milgrim

 

   

 

LOGO

 

Director since 1999

 

Independent

 

53 years old

 

Compensation Committee (Member)

 

 

Mr. Milgrim is a member of the Compensation Committee. Mr. Milgrim is Co-Chairman of the Board of Loar Group, Inc., a business specializing in the design and manufacture of aerospace components. From 1997 until early 2011, he was a Managing Director of JLL Partners, Inc., a leading private equity firm. In the last five years, he served on the boards of the following public companies: Horizon Global Corp. (current) and PGT Innovations, Inc. (current).

 

 

Qualifications: Mr. Milgrim is very knowledgeable regarding all aspects of corporate finance and capital markets. His long tenure on the board of directors of the Corporation, as well as his service on the boards of two other building products companies, gives him in-depth knowledge of the building products industry and the issues faced by the Corporation.

 

Class III — Directors with Terms Expiring in 2023

 

Paul S.

Levy

 

   

 

LOGO

 

Director since 1998

 

Independent

 

74 years old

 

Chairman of the Board

 

 

Mr. Levy is the Chairman of the Board. He is a Managing Director of JLL Partners, Inc., which he founded in 1988. Mr. Levy has also previously served on the boards of numerous private companies, including C.H.I. Overhead Doors, Inc., a garage door manufacturer, and Loar Group, Inc., a business specializing in the design and manufacture of aerospace components. In the last five years, Mr. Levy served on the boards of the following public companies: Patheon, Inc. (previous) and PGT Innovations, Inc. (previous).

 

 

Qualifications: Mr. Levy has vast experience investing in and managing a wide variety of businesses, including other building products companies. He has served on the boards of directors of several public companies. Mr. Levy has also been the CEO of a large company, general counsel of another company, and a practicing lawyer, bringing further breadth to his contributions to the Board.

 

 

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Continuing Directors

 

Cory J.

Boydston

 

   

 

LOGO

 

Director since 2021

 

63 years old

 

Audit Committee (Member)

 

 

Ms. Boydston is a member of the Audit Committee. Ms. Boydston served as a director of BMC from 2018 through the Merger. She currently serves as the Chief Financial Officer of Ashton Woods USA L.L.C, the second largest private homebuilder in the U.S., a position she has held since 2009. Prior to Ashton Woods, Ms. Boydston served as Senior Vice President, Chief Financial Officer, and Partner at Starwood Land Ventures, LLC, a real estate investment firm that engages in residential land acquisition, development, and financing, from 2008 to 2009. She also served in senior leadership roles at two publicly-traded home construction companies, including as Senior Vice President – Finance and Treasury at Beazer Homes USA, Inc. from 1998 to 2008, and as Chief Financial Officer, Corporate Controller, and in other leadership roles at Lennar Corporation from 1987 to 1997. Ms. Boydston is also the co-founder of Women’s Housing Leadership Group and serves on the Georgia Advisory Board of the Trust for Public Land. She holds a Bachelor of Science from Florida State University and is a Certified Public Accountant in the State of Georgia.

 

 

Qualifications: Ms. Boydston possesses substantial public company accounting and finance experience through her more than 30 years of service in senior and executive management and as a C.P.A. Most of her experience is in the homebuilding industry, our primary end-market, which qualifies Ms. Boydston to make critical contributions to the Corporation and our Board.

 

 

James

O’Leary

 

   

 

LOGO

 

Director since 2021

 

Independent

 

59 years old

 

Compensation Committee (Member)

 

 

Mr. O’Leary is a member of the Compensation Committee. Mr. O’Leary served as a director of BMC from 2015 through the Merger, including as the Chairman of BMC immediately prior to the Merger. He currently serves as the Chairman of Kinematics Manufacturing Company, a position he has held since 2015, and on the board of Sentient Science, a private technology company, since December 2020. Since March 2014, Mr. O’Leary has served as a Senior Advisor and member of the Basic Industries Advisory Group of Madison Dearborn Partners, a leading private equity firm. He also served as Chairman and Chief Executive Officer of WireCo Worldgroup, Inc., a leading global manufacturer of engineered wire, steel rope, and synthetic rope, from January 2017 until his retirement from WireCo in July 2019. Prior to this, Mr. O’Leary served as Chairman of the Board and Chief Executive Officer of Kaydon Corporation, Inc., a diversified global manufacturer of precision industrial goods that was listed on the New York Stock Exchange, from March 2007 until its sale in October 2013. From October 2013 to March 2014, Mr. O’Leary served as a Senior Advisor to the SKF Group, the acquiror of Kaydon Corporation, Inc. From 2005 to March 2007, he served as an independent director of Kaydon Corporation, Inc. Mr. O’Leary holds a B.B.A. from Pace University and an M.B.A. from the Wharton School of the University of Pennsylvania. He is an inactive Certified Public Accountant in the State of New York.

 

 

Qualifications: Mr. O’Leary has a depth of business, operations, and financial experience gained from serving as a chief executive officer for multiple manufacturing companies, including a publicly-traded company. He also brings valuable accounting experience to our Board as a former C.P.A.

 

 

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Continuing Directors

 

Craig A.

Steinke

 

   

 

LOGO

 

Director since 2006

 

Independent

 

65 years old

 

Audit Committee (Member)

 

Nominating and Corporate Governance Committee (Chair)

 

 

Mr. Steinke is the Chair of the Nominating and Corporate Governance Committee and a member of the Audit Committee. Since June 2013, Mr. Steinke has been the Chief Executive Officer and a director of Service Logic LLC, a private equity owned company that specializes in energy management and HVAC services for office buildings, hospitals, data centers, and other commercial buildings on a national scale. From 2008 to July 2017, he was an operating partner at Sterling Investment Partners (“Sterling”), working with management teams of select portfolio companies. From September 2010 until January 2015, Mr. Steinke served as a director and operating adviser for Lazer Spot Inc. (Sterling investment), which specializes in providing logistics support to Fortune 500 companies. Prior to that, he was President and Chief Executive Officer of GPX International Tire Corporation (Sterling investment), an international manufacturer and distributor of branded industrial and off road equipment tires. From 2001 to 2007, Mr. Steinke was President and Chief Executive Officer of Eagle Family Foods, Inc., a private equity owned consumer products company in the food industry. His previous positions held include Senior Vice President and Group General Manager of BHP Copper, a significant natural resource company, and President of Magma Metals, a billion-dollar subsidiary of Magma Copper Company. Mr. Steinke is a C.P.A. and was employed by Arthur Andersen & Co. He currently serves on the boards for a number of private companies.

 

 

Qualifications: Mr. Steinke’s extensive experience at the senior executive management level, including as a chief executive officer, allows him to make significant contributions to the development of the Corporation’s business strategy. He also brings a broad knowledge of accounting and experience as a C.P.A. to the Board’s discussions. Mr. Steinke has also served on numerous boards of directors.

 

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Director Compensation

 

DIRECTOR COMPENSATION

Compensation of Directors

 

 

The following table sets forth the cash and other compensation paid by the Corporation to the members of the Board of Directors of the Corporation for all services in all capacities during 2021.

 

       

Name

   Fees Earned or        
Paid in Cash  ($)        
  

Stock      

Awards ($)(1)       

   All Other
Compensation ($)
     Total ($)      
       

Daniel Agroskin

   106,705(2)            149,982              —                  256,687      
       

Mark A. Alexander

   121,278(2)            217,826              —                  339,104      
       

Cory J. Boydston

   121,278(2)            217,826              —                  339,104      
       

David W. Bullock

   121,384(3)            217,826              —                  339,210      
       

Cleveland A. Christophe

   126,849               149,982              —                  276,831    
       

David E. Flitman(4)

          —                     —              —                           —      
       

W. Bradley Hayes

   131,728(2)            149,982              —                  281,710      
       

Paul S. Levy

   201,815(2)            149,982              —                  351,797      
       

Brett N. Milgrim

   106,705(2)            149,982              —                  256,687      
       

James O’ Leary

   121,278(2)            217,826              —                  339,104      
       

Floyd F. Sherman

   101,778(2)            149,982              —                  251,760      
       

Craig A. Steinke

   116,753(2)            149,982              —                  266,735      

 

1.

Reflects the aggregate grant date fair value of restricted stock unit awards granted in 2021. The fair value of these awards was determined in accordance with the Compensation – Stock Compensation topic of the Financial Accounting Standards Board Accounting Standards Codification. The fair value of the restricted stock unit awards was equal to the closing price of our Common Stock on the grant date.

2.

As described below under “Director Compensation Program,” Messrs. Agroskin, Alexander, Hayes, Levy, Milgrim, O’Leary, Sherman, and Steinke and Ms. Boydston each took their annual cash retainers and any fees for serving on committees in Common Stock for the full year in 2021. Amounts include the grant date fair value of these stock awards.

3.

Mr. Bullock elected to receive $95,147 of his total annual retainer and any fees for serving on committees in cash and $26,237 in Common Stock. The amount taken in Common Stock reflects the grant date fair value of the stock award.

4.

As an employee of the Corporation, Mr. Flitman did not receive any compensation for his service as a director in 2021. As a named executive officer, the compensation Mr. Flitman received as an employee during 2021 is set forth in “Executive Compensation and Other Information” below.

The following table shows the total number of shares of Common Stock underlying restricted stock units held by the members of the Board of Directors of the Corporation (excluding executive officers) as of December 31, 2021:

 

 

Name

Number of
Shares  Underlying
Restricted
Stock Units
 

Daniel Agroskin

3,459
 

Mark A. Alexander

5,119
 

Cory J. Boydston

5,119
 

David W. Bullock

5,119
 

Cleveland A. Christophe

3,459
 

W. Bradley Hayes

3,459
 

Paul S. Levy

3,459
 

Brett N. Milgrim

3,459
 

James O’Leary

5,119
 

Floyd F. Sherman

3,459
 

Craig A. Steinke

3,459

 

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Director Compensation

 

Director Compensation Program

 

 

Under the Amended and Restated Director Compensation Policy, directors are entitled to compensation for their service on the Board if they are not concurrently employed in any capacity by the Corporation or any of its subsidiaries. Under the Amended and Restated Director Compensation Policy in effect during 2021, Directors who met these standards (“Eligible Directors”) received an annual cash retainer of $100,000. In addition, the Chairman of the Board receives an annual cash retainer of $100,000 for service in such role, which is also payable quarterly.

In connection with the Merger, the Amended and Restated Director Compensation Policy was amended effective January 15, 2021 to increase the annual cash retainer from $85,000 to $100,000 and the fair market value of the annual grant of restricted stock units from $130,000 to $150,000. The annual fees for serving on the Board’s committees were not changed. Because quarterly cash retainers are paid in advance, in the quarter following such amendment legacy Builders FirstSource directors received a cash retainer true-up for the period of time during the prior quarter in which the increased cash retainer amount was in effect.

Directors receive annual fees for serving on the Board’s committees, but do not receive separate per meeting fees for attending Board or committee meetings. The annual fees for serving on the Board’s committees are as follows:

 

   

Committee

Chair Fee

Member Fee
(non-Chair)

   

Audit Committee

$30,000 $5,000
   

Compensation Committee

$20,000 $5,000
   

Nominating and Corporate Governance Committee

$10,000 $5,000

Eligible Directors also receive annual grants of restricted stock units. In 2021, the number of shares underlying these awards is determined by dividing a dollar value ($150,000 per year) by the fair market value of our Common Stock on the date of grant. These awards vest in full on the earlier of the first anniversary of the grant date or upon such director’s cessation of service due to death, disability, or retirement. If a new Eligible Director joins the Board, or if an existing director’s status changes to allow him or her to qualify as an Eligible Director, that director will receive a grant of restricted stock units on a pro-rated basis for the remainder of the current director compensation year, which is the year from the date of the prior annual meeting of stockholders to the date of the next annual meeting of stockholders.

In lieu of receiving cash retainers, an Eligible Director may elect to receive fully vested shares of Common Stock having a value on the first day of the service quarter for which they are issued approximately equal to the amount of the cash retainer payment he or she would otherwise receive. Such stock grants in lieu of cash retainer payments will be awarded on a quarterly basis at the same time cash retainer payments would be made. The Board amended the Amended and Restated Director Compensation Policy on November 17, 2021 to clarify that directors may only elect to receive fully vested shares of Common Stock in lieu of cash retainers during an open trading window and such election will take effect the following year.

We do not compensate directors for any period of service in which they are not Eligible Directors.

 

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Information Regarding the Board and its Committees

 

INFORMATION REGARDING THE BOARD AND ITS COMMITTEES

 

       
    Name Board of
            
Directors            
Audit
        
Committee         
Compensation
        
Committee         
Nominating and
Corporate
Governance
       Committee      
       
Paul S. Levy Chair
       
Daniel Agroskin X X
       
Mark A. Alexander X X
       
Cory J. Boydston X X
       
David W. Bullock X X
       
Cleveland A. Christophe X Chair X
       
David E. Flitman X
       
W. Bradley Hayes X Chair
       
Brett N. Milgrim X X
       
James O’Leary X X
       
Floyd F. Sherman X
       
Craig A. Steinke X X Chair

Board Purpose and Structure

 

 

The mission of the Board is to provide strategic guidance to the Corporation’s management, to monitor the performance and ethical behavior of the Corporation’s management, and to maximize the long-term financial return to the Corporation’s stockholders, while considering and appropriately balancing the interests of other stakeholders and constituencies. The Board currently consists of 12 directors, but will be reduced to 10 directors upon election of the director nominees at the annual meeting as described above.

Director Independence

 

 

The Board of Directors is comprised of one management director, Mr. Flitman (who is the Corporation’s current President and CEO), Mr. Sherman (who is the Corporation’s former CEO and was an employee of the Corporation until March 31, 2019), and ten non-management directors. As part of its annual evaluation of director independence, the Board examined, among other things, whether any transactions or relationships exist currently, or existed during the past three years, between each independent director and the Corporation or its subsidiaries or independent registered public accounting firm (the “auditors”). If such transactions or relationships exist, the Board reviews the nature of those transactions or relationships, including under the relevant New York Stock Exchange Listing Standards (the “NYSE Standards”) and SEC standards, to determine whether those transactions or relationships would impair such director’s independence. The Board also examined whether there are, or have been within the past year, any transactions or relationships between each independent director and members of the senior management of Builders FirstSource or its affiliates. As a result of this evaluation, the Board affirmatively determined that each of Messrs. Levy, Agroskin, Alexander, Bullock, Christophe, Hayes, Milgrim, O’Leary, and Steinke, and director nominee Dirkson R. Charles, is independent under those criteria.

In addition, our Board of Directors affirmatively determined that all the members of the Compensation Committee and all the members of the Audit Committee except Ms. Boydston meet the additional independence requirements of the SEC and NYSE Standards to audit and compensation committee members. Pursuant to the NYSE Standards, Ms. Boydston may remain on the Audit Committee until July 19, 2022. As a result, the Compensation Committee and the Nominating and Corporate Governance Committee are each comprised solely of independent directors, and the Audit Committee is in compliance with the independence requirements of the SEC and the NYSE Standards.

 

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Information Regarding the Board and its Committees

 

Each year, the independent directors meet in regularly scheduled executive sessions outside the presence of management representatives. Interested parties, including stockholders, may communicate with the Chairman or the independent directors as a group through the process described in this Proxy Statement under the heading “Policy on Stockholder-Director Communications.”

Board Meetings and Attendance

 

 

In 2021, our Board of Directors met ten times, our Audit Committee met eight times, our Compensation Committee met three times, and our Nominating and Corporate Governance Committee met three times, including regularly scheduled and special meetings. During 2021, each of the Corporation’s incumbent directors attended at least 75% of the combined meetings of the Board and any committee on which such director served during his or her term as a director. Pursuant to the Builders FirstSource, Inc. Corporate Governance Guidelines (available on the Governance section of our website), all directors are strongly encouraged to attend the annual meeting. Any director who is unable to attend an annual meeting of stockholders is expected to notify the Chairman of the Board in advance of such meeting. In 2021, ten members of the Board were available at our annual meeting by conference call.

Board Leadership Structure and Role in Risk Oversight

 

 

The Board is led by the Chairman of the Board, Paul Levy. Neither David Flitman, the only employee director, nor Floyd Sherman, who was an employee of the Corporation until March 31, 2019, has any formal leadership role with the Board. Mr. Levy takes a leading role in establishing the timing, agenda, and procedure of Board meetings. However, each of the directors actively participates in guiding the actions of the Board. The Board has determined that this leadership structure is appropriate and effective due to the Board’s size, the working relationship that has developed between the directors as a result of their length of service on the Board, and the significant experience that the members of the Board have as directors and members of senior management with other companies. The Board reviews and guides the Corporation in the following areas, among others:

 

     LOGO

   Safety, including COVID-19   

LOGO

   Regulatory and legislative developments

     LOGO

   Environmental, social and governance matters   

LOGO

   Cybersecurity and data privacy

     LOGO

   Business strategy and policy, including industry and economic developments   

LOGO

   Human capital management and diversity and inclusion

     LOGO

   Operations and system integrity   

LOGO

   Annual budget, including capital investment plan

     LOGO

   Litigation and other legal matters   

LOGO

   Integration

The Corporation’s Board of Directors recognizes that, although day-to-day risk management is primarily the responsibility of the Corporation’s management team, the Board plays a critical role in the oversight of risk management. In that light, the Board is active, as a whole and also at the committee level, in reviewing management’s assessment of the major risks facing the Corporation and management’s processes for monitoring and controlling these risks. The Board regularly receives information from senior management regarding the Corporation’s financial results, credit, liquidity, operations, and other matters, as well as reports from the Corporation’s Audit Committee and Compensation Committee. During its review of such information, the Board discusses and analyzes risks associated with each area, as well as risks associated with new business ventures and those relating to the Corporation’s executive compensation plans and arrangements. The Board assumes ultimate responsibility for ensuring that the Corporation’s management adequately assesses the risks facing the Corporation and appropriately manages those risks.

 

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Information Regarding the Board and its Committees

 

The Audit Committee is specifically responsible for overseeing and monitoring the quality and integrity of the Corporation’s financial reports and other financial information provided to its stockholders. This includes reviewing the results of management’s risk assessment and compliance with management policies as they relate to financial reporting. The Audit Committee also monitors the Corporation’s compliance with legal and regulatory requirements and the risks associated therewith. On a regular basis, the Audit Committee reviews with senior management significant areas of risk exposure, including financial reporting controls, operational risks, pending litigation, employee issues, cybersecurity, disaster recovery planning, and issues arising from complaints to the Corporation’s hotline and other risk detection mechanisms.

The Board and the Audit Committee take an active role in reviewing the Corporation’s cybersecurity risk and actions to reduce or mitigate it. The Corporation’s Chief Information Security Officer (the “CISO”) and Chief Information Officer (the “CIO”), and the Chief Financial Officer, continuously monitor internal and external cybersecurity threats and review and revise the Corporation’s cybersecurity defenses on an ongoing basis. The CISO and CIO prepare reports on cybersecurity metrics for the Audit Committee on a regular basis. The Chief Financial Officer and CIO present those reports to the Audit Committee and address any questions and concerns raised by the Audit Committee. At least annually, the Audit Committee meets with the CIO and CISO in person to discuss cybersecurity in greater detail. The Audit Committee reports to the Board regarding cybersecurity matters, and the Board addresses cybersecurity issues either directly with management or through the Audit Committee.

The Compensation Committee reviewed with management the design and operation of our compensation programs for all employees, including executive officers, for the purpose of determining whether such programs might encourage inappropriate risk-taking that could have a material adverse effect on the Corporation. After conducting its evaluation, the Compensation Committee concluded that the Corporation’s compensation programs do not encourage employees to take risks that are reasonably likely to have a material adverse effect on the Corporation.

Audit Committee

 

 

The Audit Committee is composed of four directors, of which Messrs. Hayes, Alexander, and Steinke are independent (as that term is defined by the NYSE Standards and SEC regulations). Mr. Hayes serves as the Chair of the Audit Committee. The Board of Directors affirmatively determined that all Audit Committee members are financially literate as defined by the NYSE Standards. All members of the Audit Committee were also designated by the Board as audit committee “financial experts” under the SEC’s guidelines. The Board further determined that Messrs. Hayes, Alexander, and Steinke meet the independence standards of both the SEC regulations and the NYSE Standards for audit committee members. Although Ms. Boydston does not meet the independence requirements of the NYSE Standards, she can remain on the Audit Committee until July 19, 2022, the one-year anniversary of the Company’s listing on the NYSE, at which time she will no longer serve on the Audit Committee. A copy of the Audit Committee charter is available on the Governance section of our website at www.bldr.com. The Audit Committee is a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The primary function of the Audit Committee is to assist the Board of Directors of the Corporation in fulfilling its oversight responsibilities relating to (i) the quality and integrity of the Corporation’s financial reports and other financial information provided by the Corporation to its stockholders, the public, and others, (ii) the Corporation’s compliance with legal and regulatory requirements, (iii) the auditors’ qualifications, independence, performance, and compensation, and (iv) the performance of the Corporation’s internal audit function, including its internal control systems. The Audit Committee’s functions include preparation of the audit committee report included in this Proxy Statement and the review of material related party transactions. The Audit Committee is also annually required to evaluate its performance and review and assess the adequacy of its charter.

Compensation Committee

 

 

The Compensation Committee is composed of four independent directors, Messrs. Christophe, Agroskin, Milgrim, and O’Leary. Mr. Christophe serves as the Chair of the Compensation Committee. A copy of the Compensation Committee charter is available on the Governance section of our website at www.bldr.com.

 

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Information Regarding the Board and its Committees

 

The Compensation Committee is charged with (i) annually reviewing and recommending to the Board, for the Board’s approval, all Corporation goals and objectives relevant to the Chief Executive Officer’s compensation, (ii) annually evaluating the Chief Executive Officer’s performance in light of the Corporation’s goals and objectives, (iii) annually reviewing and recommending to the Board for its approval the Chief Executive Officer’s base salary, incentive compensation levels, and perquisites and other personal benefits based on the Compensation Committee’s evaluation of the Chief Executive Officer’s performance relative to the Corporation’s goals and objectives, (iv) annually reviewing, evaluating, and recommending to the Board for its approval the base salary level, incentive compensation levels, and perquisites and other personal benefits of the other executive officers of the Corporation, (v) reviewing and making recommendations to the Board regarding any employment, severance, or termination arrangements to be made with any executive officer of the Corporation, (vi) making recommendations to the Board with respect to awards under the Corporation’s incentive compensation plans and equity-based compensation plans, (vii) making regular reports to the Board concerning the activities of the Compensation Committee, (viii) performing an annual performance evaluation of the Compensation Committee, and (ix) performing other activities as the Compensation Committee or Board may deem appropriate. The Compensation Committee may delegate authority to subcommittees when appropriate. Information regarding the role of the Compensation Committee and its processes and procedures for considering and determining executive compensation is set forth in the “Compensation Discussion and Analysis” section later in this Proxy Statement.

Nominating and Corporate Governance Committee

 

 

The Nominating and Corporate Governance Committee is composed of three independent directors, Messrs. Steinke, Bullock, and Christophe. Mr. Steinke serves as the Chair of the Committee. A copy of the Nominating and Corporate Governance Committee charter is available on the Governance section of our website at www.bldr.com.

The purpose of the Nominating and Corporate Governance Committee is to (i) identify and evaluate individuals qualified to become Board members, consistent with criteria approved by the Board, (ii) recommend to the Board the persons to be nominated for election as directors at any meeting of stockholders and the persons to be elected by the Board to fill any vacancies on the Board, (iii) recommend to the Board the directors to be appointed to each committee of the Board, (iv) evaluate and make recommendations to the Board regarding (a) the eligibility criteria for receipt of compensation as a director and (b) the appropriate compensation to be paid to eligible members of the Board and to members of Board committees, (v) assist the Board with general corporate governance issues, (vi) assist the Board and its committees with their internal governance issues, and (vii) provide oversight of management’s efforts on issues related to corporate social responsibility and sustainability.

The Nominating and Corporate Governance Committee is charged with identifying potential nominees for director and considers a wide range of criteria, including skills, expertise, integrity, character, judgment, age, independence, corporate experience, length of service, diversity of background and experience, including with respect to race, gender and ethnicity, conflicts of interest and commitments, and other qualities which the Nominating and Corporate Governance Committee believes enhances the Board’s ability to manage and direct, in an effective manner, the affairs and business of the Corporation. The Nominating and Corporate Governance Committee may, from time to time, engage firms that specialize in identifying director candidates. In addition, the Nominating and Corporate Governance will also consider candidates recommended by stockholders.

 

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Information Regarding the Board and its Committees

 

Stock Ownership Guidelines for Executives and Directors

 

 

Under the Corporation’s Stock Ownership Guidelines for Executives and Directors, each executive officer of the Corporation (who has not reached the normal retirement age of 67) and director of the Corporation is expected to acquire (within the later of five years after the adoption of the policy or appointment to office) and continue to hold shares of the Corporation’s Common Stock having an aggregate market value that equals or exceeds the requirement set forth below. Unvested restricted stock units will count toward the ownership requirement. Until the required level is met, a director or executive officer is required to retain fifty percent of the net shares of common stock received from the Corporation as compensation. Once the requirements are met, future sales are only permitted to the extent that such director or executive officer shall continue to meet the requirements immediately following such sale. Once the target beneficial ownership level is achieved, that director or executive officer will not be required to acquire any additional shares in the event the stock price decreases, provided the underlying number of shares remain held by such director or executive officer.

 

 

Position

Holding Requirement
 

CEO

5 times annual base salary    
 

Executive Officers

3 times annual base salary    
 

Directors

5 times annual cash retainer*

* Excluding cash retainers for serving as the chairperson of the Board or any of its committees or for serving on any of the committees.

The Nominating and Corporate Governance Committee administers compliance with this policy and has the discretion to enforce these guidelines on a case-by-case basis. An annual evaluation will be performed on April 1 of each year. As of April 1, 2022, all directors and executive officers were either in compliance with the policy or subject to the grace period for reaching the required totals.

 

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Report of the Audit Committee

 

REPORT OF THE AUDIT COMMITTEE

The primary responsibility of the Audit Committee is to assist the Board of Directors of the Corporation (the “Board”) in fulfilling its oversight responsibilities relating to (i) the quality and integrity of the financial reporting process, (ii) compliance with legal and regulatory requirements, (iii) the performance of the Corporation’s internal audit function, and (iv) the appointment of the independent registered public accounting firm. Management is responsible for the financial statements and the financial reporting process, including the implementation and maintenance of effective internal controls. The independent registered public accounting firm, PricewaterhouseCoopers LLP (“PwC”), is responsible for expressing an opinion on the Corporation’s financial statements and its internal control over financial reporting. The Board has concluded that (i) Messrs. Hayes, Alexander, and Steinke satisfy the applicable independence requirements set forth in the New York Stock Exchange Listing Standards (the “NYSE Standards”), and (ii) each of the Audit Committee members satisfies the applicable independence requirements set forth under SEC Rule 10A-3, and meets the financial literacy requirements for audit committee membership under the NYSE Standards and the rules and regulations of the SEC. The Board has also designated the chair of the Audit Committee, W. Bradley Hayes, and committee members Mark A. Alexander, Cory J. Boydston, and Craig A. Steinke as Audit Committee “financial experts” under the SEC’s guidelines. The Audit Committee has reviewed and discussed with management and PwC the Corporation’s audited financial statements as of and for the year ended December 31, 2021.

During 2021, the Audit Committee conducted eight meetings. The Audit Committee chair and other members of the Audit Committee reviewed and commented on the Corporation’s earnings news release and interim financial statements contained in the Corporation’s quarterly report on SEC Form 10-Q during each quarter, and met and discussed the Corporation’s draft Annual Report on SEC Form 10-K with the chief financial officer, general counsel, and PwC prior to the report’s filing and public release. The Audit Committee considers various relevant factors including qualifications, performance, and independence when appointing the audit firm and evaluating the audit firm annually. The Audit Committee is also involved in the selection process of the lead engagement partner when rotation is required after five years under the SEC’s audit partner rotation rules or for other reasons. Due to rotational requirements, a new lead engagement partner was selected effective for the 2022 fiscal year. In addition, the Audit Committee reviewed and ratified its Charter which is available within the Governance section of the Corporation’s website.

The Audit Committee discussed with PwC the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. Both the vice president of internal audit and PwC have complete and direct access to the Audit Committee, and the Audit Committee has the same access to the vice president of internal audit and PwC. The Audit Committee met with the vice president of internal audit and PwC, with and without management present, to discuss the results of their examinations, their evaluations of the Corporation’s internal controls, and the overall quality of the Corporation’s financial reporting process. The Audit Committee met separately with the Corporation’s chief financial officer and general counsel. The Audit Committee discussed with management the status of pending litigation, taxation, and other areas of oversight relating to financial reporting and audit processes as the Committee determined to be appropriate. The Audit Committee also reviewed the Company’s Enterprise Risk Management (ERM) program, including, among other topics, specific information security risks. The Audit Committee recommended that many of these topics be addressed in presentations to the Board. The Audit Committee has discussed the overall scope of the Corporation’s internal audits and approved the annual internal audit plan. The Audit Committee reports the results of these discussions to the Board on a quarterly basis.

The Audit Committee received and reviewed the written communications from PwC as required by applicable requirements of the Public Company Accounting Oversight Board for independent auditor communications with audit committees concerning independence, and has discussed with PwC its independence. The Audit Committee has adopted procedures for pre-approving all audit, audit-related, and non-audit services provided by PwC, which included reviewing and approving estimated fees for audit, audit-related, and permitted non-audit services. The Audit Committee considers the compatibility of all services provided by PwC with its independence and has concluded the provision of the non-audit services is compatible with maintaining PwC’s independence. During the fiscal year ended December 31, 2021, PwC was employed principally to perform the annual audit and to render tax services. The Audit Committee reviewed the audit engagement letter and approved all fees paid to PwC for audit, audit-related, and non-audit services.

 

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Report of the Audit Committee

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Corporation’s Annual Report on SEC Form 10-K for the year ended December 31, 2021, as filed with the SEC. The Audit Committee appointed PwC as the Corporation’s independent registered public accounting firm for fiscal 2022, subject to stockholder ratification.

Submitted by the Audit Committee:

W. Bradley Hayes (Chair)

Mark A. Alexander

Cory J. Boydston

Craig A. Steinke

 

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Corporate Governance

 

CORPORATE GOVERNANCE

Builders FirstSource is committed to conducting its business in a way that reflects best practices, as well as the highest standards of legal and ethical conduct. To that end, the Board of Directors has approved a comprehensive system of corporate governance documents and policies. These documents and policies are reviewed periodically and updated as necessary to reflect changes in regulatory requirements and evolving governing practices. These policies embody the principles, policies, processes, and practices followed by the Board, executive officers, and employees in governing the Corporation and serve as a flexible framework for sound corporate governance.

Code of Business Conduct and Ethics

 

 

Builders FirstSource 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 the Corporation’s directors, officers (including our principal executive officer, principal financial officer, principal accounting officer, and controller), and employees. Our Code of Business Conduct and Ethics is administered by the Compliance Committee, which is made up of representatives from our Finance, Legal, Human Resources, and Internal Audit Departments. Our employees are encouraged to report any suspected violations of laws, regulations, or the Code of Business Conduct and Ethics and all unethical business practices. We provide a continuously monitored hotline for anonymous reporting by employees. Our Board of Directors also approved a Supplemental Code of Ethics for Chief Executive Officer, President, and Senior Financial Officers of Builders FirstSource, Inc., which is administered by our General Counsel. Both policies can be found on the Governance 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., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201.

In addition, within four business days of:

 

   

any amendment to our Code of Business Conduct and Ethics or our Supplemental Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, or Controller, or

 

   

the grant of any waiver, including an implicit waiver, from a provision of one of these policies to one of these officers

that relates to one or more of the items set forth in Item 406(b) of Regulation S-K, we will provide information regarding any such amendment or waiver (including the nature of any waiver, the name of the person to whom the waiver was granted, and the date of the waiver) on our website at the internet address above. Such information will be available on our website for at least a 12-month period. In addition, we will promptly disclose any waivers to our Code of Business Conduct and Ethics and our Supplemental Code of Ethics as required by the NYSE Standards.

Additionally, the Corporation has adopted a Related Party Transaction Policy that works in conjunction with the Code of Business Conduct and Ethics and sets forth the process by which the Audit Committee will review certain related party transactions between the Corporation and its executive officers, directors, and greater than five percent beneficial owners, and their immediate family members, and the Corporation.

By-law Provisions on Stockholder Nominations of Director Candidates

 

 

Builders FirstSource’s By-laws provide that, other than pursuant to the Corporation’s proxy access provision (which is described below), no director candidate may be nominated by a stockholder for election at a meeting unless the stockholder (i) has delivered to the Corporate Secretary, within the time limits described in the By-laws, a written notice containing the information specified in the By-laws and (ii) was a stockholder of record (a) at the time such notice was delivered to the Corporate Secretary and (b) on the record date for the determination of stockholders entitled to notice and to vote at the meeting at which such director is standing for election. Accordingly, in order for a stockholder’s nomination of a person for election to the Board of Directors to be

 

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considered by the stockholders at the 2023 annual meeting in accordance with the Corporation’s By-laws, the required written notice must be received by our Corporate Secretary on or after February 14, 2023, but no later than March 16, 2023. Only individuals nominated in accordance with the procedures set forth in the By-laws are eligible to stand for election as directors at a meeting of stockholders and to serve as directors. A copy of the By-laws may be obtained on the Governance section of our website at www.bldr.com, by written request to the Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201, or by e-mail at inforequest@bldr.com. The foregoing is subject to the Corporation’s obligations under SEC Rule 14a-8 regarding the inclusion of stockholder proposals in the Corporation’s proxy statements, which is further described below in “Stockholder Proposals.”

Policy on Stockholder Recommendations for Director Candidates

 

 

The Nominating and Corporate Governance Committee adopted a Policy on Stockholder Recommendations for Director Candidates to describe the process by which the Nominating and Corporate Governance Committee (in preparing their recommendation of director nominees to the Board) will consider candidates for director recommended by stockholders in accordance with the Corporation’s By-laws. A current copy of the Policy on Stockholder Recommendations for Director Candidates is available on the Governance section of our website at www.bldr.com. To have a candidate considered by the Nominating and Corporate Governance Committee, a stockholder must submit the recommendation in writing and must include the information set forth in the Policy on Stockholder Recommendations for Director Candidates.

Proxy Access for Director Nominations

 

 

In addition to the above, Builders FirstSource’s By-laws also include a proxy access provision, which permits a stockholder, or a group of up to 20 stockholders, owning 3% or more of the Corporation’s outstanding Common Stock continuously for at least three years to nominate and include in the Corporation’s proxy materials director nominees constituting up to two individuals or 20% of the Board (whichever is greater); provided, however, that for so long as the Corporation has a classified Board of Directors, in no case shall the number of nominees appearing in the Corporation’s proxy materials exceed one-half of the number of directors to be elected at such annual meeting (rounded down to the nearest whole number).

Pursuant to the Corporation’s By-laws, to be timely for inclusion in the proxy materials for our 2023 annual meeting, a stockholder’s written notice to nominate a director using the Corporation’s proxy materials must be received by our Corporate Secretary on or after February 14, 2023, but no later than March 16, 2023. Such notice should be addressed to the Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201. The notice must contain the information required by our By-laws, and the stockholder(s) and nominee(s) must comply with the information and other requirements in our By-Laws relating to the inclusion of stockholder nominees in our proxy materials. A copy of the By-laws may be obtained on the Governance section of our website at www.bldr.com, by written request to the Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201, or by e-mail at inforequest@bldr.com.

Corporate Governance Guidelines

 

 

Builders FirstSource adopted its Corporate Governance Guidelines to assist the Board in the exercise of its duties and responsibilities. The Corporate Governance Guidelines set forth the practices the Board follows with respect to, among other matters, the composition of the Board, director responsibilities, Board committees, director access to officers and independent advisors, director compensation and the performance evaluation of the Board. A current copy of the Corporate Governance Guidelines is available on the Governance section of our website at www.bldr.com.

The Corporate Governance Guidelines limit the number of other public company boards our directors may join to ensure that a director is not “overboarded” and is able to devote the appropriate amount of time and attention to the oversight of the Corporation. Ordinarily, directors may not serve on the boards of more than four public companies, including our Board. Directors who are chief executive officers of public companies may not serve on

 

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the boards of more than two other public companies, in addition to our Board. No member of the Corporation’s Audit Committee may serve on more than three public company audit committees (including our Audit Committee). Service on the boards of subsidiary companies with no publicly traded stock (or that issue only debt), non-profit organizations and private companies is not included in this calculation. Any director seeking to join the board of directors of another company must first notify the Nominating and Corporate Governance Committee and obtain its approval to continue as a member of our Board.

A key responsibility of the Board is overseeing the identification and development of senior leadership. The Corporate Governance Guidelines outline a succession planning process that includes consideration of both ordinary course succession, in the event of planned promotions and retirements, and planning for situations where the Chief Executive Officer or another member of senior management unexpectedly become unable to perform the duties of their positions. To assist the Board, the Compensation Committee reviews our succession plans, monitors development of qualified candidates for principal positions in the Corporation, and reviews succession planning and management development at least annually with the Board.

Each year, the Board, as required by the Corporation’s Corporate Governance Guidelines, conducts an evaluation of its performance and effectiveness. As set forth in its charter, the Nominating and Corporate Governance Committee oversees this process. The Board and each committee conduct self-evaluations generally at the first regularly scheduled meetings of the fiscal year. These self-evaluations solicit feedback on a range of issues, including Board and committee structure, culture and dynamics, meeting content, and interactions with management.

Communication with Directors

 

 

Stockholders and other interested parties may contact any member (or all members) of the Board (including the non-management or independent directors as a group, any Board committee, or any chair of any such committee) in writing by mail or overnight service or electronically. To communicate with the Board of Directors, any individual directors, or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual directors or group or committee of directors by either name or title. All such correspondence should be sent to the Corporation in care of the Corporate Secretary at 2001 Bryan Street, Suite 1600, Dallas, Texas 75201. A current copy of the Policy on Stockholder-Director Communications is available on the Governance section of our website at www.bldr.com.

All communications received will be opened by the office of our General Counsel for the sole purpose of determining whether the contents represent a message to our directors. Any contents that legitimately relate to the business and operation of the Corporation and that are not in the nature of advertising, promotions of a product or service, patently offensive material, charitable requests, repetitive materials, or promotions of a political or similar agenda will be forwarded promptly to the addressee.

Auditor Services Pre-Approval Policy

 

 

Our Audit and Non-Audit Services Pre-Approval Policy, available on the Governance section of our website at www.bldr.com, defines the principles and procedures followed by the Audit Committee in pre-approving audit and non-audit services performed by the Corporation’s independent registered public accounting firm.

Policy Regarding Hedging and Pledging

 

 

The Corporation’s Insider Trading Policy, which is applicable to all directors, executive officers, and other employees, provides that such persons may not trade in options, warrants, puts and calls, or similar instruments on Corporation securities, hold Corporation securities in margin accounts, or sell Corporation securities “short” without the prior written approval of the Corporation’s General Counsel. Such persons may not enter into any other hedging transaction involving Corporation securities or pledge Corporation securities as collateral for a loan or other obligation without the prior written approval of the Corporation’s General Counsel.

 

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2021 Sustainability Highlights

 

 

Our values are at the center of everything we do: safety; people; integrity; customers; excellence. From the boardroom to the jobsite, they define our culture and guide our priorities, decisions and actions. Our sustainability strategy and goals are reviewed and approved by our executive management team, with the Nominating and Corporate Governance Committee tasked with overseeing management’s efforts on these matters, including sustainability, human rights, labor, diversity, health and safety, supply chain and community, to enhance shareholder value.

Below are some highlights with respect to our sustainability efforts in 2021.

Publishing Our First Sustainability Report

 

 

We have committed to publish prior to the 2022 Annual Meeting the first sustainability report for Builders FirstSource following the close of the merger with BMC in 2021.

The sustainability report will apply the Sustainability Accounting Standards Board (SASB) and Task Force on Climate-Related Financial Disclosures (TCFD) frameworks.

Team Member Safety, Engagement and Diversity

 

 

In 2021, we delivered an 18% reduction in recordable injuries across the Company, resulting in a recordable injury rate of 2.84 and beating our 10% reduction goal. We have set another 10% annual safety improvement target for 2022, and this target is a component of executive and employee compensation. The Company has also implemented many processes aimed at protecting our associates during the COVID-19 pandemic, including providing personal protective equipment and encouraging remote work where appropriate.

Our dedicated internal training and development team supports the continuous professional development of our Team Members by identifying and addressing current and future training needs.

As part of our diversity, equity and inclusion strategy, in 2021 we engaged our Team Members through a DEI survey to develop our key priorities. To drive these priorities, we have launched required trainings for all Team Members, including the training modules “Unconscious Bias” and “Diversity Face to Face.” The following table sets forth the gender and ethnic diversity composition of our Team Members in 2021.

2021 Gender and Ethnic Diversity by Function

 

 

 

All Team
Members

 

 

Executives

 

 

Corporate

 

 

Field Ops

 

 

Field

Management

 

         

Male

84% 89% 67% 85% 83%
         

Female

16% 11% 33% 15% 17%
         

Ethnically Diverse

51% 13% 29% 55% 24%

Enabling Greener, More Efficient Construction

 

 

In sourcing our materials, Builders FirstSource is committed to partnering with those companies that share our values on environmental sustainability and responsibility towards our planet. Approximately 90% of the wood we purchased in 2021 was certified sustainable by the Sustainable Forestry Initiative (“SFI”). Our top suppliers represent industry leaders in actively promoting, supplying, or collaborating with environmentally conscious organizations including SFI, the Forest Sustainability Counsel (“FSC”), ISO 14001, and the Programme for the Endorsement of Forest Certification (“PEFC”). The certification of SFI is accepted by the U.S. Green Building Council in its Leadership in Energy and Environmental Design (“LEED”) rating system. We offer a broad range of energy-efficient and sustainable-certified products, including SFI wall panels, lumber, and Energy Star® qualified windows and doors. The Company has also enacted a Responsible Supply Chain Policy outlining that it expects all of its suppliers to buy materials from socially responsible sources in compliance with Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

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Our products enable our partners to build more sustainably and efficiently. Our READY-FRAME® computerized, precise pre-cut, labeled framing bundles enable crews to build faster, safer, and with less waste. READY-FRAME® enables construction up to 20% faster and can deliver a 39% increase in productivity per person hour. It can require 60% less cutting and 27% less ladder time, reducing injury risk for a safer and cleaner jobsite. READY-FRAME® also significantly reduces the amount of material sent to landfill, with up to two-thirds fewer dumpsters, meaning less waste and lower disposal costs.

Representatives at Levy Partnership, a New York City consulting firm that specializes in sustainable building, analyzed all of the data collected from construction using our READY-FRAME® products and figured savings of approximately 2,500 pounds of carbon per completed house frame and 7.8 fewer trees harvested per home. These savings have resulted in nearly 3.4 million trees saved since January 1, 2019 and another 1,500 fewer pounds of carbon emissions per home as a result of less mill time.

As part of our climate change commitment, we have been working to harmonize the combined Builders FirstSource and BMC systems to collect and report our energy use and greenhouse gas (“GHG”) emissions data. We plan to report the operational emissions from our largest sites this year and company-wide Scope 1 and 2 GHG emissions in 2023.

Sustainability Ambitions

 

 

As we continue to drive sustainability initiatives following the Merger, we are working towards a comprehensive plan to reduce our GHG emissions. As part of our comprehensive plan to reduce our GHG, we are committed to taking the following steps:

 

   

Quantifying and disclosing our Scope 1 and 2 greenhouse gas emissions in 2023. We are actively engaging in efforts to quantify and disclose Scope 3 greenhouse gas emissions in the near term.

 

   

Assessing setting a net-zero science-based target with the Science Based Targets initiative (“SBTi”). As per the SBTi rules, after committing to set a science-based target, the Corporation would have two years to develop, submit, and set a target through SBTi.

 

   

Integrating zero emission vehicles into our fleets, and we expect that our operations will become increasingly energy efficient, especially with respect to Scope 1 emissions.

 

   

Prioritize sourcing wood from SFI or FSC certified vendors, particularly for wood from Canadian boreal forests and temperate rainforests.

We are strongly committed to meeting the challenges of reducing our greenhouse gas emissions and look forward to continuing our sustainability efforts, and communicating these efforts to shareholders, in the months and years ahead. We will continue to engage with our shareholders to solicit their perspectives on our sustainability efforts, and appropriately integrate the feedback provided by our shareholders as our policies, practices and disclosures evolve.

For more information on our sustainability programs and progress, please visit investors.bldr.com/ESG.

 

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Executive Officers of the Registrant

 

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of Builders FirstSource and their ages (as of April 28, 2022) are as follows:

 

 

Name

 

 

     Age     

 

 

Position(s) Held

 

 

David E. Flitman(1)

  57        President, Chief Executive Officer, and Director
 

Peter M. Jackson

  50        Executive Vice President and Chief Financial Officer
 

Timothy D. Johnson

  47        Executive Vice President, General Counsel and Corporate Secretary
 

Amy B. Messersmith

  48        Chief People Officer
 

Michael A. Farmer

  45        President – Commercial Operations
 

Stephen J. Herron

  64        President – East Division
 

Michael Hiller

  48        President – Central Division
 

Scott L. Robins

  55        President – West Division

 

  (1)

As Mr. Flitman is also a director of the Corporation, Mr. Flitman’s biography is set forth under “Proposal 1 – Election of Directors” beginning on page 7 of this Proxy Statement.

 

 

 

 

Peter M. Jackson was appointed as Executive Vice President and Chief Financial Officer in January 2021. He had been Senior Vice President and Chief Financial Officer of the Corporation since November 2016. Prior to joining the Corporation, Mr. Jackson was employed by Lennox International, Inc. (“Lennox”). Since July 2014, he had served as Vice President and CFO of Lennox’s Refrigeration Segment. His previous positions at Lennox also included Vice President, Finance – Financial Planning and Analysis and Mergers and Acquisitions as well as Vice President and Chief Financial Officer of Lennox’s Residential Heating and Cooling Segment. Before joining Lennox, Mr. Jackson served in multiple financial leadership positions at SPX Corporation, General Electric, and Gerber Scientific. He is a certified public accountant and a graduate of General Electric’s Experienced Financial Leadership program. He holds an M.B.A. degree from Rensselaer Polytechnic Institute and a B.S. from Bryant University.

 

 

 

 

 

 

Timothy D. Johnson joined the Corporation as Executive Vice President, General Counsel, and Corporate Secretary in January 2021. Previously, he served as Executive Vice President, General Counsel, and Corporate Secretary of BMC Stock Holdings, Inc. since January 2019. Prior to BMC, Mr. Johnson was Senior Vice President and General Counsel at Ply Gem Holdings, Inc. from June 2008 until January 2019 and Senior Vice President and Regional Counsel for Arysta LifeScience North America from March 2006 to June 2008. Mr. Johnson practiced law at the international law firms of Hunton Andrews Kurth (previously Hunton & Williams) and Wilson, Sonsini, Goodrich & Rosati. He holds a B.A. in Biology from Taylor University and a J.D. from Duke University School of Law.

 

 

 

 

 

 

Amy B. Messersmith was appointed as Chief People Officer in March 2022. Prior to joining the Corporation, Ms. Messersmith served as Chief Human Resources Officer at U.S. Anesthesia Partners Inc. from September 2018 to March 2022. Prior to that, she served as the Chief People Officer at TDIndustries Inc. from June 2017 to September 2018 and the Chief People Officer for the Pizza Hut Division of YUM! Brands from January 2013 to June 2017. Ms. Messersmith began her human resources career in various roles at PepsiCo and Frito-Lay Inc. Ms. Messersmith holds a B.B.A. from Texas A&M University.

 

 

 

 

 

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Michael A. Farmer was appointed as President – Commercial Operations in January 2021. Prior to joining the Corporation, Mr. Farmer served in various roles at BMC Stock Holdings, Inc., including Executive Vice President – Operational Excellence, People and Growth from February 2019 to December 2020 and as Senior Vice President of Human Resources from December 2015 to January 2019. Prior to that, he had been a member of the human resources department at Stock Building Supply since 2006. Mr. Farmer holds a bachelor’s degree from Hope College and a master’s degree from Michigan State University. Mr. Farmer has also completed executive development programs at the Wharton School of the University of Pennsylvania and Harvard University.

 

 

 

 

 

 

Stephen J. Herron was appointed as President – East Division of the Corporation in January 2021. Mr. Herron previously served as Senior Vice President (Region 5) for the Corporation from August 2015 to December 2020. Before the Corporation’s acquisition of ProBuild Holdings LLC in 2015, he served as Senior Vice President of the Southeastern US Operations for Pro Build. Prior to that, Mr. Herron served as Senior Vice President for HD Supply Holdings and oversaw the lumber and building materials (LBM) division. He has over 39 years of experience in the building products industry and has held senior management roles at Home Depot, HD Supply Holdings, and Williams Brothers Lumber.

 

 

 

 

 

 

Michael Hiller was appointed as President – Central Division in January 2021. Prior to joining the Corporation, Mr. Hiller served in various roles at BMC Stock Holdings, Inc., including Division Vice President – Intermountain from January 2017 to December 2020, Area Manager – Colorado from January 2015 to December 2016, and Area Manager – Utah from October 2011 to December 2014. He holds a Master’s in Business Administration and graduate certificate in finance from Westminster College.

 

 

 

 

 

 

Scott L. Robins was appointed as President – West Division in January 2021. Mr. Robins had previously served as Senior Vice President and Chief Operating Officer – West of the Corporation since February 2018. He was a Senior Vice President – Operations of the Corporation since the acquisition of ProBuild Holdings LLC by the Corporation in 2015 and with ProBuild prior to that since 2007. At ProBuild, Mr. Robins had supervisory responsibility for 93 locations in eight states. Mr. Robins joined Hope Lumber Company in 2004 as a Vice President of Operations, overseeing numerous operations in a three-state area, and continued in that role when Hope was acquired by ProBuild Holdings LLC in 2007. Before then, he had worked in various operational, sales, and supply chain management positions with Anderson Lumber and Stock Building Supply since 1988. Mr. Robins has 30 plus years of experience in the building products business. He holds a B.A. in Finance from Weber State University.

 

 

 

 

 

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Executive Compensation and Other Information

 

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Compensation Discussion and Analysis

 

 

Overview

In the discussion that follows, we will give an overview and analysis of our compensation program and policies, the material compensation decisions we have made under those programs and policies with respect to our top executive officers, and the material factors that we considered in making those decisions. The executive officers of our Company during 2021 (whom we refer to herein as our “named executive officers,” or “NEOs”) were as follows:

 

 

Name

Title
 

David E. Flitman

President and Chief Executive Officer
 

M. Chad Crow

Former President and Chief Executive Officer
 

Peter M. Jackson

Executive Vice President and Chief Financial Officer
 

Scott L. Robins

President – West Division
 

Michael A. Farmer

President – Commercial Operations
 

Timothy D. Johnson

Executive Vice President, General Counsel, and Corporate Secretary

As previously announced, Chad Crow stepped down as President on January 1, 2021, but continued to serve as CEO until April 1, 2021, at which time he retired. David E. Flitman has served as President of the Company since January 1, 2021, and became our CEO effective April 1, 2021.

Our operations are internally organization into three geographic operation divisions—West, Central, and East. In 2021, Scott L. Robins served as President of our operations located in the West Division. As such, his compensation was aligned to reflect the performance of the division he oversees.

The remaining NEOs, David E. Flitman, M. Chad Crow, Peter M. Jackson, Michael A. Farmer, and Timothy D. Johnson, were corporate leaders in 2021. As such, their compensation was aligned to reflect overall company performance.

 

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Executive Summary

In early 2021, our Board of Directors tasked our executive team with several priority objectives for the year. The Compensation Committee believes that the executive team substantially accomplished most of these objectives, which are summarized as follows:

 

 
2021 Priority Objectives   2021 Achievements  
 

Continue to accelerate growth and stockholder value through strategic acquisitions

     Completed five lumber and building material acquisitions, which continued the expansion of our geographical footprint in critical markets     
 

Adjusted EBITDA(1) (defined below) equal to or greater than $1.3 billion target in our 2021 Annual Operating Plan (“2021 AOP”)

Achieved record Adjusted EBITDA of $3.1 billion
(an increase of 186% over 2020)
 

Reduction of net debt/Adjusted EBITDA leverage ratio

(1.7x at December 31, 2020)

Net debt/Adjusted EBITDA leverage ratio of 1.0x at December 31, 2021
 

Return on invested capital (“ROIC”) growth of 12.5% or more above 2020 pro-forma ROIC

Achieved ROIC growth of 233% above 2020 pro-forma ROIC
 

Expansion of manufacturing capacity for value-added products

•  Opened two additional truss facilities and acquired eleven facilities through acquisitions

•  Improved product throughput in our manufacturing facilities with efficiency investments and lean practice deployment

 

Reduction of Recordable Incident Rate (“RIR”) of 3.10 or lower

RIR of 2.84 in 2021
 

Provide industry-leading digital solutions for our customers

Acquired two companies specializing in software solutions and services, underscoring our commitment to enhancing digital offerings for our customers and to the broader homebuilding industry
 

Working Capital as a Percentage of Sales equal to or less than 8.5% target in our 2021 AOP

Working Capital as a Percentage of Sales was 10.1%, which was below target largely due to commodity price volatility

With our financial and operational objectives in mind, our Compensation Committee designed the 2021 executive compensation program, which included the following components:

 

   

Salary increases for all NEOs except M. Chad Crow, who retired as Chief Executive Officer on April 1, 2021.

 

   

The Compensation Committee implemented a performance-based annual incentive bonus program for all corporate managers, including our NEOs (the “2021 Corporate Incentive Plan” or the “2021 Plan”). As described in more detail below, the 2021 Corporate Incentive Plan provided our NEOs with an opportunity to earn an annual incentive based on (i) the amount of Adjusted EBITDA generated by the Company in 2021, (ii) the level of working capital as a percentage of sales managed by the Company for the year, and (iii) a reduction of RIR during the year. Because of management’s significant outperformance of these financial and operational objectives, all of our NEOs received 2021 annual incentive awards of 163.5% of their respective target bonus opportunities under the 2021 Plan.

 

   

The Compensation Committee annually considers the grant of equity incentive awards to our executive team in order to further align their financial interests with those of our stockholders. Effective in March 2021, the Compensation Committee issued new equity incentive awards to key managers, including our NEOs, in order to promote retention and to incentivize management to maximize the financial performance of our Company. The equity incentive awards consisted of both performance-based restricted stock units (“PSUs”) and time-vesting restricted stock units (“RSUs”). The PSUs vest based on the achievement of annual and three-year ROIC goals set by the Compensation Committee, with a performance modifier based on total shareholder return (“TSR”) of the Company measured over the three-year performance period, as described below. The Compensation Committee selected ROIC as the primary performance metric for the PSUs in order to better align management’s financial interest with those of our stockholders over the longer term.

 

1.

Company provided a reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures in its Form 8-K filed with the Securities and Exchange Commission on March 1, 2022.

 

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Compensation Principles

Our executive compensation program has been designed to provide a total compensation package that allows us to attract, retain, and motivate executives who have the talent to capably manage our business. Our executive compensation program has historically been guided by several key principles:

 

   

Provide total compensation opportunities at levels that are competitive for comparable positions at companies with whom we compete for talent.

 

   

Provide incentives to our executive officers to achieve key financial objectives set by the Board of Directors.

 

   

Provide an appropriate mix of fixed and variable pay components to establish a “pay-for-performance” oriented compensation program.

 

   

Align the financial interests of executives with stockholder interests by providing significant compensation opportunities in the form of equity awards.

 

   

Emphasize direct pay components, such as cash and equity.

Key Executive Compensation Practices

The following is a summary of our executive compensation practices that we believe drive performance and align our executives’ interests with the interests of our stockholders:

 

   

We strive to provide balanced pay opportunities for our executives, consisting of an appropriate mix of cash and equity, annual and longer-term incentives, and fixed and variable pay.

 

   

Our annual incentive plan is performance-based, and payouts are subject to minimum thresholds based on performance targets and appropriate caps.

 

   

We have a compensation clawback policy that allows the Company, in the event of a restatement of its financial results, to recover excess amounts erroneously paid to executive officers under certain circumstances.

 

   

Our incentive plan provides for “double-trigger” vesting for equity awards upon a change in control.

 

   

We do not provide any tax gross-ups.

 

   

Our insider trading policy prohibits employees and directors from engaging in pledging or hedging activities involving Company stock.

Consideration of Most Recent Advisory Stockholder Vote on Executive Compensation

At the annual meeting of stockholders on June 15, 2021, over 95% of the shares represented and entitled to vote on the proposal at the annual meeting were voted to approve the compensation of the Company’s named executive officers, as discussed and disclosed in the 2021 Proxy Statement. The Board and the Compensation Committee appreciate and value the views of our stockholders. In considering the results of this advisory vote on executive compensation, the Compensation Committee concluded that the compensation paid to our named executive officers and the Company’s overall pay practices enjoy strong stockholder support.

Going forward, future advisory votes on executive compensation will serve as an additional tool to guide the Board and the Compensation Committee in evaluating the alignment of the Company’s executive compensation program with the interests of the Company and its stockholders.

 

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2021 Executive Compensation Process

Role of the Compensation Committee. Under its charter, the Compensation Committee is responsible for (i) reviewing and approving our executive compensation program, (ii) administering our long-term incentive plan, (iii) reviewing the Company’s compensation programs in light of best practices and good corporate governance, (iv) reviewing and approving the Compensation Discussion and Analysis section of our proxy statement, and (v) monitoring the Company’s compensation-related risk. As part of its evaluation process relating to NEO compensation, the Compensation Committee reviewed information compiled by our compensation consultant as well as data compiled by the Company. At meetings held in November and December 2020 and February 2021, the Compensation Committee approved, and recommended to our Board of Directors for its ratification, the 2021 executive compensation program for all post-Merger executive officers except Mr. Flitman, which included setting 2021 base salaries, approving the 2021 Corporate Incentive Plan, and approving equity incentive awards to be granted in 2021. The Compensation Committee reviewed and approved Mr. Flitman’s compensation arrangement in August 2020 in connection with the Merger.

Role of Executives. Our CEO and General Counsel, as well as members of our Legal, Human Resources, and Finance Departments, assisted the Compensation Committee and the Board in gathering the information needed for their respective reviews of our 2021 executive compensation program. The Compensation Committee and the Board also considered our CEO’s recommendations for our executive officers (other than himself) with respect to the 2021 executive compensation program.

Role of the Board of Directors. The Board of Directors is responsible for reviewing and ratifying the decisions and recommendations of the Compensation Committee regarding our executive compensation program. In March 2021, after considering the decisions and recommendations of the Compensation Committee, the Board ratified the 2021 executive officer compensation program.

Role of Compensation Consultants. Under its charter, the Compensation Committee is authorized to engage independent outside advisors to assist it in discharging its responsibilities relating to executive compensation. The Compensation Committee has retained Meridian Compensation Partners, LLC (“Meridian”) to perform a comprehensive review of our executive compensation program and to conduct market compensation comparisons for our executive officers in order to assist the Compensation Committee in designing our 2021 executive compensation program. The Compensation Committee determined that Meridian is independent under applicable SEC rules. While the Compensation Committee takes Meridian’s advice on compensation matters into consideration, the Compensation Committee has the authority and responsibility to make final decisions on our executive compensation program.

Market Comparisons. The Compensation Committee periodically examines the competitiveness of our executive compensation program to determine how our compensation levels compare to our overall philosophy and target markets. The Compensation Committee has retained Meridian to assist in updating our Peer Group (defined below) list for purposes of reviewing market compensation comparisons. In our case, peer selection is somewhat difficult due to the lack of publicly-traded companies with whom we compete and the absence of available data for privately-held competitors. We revised our Peer Group in November 2020 to align more closely with the size of our company after the Merger. We removed six companies from the 2020 peer group (including BMC Stock Holdings, Inc.) and added six new companies, resulting in a peer group of 18 companies.

 

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For purposes of the Compensation Committee review of market compensation comparisons for 2021, the primary peer group (“Peer Group”) included:

 

   

Peer Group Companies

GICS Sub-Industry             Revenue(1)            
   

Ball Corporation

Metal and Glass Containers $11,258
   

Beacon Roofing Supply, Inc.

Trading Companies and Distributors $6,956
   

Carrier Global Corporation

Building Products $17,183
   

Core-Mark Holding Company, Inc.

Distributors $13,449
   

Fastenal Company

Trading Companies and Distributors $5,566
   

Fortune Brands Home & Security, Inc.

Building Products $5,708
   

Genuine Parts Company

Distributors $18,436
   

Lennar Corporation

Homebuilding $22,634
   

LKQ Corporation

Distributors $11,785
   

Masco Corporation

Building Products $6,700
   

Mohawk Industries, Inc.

Home Furnishings $9,279
   

Owens Corning

Building Products $6,822
   

PulteGroup, Inc.

Homebuilding $10,861
   

Trane Technologies plc

Building Products $15,982
   

Univar Solutions Inc.

Trading Companies and Distributors $8,763
   

Veritiv Corporation

Trading Companies and Distributors $6,872
   

WESCO International, Inc.

Trading Companies and Distributors $8,303
   

W.W. Grainger, Inc.

Trading Companies and Distributors $11,703

 

  1.

Revenue measured as of trailing 12 months starting September 30, 2020. Dollar figures in millions.

Our market comparison analysis consisted of all components of total direct compensation, including base salary, annual bonus, and long-term incentives. These components were measured against data gathered from the proxy statements of the Peer Group.

 

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Elements of our Compensation Program

Components of Compensation. Our executive compensation program for 2021 consists of the following elements for our NEOs:

 

   
    Plan   Purpose  

Relevant Performance

Metric and Description

   
   
LOGO   Base Salary   To provide fair and competitive compensation for individual performance and level of responsibility of position held.   Individual Performance   LOGO
  2021 Corporate Annual Incentive Plan   To provide performance-based annual cash awards for Company and divisional performance to motivate and reward key employees for achieving our short-term business objectives and drive performance.  

Mix of metrics, including:

 

•  Adjusted EBITDA

 

•  Working Capital

 

•  Safety

 

LOGO

LOGO   2021 Long-Term Incentive Plan: Performance Stock Units (50%) (“PSUs”)   To provide performance-based equity compensation in the form of restricted stock units to maximize stockholder value and retain key employees.   Awards vest at the end of a three-year performance period based on achievement of goals tied to return on invested capital, +/- 10% TSR modifier compared to Peer Group.
  2021 Long-Term Incentive Plan: Restricted Stock Units (50%) (“RSUs”)   To enhance the program’s ability to retain participants and drive long-term behavior by allowing for time-based awards.  

The RSUs are time-vested awards that generally vest in equal annual installments on the first three anniversaries of the applicable grant date, subject to the award recipient’s continued employment by the Company.

The Compensation Committee generally seeks to provide total direct compensation opportunities to our executive officers, consisting of base salary, target annual cash incentive, and long-term equity award value (“TDC”), at approximately the median of the market or below, but individual market positioning may be more or less than median for a variety of reasons such as Company and individual performance, experience, tenure, retention concerns, internal alignment, unique aspects of their role relative to external benchmarks, or other relevant factors. Based on the market comparison surveys conducted by Meridian, the 2021 TDC target opportunities established for our executive officers were consistent with this compensation philosophy and were within the following percentile ranges relative to our Peer Group:

 

 

Name

     Peer Group Range     
 

David E. Flitman

Approximately 50%
 

M. Chad Crow

25-50%
 

Peter M. Jackson

Approximately 50%
 

Scott L. Robins

Approximately 50%
 

Michael A. Farmer

25-50%
 

Timothy D. Johnson

25-50%

 

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The following sections describe in greater detail each of the elements of our executive compensation program, why they were selected, and how the amounts of each element were determined.

Base Salary

Base salary is designed to compensate the executive officers for their roles and responsibilities and to provide a stable and fixed level of compensation that serves as a retention tool throughout the executive’s career. In determining base salaries, we generally consider each executive’s role and responsibilities, unique skills, the salary levels for similar positions in our Peer Group companies, and internal pay equity.

The salaries approved for our executive officers are listed below and were within the following percentage ranges of our Peer Group:

 

       

Name

       2020 Salary               2021 Salary                   Increase                  Peer Group Range     
       

David E. Flitman

N/A $    1,050,000 N/A Approximately 50%
       

M. Chad Crow

$        950,000 $        950,000 0.0% Approximately 25%
       

Peter M. Jackson

$        550,000 $        625,000 13.6% 25-50%
       

Scott L. Robins

$        500,000 $        525,000 5.0% Approximately 50%
       

Michael A. Farmer

N/A $        425,000 N/A <25%
       

Timothy D. Johnson

N/A $        450,000 N/A <25%

The 2020 salaries of Messrs. Flitman, Farmer, and Johnson are not included because they were not employed by the Company until the Merger Effective Date.

Annual Cash Incentives

We provide annual cash incentive opportunities to our executive officers that are designed to reward the achievement of financial results measured over the current fiscal year. The Compensation Committee selects the financial performance goals applicable to the annual incentive program, which are based on key financial metrics that are deemed critical to the Company’s near-term success.

2021 Corporate Annual Incentive Plan. For 2021, the Compensation Committee decided to implement an annual cash incentive program for our corporate office managers, including our NEOs. Under the 2021 Corporate Incentive Plan, a target bonus opportunity for each participant was set as a percentage of base salary determined by their position. Actual bonus amounts that could be earned by our NEOs ranged from 0% (for performance below threshold levels) to a maximum of 200% (for performance above target levels) of their respective target bonus amounts.

For 2021, the Compensation Committee set the target bonus opportunity for Mr. Flitman at 125% of his base salary and for each other NEO at 100% of such NEO’s base salary, as provided in each NEO’s employment agreement. Because Mr. Crow retired as CEO on April 1, 2021, he did not participate in the 2021 Corporate Incentive Plan.

Under the 2021 Plan, 90% of an NEO’s bonus potential was based solely on the Company’s achievement of financial goals in 2021, while the remaining 10% was based on achievement of a safety-focused Recordable Incident Rate (“RIR”) target.

Specifically, the 2021 Corporate Incentive Plan provided for bonuses for our NEOs based on the following metrics:

 

 

Metric

Weighting
 

Adjusted EBITDA

70%
 

Working Capital as a Percentage of Sales

20%
 

Safety Goal

10%

 

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The Compensation Committee chose Adjusted EBITDA (as defined below) and Working Capital as a Percentage of Sales as the financial performance goals under the 2021 Plan because it believes that these metrics provide an effective incentive to maximize financial performance and closely align management awards with Company performance and the financial interests of stockholders.

Adjusted EBITDA Metric. The 2021 Plan provided that 70% of the bonuses for Messrs. Flitman, Jackson, Farmer, and Johnson and 35% of the bonus for Mr. Robins were based on the amount of Adjusted EBITDA earned by the Company for the year as compared to the budgeted target amount of Adjusted EBITDA included in the Company’s 2021 AOP. The other 35% of the Adjusted EBITDA bonus component for Mr. Robins was based on the amount of Adjusted EBITDA earned in 2021 by the West Division, for which Mr. Robins was operationally responsible, as compared to the 2021 AOP. “Adjusted EBITDA” is calculated as earnings before interest, taxes, depreciation, and amortization, as adjusted for other non-recurring and/or non-cash items.

The 2021 Plan provided that no bonuses would be earned under the Adjusted EBITDA component unless the Company achieved more than 80% of its Adjusted EBITDA target included in the 2021 AOP, as set by the Board of Directors.

The following grid outlines the scaled bonus payments for this component of the 2021 Plan based on the Company’s Adjusted EBITDA performance in 2021. Any performance between levels was calculated based on the linear interpolation between such levels.

 

Adjusted EBITDA Targets

(70% Weighting)

Target Levels

   Percentage of Target Earned     

Under $1.03 billion

   0%     

$1.03 billion

   25%     

$1.09 billion

   50%     

$1.29 billion

   100%     

$1.55 billion

   maximum 200%     

The Adjusted EBITDA target included in the 2021 AOP was $1.3 billion. As noted above, the Company achieved Adjusted EBITDA of $3.1 billion for fiscal year 2021, 200% above the AOP target. Additionally, Adjusted EBITDA for the West Division for fiscal year 2021 was 200% above target. The following chart shows the 2021 performance of each NEO under the Adjusted EBITDA component of the 2021 Plan.

 

Adjusted EBITDA Actual Performance

(70% Weighting)

Name

   Percentage of Target Earned

David E. Flitman

   200%    

M. Chad Crow

   N/A    

Peter M. Jackson

   200%    

Scott L. Robins

   200%    

Michael A. Farmer

   200%    

Timothy D. Johnson

   200%    

The Adjusted EBITDA-related bonus amounts paid to our NEOs for 2021 are included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” in this Proxy Statement.

Working Capital Metric. Working capital is a measurement of the Company’s operating liquidity and includes funds invested in accounts receivable, product inventories, and accounts payable. The Compensation Committee set the Working Capital as a Percentage of Sales target under the 2021 Plan for the NEOs at 8.5%, because that matched the Company’s budgeted working capital target included in the 2021 AOP. This working capital target included both working capital managed at the corporate level (e.g., checks outstanding, corporate accruals, and prepaid assets) and regional working capital results. If the actual working capital percentage for the year was lower than the target, the bonus payment would increase. If the actual working capital percentage was higher than

 

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the target, the bonus payment would decrease. Under the 2021 Plan, the Company had to achieve at least 80% of the 2021 working capital target (or a maximum of 10.2% Working Capital as a Percentage of Sales) to trigger any payment.

The following grid outlines the scaled bonus payment for this component of the 2021 Plan for the actual Working Capital percentage achieved by the Company for the year. Any performance between levels was calculated based on the linear interpolation between such levels.

 

Working Capital Targets

(20% Weighting)

Target Levels

   Percentage of Target Earned     

Above 10.20%

   0%     

10.20%

   25%     

9.78%

   50%     

8.50%

   100%     

6.80% or below

   maximum 200%     

The Company achieved a 10.1% Working Capital as a Percentage of Sales result for 2021, which was above its budget threshold. For purposes of this component of the 2021 Plan, the performance of all NEOs was determined based on results of the entire Company. The following chart shows the 2021 performance of each NEO under the Working Capital as a Percentage of Sales component of the 2021 Plan.

 

Working Capital Actual Performance

(20% Weighting)

Name

   Percentage of Target Earned

David E. Flitman

   29%

M. Chad Crow

   N/A

Peter M. Jackson

   29%

Scott L. Robins

   29%

Michael A. Farmer

   29%

Timothy D. Johnson

   29%

The working capital-related bonus amounts paid to our NEOs for 2021 are included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” in this Proxy Statement.

Safety Component. The Compensation Committee believes that the safety of the Company’s employees is a critical component of the Company’s success and one of the Company’s core values. Therefore, in addition to the Adjusted EBITDA and Working Capital metrics described above, the Compensation Committee decided that the 2021 Plan should include the reduction of the Company’s RIR as a component of our NEO bonus program. For 2021, the Compensation Committee set a 3.10 RIR target to trigger any payment under the 2021 Plan.

The following grid outlines the scaled bonus payment for this component of the 2021 Plan for the RIR achieved by the Company for the year. Any performance between levels was calculated based on the linear interpolation between such levels.

 

RIR Targets

(10% Weighting)

Target Levels

   Percentage of Target Earned     

Above 3.10 RIR

   0%     

3.10 RIR

   100%     

2.76 RIR or below

   maximum 200%     

The Compensation Committee, in consultation with our CEO, set this objective on a company-wide basis. For purposes of this component of the 2021 Plan, the performance of all NEOs was determined based on the RIR target for the overall performance of the Company as a whole during 2021. The Company’s RIR in 2021 was

 

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2.84. The following charts show the 2021 performance of each NEO against the RIR target set by the Compensation Committee.

 

RIR Actual Performance

(10% Weighting)

Name

   Percentage of Target Earned

David E. Flitman

   177%

M. Chad Crow

   N/A

Peter M. Jackson

   177%

Scott L. Robins

   177%

Michael A. Farmer

   177%

Timothy D. Johnson

   177%

Overall Payout. As a result of the Company’s 2021 financial performance, as well as the substantial achievement by our executive team of the operational objectives described above, our NEOs received aggregate bonuses as follows:

 

Name

   2021 Target Bonus
(percentage of salary)
  2021 Target Amount  

     Percentage of 2021 Target     

Bonus Earned

David E. Flitman

   125%   $    1,312,500   163.5%

M. Chad Crow

   N/A                   N/A   N/A

Peter M. Jackson

   100%   $        625,000   163.5%

Scott L. Robins

   100%   $        525,000   163.5%

Michael A. Farmer

   100%   $        425,000   163.5%

Timothy D. Johnson

   100%   $        450,000   163.5%

The bonus amounts paid to our NEOs for 2021 are included in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table” in this Proxy Statement.

Long-Term Equity Incentives

A key component of our executive compensation program consists of rewards for long-term strategic accomplishments and enhancement of long-term stockholder value through the use of equity-based incentives. We believe that long-term incentive compensation performs an essential role in attracting and retaining talented executives and providing them with incentives to maximize stockholder value. Restricted stock unit awards and stock options have historically been the primary long-term incentive vehicles that we use in our executive compensation program. In 2021, the Compensation Committee decided to grant performance-based restricted stock units (“PSUs”) and time-vesting restricted stock units (“RSUs”), consistent with our practice in recent years. These award vehicles were selected by the Compensation Committee due to their retention value and the performance link to our stock price.

Effective March 15, 2021, the Compensation Committee and the Board approved equity awards to key managers, including our NEOs other than M. Chad Crow, in order to promote retention and provide incentive to management to maximize the Company’s financial performance over an extended period. 50% of the awards were RSUs and 50% were PSUs, as described below:

 

   

Time-Vesting. The RSUs vest over three years in equal annual installments.

 

   

Performance-Vesting. The PSUs vest in full on the third anniversary of the grant date based on the Company’s achievement of annual and three-year ROIC targets, with the payout subject to a modifier in the event that the Company’s TSR significantly outperforms or underperforms the TSR of our Peer Group over the three-year measurement period.

The Compensation Committee chose the foregoing performance metrics for the PSU grants to each NEO other than M. Chad Crow in order to (i) incentivize our executive team to grow the Company’s ROIC in conjunction with the Adjusted EBITDA and Working Capital financial metrics utilized in our 2021 Corporate Incentive Plan and

 

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(ii) ensure that our NEOs’ financial interests are aligned with those of our stockholders over an extended period. The Compensation Committee determined that 50% of the award to each NEO should be RSUs that vest based on continued employment with the Company, because it views retention of key management talent as a critical function of our long-term equity incentive program.

The Compensation Committee determined that it was critical to retain key legacy BMC executives following the Merger. The Compensation Committee therefore granted to Mr. Flitman a one-time sign-on RSU award with a target value of $2,000,000 as set forth in his Employment Agreement and to Messrs. Farmer and Johnson a one-time sign-on RSU award with a target value of $1,500,000, in each case that vest in three equal installments on March 15, 2022-2024 (the “BMC Sign-On RSU Awards”).

The target value of the RSU and PSU awards made to each executive officer for 2021 was as follows:

 

Name

     Value of Award      

David E. Flitman

$    6,800,000

M. Chad Crow

N/A

Peter M. Jackson

$    1,500,000

Scott L. Robins

$       800,000

Michael A. Farmer

$    2,075,000

Timothy D. Johnson

$    2,000,000

Excluding the BMC Sign-On RSU Awards, the RSU awards to each of our executive officers were set between the 25th percentile and the median of the market. The restricted stock unit awards granted to our NEOs in 2021 are reflected in the “2021 Grants of Plan-Based Awards” table later in this Proxy Statement.

Performance Measurement – ROIC Component. The Compensation Committee believes that ROIC is an effective metric to measure the Company’s efficiency at allocating capital and generating returns for stockholders.

In establishing a long-term performance goal, the Compensation Committee and management believe it is appropriate to incentivize immediate and continued performance against pre-established goals. Additionally, as we operate in a cyclical industry, it is important to mitigate large swings in performance (either up or down). As such, the ROIC incentive plan was designed to reward for three individual performance years based on continual improvement from prior year results as well as the achievement against a pre-set three-year objective. This provides the appropriate balance between year-over-year improvement and long-term sustained performance.

ROIC is defined as:

 

                                         Adjusted EBIT                                        

(Total Debt + Finance and Operating Lease Obligations

– Cash and Cash Equivalents + Stockholders’ Equity) *

*  Calculated based on trailing four quarter average for each of the annual tranches

ROIC performance is measured over four separate measurement tranches: an annual ROIC measurement for each of 2021-2023 and a cumulative ROIC measurement for performance over the three-year period.

 

Measurement Tranche

            Weight            

2021 ROIC

25%

2022 ROIC

25%

2023 ROIC

25%

3-year Avg. ROIC (2021-2023)

25%

For each tranche, payout would begin at 50% at the minimum performance goal, would increase to 100% at the full payout target, and would be capped at 200% at the maximum target. There will be no payout for a tranche

 

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where the minimum goal is not met. Payout percentages between targets would be determined by linear interpolation. The payout scale is set forth in the following table.

 

Tranche

Minimum

(50% Payout)

Full Payout

(100% Payout)

Maximum

(200% Payout)

2021 ROIC

2020 Pro Forma ROIC

2020 Pro Forma ROIC

+ 12.5% Improvement

2020 Pro Forma ROIC

+ 25% Improvement

2022 ROIC

2021 Actual ROIC

2021 Actual ROIC

+ 12.5% Improvement

2021 Actual ROIC

+ 25% Improvement

2023 ROIC

2022 Actual ROIC

2022 Actual ROIC

+ 12.5% Improvement

2022 Actual ROIC

+ 25% Improvement

3-year Avg. ROIC

2020 Pro Forma ROIC

+ 12.5% Improvement

3-year Avg. Minimum Target

+ 12.5% Improvement

3-year Avg. Minimum Target

+ 25% Improvement

As shown in the above grid, for each of the annual tranches, (i) minimum payout requires hitting the actual ROIC performance for the prior year, (ii) target payout is based on achieving the actual ROIC performance for the prior year plus a 12.5% improvement, and (iii) maximum payout would require generating a 25% improvement over the actual ROIC performance for the prior year. For the three-year average tranche, (i) the minimum payout threshold is a 12.5% improvement over 2020 pro forma ROIC, (ii) the target payout is a 12.5% increase over that minimum target, and (iii) the maximum target is a 25% increase above the minimum payout threshold. 2020 ROIC is calculated on a combined pro forma basis for the Company and BMC.

As mentioned above, the Company’s TSR measured over the three-year vesting period of the awards will be used as a modifier rather than a primary metric. If the Company’s TSR is in the bottom two of the selected peer group of 18 companies, the payout based on the ROIC percentage will be reduced by 10%. If the Company’s TSR is in the top two of that group, the payout based on the ROIC percentage will be increased by 10%. For this purpose, the peer group is identical to the Peer Group used for executive compensation and shown earlier in this Proxy Statement.

Any payouts generated by the 2021 and 2022 tranches would be subject to additional time-based vesting requirements such that they would vest in each of the annual 2021, 2022, and 2023 tranches upon the conclusion of the three-year performance period based on achievement of the ROIC and TSR performance goals for each tranche, provided that our NEOs remain employed by the Company for the full three-year period of the grant.

Executive Benefits and Perquisites

The Company generally does not provide its executive officers with perquisites or special benefits that are not available to other employees. Company-provided air travel for officers is for business purposes only. The Company’s health care, insurance, 401(k) plan (including Company matching contributions), and other welfare and employee-benefit programs are the same for all eligible employees, including the NEOs, except that employees making over $100,000 annually make higher monthly contributions for their health insurance benefits and certain senior officers are eligible for reimbursement of executive physicals.

The benefits provided to our named executive officers during 2021 are set forth in the “All Other Compensation” column of the “Summary Compensation Table” later in this Proxy Statement.

Post-Termination Compensation

The Board believes that severance benefits are necessary in order to attract and retain the caliber and quality of executive that the Company needs in its most senior positions.

The Company had entered into employment agreements with each of its executive officers. The terms of these agreements are described under the caption “Employment Agreements” later in this Proxy Statement. These agreements provide the Company with protection in the form of restrictive covenants, including non-competition, non-solicitation, and confidentiality covenants. The Board considered the advisability of using employment

 

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agreements with its executive officers and determined that they are in the best interests of the Company insofar as they permit the Company to achieve its goals of attracting and retaining the best possible executive talent while obtaining post-employment non-competition and non-solicitation covenants from executive officers.

Under the terms of their employment agreements in effect for 2021, our executive officers are entitled to certain severance benefits in the event their employment is terminated by the Company without “cause” or by the NEO under certain circumstances, as described in the employment agreements. For Mr. Flitman, these severance benefits include (i) salary continuation for a period of 18 months if terminated without “cause,” (ii) continuation of health and welfare benefits during this period, and (iii) a payment equal of 150% of his annual target bonus if he is terminated without “cause.” For the other NEOs, these severance benefits include (i) salary continuation for a period of one year, (ii) continuation of health and welfare benefits during this period, and (iii) a payment equal of 100% of his annual target bonus. These severance benefits are described under the caption “Potential Payments Upon Termination or Change in Control” later in this Proxy Statement.

As disclosed above (and previously announced), M. Chad Crow stepped down as President as of the Merger Effective Date, but continued to serve as CEO until April 1, 2021, at which time he retired. Mr. Crow entered into a consulting agreement with the Company pursuant to which Mr. Crow will provide executive-level advisory consulting services to the Company for two years after the date of his retirement. Under the consulting agreement, Mr. Crow’s outstanding restricted stock unit awards will continue to remain outstanding and vest in accordance with the terms of the original award agreements, subject to Mr. Crow’s continued service to the Company under the consulting agreement.

Retirement / Post-Employment Benefits

The Company does not provide any retirement programs or benefits to its NEOs other than its 401(k) program, which is available to all employees.

Compensation Committee Report

 

 

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this Proxy Statement with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

Submitted by the Compensation Committee:

Cleveland A. Christophe (Chair)

Daniel Agroskin

Brett N. Milgrim

James O’Leary

 

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Summary Compensation Table

 

 

The following table sets forth the cash and other compensation that we paid to our NEOs, or that was otherwise earned by our NEOs, for their services in all capacities during 2021, 2020, and 2019.

 

Name and Principal Position

    Year      

Salary

($)

 

 

   

    Stock

    Awards

     ($)(1)

 

 

 

   

Non-Equity

Incentive Plan

 Compensation 

($)(2)

 

 

 

  All Other

Compensation

($)(3)

   

Total 

($) 


David E. Flitman

           

Chief Executive Officer and President(4)

  2021     1,050,000       6,842,350 (7)      2,145,506     91,703(8)     10,129,559  

 

M. Chad Crow

           

Former Chief Executive Officer and President(5)

  2021     252,115             —           5,800     257,915  
  2020     931,731       3,031,035       1,341,353     5,700     5,309,819  
  2019     950,000       3,041,688       1,006,264     4,200     5,002,152  

 

Peter M. Jackson

           

Executive Vice President and Chief Financial Officer

  2021     625,000       1,513,224       1,021,669     5,800     3,165,693  
  2020     533,462       1,487,927           759,357     5,700     2,786,446  
  2019     525,000       1,013,887           556,093     4,200     2,099,180  

 

Scott L. Robins

           

President – West Division

  2021     525,000       807,059           858,202     5,800     2,196,061  
  2020     464,006       757,758           710,537     5,700     1,938,001  
  2019     434,700       506,937           401,161     4,200     1,346,998  

 

Michael A. Farmer

           

President – Commercial Operations(6)

  2021     425,000       2,080,023 (9)          694,735     27,413(10)     3,227,171  

 

Timothy D. Johnson

           

Executive Vice President, General Counsel, and

Corporate Secretary(6)

  2021     450,000       2,004,364 (9)          735,602     9,750     3,199,716  

 

  1.

Reflects the aggregate grant date fair value of restricted stock unit awards, which for 2021 included both time-based vesting and performance-based vesting RSUs. The fair value of these awards was determined in accordance with the Compensation – Stock Compensation topic of the Financial Accounting Standards Board Accounting Standards Codification. The grant date fair value of time-based vesting RSUs was equal to the closing price of our Common Stock on the grant date. The grant date fair value of the performance-based vesting RSUs, utilizing an annual return on invested capital (“ROIC”) measurement for each of 2021-2023 individually and a cumulative ROIC measurement for performance over that three-year period, and subject to a total shareholder return modifier, was determined using the Monte Carlo simulation model, which is based on a number of factors. If achievement of the highest level of performance conditions is assumed, the grant date fair value of the awards to Messrs. Flitman, Jackson, Robins, Farmer, and Johnson would increase by $2,930,813, $915,849, $488,453, $351,028, and $305,235, respectively. The weighted average assumptions used in determining the grant date fair value of these awards are set forth in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

  2.

Reflects cash incentive awards earned under the 2021 Corporate Annual Incentive Plan. For information regarding our 2021 Corporate Annual Incentive Plan, see the discussion in the “Compensation Discussion and Analysis” section above.

  3.

Unless otherwise noted, amounts in this column reflect the amount of employer contributions to 401(k) plans in 2021. Messrs. Flitman, Farmer, and Johnson each received a 50% match for his contributions up to 6% of his annual compensation in 2021, subject to a maximum match pursuant to Internal Revenue Service regulations. Messrs. Jackson and Robins received a 40% match for his contribution up to 5% of his annual compensation in 2021, subject to a maximum match pursuant to Internal Revenue Service regulations.

  4.

Mr. Flitman was elected as President effective January 1, 2021 and as Chief Executive Officer effective April 1, 2021.

  5.

Mr. Crow retired as President effective January 1, 2021 and as Chief Executive Officer effective April 1, 2021.

  6.

Messrs. Farmer and Johnson were elected to their respective positions effective January 1, 2021.

  7.

Amount reflects one-time sign-on time-based vesting RSUs with a target value of $2,000,000. For more information regarding this award, see the discussion in the “Compensation Discussion and Analysis” section above.

  8.

Amount reflects $11,991 in employer contributions to Mr. Flitman’s 401(k) plan and $79,712 in company-paid moving expenses.

  9.

Amount reflects one-time sign-on time-based vesting RSUs with a target value of $1,500,000. For more information regarding these awards, see the discussion in the “Compensation Discussion and Analysis” section above.

  10.

Amount reflects $9,750 in employer contributions to Mr. Farmer’s 401(k) plan, $6,865 in auto allowance payments, and $10,798 in company-paid taxable travel for Mr. Farmer and his spouse.

 

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2021 Grants of Plan-Based Awards

 

 

The following table below sets forth the individual grants of plan-based awards made to each of our NEOs during 2021.

 

Name

 

Grant

Date

   

Approval

Date

   

Estimated Future Payouts Under

Non-Equity Incentive Plan Awards(1)

 

Estimated Future Payouts Under

Equity Incentive Plan Award(2)

 

All Other

 Stock Awards: 

Number

of Shares

of Stock

or Units

(#)

 

Grant Date 

Fair Value 

of Stock 

and Option 

Awards 

($)(3)  

 
 

Threshold

($)

 

Target

($)

 

Maximum

($)

 

Threshold 

(#)

 

Target

(#)

 

Maximum

(#)

David E. Flitman

                   

2021 Plan

                  65,625   1,312,500   2,625,000                        

RSU

    3/15/21       3/3/21                             93,577(4)     $4,399,990  

PSU

    3/15/21       3/3/21           5,742   51,042   112,292       $2,442,360  

M. Chad Crow(6)

                   
                               

Peter M. Jackson

                   

2021 Plan

                  31,250   625,000   1,250,000                        

RSU

    3/15/21       3/3/21                             15,951(4)     $750,016  

PSU

    3/15/21       3/3/21           1,794   15,950   35,090       $763,208  

Scott L. Robins

                   

2021 Plan

                  26,250   525,000   1,050,000                        

RSU

    3/15/21       3/3/21                             8,507(4)     $399,999  

PSU

    3/15/21       3/3/21           957   8,507   18,715       $407,060  

Michael A. Farmer

                   

2021 Plan

                  21,250   425,000   850,000                        

RSU

    3/15/21       3/3/21                             6,114(4)     $287,480  

RSU

    6/24/21       6/24/21                             33,452(5)     $1,499,988  

PSU

    3/15/21       3/3/21           687   6,114   13,450       $292,555  

Timothy D. Johnson

                   

2021 Plan

                  22,500   450,000   900,000                        

RSU

    3/15/21       3/3/21                             5,317(4)     $250,005  

RSU

    6/24/21       6/24/21                             33,452(5)     $1,499,988  

PSU

    3/15/21       3/3/21                 598   5,316   11,695         $254,371  

 

  1.

Represents threshold, target, and maximum payout levels for 2021 performance under the 2021 Corporate Annual Incentive Plan, which was established under the 2014 Incentive Plan. The threshold amount for each of Messrs. Flitman, Jackson, Robins, Farmer and Johnson represents the minimum amount that could be paid under the 2021 Corporate Annual Incentive Plan, which would occur if the Company only achieved the minimum payout under the Working Capital as a Percentage of Sales metric. For more information regarding the 2021 Corporate Annual Incentive Plan, see the discussion in the “Compensation Discussion and Analysis” section above.

  2.

Reflects awards of performance-based vesting RSUs under the 2014 Incentive Plan. Each award vests on the third anniversary of the grant date based on four separate performance measures: an annual return on invested capital (“ROIC”) measurement for each of 2021-2023 and a cumulative ROIC measurement for performance over that three-year period. For each of the annual tranches, (i) minimum payout requires achieving the actual ROIC performance for the prior year, (ii) full payout requires achieving the actual ROIC performance for the prior year plus a 12.5% improvement, and (iii) maximum payout requires achieving a 25% improvement over the actual ROIC performance for the prior year. When used as a target to calculate 2021 ROIC, actual ROIC for 2020 will be calculated on a combined pro forma basis for the Corporation and BMC. For the three-year average tranche, (i) minimum payout requires achieving pro forma 2020 ROIC plus a 12.5% improvement, (ii) the full payout target is a 12.5% increase over that minimum target, and (iii) the maximum target is a 25% increase above the minimum payout threshold. Additionally, the awards are subject to a total shareholder return (“TSR”) modifier. If the Corporation’s TSR is in the bottom two of a selected peer group, the payout based on the ROIC percentage will be reduced by 10%. If the Corporation’s TSR is in the top two of the selected peer group, the payout based on the ROIC percentage will be increased by 10%.

  3.

Reflects the aggregate grant date fair value of restricted stock unit awards granted in 2021. The fair value of these awards was determined in accordance with the Compensation — Stock Compensation topic of the Financial Accounting Standards Board

 

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  Accounting Standards Codification. For time-based vesting RSUs, the grant date fair value of such RSUs is equal to the closing price of our Common Stock on the grant date. The grant date fair value of performance-based vesting RSUs was determined using the Monte Carlo simulation model, which is based on a number of factors. The weighted average assumptions used in determining the grant date fair value of these awards are set forth in Note 2, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.
  4.

Reflects awards of time-based vesting RSUs under the 2014 Incentive Plan. Each award vests in three equal annual installments on March 1, 2022, 2023, and 2024.

  5.

Reflects awards of one-time sign-on time-based vesting RSUs under the 2014 Incentive Plan. Each award vests in three equal annual installments on March 1, 2022, 2023, and 2024. For more information regarding these awards, see the discussion in the “Compensation Discussion and Analysis” section above.

  6.

Mr. Crow retired as Chief Executive Officer on April 1, 2021 and was not granted any plan-based awards in 2021.

Employment Agreements

 

We have employment agreements with each of our continuing named executive officers that include the terms described below. Additional information regarding the severance benefits provided under the employment agreements may be found under “Potential Payments Upon Termination or Change in Control.”

 

     
 Name  

Effective Date of Employment

Agreement and Amendments

  Base Salary on
January 1, 2021
  Changes to Salary in 2021
     

David E. Flitman

  January 1, 2021 (as amended
January 31, 2022)
  $1,050,000   None
     

M. Chad Crow

  April 1, 2021   $950,000   Upon his retirement as CEO on
April 1, 2021, Mr. Crow no
longer received a base salary
     

Peter M. Jackson

  January 1, 2021   $625,000   None
     

Scott L. Robins

  January 1, 2021   $525,000   None
     

Michael A. Farmer

  January 1, 2021   $425,000   None
     

Timothy D. Johnson

  January 1, 2021   $450,000   None

Each of these agreements has an indefinite term and may be terminated by the Company with or without “cause,” as described in each of the employment agreements, or by the NEO with or without “good reason,” as described in each of the employment agreements.

Mr. Flitman’s agreement provides for the payment of an annual cash incentive bonus with a target of 125% of base salary. The employment agreements for the other NEOs provide for the payment of an annual cash incentive bonus with a target of 100% of base salary.

The employment agreements for all NEOs also provide that the executives are entitled to fully participate in all (i) health and dental benefits and insurance programs, (ii) life and short- and long-term disability benefits and insurance programs, and (iii) defined contribution and equity compensation programs, all as available to senior executive officers of the Corporation generally.

Mr. Flitman’s employment agreement includes confidentiality and 12-month post-termination non-competition, non-interference, and non-solicitation covenants if he is terminated on or before the one-year anniversary of Merger Effective Date or 18-month post-termination non-competition, non-interference, and non-solicitation covenants if he is terminated after the one-year anniversary of Merger Effective Date. The employment agreements for the other NEOs include confidentiality and 12-month post-termination non-competition, non-interference, and non-solicitation covenants.

As discussed in the “Compensation Discussion and Analysis” section above, Mr. Crow entered into a consulting agreement with the Company on April 1, 2021 pursuant to which he will provide executive-level advisory consulting services to the Company for two years after the date of his retirement. Under the consulting agreement, Mr. Crow’s outstanding restricted stock unit awards will continue to remain outstanding and vest in accordance with the terms of the original award agreements, subject to Mr. Crow’s continued service to the Company under the consulting agreement.

 

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2021 Outstanding Equity Awards at Year-End

 

The following table provides information concerning equity awards that are outstanding as of December 31, 2021 for each of our NEOs.

 

  Option Awards Stock Awards

Name

Number of

Securities

Underlying

Unexercised 

Options

(#)

Exercisable

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable 

Option

Exercise 

Price

($)

Option

Expiration 

Date

Number of 

Shares or 

Units of

Stock That 

Have Not

Vested

(#)

Market

Value of

Shares or

Units of

Stock That 

Have Not

Vested

($)(1)

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or
Other  Rights
That Have
Not Vested

(#)

Equity
Incentive Plan
Awards:
Market or Payout
Value of
Unearned Shares,
Units or Other
Rights That
Have Not Vested

($)(1)

David E. Flitman

 

 

 

 

 

 

 

 

               

RSU

 

 

 

 

93,577(2) 8,020,485

 

 

               

PSU

 

 

 

 

 

 

51,042(3) 4,374,810

M. Chad Crow

 

 

 

 

 

 

 

 

               

PSU

 

 

 

 

 

 

55,493(4) 4,756,305
               

RSU

 

 

 

 

35,638(5) 3,054,533

 

 

               

PSU

 

 

 

 

 

 

216,605(6) 18,565,215
               

RSU

 

 

 

 

44,034(7) 3,774,154

 

 

               

PSU

 

 

 

 

 

 

132,100(8) 11,322,291

Peter M. Jackson

 

 

 

 

 

 

 

 

               

RSU

 

 

 

 

11,880(5) 1,018,235

 

 

               

PSU

 

 

 

 

 

 

72,200(6) 6,188,262
               

RSU

 

 

 

 

18,348(7) 1,572,607

 

 

               

PSU

 

 

 

 

 

 

55,042(8) 4,717,650
               

RSU

 

 

 

 

9,907(9) 849,129

 

 

               

RSU

 

 

 

 

15,951(2) 1,367,160

 

 

               

PSU

 

 

 

 

 

 

15,950(3) 1,367,075

Scott L. Robins

 

 

 

 

 

 

 

 

               

RSU

 

 

 

 

5,941(5) 509,203

 

 

               

PSU

 

 

 

 

 

 

36,099(6) 3,094,045
               

RSU

 

 

 

 

11,009(7) 943,581

 

 

               

PSU

 

 

 

 

 

 

33,024(8) 2,830,487
               

RSU

 

 

 

 

8,507(2) 729,135

 

 

               

PSU

 

 

 

 

 

 

8,507(3) 729,135

Michael A. Farmer

 

 

 

 

 

 

 

 

               

Stock Options

6,668(10)

 

15.50 7/3/24

 

 

 

 

               

RSU

 

 

 

 

6,114(2) 524,031

 

 

               

PSU

 

 

 

 

 

 

6,114(3) 524,031
               

RSU

 

 

 

 

33,452(11) 2,867,171

 

 

Timothy D. Johnson

 

 

 

 

 

 

 

 

               

RSU

 

 

 

 

5,317(2) 455,720

 

 

               

PSU

 

 

 

 

 

 

5,316(3) 455,634
               

RSU

 

 

 

 

33,452(11) 2,867,171

 

 

 

1.

Reflects the value as calculated using the closing market price of our Common Stock as of December 31, 2021 ($85.71).

2.

Restricted stock units awarded to the executive on March 15, 2021 under the 2014 Incentive Plan. The restricted stock units vest in three equal annual installments on each of March 15, 2022, 2023, and 2024. Each restricted stock unit converts into one share of common stock upon vesting.

 

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3.

Restricted stock units awarded to the executive on March 15, 2021 under the 2014 Incentive Plan. The award vests on March 15, 2024 based on four separate performance measures: an annual return on invested capital (“ROIC”) measurement for each of 2021-2023 and a cumulative ROIC measurement for performance over that three-year period. For each of the annual tranches, (i) minimum payout requires achieving the actual ROIC performance for the prior year, (ii) full payout requires achieving the actual ROIC performance for the prior year plus a 12.5% improvement, and (iii) maximum payout requires achieving a 25% improvement over the actual ROIC performance for the prior year. When used as a target to calculate 2021 ROIC, actual ROIC for 2020 is calculated on a combined pro forma basis for the Corporation and BMC. For the three-year average tranche, (i) minimum payout requires achieving pro forma 2020 ROIC plus a 12.5% improvement, (ii) the full payout target is a 12.5% increase over that minimum target, and (iii) the maximum target is a 25% increase above the minimum payout threshold. Payout percentages between targets are linear. Additionally, the awards are subject to a total shareholder return (“TSR”) modifier. If the Corporation’s TSR is in the bottom two of a selected peer group, the payout based on the ROIC percentage will be reduced by 10%. If the Corporation’s TSR is in the top two of the selected peer group, the payout based on the ROIC percentage will be increased by 10%. The amounts reflected assume target payouts.

4.

Restricted stock units awarded to the executive on October 31, 2017 under the 2014 Incentive Plan. One half of the award vests on March 1, 2022 if the Corporation’s earnings before adjustments for interest, taxes, depreciation, and amortization for the year ended December 31, 2021 (“2021 Adjusted EBITDA”) equals or exceeds $650 million. The other half of the award vests on March 1, 2022 if the Corporation’s ratio of net debt to 2021 Adjusted EBITDA on December 31, 2021 is equal to or less than 3.0:1. Each restricted stock unit converts into one share of common stock upon vesting. The performance period has been completed and the amount reflected is the actual amount earned.

5.

Restricted stock units awarded to the executive on March 1, 2019 under the 2014 Incentive Plan. The restricted stock units vest in three equal annual installments on each of March 1, 2020, 2021, and 2022. Each restricted stock unit converts into one share of common stock upon vesting.

6.

Restricted stock units awarded to the executive on March 1, 2019 under the 2014 Incentive Plan. The award vests on March 1, 2022 based on four separate performance measures: an annual return on invested capital (“ROIC”) measurement for each of 2019-2021 and a cumulative ROIC measurement for performance over that three-year period. For each of the annual tranches, (i) minimum payout requires achieving the actual ROIC performance for the prior year, (ii) full payout requires achieving the actual ROIC performance for the prior year plus a 7.5% improvement, and (iii) maximum payout requires achieving a 17.5% improvement over the actual ROIC performance for the prior year. When used as a target to calculate 2021 ROIC, actual ROIC for 2020 is calculated on a combined pro forma basis for the Corporation and BMC. For the three-year average tranche, (i) minimum payout requires achieving the average of the 2019-2021 ROIC minimum targets plus a 7.5% improvement, (ii) the full payout target is a 7.5% increase over that minimum target, and (iii) the maximum target is a 17.5% increase above the minimum payout threshold. Payout percentages between targets are linear. Additionally, the awards are subject to a TSR modifier. If the Corporation’s TSR is in the bottom two of a selected peer group, the payout based on the ROIC percentage will be reduced by 10%. If the Corporation’s TSR is in the top two of the selected peer group, the payout based on the ROIC percentage will be increased by 10%. The performance period has been completed and the amounts reflected are the actual amounts earned.

7.

Restricted stock units awarded to Mr. Crow on April 10, 2020 and to Messrs. Jackson and Robins on March 1, 2020 under the 2014 Incentive Plan. The restricted stock units vest in three equal annual installments on each of March 1, 2021, 2022, and 2023. Each restricted stock unit converts into one share of common stock upon vesting.

8.

Restricted stock units awarded to Mr. Crow on April 10, 2020 and to Messrs. Jackson and Robins on March 1, 2020 under the 2014 Incentive Plan. The award vests on March 1, 2023 based on four separate performance measures: an annual return on invested capital (“ROIC”) measurement for each of 2020-2022 and a cumulative ROIC measurement for performance over that three-year period. For each of the annual tranches, (i) minimum payout requires achieving the actual ROIC performance for the prior year, (ii) full payout requires achieving the actual ROIC performance for the prior year plus a 7.5% improvement, and (iii) maximum payout requires achieving a 17.5% improvement over the actual ROIC performance for the prior year. When used as a target to calculate 2021 ROIC, actual ROIC for 2020 is calculated on a combined pro forma basis for the Corporation and BMC. For the three-year average tranche, (i) minimum payout requires achieving the average of the 2020-2022 ROIC minimum targets plus a 7.5% improvement, (ii) the full payout target is a 7.5% increase over that minimum target, and (iii) the maximum target is a 17.5% increase above the minimum payout threshold. Payout percentages between targets are linear. Additionally, the awards are subject to a TSR modifier. If the Corporation’s TSR is in the bottom two of a selected peer group, the payout based on the ROIC percentage will be reduced by 10%. If the Corporation’s TSR is in the top two of the selected peer group, the payout based on the ROIC percentage will be increased by 10%. The amounts reflected assume maximum payouts excluding any TSR modifier.

9.

Restricted stock units awarded to the executive on March 1, 2020 under the 2014 Incentive Plan. The restricted stock units vest in full on March 1, 2022. Each restricted stock unit converts into one share of common stock upon vesting.

10.

Stock options assumed by the Company in connection with the Merger and converted into options to purchase the common stock of the Company.

11.

Restricted stock units awarded to the executive on June 24, 2021 under the 2014 Incentive Plan. The restricted stock units vest in three equal annual installments on each of March 15, 2022, 2023, and 2024. Each restricted stock unit converts into one share of common stock upon vesting.

 

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Executive Compensation and Other Information

 

2021 Option Exercises and Stock Vested

 

The following table provides information regarding the vesting of restricted stock awards and the exercise of stock options held by our NEOs in 2021.

 

 

Option Awards

 

Stock Awards

 

Name

Number of

Shares

Acquired

  on Exercise  

(#)

Value Realized

on Exercise

($)

Number of

Shares

Acquired

on Vesting

(#)

Value Realized

on Vesting

($)(1)

       

David E. Flitman

  —            —         
       

M. Chad Crow

  169,735            7,610,917         
       

Peter M. Jackson

  50,940            2,284,150         
       

Scott L. Robins

  30,124            1,350,760         
       

Michael A. Farmer

  —            —         
       

Timothy D. Johnson

  —            —         

 

1.

Reflects the value as calculated by multiplying the number of shares of stock by the closing market price of our Common Stock on the date of vesting.

Potential Payments Upon Termination or Change in Control

 

As described above in “Employment Agreements,” we entered into employment agreements with our NEOs, which, among other things, provide benefits to them in the event of a termination of employment under certain circumstances. These agreements, as in effect for 2021, are described below.

Termination by the Corporation Without Cause; Certain Terminations by the Executive; Non-Renewal of Employment Agreement; Mutual Consent to Termination.  Under Mr. Flitman’s employment agreement and following the Merger Effective Date, in the event that (i) his employment is terminated by us without “cause” (as defined in the employment agreement), or (ii) he terminates his employment for “good reason” (as defined in the employment agreement, and which includes a “change in control”), he is entitled to (a) the sum of Mr. Flitman’s base salary and target bonus, payable in equal installments according to our normal payroll practices over the period of 12 months following the termination date and health benefit continuation for 12 months following the termination date if such date is on or before the Merger Effective Date, or (b) 1.5 times the sum of Mr. Flitman’s base salary and target bonus, payable in equal installments according to our normal payroll practices over the period of eighteen months following the termination date and health benefit continuation for eighteen months following the termination date if such date is after the Merger Effective Date.

Under each of the employment agreements for Messrs. Jackson, Robins, Farmer, and Johnson, in the event that (i) the executive’s employment is terminated by us without “cause” (as defined in the employment agreement), or (ii) the executive terminates his employment for “good reason” (as defined in the employment agreement, and which includes a “change in control”), the executive is entitled to (a) the sum of his base salary and target bonus, payable in equal installments according to our normal payroll practices over the period of 12 months following the termination date and (b) health benefit continuation for 12 months following the termination date. Under the employment agreements for each of Messrs. Jackson and Robins, in the event that he is terminated without cause or for good reason on or prior to June 30, 2022, all of executive’s unvested restricted stock units issued prior to December 15, 2020 shall accelerate and immediately vest.

Mr. Crow’s consulting agreement does not contain provisions related to termination without “cause” or for “good reason.”

Restrictive Covenants.  Mr. Flitman’s employment agreement contains customary restrictive covenants, including non-competition, non-interference, and non-solicitation covenants that apply during the period of his employment and for 18 months after his termination date. The employment agreement for our other NEOs and Mr. Crow’s consulting agreement also contain customary restrictive covenants, including non-competition, non-interference,

 

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Executive Compensation and Other Information

 

and non-solicitation covenants that apply during the period of his employment and for 12 months after an executive’s termination date or the termination of Mr. Crow’s consulting period on April 1, 2023, respectively.

Death or Disability.  The employment agreements do not provide for any payments in such event.

Summary of Termination Payments and Benefits

 

The following table summarizes the value of the termination payments and benefits that our NEOs would receive if they had terminated employment on December 31, 2021 under the circumstances shown. The amounts shown in the table exclude distributions under our 401(k) retirement plan and any additional benefits that are generally available to all of our salaried employees. Mr. Crow’s consulting agreement may not be terminated before the end of the consulting period ending on April 1, 2023 and he is therefore not entitled to any termination payments or benefits.

 

    Mr. Flitman     Mr. Jackson     Mr. Robins     Mr. Farmer     Mr. Johnson  
         

Reason for Termination:

By Corporation Without Cause or by the Executive for Good Reason (without a Change in Control)

                                       
         

Cash Severance(1)

  $ 2,362,500     $ 1,250,000     $ 525,000     $ 850,000     $ 900,000  
         

Health and Welfare Continuation(2)

    8,642       13,922       13,725       15,047       14,702  
         

Equity Acceleration(3)

          9,199,340       4,741,306              
         

Total Estimated Value of Payments and Benefits(4)

  $ 2,371,142     $     10,463,262     $ 5,280,031     $  865,047   $ 914,702  
         

Reason for Termination:

By Corporation Without Cause or by the Executive for Good Reason and a Change in Control

                                       
         

Cash Severance(1)

  $ 2,362,500     $ 1,250,000     $ 1,050,000     $ 850,000     $ 900,000  
         

Health and Welfare Continuation(2)

    8,642       13,922       13,725       15,047       14,702  
         

Equity Acceleration(5)

    12,395,294       11,587,478       5,853,479       3,915,233       3,778,525  
         

Total Estimated Value of Payments and Benefits(4)

  $     14,766,436     $ 12,851,400     $     6,917,204     $     4,780,280     $ 4,693,227  
         

Reason for Termination:

Death or Disability

                                       
         

Equity Acceleration(6)

  $ 8,020,485     $ 4,807,131     $ 2,181,919     $ 3,391,202     $     3,322,891  
         

Total Estimated Value of Payments and Benefits

  $ 8,020,485     $ 4,807,131     $ 2,181,919     $ 3,391,202     $ 3,322,891  

 

1.

This amount includes the dollar value of continuation of the executive’s then-current base salary for a period of 12 months and the payment of his target bonus in equal installments over 12 months for Messrs. Flitman, Jackson, Farmer, and Johnson. For Mr. Robins, this amount only includes the dollar value of continuation of his then-current base salary for 12 months.

2.

The dollar value represents the cost of providing continued health and welfare benefits to the executive for one year after his date of termination of employment.

3.

Amount reflects the acceleration of all outstanding and unvested time-based and performance-based RSUs at target payouts granted to executive prior to December 15, 2020, held by executive on December 31, 2021, and multiplied by the closing market price of our Common Stock on that date ($85.71).

4.

Payments of cash severance under these agreements will be made in accordance with the Corporation’s regular payroll practices. However, to the extent any amount or benefit would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, (i) the payment of such amount or benefit shall only be in connection with an event that constitutes a Section 409A-compliant “separation from service” and (ii) if the amount or benefit would otherwise be payable or distributable during a period in which the executive is a “specified employee” (as defined in Code Section 409A and the final regulations thereunder), then the executive’s right to receive such payment or distribution will be delayed until the earlier of the executive’s death or the first day of the seventh month following the executive’s separation of service.

5.

Amount reflects the acceleration of all outstanding and unvested time-based and performance-based RSUs at target payouts held by executive on December 31, 2021 and multiplied by the closing market price of our Common Stock on that date ($85.71).

6.

Amount reflects the acceleration of all outstanding and unvested time-based RSUs held by executive on December 31, 2021 and multiplied by the closing market price of our Common Stock on that date ($85.71).

 

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Executive Compensation and Other Information

 

Chief Executive Officer Pay Ratio Disclosure

 

Below is: (i) the 2021 annual total compensation of our CEO; (ii) the 2021 annual total compensation of our median employee; (iii) the ratio of the annual total compensation of our CEO to that of our median employee; and (iv) the methodology we used to calculate our CEO pay ratio:

 

CEO Pay Ratio

 
 

CEO Annual Total Compensation

$     10,138,201
 

Median Employee Annual Total Compensation

$ 61,301
 

Median Employee Pay Ratio

  165:1

To determine our median employee’s pay, we chose total cash compensation paid through our payroll system in 2021 as our consistently applied compensation measure. That amount does not include any 401(k) match. We then annualized base salary for those employees who commenced work during 2021 and any employees who were on an unpaid leave of absence for a portion of 2021. As of December 31, 2021, we had 27,834 employees. Using this methodology, we identified the median employee as of December 31, 2021.

That median employee’s total annual compensation in 2021 includes total cash compensation paid through our payroll system in 2021, the value of company-paid cost of health and life insurance, and the value of company-paid contributions to the employee’s 401(k) plan, if any. Because Mr. Flitman was elected President of the Company on January 1, 2021 and the terms of his compensation did not change when he became CEO on April 1, 2021, Mr. Flitman’s total annual compensation includes his base salary, long-term equity incentives awards, non-equity incentive plan bonus, company-paid contributions to his 401(k) plan, and the value of company-paid cost of health and life insurance. The value of company-paid health and life insurance is not included for Mr. Flitman in the Summary Compensation Table above because that benefit is available to all full-time employees and does not discriminate against lower-paid employees.

Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.

 

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Proposal 2 — Advisory Vote on Executive Compensation

 

PROPOSAL 2 — ADVISORY VOTE ON EXECUTIVE COMPENSATION

As required by Section 14A of the Securities Exchange Act, this proposal provides stockholders with an opportunity to cast a non-binding, advisory vote on the 2021 compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the disclosure rules of the Securities and Exchange Commission. This proposal, commonly known as a “say on pay” proposal, gives stockholders the opportunity to approve, reject, or abstain from voting with respect to our fiscal 2021 executive compensation program.

At the 2021 annual meeting of stockholders, over 95% of the shares represented at the meeting in person or by proxy and entitled to vote were voted in support of the Corporation’s compensation program. At the 2017 annual meeting of stockholders, the Corporation’s stockholders selected, on a non-binding, advisory basis, an annual vote for the frequency at which the Corporation should include a say on pay vote in its proxy statement for stockholder consideration. In light of this result and other factors considered by the Board, the Board determined that the Corporation will hold say on pay votes every year until the next required non-binding, advisory vote on the frequency of such votes, which is required to be held no later than the Corporation’s 2023 annual meeting of stockholders.

As discussed in the “Compensation Discussion and Analysis” section of this Proxy Statement, our 2021 executive compensation program has been designed to provide a total compensation package that allows us to attract, retain, and motivate executives who have the talent to capably manage our business.

Our compensation program is intended to:

 

   

Provide total compensation opportunities at levels that are competitive for comparable positions at companies with whom we compete for talent,

 

   

Provide incentives to our executive officers to achieve key financial objectives set by the Board,

 

   

Provide an appropriate mix of fixed and variable pay components to establish a “pay-for-performance” oriented compensation program,

 

   

Align the financial interests of executives with stockholder interests by providing significant compensation opportunities in the form of equity awards, and

 

   

Emphasize direct pay components such as cash and equity and avoid indirect compensation such as benefits and perquisites that are not available to employees generally.

This proposal allows our stockholders to express their opinions regarding the decisions of the Board and the Compensation Committee on the annual compensation for the NEOs in 2021. This advisory vote will serve as an additional tool to guide the Board and the Compensation Committee in evaluating the alignment of the Corporation’s executive compensation program with the interests of the Corporation and its stockholders. Approval of this proposal requires the affirmative vote of the holders of a majority of the shares represented and entitled to vote on this proposal at the annual meeting.

Because the vote on this proposal is advisory in nature, it will not affect any compensation already paid or awarded to any NEO and will not be binding on or overrule any decisions by the Board. The Compensation Committee and the Board will consider the outcome of the vote when setting future compensation arrangements for our NEOs.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE 2021 EXECUTIVE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.

 

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Compensation Committee Interlocks and Insider Participation

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2021, Messrs. Christophe, Agroskin, Milgrim, and O’Leary served on the Compensation Committee. No member of the Compensation Committee was an officer or employee of Builders FirstSource or any of its subsidiaries during the last fiscal year or at any other time. None of the members of the Compensation Committee had any relationship with the Corporation during the last fiscal year that would require disclosure under Item 404 of Regulation S-K. No executive officer of the Corporation served as a member of the board of directors or compensation committee of another entity, one of whose executive officers served on the Compensation Committee or the Board of Builders FirstSource.

 

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Certain Relationships and Related Party Transactions

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The Corporation’s Code of Business Conduct and Ethics and its Supplemental Code of Ethics, both of which are in writing, provide guidelines for identifying, reviewing, approving, and ratifying related party transactions. Related party transactions include those transactions that create an actual, apparent, or potential conflict of interest. Related party transactions involving the Corporation’s Chief Executive Officer, President, Chief Financial Officer, or Controller (or persons forming similar functions, including our Chief Accounting Officer) must be submitted to the General Counsel for review. If the General Counsel determines that an actual or apparent conflict of interest exists, the transaction must be submitted to the Audit Committee for approval. The directors and executive officers, as well as all other employees of the Corporation, must obtain a waiver for any activity that violates the Corporation’s Code of Business Conduct and Ethics. The Corporation’s Compliance Committee, which is made up of representatives from our Finance, Legal, Human Resources, and Internal Audit Departments, is responsible for the administration of the Code of Business Conduct and Ethics. However, only the Audit Committee may waive any violation of this code by directors or executive officers.

Additionally, the Corporation has adopted a Related Party Transaction Policy that sets forth the process by which the Audit Committee will review certain related party transactions between the Corporation and its executive officers, directors, and greater than five percent beneficial owners, and their immediate family members, and the Corporation.

The Corporation’s By-laws provide that no contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other entity in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because any such director’s or officer’s vote is counted for such purpose, if: (i) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum, (ii) the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders, or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved, or ratified by the Board, a committee thereof, or the stockholders.

Certain members of the Corporation’s Board of Directors serve on the board of directors for one of our suppliers, PGT Innovations, Inc. The Corporation purchases building materials from PGT Innovations, Inc. in the ordinary course of business and on terms no less favorable to us than we could obtain from unaffiliated third parties. We anticipate that such purchases will continue in the foreseeable future. In addition, as of January 1, 2021, a member of the Board is an executive officer of one of our customers, Ashton Woods USA, L.L.C. Sales to Ashton Woods USA. L.L.C. made up approximately 1% of our net sales in 2021.

 

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Securities Owned by Directors, Executive Officers, and Certain Beneficial Owners

 

SECURITIES OWNED BY DIRECTORS, EXECUTIVE OFFICERS, AND CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information regarding the beneficial ownership, as of April 15, 2022, of our Common Stock by (i) each person known to us (based upon their Schedule 13D and 13G filings with the SEC) to hold greater than 5% of the total number of outstanding shares and (ii) each current director or named executive officer and all the current directors (including director nominees) and executive officers as a group. The number of shares beneficially owned by each person or group as of April 15, 2022 includes shares of Common Stock that such person or group had the right to acquire on or within 60 days after April 15, 2022, including upon the exercise of options and conversion of restricted stock units. All such information is estimated and subject to change. Each outstanding share of Common Stock entitles its holder to one vote on all matters submitted to a vote of our stockholders.

Ownership of our Common Stock is shown in terms of “beneficial ownership.” Amounts and percentages of Common Stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which he or she has a right to acquire beneficial ownership within 60 days. More than one person may be considered to beneficially own the same shares. In the table below, unless otherwise noted, a person has sole voting and dispositive power for those shares shown as beneficially owned by such person.

 

Name and Address of Beneficial Owner(1)

Shares of

Common Stock

Beneficially

Owned(2)

Percentage

Ownership of
Shares

Beneficially

Owned(3)

 

BlackRock, Inc.(4)

 

 

 

 

 

18,709,108

 

 

 

 

 

 

 

10.7

 

 

%

 

 

FMR LLC(5)

 

 

 

 

 

17,960,742

 

 

 

 

 

 

 

10.3

 

 

%

 

 

The Vanguard Group, Inc.(6)

 

 

 

 

 

17,335,692

 

 

 

 

 

 

 

10.0

 

 

%

 

 

Wellington Management Group LLP(7)

 

 

 

 

 

9,821,432

 

 

 

 

 

 

 

5.6

 

 

%

 

 

Paul S. Levy(8)(10)

 

 

 

 

 

1,160,817

 

 

 

 

 

 

 

    

 

 

*

 

 

David E. Flitman

 

 

 

 

 

328,240

 

 

 

 

 

 

 

    

 

 

*

 

 

Daniel Agroskin(9)(10)

 

 

 

 

 

36,380

 

 

 

 

 

 

 

    

 

 

*

 

 

Mark A. Alexander(10)

 

 

 

 

 

33,588

 

 

 

 

 

 

 

    

 

 

*

 

 

Cory J. Boydston(10)

 

 

 

 

 

29,896

 

 

 

 

 

 

 

    

 

 

*

 

 

David W. Bullock(10)

 

 

 

 

 

99,931

 

 

 

 

 

 

 

    

 

 

*

 

 

Cleveland A. Christophe(10)

 

 

 

37,721

 

 

 

 

    

 

*

 

 

W. Bradley Hayes(10)

 

 

 

 

 

18,874

 

 

 

 

 

 

 

    

 

 

*

 

 

Brett N. Milgrim(10)

 

 

 

 

 

70,034

 

 

 

 

 

 

 

    

 

 

*

 

 

James O’Leary(10)

 

 

 

 

 

76,574

 

 

 

 

 

 

 

    

 

 

*

 

 

Floyd F. Sherman(10)

 

 

 

 

 

48,972

 

 

 

 

 

 

 

    

 

 

*

 

 

Craig A. Steinke(10)

 

 

 

 

 

117,025

 

 

 

 

 

 

    

 

*

 

M. Chad Crow

 

 

 

 

 

90,435

 

 

 

 

 

 

 

    

 

 

*

 

 

Michael A. Farmer(11)

 

 

 

 

 

37,747

 

 

 

 

 

 

 

    

 

 

*

 

 

Peter M. Jackson

 

 

 

 

 

96,634

 

 

 

 

 

 

 

    

 

 

*

 

 

Timothy D. Johnson

 

 

 

 

 

22,596

 

 

 

 

 

 

 

    

 

 

*

 

 

Scott L. Robins

 

 

 

 

 

72,949

 

 

 

 

 

 

 

    

 

 

*

 

 

Directors, Director Nominees, and Executive Officers as a group (20 persons)

 

 

 

2,435,916

 

 

 

 

1.4

 

%*

 

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Securities Owned by Directors, Executive Officers, and Certain Beneficial Owners

 

 

  *

Percentage does not exceed one percent of the total outstanding class.

  1.

Unless otherwise indicated, the business address of each person named in the table is Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201.

  2.

The number of shares beneficially owned by each person or group as of April 15, 2022 includes shares of Common Stock that such person or group had the right to acquire on or within 60 days after April 15, 2022, including upon the exercise of stock options and conversion of restricted stock units.

  3.

For each person and group included in the table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group as described above by the sum of 174,078,129 shares of Common Stock outstanding on April 15, 2022 and the number of shares of Common Stock that such person or group had the right to acquire on or within 60 days of April 15, 2022, including upon the exercise of options and conversion of restricted stock units.

  4.

BlackRock, Inc., a Delaware corporation, reported sole voting power over 17,681,546 shares of Common Stock and sole dispositive power over 18,709,108 shares of Common Stock. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Common Stock. BlackRock Life Limited, BlackRock Advisors, LLC, Aperio Group, LLC, BlackRock (Netherlands) B.V., BlackRock Fund Advisors, BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, BlackRock (Singapore) Limited, and BlackRock Fund Managers Ltd are subsidiaries of BlackRock, Inc. that acquired the Common Stock, of which BlackRock Fund Advisors reported individually owning more than five percent of the outstanding Common Stock. The information in the foregoing table and in this footnote is based on the ownership information reported on the Schedule 13G filed by BlackRock, Inc., as last amended by Amendment No. 8 on February 3, 2022. The business address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.

  5.

FMR LLC, a Delaware limited liability company, reported sole voting power over 3,198,118 shares of Common Stock and sole dispositive power over 17,960,742 shares of Common Stock. Abigail P. Johnson, a Director, the Chairman, and the Chief Executive Officer of FMR LLC, has sole dispositive power over 17,960,742 shares of Common Stock. Pursuant to Item 3 classification, the following entities beneficially own shares of Common Stock: FIAM LLC, Fidelity Institutional Asset Managed Trust Company, Fidelity Management & Research Company LLC, Fidelity Management Trust Company, and Strategic Advisers LLC, of which Fidelity Management & Research Company LLC reported individually owning more than five percent of the outstanding Common Stock. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management & Research Company LLC (“FMR Co. LLC”), a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. FMR Co. LLC carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. The information in the foregoing table and in this footnote is based on the ownership information reported on the Schedule 13G filed by FMR LLC, as last amended by Amendment No. 2 on February 9, 2022. The business address for FMR LLC is 245 Summer Street, Boston, Massachusetts 02210.

  6.

The Vanguard Group, Inc., a Pennsylvania corporation, reported shared voting power over 97,622 shares of Common Stock, sole dispositive power over 17,068,275 shares of Common Stock, and shared dispositive power over 267,417 shares of Common Stock. No one person’s interest in the Common Stock is more than five percent of the total outstanding Common Stock. The information in the foregoing table and in this footnote is based on the ownership information reported on the Schedule 13G filed by The Vanguard Group, as last amended by Amendment No. 5 on February 9, 2022. The business address for The Vanguard Group is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.

  7.

Wellington Management Group LLP, a Massachusetts limited liability partnership, reported shared voting power over 9,160,109 shares of Common Stock and shared dispositive power over 9,821,432 shares of Common Stock. No one person’s interest in the Common Stock is more than five percent of the total outstanding Common Stock. Pursuant to Item 3 classification, the following entities beneficially own shares of Common Stock: Wellington Group Holdings LLP, Wellington Investment Advisors LLP and Wellington Management Global Holdings, Ltd. (each a holding company), and Wellington Management Company LLP, Wellington Management Canada LLC, Wellington Management Singapore Pte Ltd, Wellington Management Hong Kong Ltd, Wellington Management International Ltd, Wellington Management Japan Pte Ltd, and Wellington Management Australia Pty Ltd (each an investment adviser, and collectively the “Wellington Investment Advisers”). The shares of Common Stock are owned of record by clients of the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP controls directly, or indirectly through Wellington Management Global Holdings, Ltd., the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP is owned by Wellington Group Holdings LLP. Wellington Group Holdings LLP is owned by Wellington Management Group LLP. The information in the foregoing table and in this footnote is based on the ownership information reported on the Schedule 13G filed by Wellington Management Group LLP on February 4, 2022. The business address for Wellington Management Group LLP is 280 Congress Street, Boston Massachusetts 02210.

  8.

The business address for Mr. Levy is 440 Royal Palm Way, Suite 206, Palm Beach, Florida 33408.

  9.

The business address for Mr. Agroskin is 245 Park Avenue, Suite 1601, New York, New York 10167.

 

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Securities Owned by Directors, Executive Officers, and Certain Beneficial Owners

 

  10.

Includes 3,459 shares of Common Stock issuable upon conversion of restricted stock units that vest on the earlier of the first anniversary of the grant date or upon the director’s cessation of service due to death, disability, or retirement.

  11.

Includes 6,668 shares of Common Stock issuable upon exercise of outstanding and exercisable options under the 2014 Incentive Plan.

 

56    Builders FirstSource, Inc.  |  2022 Proxy Statement


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Delinquent Section 16(a) Reports

 

DELINQUENT SECTION 16(a) REPORTS

Section 16(a) of the Exchange Act (“Section 16(a)”) requires the Corporation’s directors and executive officers, and certain persons who own more than ten percent of a registered class of the Corporation’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other security interests of the Corporation.

Based solely on a review of Forms 3, 4, and 5 and any amendments thereto filed with the SEC, or written representations that no Form 5s were required, all Section 16(a) filing requirements during the fiscal year ended December 31, 2021 were timely complied with, as applicable to its directors, executive officers, and greater than ten percent owners during 2021 with the exception of the late filing of one Form 4 to report a sale of shares by Floyd F. Sherman.

 

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Equity Compensation Plan Information

 

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth certain information regarding securities authorized for issuance under the Corporation’s equity compensation plans as of December 31, 2021.

 

Plan category

Number of

Securities to be

Issued Upon

Exercise of

Outstanding

Options, Warrants,

and Rights

Weighted Average

Exercise Price of

Outstanding

Options, Warrants,

and Rights

Number of

Securities Remaining

Available for

Future Issuance

Under Equity

Compensation Plans

(Excluding Securities

Reflected in Column (a))

 

Equity compensation plans approved by security holders

 

 

 

2,237,626(1)

 

 

 

 

 

$    10.30(2)

 

 

 

 

 

7,969,483(3)

 

 

 

Equity compensation plans not approved by security holders

 

 

 

18,850(4)

 

 

 

 

 

$      3.15    

 

 

 

 

 

    

 

 

 

Total

 

 

 

2,256,476    

 

 

 

 

 

$      9.60(2)

 

 

 

 

 

7,969,483    

 

 

 

  1.

Includes (i) 174,243 shares to be issued upon exercise of options granted under the Builders FirstSource, Inc. 2005 Equity Incentive Plan, the Builders FirstSource, Inc. 2007 Incentive Plan, and the Builders FirstSource, Inc. 2014 Incentive Plan and (ii) 2,063,383 shares to be issued upon the full vesting of restricted stock units granted under the 2014 Incentive Plan. The 2005 Equity Incentive Plan was approved by the Corporation’s stockholders in June 2005. The Corporation’s stockholders approved the 2007 Incentive Plan in May 2007 and reapproved the plan in January 2010. The 2014 Incentive Plan was approved by the Corporation’s stockholders in May 2014 and reapproved by the Corporation’s stockholders in May 2016. The Stock Building Supply Holdings, Inc. 2013 Incentive Compensation Plan (the “BMC 2013 Plan”) was assumed by the 2014 Incentive Plan on January 4, 2021 pursuant to the Registration Statement on Form S-8 filed by the Company with the SEC on such date. The 2005 Equity Incentive Plan expired in June 2015, and the 2007 Incentive Plan expired in May 2017, but such expirations will not adversely affect any awards issued under either plan prior to its expiration. It is assumed that the maximum number of shares will be issued on payout for RSUs that contain variable payout provisions. If it is assumed that shares will be issued at the target vesting amount for outstanding RSUs with variable payout provisions, an additional 844,864 shares would be included in the shares available for future issuance under the 2014 Incentive Plan.

  2.

Restricted stock units are excluded from the calculation of weighted average exercise price.

  3.

Securities available for future awards pursuant to the 2014 Incentive Plan, which was approved by the Corporation’s stockholders in May 2014 and reapproved in May 2016, including the shares assumed under the BMC 2013 Plan. Under our 2014 Incentive Plan, the Corporation is authorized to grant awards in the form of incentive stock options, non-qualified stock options, restricted stock shares, restricted stock units, other common stock-based awards, and cash-based awards. The maximum number of shares of Common Stock initially reserved for awards (including future grants, currently outstanding awards, and previously exercised awards) under the 2014 Incentive Plan (including the BMC 2013 Plan) as of December 31, 2021 was 15,152,523, subject to adjustment as provided by the plan. All 15,152,523 shares under the 2014 Incentive Plan may be made subject to options, SARs, or stock-based awards. The 6,652,523 shares assumed under the BMC 2013 Plan may only be issued to participants who were not Builders FirstSource employees on the Merger Effective Date.

  4.

Includes securities to be issued upon exercise of options under the Builders FirstSource, Inc. 1998 Stock Incentive Plan, as amended. No grants were made under this plan after the Corporation’s initial public offering in June 2005. No further grants will be made under this plan.

 

58    Builders FirstSource, Inc.  |  2022 Proxy Statement


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Proposal 3 — Ratification of Selection of Independent Registered Public Accounting Firm

 

PROPOSAL 3 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Based upon the recommendation of the Audit Committee, the Board of Directors selected PricewaterhouseCoopers LLP (“PwC”) to serve as the Corporation’s independent registered public accounting firm (the “auditors”) for the year ending December 31, 2022. As a matter of good corporate governance, the stockholders will be requested to ratify the Audit Committee’s selection at the annual meeting. Representatives of PwC will be present at the annual meeting, have the opportunity to make a statement if they desire to do so, and be available to answer appropriate questions.

If the stockholders do not ratify the appointment of PwC, the selection of auditors will be reconsidered by the Audit Committee. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent registered public accounting firm, subject to ratification by the Board, at any time during the year if it determines that such a change would be in the best interests of the Corporation and its stockholders.

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

 

Fees Paid to PricewaterhouseCoopers LLP

 

 

The following table shows the fees paid or accrued by the Corporation for the audit and other services provided by PwC for fiscal years 2021 and 2020.

 

      2021     2020

Audit fees(1)

  $5,840,000     $3,615,000  

Audit-related fees(2)

  754,150     671,210  

Tax fees(3)

  547,180     308,101  

All other fees(4)

      15,000  

Total PwC fees

  $7,141,330     $4,609,311  

 

1.

Audit fees of PwC for 2021 and 2020 consisted of the audit and quarterly reviews of the consolidated financial statements of the Corporation, the audit of the effectiveness of management’s internal control over financial reporting, the review of filings made with the SEC, preparation of comfort letters, and work on registration statements.

2.

Audit-related fees of PwC for 2021 and 2020 include assistance with due diligence in connection with the Corporation’s acquisition of BMC and other acquisitions and transactions.

3.

Tax fees for 2021 and 2020 include assistance with the preparation of tax returns of certain of the Corporation’s subsidiaries and assistance with audits, as well as tax planning and advising management as to the tax implications of certain transactions undertaken by the Corporation.

4.

All other fees in 2020 relate to certain other advisory services provided to the Corporation by PwC.

The Audit Committee determined that the provision of services related to audit services, audit-related services, tax compliance, advisory services, and other services is compatible with maintaining the independence of PwC. PwC did not render professional services relating to financial information systems design and implementation for the fiscal years ended December 31, 2020 or 2021.

The Audit Committee has the sole and direct authority to engage, appoint, and replace our auditors. In addition, the Audit Committee has established in its charter a policy that every engagement of PwC to perform audit or permissible non-audit services on behalf of the Corporation or any of its subsidiaries requires pre-approval from the Audit Committee or its designee before PwC is engaged to provide those services. Pursuant to the Audit Committee Charter, the Audit Committee reviews and, in its sole discretion, approves in advance the Corporation’s auditors’ annual engagement letter, including the proposed fees contained therein, as well as all audit and, as provided in the Sarbanes-Oxley Act of 2002 and the SEC rules and regulations promulgated thereunder, all permitted non-audit engagements and relationships between the Corporation and such auditors

 

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Proposal 3 — Ratification of Selection of Independent Registered Public Accounting Firm

 

(which approval should be made after receiving input from the Corporation’s management, if desired). Approval of audit and permitted non-audit services will be made by the Audit Committee as set forth in the Audit and Non-Audit Services Pre-Approval Policy (the “Pre-Approval Policy”). Under the Pre-Approval Policy, the Audit Committee may delegate either specific or general pre-approval authority to one or more of its members. The Pre-Approval Policy delegates specific pre-approval authority to its chair for services subject to the policy, provided that the estimated fees for any such proposed pre-approved services do not exceed $500,000 in the aggregate and the services are not specifically prohibited by the Pre-Approval Policy. The Chair of the Audit Committee must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

Under the Pre-Approval Policy, the Audit Committee must specifically pre-approve a service unless the type of service has received general pre-approval. The Audit Committee annually reviews and generally pre-approves the services that may be provided by the independent auditor during the following calendar year without obtaining specific pre-approval from the Audit Committee. The Corporation’s Chief Financial Officer, in consultation with the Chair of the Audit Committee, will determine whether services are eligible for general pre-approval. The Pre-Approval Policy sets out certain audit, audit-related, and tax services that have the general pre-approval of the Audit Committee for an amount not to exceed $500,000. The Audit Committee may specifically pre-approve any services in these categories that exceed the permitted general pre-approval amount.

As a result, the Audit Committee or its designee approved 100% of all services performed by PwC on behalf of the Corporation and its subsidiaries in 2021.

 

60    Builders FirstSource, Inc.  |  2022 Proxy Statement


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Proposal 4 — Adopt Greenhouse Gas Emissions Reduction Targets

 

PROPOSAL 4 — ADOPT GREENHOUSE GAS EMISSIONS REDUCTION TARGETS

The following stockholder proposal has been submitted to the Corporation for action at the annual meeting by Green Century Capital Management, Inc., 114 State Street, Suite 200, Boston, Massachusetts 02109. The proposal will be voted on at the annual meeting only if properly presented by or on behalf of the proponent. In accordance with applicable proxy regulations, the proposal and supporting statement, for which we accept no responsibility, are set forth below exactly as they were submitted by the proponent.

Whereas: In 2018, the Intergovernmental Panel on Climate Change advised that greenhouse gas emissions must be reduced 45% by 2030 and reach net zero by 2050 to limit warming to 1.5° Celsius, prevent the worst consequences of climate change, and meet the goals of the Paris Agreement. The UN reports that the world is “way off track” in its efforts to achieve these targets, spurring investors to seek corporate commitments to science-based greenhouse gas emissions (GHG) reduction goals.

Companies, such as Builders FirstSource (BFS), that provide construction services and forestry products are vulnerable to the physical, operational, and supply chain risks caused by climate change. With predicted increases in the severity of hurricanes, heat waves, wildfires and long-lasting droughts, BFS’ wood product supply may be disrupted, and its facilities, vehicles, and equipment may be damaged or destroyed. In its 2020 10-k, BFS acknowledges that climate change could “reduce or delay construction activity, which could adversely impact our financial condition, operating results and cash flows”.

Wood products contribute significantly to deforestation and forest degradation, which are responsible for approximately 12.5 percent of global greenhouse gas emissions. In 2020, BFS derived nearly 36% of its net sales from selling lumber and lumber sheet goods, but the Company has yet to account for emissions linked to the harvesting and manufacturing of wood products or for any other emissions from its operations or value chain. Further, BFS has neither greenhouse gas emissions reduction targets nor time-bound commitments to set targets for reducing its Scope 1, 2, and 3 emissions.

Given the current and predicted impacts of climate change and the resulting threats to BFS’ financial health, and more broadly, to natural systems and the global economy, proponents believe that the Builders FirstSource board and management have a responsibility to their investors and stakeholders to mitigate climate-related risks by committing to and adopting science-based greenhouse gas goals that cover Scope 1, 2 and 3 emissions and that align with a 1.5° Celsius scenario.

Resolved: Shareholders request that Builders FirstSource adopt short, medium, and long-term science-based greenhouse gas emissions reduction targets, inclusive of emissions from its full value chain, in order to achieve net-zero emissions by 2050 or sooner and to effectuate appropriate emissions reductions prior to 2030.

Supporting Statement: In assessing targets, proponents recommend, at management’s discretion:

 

   

Consideration of approaches used by advisory groups such as the Science Based Targets initiative;

 

   

Adopting emissions reduction targets inclusive of all GHG Protocol-defined sources of Scope 3 emissions—including from deforestation and forest degradation—that align with limiting temperature increases to 1.5° Celsius;

 

   

Within the Company’s operations, setting goals for renewable energy sourcing, energy efficiency improvements, and transitioning to zero emissions vehicles.

Builders FirstSource Sustainability Strategy

 

 

We are actively engaged in implementing our own sustainability strategy that substantially complies with this stockholder proposal, which we outline below. While the Board does not believe the stockholder proposal benefits the Company, the Board is not making a recommendation with respect to the stockholder proposal because (i) the Company already has plans to substantially comply with the goals of the proposal and (ii) the disclosures and timeline that would be required to comply with the proposal are overly burdensome for the Company in light of the recent Merger.

 

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Proposal 4 — Adopt Greenhouse Gas Emissions Reduction Targets

 

We are committed to long-term greenhouse gas emission reductions, forest protection and continuing our efforts to build a more sustainable company. Following the Merger in early 2021, we have made considerable strides integrating BMC’s products, operations and people in order to efficiently and effectively maximize the benefits of the Merger. As part of these efforts, we integrated BMC’s environmental, social and governance practices with our own existing policies and programs.

Historically, our core sustainability efforts have focused on responsibly sourcing our products and reducing our use of traditional, non-renewable energy sources. As part of our sourcing initiatives, we prioritize sourcing Sustainable Forestry Initiative (“SFI”) certified wood. Approximately 90% of the wood we purchased in 2021 was certified sustainable by SFI. In addition, we have also taken steps to improve renewable energy sourcing and energy efficiency and reduce vehicle emissions. These efforts include the use of renewable energy, LED lighting and fans at many of our facilities in order to reduce our reliance on traditional energy sources, maximizing fleet efficiency through DDMS delivery routing systems, and the use of electric forklifts.

Currently, our focus is on continuing to expand our existing sustainability efforts in addition to improving our sustainability reporting and disclosures.

In 2021, we published information regarding our sustainability efforts, which is available on our website at investors.bldr.com/ESG.

Moreover, our executive leadership continues to emphasize the importance of these goals and has publicly committed to publishing our first Corporate Social Responsibility Report (the “CSR Report”) prior to the 2022 Annual Meeting. The CSR Report will disclose environmental sustainability metrics that are material to

the Company and its business using the framework developed by the Task Force on Climate-Related Financial Disclosures and the Building Products and Furnishings standards set forth by the Sustainability Accounting Standards Board.

Additionally, we are working towards a comprehensive plan to reduce our greenhouse gas emissions. As part of our comprehensive plan to reduce our greenhouse gas emissions, we are committed to taking the following steps:

 

   

Quantifying and disclosing our Scope 1 and 2 greenhouse gas emissions in 2023. We are actively engaging in efforts to quantify and disclose Scope 3 greenhouse gas emissions in the near term.

 

   

Assessing setting a net-zero science-based target with the Science Based Targets initiative (“SBTi”). As per the SBTi rules, after committing to set a science-based target, the Company would have two years to develop, submit, and set a target through SBTi.

 

   

Integrating zero emission vehicles into our fleets, and we expect that our operations will become increasingly energy efficient, especially with respect to Scope 1 emissions.

 

   

Prioritize sourcing wood from SFI or FSC certified vendors, particularly for wood from Canadian boreal forests and temperate rainforests.

We are strongly committed to meeting the challenges of reducing our greenhouse gas emissions and look forward to continuing our sustainability efforts, and communicating these efforts to shareholders, in the months and years ahead. We will continue to engage with our shareholders to solicit their perspectives on our sustainability efforts, and appropriately integrate the feedback provided by our shareholders as our policies, practices, and disclosures evolve.

 

 

FOR THE REASONS OUTLINED ABOVE, THE BOARD OF DIRECTORS DOES NOT MAKE A RECOMMENDATION WITH RESPECT TO THE STOCKHOLDER PROPOSAL.

 

 

 

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Stockholder Proposals

 

STOCKHOLDER PROPOSALS

Proposals to be included in Next Year’s Proxy Statement

 

 

Pursuant to SEC Rule 14a-8, any stockholder proposal for business other than director nominations to be considered for inclusion in next year’s Proxy Statement and acted upon at next year’s annual meeting must be received by the Corporate Secretary not later than January 5, 2023 and must comply with the other requirements set forth in SEC Rule 14a-8.

Director nominations to be considered for inclusion in next year’s Proxy Statement and acted upon at next year’s annual meeting must be received no earlier than one hundred twenty (120) days (February 14, 2023) and no later than ninety (90) days (March 16, 2023) prior to the anniversary date of the immediately preceding annual meeting and must comply with the other requirements of our By-laws; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice of the nomination must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs.

Proposals not to be included in Next Year’s Proxy Statement

 

 

Our By-laws also establish advance notice procedures with regard to stockholder proposals or director nominations that are not submitted for inclusion in the in the Proxy Statement but that a stockholder instead wishes to present directly at the annual meeting.

For all proposals of business other than director nominations to be considered at next year’s annual meeting but not included in the Proxy Statement, notice must be received no earlier than one hundred twenty (120) days (February 14, 2023) and no later than ninety (90) days (March 16, 2023) prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs.

A formal nomination by a stockholder of a candidate for election as a director to be considered at next year’s annual meeting but not included in the Proxy Statement must be in writing and received by our Corporate Secretary no earlier than one hundred twenty (120) days (February 14, 2023) and no later than ninety (90) days (March 16, 2023) prior to the anniversary of this year’s annual meeting; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs.

General Requirements

 

 

Each proposal submitted must be a proper subject for stockholder action at the meeting, and all proposals and nominations must comply with the applicable requirements of our By-laws. All proposals and nominations must be submitted to: Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201. The stockholder proponent must appear in person to present the proposal or nomination at the meeting or send a qualified representative to present such proposal or nomination. If a stockholder gives notice after the applicable deadlines or otherwise does not satisfy the relevant requirements of SEC Rule 14a-8 or our By-laws, the stockholder will not be permitted to present the proposal or nomination for a vote at the meeting.

A copy of the By-laws may be obtained on the Governance section of our website at www.bldr.com or by written request to the Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201.

 

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Reduce Printing and Mailing Costs

 

REDUCE PRINTING AND MAILING COSTS

To reduce the expenses of delivering duplicate Notices and proxy materials, we may take advantage of the SEC’s “householding” rules that permit us to deliver only one Notice or set of proxy materials to stockholders who share an address, unless otherwise requested. If you share an address with another stockholder and received only one Notice or set of proxy materials, you may request a separate copy of these materials at no cost to you by calling our Legal Department at (214) 880-3500, by e-mail at inforequest@bldr.com, or by written request to the Corporate Secretary, Builders FirstSource, Inc., 2001 Bryan Street, Suite 1600, Dallas, Texas 75201. For future annual meetings, you may request a separate Notice or set of proxy materials, or request that we send only one Notice or set of proxy materials to you if you are receiving multiple copies, by calling or writing to us at the phone number and address given above.

Stockholders may help us to reduce printing and mailing costs further by opting to receive future proxy materials by e-mail. This Notice of Annual Meeting and Proxy Statement and our 2021 Annual Report on Form 10-K are available on our website at www.bldr.com. Instead of receiving future copies of our proxy materials by mail, most stockholders can elect to receive an e-mail that will provide electronic links to them. Opting to receive your proxy materials online will save us the cost of producing and mailing documents to your home or business and also will give you an electronic link to the proxy voting site.

Stockholders of Record. If you vote on the internet at www.proxypush/BLDR.com, simply follow the prompts for enrolling in the electronic proxy delivery service.

Street Name Holders. If you hold your shares in a brokerage account, you may also have the opportunity to receive copies of these documents electronically. Please check the information provided in the proxy materials mailed to you by your bank or other holder of record regarding the availability of this service.

 

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Other Matters

 

OTHER MATTERS

The Board of Directors knows of no other matters to be acted upon at the meeting, but if any matters properly come before the meeting that are not specifically set forth in the Notice, on the proxy card, and in this Proxy Statement, it is intended that the persons voting the proxies will vote in accordance with their best judgments.

By Order of the Board of Directors,

 

LOGO

Timothy D. Johnson

Corporate Secretary

April 28, 2022

 

 

LOGO

 

 

 

Builders FirstSource, Inc. and the Builders FirstSource logo are trademarks or service marks of an affiliate of

Builders FirstSource, Inc. © 2022 Builders FirstSource, Inc. All rights reserved.

 

 

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LOGO

P.O. BOX 8016, CARY, NC 27512-9903 YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: INTERNET Go To: www.proxypush.com/BLDR Cast your vote online Have your Proxy Card ready Follow the simple instructions to record your vote PHONE Call 1-866-490-6854 Use any touch-tone telephone Have your Proxy Card ready Follow the simple recorded instructions MAIL Mark, sign and date your Proxy Card Fold and return your Proxy Card in the postage-paid envelope provided Builders FirstSource, Inc. Annual Meeting of Stockholders For Stockholders of record as of April 22, 2022 TIME: Tuesday, June 14, 2022 1:00 PM, Central Time PLACE: Sheraton Dallas Hotel, 400 Olive Street Dallas, TX 75201 This proxy is being solicited on behalf of the Board of Directors The undersigned hereby appoints Timothy D. Johnson and Peter M. Jackson (the “Named Proxies”), and each or either of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of Builders FirstSource, Inc. which the undersigned is entitled to vote at said meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the Named Proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof. You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The Named Proxies cannot vote your shares unless you sign (on the reverse side) and return this card. PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE


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LOGO

Builders FirstSource, Inc. Annual Meeting of Stockholders Please make your marks like this: X THE BOARD OF DIRECTORS RECOMMENDS A VOTE: FOR ON PROPOSALS 1, 2 AND 3 AND NO RECOMMENDATION FOR PROPOSAL 4 PROPOSAL 1. Election of Directors 1.01 Mark A. Alexander 1.02 Dirkson R Charles 2. Advisory vote on the compensation of the named executive officers 3. Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm 4 Stockholder proposal regarding greenhouse gas emissions reduction targets BOARD OF DIRECTORS YOUR VOTE RECOMMENDS FOR AGAINST ABSTAIN FOR FOR FOR FOR N/A FOR AGAINST ABSTAIN Check here if you would like to attend the meeting in person. Authorized Signatures - Must be completed for your instructions to be executed. Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form. Signature (and Title if applicable) Date Signature (if held jointly) Date