Floyd Sherman – CEO Chad Crow – SVP and CFO Marcie Hyder – VP and Controller

Trey Grooms – Stephens Incorporated Rob Hansen – Deutsche Bank Jack Kasprzak – BB&T Justin Bergner – Gabelli & Company Matthew Dodson – JWest LLC

Good morning, and welcome to the Builders FirstSource First Quarter 2014 Earnings Conference Call. Your host for today’s call is Mr. Floyd Sherman, Chief Executive Officer. (Operator Instructions). And as a reminder, this conference is being recorded today, April 25, 2014. The company issued a press release after the market closed yesterday. If you don’t have a copy, you can find it on our website at bldr.com. Before we begin, I would like to remind you that during the course of this conference call, management may make statements concerning the company’s future prospects, financial results, business strategies and industry trends. Such statements are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties, which could cause actual results to differ materially from expectations. Please refer to our most recent Form 10-K filed with the Securities and Exchange Commission and other reports filed with the SEC for more information on those risks. The company undertakes no obligation to publicly update or revise any forward-looking statements. We have provided reconciliations of non-GAAP financial measures to their GAAP equivalents in our earnings press release and detailed explanations of non-GAAP financial measures in our Form 8-K filed yesterday, both of which are available on our website. At this time, I will turn the call over to Mr. Floyd Sherman. Please go ahead.

Thank you, and good morning. Welcome to our first quarter 2014 earnings call. Joining me from our management team is Chad Crow, Senior Vice President and Chief Financial Officer; and Marcie Hyder, Vice President and Controller. I’ll start by giving a brief recap of our first quarter and then turn the call over to Chad who will discuss our financial results in more detail. After my closing comments regarding our outlook, we’ll take your questions. Despite the extreme winter weather that slowed construction activity across our markets and housing starts at relatively flat, we successfully grew sales and adjusted EBITDA on a year-over-year basis. Our sales increased 8.2% and adjusted EBITDA increased 59% when compared to the first quarter of 2013. For the same time period, the U.S. Census Bureau reported actual single-family starts for the south region declined slightly by one tenth of 1%. In addition, commodity deflation had a negative impact on our sales for the quarter. Lumber & Lumber Sheet Goods prices were on average, 14% lower compared to a year ago, which we estimate negatively impacted sales for the current quarter by 2% to 3%. From a sales per start perspective, we ended the current quarter with $4,357 for South region, single-family start, up from $4,021 in the first quarter of 2013. For the record, during the year, worst of the weather, there were days where we had 75% to 80% of our locations closed. On a companywide basis, I estimate that we lost 5 to 6 total ship days which equates to about 8% to 9% of our total ship days for the quarter. I believe our employees did a great job managing through the difficult weather conditions and again delivered strong financial results for the quarter. I’ll now turn the call over to Chad, who will review our financial results in more detail.

Thank you, Floyd. Good morning everyone. For the current quarter, we reported sales of $345.9 million compared to $219.7 million for the first quarter of 2013, an increase of $26.2 million or 8.2%. We estimate sales increased 10.5% due to increased sales volume and was offset 2.3% due to decreased market prices for commodity lumber products. Breaking down our sales by product category, Prefabricated Components were $70.5 million, up approximately 16% from $60.8 million in the first quarter of 2013. Windows & Doors were $76.3 million, up 19.9%. Lumber & Lumber Sheet Goods were $115.5 million, down 1.1%. Our Millwork category was $33.5 million, up approximately 15% and Other Building Products & Services were $50.1 million up approximately 2%. From a sales mix perspective, Lumber & Lumber Sheet Goods were 33.4% of total sales, down from 36.5% of total sales in the same quarter last year, largely due to lower market prices for commodity lumber products. All of the product categories were fairly consistent between periods from a mix standpoint although weighted more towards value added products versus a year ago. Our gross margin percentage was 21.7% in the current quarter, up 220 basis points from 19.5% in the same quarter last year. Our gross margin percentage increased largely due to improved customer pricing as well as less inter quarter price volatility in the commodity lumber markets compared to the first quarter of 2013. Lumber & Lumber Sheet Goods prices rose sharply during the first quarter of 2013 while prices fell during the first quarter of 2014. From an SG&A perspective, the disruptions caused by the severe winter weather negatively impacted our operational efficiencies as selling, general and administrative expenses expressed as a percent of sale increased to 20% in the first quarter of 2014 compared to 19.1% last year. On a sequential quarter basis, total SG&A dollars were flat with the fourth quarter of 2013. For the current quarter, our salary and benefit expense, excluding stock compensation expense, was $43.5 million or 12.6% of sales compared to $37.7 million or 11.8% of sales last year. Delivery expense increased $1.5 million and other G&A expenses increased $1 million, primarily a result of increased sales volumes. Interest expense was $8.8 million, a decrease of $3.7 million, when compared to the first quarter of 2013, as a result of our second quarter 2013 refinancing. For the current quarter, interest expense included $6.7 million related to our senior secured notes due 2021, a $1.2 million non-cash fair value adjustment related to outstanding stock warrants and $600,000 of amortized deferred loan cost. Interest expense in the first quarter of 2013 included $6.5 million related to our term loan and $4.5 million related to our floating rate notes due 2016. In addition, interest expense in the first quarter of ‘13 included $400,000 non-cash fair value adjustment related to stock warrants and $600,000 of amortized debt discount. We recorded $100,000 income tax benefit in the first quarter of 2014 compared to $300,000 of income tax expense in 2013. We recorded an increase in the after-tax non-cash valuation allowance of $1 million and $4.4 million in the first quarters of 2014 and 2013 respectively. Both were related to our net deferred tax assets. Absence of valuation allowance, the effective tax rate would have been 33.1% and 36.3% in 2014 and 2013 respectively. At the end of the current quarter, our gross federal income tax NOL available for carry-forward was approximately $270 million. Loss from continuing operations improved to $3.3 million or $0.03 loss per diluted share compared to $11.6 million or $0.12 loss per diluted share in the first quarter of 2013. Excluding the fair-value adjustment for stock warrants and the tax valuation allowance our adjusted loss from continuing operations with $1.1 million or a $0.01 loss per diluted share compared to $6.8 million or $0.07 loss per diluted share for the first quarter of 2013. Our net loss was $3.4 million or $0.03 loss per diluted share for the current quarter, compared to $11.8 million or $0.12 loss per diluted share for the first quarter of 2013. Adjusted EBITDA was $8.6 million or 2.5% of sales for the current quarter compared to $5.4 million or 1.7% of sales in the first quarter of 2013. We were cash flow positive during the quarter and ended with total liquidity of $223.9 million consisting of $62.8 million of cash and $161.1 million in borrowing availability under our revolving credit facility. We had no borrowings during the quarter under our revolver and no interest payment due on our 2021 notes. Our working capital as a percent of sales, remain fairly consistent at 10.5% of sales. Operating cash flow was positive $13.8 million for the first quarter of 2014 compared to negative $25.2 million for the first quarter of 2013. The difference primarily attributable to our improved financial performance and reduction in working capital during the first quarter of 2014. Capital expenditures were $5.3 million for the first quarter of ‘14, compared to $1 million for the same quarter of 2013. I’ll now turn the call back over to Floyd for his closing comments.

Thank you, Chad. Harsh weather disrupted construction activities during the first quarter. However, we believe the underlying demand for new housing remains strong and with the weather problems from earlier this year behind us, the pace of construction should accelerate over the coming months. We also remain confident in our ability to use our scale of market share to continuing delivering strong financial results. I’ll now turn the call over to the operator for Q&A.

Mr. Sherman, pardon the interruption. This is the operator, we can’t hear your audio any longer.

Can you hear us?

Yes, I can hear you now.

We’re ready for Q&A.

Okay, thank you very much. (Operator Instructions). And we’ll take our first question from Trey Grooms of Stephens Incorporated. Trey Grooms – Stephens Incorporated: First of all, can you maybe give us a little bit more color on how demand trended as the quarter progressed. I know the weather was an issue obviously. But as the quarter progressed, how demand has looked and then also how has it been trending in April, if you could give us any color there?

Trey, this is Floyd. January and February were flat, the slight improvement over 2013, March we saw a pretty good up-tick and we finished March on a really good note. April, while it is better than it was in March, and better than April of a year ago. It’s a little bit short of our expectations of what we were hoping we would see. It’s still good but maybe not as strong as we were hoping. We thought we would see a real surge that after following the bad weather. Part of the issue, I think that we are facing, maybe we got a little bit ahead of ourselves, is that it takes a while for some of the construction sites to dry out so you can get back on the building side. So I think that probably is slowed us down a little bit. But we’re encouraged with what we see. We’d always like to see things stronger but April is – we’re going, we’ll finish ahead of last April. I think the quarter will probably follow the same trends as what we’ve seen. I think it looks like housing, instead of a real hockey stick rebound is probably looking more like a gradual improvement. And we’re going to have some fall in the market. And I think the – we’ll continue to turn in and pull results.

Trey, just to add a little. Trey Grooms – Stephens Incorporated: It’s said to say that I mean, you are seeing some improvement year-over-year. And you said April is better than March.

Yes. Trey Grooms – Stephens Incorporated: Okay. Is your expectation know that with – as things dry out and so forth that you should see May better than April?

Yes, I would definitely – I definitely feel that would be the case. Trey Grooms – Stephens Incorporated: Okay. And then, Chad, if you could comment on given where the lumber prices are – where you guys think volume is trending. How should we be thinking about gross margins in the quarter relative to of course – lumber looks like it might be finding a bottom here, I haven’t seen the numbers today yet, but for this week. But your thoughts on that and how to think about lumber prices and margins that would be helpful?

And I’ll add a little bit more color on sales as well. Through today, we’re trending about 8% to 10% over last April for the current month to date that I give you any additional color on what we’re seeing currently. Trey Grooms – Stephens Incorporated: And that’s volume, Chad, just to be clear?

No, that’s just dollars. Trey Grooms – Stephens Incorporated: That’s dollars. And that’s on a lumber price environment that’s down year-over-year?

That’s correct. Trey Grooms – Stephens Incorporated: Okay.

We see the same lumber numbers you do. And we’re all certainly hoping that lumber has found a bottom and we’ll start ticking back up as we’ve said before. We like higher lumber prices that can certainly benefit our EBITDA flow-through. So, anytime we have a depressed lumber price environment like we’ve had in the first quarter, it does hurt our overall results. From a margin perspective, really all I can right now is through April we’re consistent with or up slightly from our Q1 gross margin. Certainly our margin in Q1 was hurt a little bit by volume, probably in the neighborhood of 20 basis points or so. So, any up-tick in volumes is going to help and as we’ve said in the past just a healthier building environment in general is going to help. So, hopefully we’ll continue to see the positive trends that we’ve started seeing in March and April and continue to accelerate through the Spring and Summer.

And Trey, I think some encouraging signs at least for me. The last couple of days, some of the large builders have been giving their first quarter numbers. And for the first time for the last several quarters, as you know, there are number of, when you look at by unit count, their new contracts were going down, the new sale contracts, the backlog was coming down. But now that same story will be reversed and they all were reporting a nice up-tick in new orders. And the backlog growing in that that can only be a very positive sign for us as we look down the road. Trey Grooms – Stephens Incorporated: Okay. And one just last question, just more on just to get some clarity. So, lumber segment was down 1% year-over-year and you put in the release that on average I guess it’s – lumber pricing being down 14%. Is that the read through there that volume in the segment was up 13%, is that how you take that or is there other moving pieces there?

Volume was certainly up, and but as we said, it was offset certainly by price. So yes, I think that that’s directionally correct. Trey Grooms – Stephens Incorporated: Okay, thanks a lot guys. And good luck.

We’ll take our next question from Rob Hansen of Deutsche Bank. Rob Hansen – Deutsche Bank: Thanks. Floyd, I just wanted to get your thoughts on lumber prices. You’ve always had a good kind of read into what’s going on. And where you kind of see them added from here in terms of the kind of supply and demand dynamics?

We, my view on lumber, I think we as Chad said earlier, really feel robbed that we’ve seen the bottom. We’ve seen a nice improvement on the Southern Yellow Pond, especially on the west side, here in the last week. Prices really started moving up, not quite as strong on the east side. SPF, market looks like it’s really trying to firm up and that’s very encouraging, that’s the first encouraging signs to me that I’ve seen. It looks like the order rate is definitely improving. I don’t think anybody is starting to jump in and take long positions yet. But they certainly have stepped up their buying activity. The mills are showing a lot less willingness to the back half of the prices. And I think that’s encouraging. I think that indicates that their order files are getting a much better shape. One of the issues that you have still is the transportation railcars out of Canada continue to be a nightmare. The allocation of cars are definitely still going to – the agriculture, grain movement as well as the oil shipments. The lumber guys continually are still confirming with not being able to get cars and not being able to get cars moved anywhere quickly as they would like. But I spent – I think we’re going to start monotonously a sharp rebound on lumber but definitely an improving pricing structure as we go into the summer months. Unless BS is certainly starting to firm up, it looks like the LSP market is continuing to interrupt a couple of box at a time, per thousand on a weekly basis. So, I view overall the commodity markets are going to be better than what we have seen probably not anywhere near at the highs that they got to in the first quarter or first four months of last year. Rob Hansen – Deutsche Bank: Okay, that’s great color. And we probably shouldn’t – and kind of thinking about it from a quarterly perspective, we probably shouldn’t really expect much – too much of like – of a gross margin hit in terms of what you’re buying and structuring the contracts. Is that a good way to put it as well or?

Yes, I think so. Chad, anything you want to add to that?

No, I think in that type of environment of prices slowly recovering that should not be a negative to our gross margin. Rob Hansen – Deutsche Bank: Okay. And then, I wanted to see if I could I get a little bit of color in terms of the health of the construction market in the South, a bit single family starts were flat during the quarter. How did true volumes look overall for you guys, and was the out-performance driven by an increase of sales within existing customers that you gave share, how did that all kind of look?

Well, our gain is coming yes, we have been increasing our share, the wallet with existing customers. But we’ve continued to add new customers at pretty similar rate to what we’ve been doing in the past. I think for the quote, they were close to 500 unique new customers that we sold to for the first time. That continues to be a very important part of the direction – the sales direction of our company. And that definitely contributed to our increasing our market share. So it’s a combination really of both of those factors. Rob Hansen – Deutsche Bank: Okay, well, that’s all I had for now. I’ll talk to you guys later. Thanks.

Thanks Rob.

And we’ll take our next question from Jack Kasprzak of BB&T. Jack Kasprzak – BB&T: Thanks, good morning guys.

Good morning.

Good morning. Jack Kasprzak – BB&T: Hi, just one small question I guess or small item. Shares outstanding, diluted shares in the fourth quarter were about 99.5 when you reported in the first quarter, they were 97.6. Is that just a function of slipping into a small loss from Q4 to Q1?

Yes, that’s right. Jack Kasprzak – BB&T: So, we go back to a profit in the season’s stronger period, we should probably its 99.5 or so for the fully diluted share-count?

Yes, I think that’s right. Jack Kasprzak – BB&T: Okay. And some other, your window sales were strong in the quarter, some of the window manufacturers we know have announced price increases, have you guys seen that that was benefit do you think, your window sales in the quarter?

There was some benefit Jack, we really – the timing of the increase of when it went into effect, that was partially responsible but overall our window sales again are – we put a lot of emphasis on that product category. And I think it’s more due to the fact that we continue to take market share and continue to take business in that category. And I think with our service levels with our, certainly I think our competitive pricing and the manufacturers have kept competitive position in the market. And so that’s more than I think those are the reasons that have accounted our gain in the window market share percentages.

And our window playing at Houston continues to perform extremely well that manufacturer for Texas. Jack Kasprzak – BB&T: Right, great, okay. And the press release your comments on lumber pricing I appreciate Floyd, the press release also mentions improved customer pricing. I mean, there is something I think you guys have talked about for a while for the downturn. Can you just elaborate maybe there is, is this just to ongoing discipline by you guys or people sort of filling up and feeling better about overall pricing environment in terms of what maybe the competitors are doing or maybe some color there would be appreciated?

We are still saying that very, very competitive ramp there. I think everybody went into the first quarter this year, expecting a housing market that was going to be mirroring what we saw in the first quarter of first half of last year. And everybody’s expectations for continual improvement and housing, is certainly there. So, as a result, you’re beginning increase your output capabilities. And the increase didn’t materialize and so, we have been saying no to a lot of business that before we would have taken, where we just are not yet in the pricing that we feel that we can live with. And so, I think we’ve been – ourselves better margins and certainly that went for the commodity products as well as other products. So I attribute most of the pricing gains to our people being very disciplined in what they’re doing in the market and willingness to walk from substandard business. Chad, anything you want to add to that?

No, I agree. I just echo Floyd’s comments. Our guys are doing a really nice job, kind of holding the line on pricing. And when we need to we’ll pass on the pricing. I think what Floyd said is dead on. Jack Kasprzak – BB&T: Okay. Thanks very much guys, I appreciate it.

And we’ll take our next questions from Justin Bergner of Gabelli & Company. Justin Bergner – Gabelli & Company: Hi, good morning Chad, good morning Floyd.

Good morning.

Good morning. Justin Bergner – Gabelli & Company: My first question related to the I guess matter of I guess lag time between housing starts and your activity. One of the major home improvement companies yesterday talked about an increasing lag time between starts in their activity. What are you seeing in your business in terms of that lag?

I would guess its two to three months maybe it’s probably a little slower in the first quarter due to the weather. But I think we’ve got to settle into a two or three month lag. Justin Bergner – Gabelli & Company: And that was compared to sort of normal lag time that’s a little bit less in that or about the same?

Well, that’s certainly less of a lag then I would have said a couple of years ago. And probably back at the peak of housing in ‘05, ‘06, you were probably talking one to two month lag. Justin Bergner – Gabelli & Company: Okay. So, two to three months is probably a decent number to use going forward?

I think so. Justin Bergner – Gabelli & Company: Okay. And can you give an estimate as to internal estimate as to sort of how much weather impacted the dollars per housing start that you may have realized in the first quarter to the extent that there were starts underway but you just weren’t able to sort of do the activity that you wanted to do?

No, I think the best way to calculate that might be just to take our average sales per day in the first quarter. And based on the five or six days that Mr. Floyd said we were closed. So it probably would have been I don’t know another $25 million or so let’s say relatively may have had without the weather issues. So, you could divide that by the number of starts. Justin Bergner – Gabelli & Company: Okay. That’s very helpful. And then, just finally, yeah, I was certainly expecting that without the weather, your dollars per start would have looked better. I mean, conversely if I sort of look at housing starts in a lag basis, towards the growth in dollars per housing start, doesn’t look quite as strong as sort of the 8%, is that sort of a fair assessment that you observed in your own data?

I haven’t to be honest I haven’t looked at that in that much detail. I can tell you the numbers that go into these queues in the first quarter, whether you look at starts or units under construction. The bottom line is activity, construction activity came to a grinding halt to a large degree on a lot of markets for multiple days. So, I think it’s going to be tough to try to read too much into some of those numbers to be honest with you. Justin Bergner – Gabelli & Company: Okay. But sort of a clean number without sort of the impact of weather probably would have booked decently a better than the plus 8% dollars per start?

Right. Justin Bergner – Gabelli & Company: Okay. Great. Thank you very much for giving that.

(Operator Instructions). And we’ll take our next question from Matthew Dodson of JWest LLC. Matthew Dodson – JWest LLC: Hi Chad. Can you just help us understand a little bit better kind of the sequential movement in your gross margins? So, in the fourth quarter, your gross margins were 22.4, they were 21.7. And you had lesser the commodity, the Lumber & Lumber Sheet Goods, as a mix. So, can you help us understand just maybe why that happened and then – do you take gross margins there kind of active level or do they rebound back above 22?

I think as volume picks up and the construction activity picks up in the coming quarters, I wouldn’t fully expect to see our margins improve. During the first quarter, the follow-up in volumes certainly had a negative impact on our gross margin. And as Floyd mentioned there were several days we were closed. And even days, some days when we were open, we weren’t as productive as we could have been. And probably we reassigned the times to clear snow off the yard and up the drives and walk-a-ways and builders were holding up shipments, we couldn’t ship orders to the job sites due to the weather. So, I would fully expect gross margins to improve as we move into the second and third quarters. Matthew Dodson – JWest LLC: Okay, got it. And then, can you help me understand just a little bit that you guys did a phenomenal job on the SG&A, only at about $800,000 sequentially. How do we think about kind of the SG&A dollars going forward sequentially over the next couple of quarters?

Well, it was a rough quarter for us from an efficiency standpoint, certainly with disruption caused by the weather and managing our workforce, very difficult during the first quarter. And also on a sequential quarter basis, as I’ve said this time every year, we get hit with additional payroll taxes in the first quarter compared to the fourth quarter. And then we have to restart our vacation accruals, the first part of the year which we don’t have in Q4. Those two items can bind with the $3 million delta Q1 to Q4. So, the fact that we were flat on a dollar basis versus Q4, I think we get a pretty damn good job of managing it, given everything we were dealing with. Going forward, I fully expect to start driving that operating expense down as a percentage of sales. And I still think, I still think we’ll be lower to percentage of sales than we were last year. It was just a difficult quarter to manage it from an efficiency standpoint. Matthew Dodson – JWest LLC: Okay. And then just a last question, to get a little clarification again. So, you said you guys were up about 8% year-over-year in April. And then, you expect an acceleration of that percentage in May and June, correct, is that right?

Well, we certainly expect volume to accelerate. Matthew Dodson – JWest LLC: Right, that’s normal seasonality right, I mean, May and June go up, so I’m just?

No. Matthew Dodson – JWest LLC: You think that year-over-year, do you see an acceleration in the year-over-year percentage?

Yes, I think we’re all kind of waiting to seeing. And a lot of that would depend on housing activity of the year-over-year comparisons, and the commodity lumber prices are going to have an impact as well. So, I do think we’ll continue to see sales accelerate but to what degree and how that’s going to look on a year-over-year basis, I think we’re all just kind of waiting to see. Matthew Dodson – JWest LLC: Okay, great. Thanks Chad, I appreciate it.

You bet.

(Operator Instructions). We have no further questions at this time. I’d like to turn it back over to our speakers for any other remarks.

Okay. We appreciate everyone joining the call today. If you have any follow-up questions, please don’t hesitate to give either Chad or Marcie a call here in Dallas. Thanks and have a great day.

And that does conclude today’s conference. Thank you for your participation.