Floyd Sherman - CEO Chad Crow - President, COO, CFO Marcie Hyder - VP, Controller

Trey Grooms - Stephens John Baugh - Stifel Nicolaus Reuben Garner - BB&T Capital Markets Jay McCanless - Sterne Agee CRT Paul Carrolls - Whitebox Advisors Justin Bergner - Gabelli & Company Phillip Pennell - Mariner Investment Group

Good morning and welcome to the Builders FirstSource Second Quarter 2015 Earnings Conference Call. Your host for today's call is Mr. Floyd Sherman, Chief Executive Officer. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. Any reproduction of this call in whole or in part is not permitted without prior written authorization of Builders FirstSource. As a reminder this conference is being recorded today, July 24, 2015. The Company issued a press release after the market closed yesterday. If you don't have a copy, you can find it on our Web site 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 Web site. At this time, I would like to turn the call over to Mr. Floyd Sherman. Please go ahead.

Thank you and good morning. Welcome to our second quarter 2015 earnings call. Joining me from our management team is Chad Crow, President, Chief Operating Officer and Chief Financial Officer as well as Marcie Hyder, our Vice President and Controller. After I give a brief recap of the current quarter, I’ll turn the call over to Chad who will discuss our financial results in more detail. And after my closing comments regarding our outlook, we’ll take your questions. Builders FirstSource made good strides in the second quarter 2015. The Company was able to grow top-line results despite the negative year-over-year impact from commodity price deflation and the abnormally wet weather conditions we experienced in many of our markets. We increased our gross profit margins to levels that we haven't seen since the third quarter of 2007. Thanks, to great execution by our people in the field and a higher percentage of sales coming from our value-added segments. We also exceeded our stated goal of 15% adjusted EBITDA flow-through on incremental sales by delivering flow-through of 21% in the quarter, resulting in our highest adjusted EBITDA since the third quarter of 2006. When single-family starts were more than two times what they are today. The results reinforced our belief that we are continuing the benefit from a strengthening of the housing market and that Builders FirstSource is well-positioned to take advantages of improving condition. With that I'll now turn the call over to Chad who'll review our financial results in more detail.

Thank you Floyd, good morning everyone. For the current quarter we reported sales of 461.5 million compared to 426.5 million for the second quarter of 2014, an increase of 35 million or 8.2%, which includes a 2.4% negative impact of commodity price deflation. We estimate sales volume increased approximately 10.6% of which 4.3% related to recent acquisitions and 6.3% related to volume growth at legacy locations. Breaking down our sales by product category, prefabricated components were 102.6 million, up 12.8% from 91 million in the second quarter of 2014. Windows & doors were 100.6 million, up 10.7%. Lumber and lumber sheet goods were 140.3 million down 3.6 million from approximately 143.9 million in 2014. Our millwork category was 48.6 million, up 21.4% and other building products and services were 69.4 million, up 14.3% from last year. From a product mix standpoint our value-added product categories continue to make up a higher percentage of our overall sales as our prefabricated components windows & doors and millwork categories accounted for 54.6% of overall sales in the current quarter compared to 52% last year. Our lumber and lumber sheet goods declined as a percentage of sales, while other building products and services category was 80 basis points higher. Our gross margin percentage was 24% in the current quarter, up 200 basis points from 22% last year. Our gross margin percentage increased largely due to improved customer pricing and a higher mix of value-added sales. For the current quarter our SG&A expense increased 18.1 million. Of the 18.1 million increase in SG&A 6.4 million related to expenses associated with the recently announced ProBuild acquisition, 1.5 million related to an increase in depreciation and amortization and 700,000 related to an increase in stock comp expense. As a percentage of sales SG&A expense increased to 20.5% compared to 17.9% for the second quarter of 2014. Of this 260 basis point increase, 140 basis points related to acquisition expenses and approximately 50 basis points related to increases in stock comp expense and depreciation and amortization. Excluding these expenses our SG&A expense expressed as a percentage of sales was 18.6% in the current quarter compared to 17.9% last year. This remaining increase was further affected by a negative impact of commodity price inflation on our sales. Interest expense was $12.6 million for the second quarter of 2015, an increase of 6.1 million from last year. The increase was primarily related to a 5.9 million increase in the non-cash, fair value adjustment related to stock warrants, issued in connection with our 2011 financing. During the second quarter of 2015 all of the remaining stock warrants were exercised and there were none outstanding as of June 30, 2015. We recorded $200,000 income tax benefit compared to 200,000 of income tax expense in the second quarter of 2014. We recorded a reduction of the after-tax, non-cash valuation allowance of our net deferred tax assets of 1.3 million and 4.1 million in the second quarters of '15 and '14 respectively. As of June 30 our federal gross income tax NOL available for carry-forward was approximately 257 million. Income from continuing operations for the second quarter of ’15 was 3.6 million or $0.03 per diluted share, compared to 10.6 million or $0.09 per diluted share last year. Adjusted income from continuing operations for the second quarter of ’15 was 14.3 million or $0.14 per diluted share, compared to 9.4 million or $0.09 per diluted share last year. Adjusted EBITDA was 27.6 million or 6% of sales, compared to 20.4 million or 4.8% of sales in the second quarter of 2014. Adjusted EBITDA flow through on our incremental sales for the current quarter was approximately 21%. Operating cash flow was 7.7 million in the second quarter compared to negative 13.1 million in the second quarter of last year the difference is largely due to a higher working capital build in the second quarter of 2014. Capital expenditures were 5.2 million for the second quarter of 2015 compared to 6.8 million last year. Total liquidity at June 30 was 143.8 million, including 40.2 million of cash and 103.6 million in borrowing availability under our revolver. We had 55 million in outstanding borrowings and 16.4 million in outstanding letters of credit under our revolver as of June 30, 2015. I’ll now turn the call back over to Floyd for his closing comments.

In summary I think I am very pleased with the results this quarter. Where we were able to grow top-line results in spite of the negative impact from a commodity deflation and wet weather conditions and reached the level of profitability that we haven't seen in years. The future of our company looked very bright indeed and given the trends that we see in the business today and our positioning within our markets and recent improvements in the fundamental drivers of our business such as job growth, consumer confidence suggests that new home construction activity should continue to improve. With the acquisition of ProBuild scheduled to close in early August, Builders FirstSource stands ready to benefit from this increase in construction activity as the nation’s largest build and supply company. And lastly I’d like to express my gratitude to the hard work in men and women of this company. Preparing for the eventual integration of ProBuild while maintaining a focus on the day-to-day responsibilities is no easy task, but based on our results this quarter it’s clear that our people were up for the challenge. I am very appreciative of your efforts. And I’ll now turn the call over to the operator for Q&A.

Thank you. [Operator Instructions] And we’ll take our first question from Trey Grooms with Stephens.

First off could you guys talk a little bit about what you’re seeing and what you mentioned the trends are positive but could you go into a little bit of more color about kind of the demand trends you’re seeing since the weather has started cooperating through the end of June and into the third quarter in your different markets?

Yes Trey, we are definitely seeing an accelerated pace as builders are making up for the time that was lost due to the weather and waiting for jobs like conditions to dry out so that they could get the homes construction process started. Definitely seeing that but we’re also seeing what I think is very encouraging is definitely an upbeat feeling among our customer base. They’re looking for the second quarter I mean the second half to be a lot stronger than the first half and it’s not just weather related they are gaining and they are seeing good attendance some of their model home programs I think the interest is definitely out there, the lot of optimism that we haven’t I haven’t personally seen or felt imply some time, so I think there is a positive feeling about where housing is going. I am not saying anyone expects a hockey stick recovery but I think it’s still a glitch solid 5% to 7%-8% increase on an ongoing basis and so I think that’s very healthy. The other issue that we definitely continue to face out on the job side really plays into our strengths is the labor shortage. Labor shortage problems are still very -- are extreme and I think that is definitely helping move and the reason for the nice increase is that we have seen in our component products when you look at where our business is coming from the fixed advertising components those sales were up almost 13%, the windows and doors up almost 11%, mill work up over 21% and the other products installed up 14% the only negative was in the lumber and lumber sheet good category and lot of that is due to price deflation which we continue to face and that was down about 2.5% over the second quarter of last year. So the trends of our business are very-very good obviously the healthy trend is being accelerated by the labor conditions and the tight labor conditions and the builders are definitely looking for ways to reduce the labor content at the job site. And we’re in a very good position to serve it. We’re seeing very strong our backlogs are continuing. I think I have mentioned on previous call about how in our trust operations we were seeing record backlogs. Well that’s continuing. And so that means we got a lot of new business coming in and as well as stepping up the deliveries for on an outgoing basis. So, I feel really good about what’s happening in our building margins. And this seems to be what we are hearing the same type of story from the ProBuild people as -- and I think that’s reflected in their business as well.

And I know you guys have a lot of boots on the ground in Texas specifically given the pullback in the energy markets and things like that, can you talk about what you’re seeing specifically in Texas now because I am understanding it was a very cold quarter from a weather standpoint in the June quarter. But are you seeing any slowdown across Texas anywhere or is it -- can you just comment on that please?

No, in the beginning in the first quarter Houston was the most impacted market that we had because of oil and gas issues definitely the Houston market where they lost 12% to 14% by the end of the second quarter the Houston building market is gotten themselves almost even with last year, all of our customers are telling us and we see this especially through the window operation where the builders are very-very sensitive to making sure where they're going to have their needs covered or by when does it get those openings closed. They really would indicate based on what we're seeing is that by the end of the year they're looking to have their overall market up 3% to 5%, so it is good recovery it is taking place in the Houston market. As you said the water and rain in fact those estimated that with all the rains that we had the entire State of Texas was left would have been under 7 inches of water. So record rainfall really affected us, but towards the end of June as the things started drying out, to get on the job site, and boy the work pace really accelerating. The Saint Antonio market, Austin market, DSW market very-very solid, really hot markets, we're not in West Texas so we have a very little exposure I think the Midland Odessa love it, Amarillo areas have been more impacted by the oil and gas, but I really can't -- so I can't comment on what's going on in those operations. And ProBuild also very little exposure to the West Texas markets, so you have to find that what's going on in those markets from somebody else who does operate in those areas.

And then I am going to sneak one more and then I am going to jump back in queue. Chad this must be for you obviously you guys did a great job on the margin, how should we be thinking about margins in 3Q and kind of the back half, I know you're putting up some good incremental with the moving pieces of where you guys are kind of expecting the demand level to be the product mix as well as the move that we've seen in Lumber? What do you thinking or how should we be thinking about margins as we look out into the next quarter or two?

I think Q3 the margins will look very similar to what we just saw in Q2 somewhere in the gross margin somewhere in that 24% range give or take 50/50 their side. And I think from an EBITDA margin perspective it should look pretty similar as well.

And we'll take our next question from John Baugh with Stifel.

I wanted to -- you've mentioned the labor tightness and I am just curious on this whole value add mix shift which is significant has been going on for awhile, if anything seems to be accelerating and certainly helpful with margin if the labor shortage really driving that and any color Floyd on may be what inning of that gain we're in not just for Builders FirstSource but I know ProBuild has dramatically less exposure here so I am just trying to get a sense for tailwind the margin overtime if you could continue to drive this higher?

Yes we're definitely the labor issues out at the construction site and it is being tight and is definitely helping drive the component business and other forms of value add products whether it be installed millwork and so forth. I won't say that is the only driver because we've also put a lot of focus on increasing the sale of our value add products and put a lot of emphasis our people are really responding to that, and so also our pricing discipline most of the business you walk from today is in the area of lumber pricing and commodity product pricing, and so that you've got to start driving those other parts of your business. But we while it's tough to find truck drivers and the qualified CDO license holder. More people to work in the operations it's a lot of easier to do that, we don't have the same problem it's out on the job site where you have the building skills required. So it's a labor replacement obviously for us. I think it's a good combination of the labor issues on the job site and our people’s focus on selling the more value-add products.

And Floyd are you -- I know it's something you are going to work on with ProBuild, is that something that just has to wait post-merger or there are things underway there to influence that currently?

No I think they definitely have had some number of very good programs that are underway. I think the under Rob Marchbank and their management group they have been focused on many of the same things that we've been focused on, the -- we're going to -- but to the end it'll be a continuation of those programs but I think they're seeing the same benefits for the same reasons that we are.

And last two questions quickly, one any color on kind of how lumber deflation might influence numbers in the second half of the year. And then secondly as you look it on per minute starts then project completions in the regions that matter to you. How that number kind of looked year-over-year in the second half? Thank you.

Yes John I really anticipated that we would begin seeing a slow but steady improvement in commodity pricing. By my count and as the way I've known it I think we potentially had affected our sales by almost little over $8 million. If you look at what that means almost 90% of that floods right to the bottom-line. So, our EBITDA would have been significantly improved and with any type of pricing similar even to what we had last year. I think the commodities, it's going to be a slow recovery, I don't look for a lot of change and in fact maybe little bit more deflation in this third quarter. I think as we go into the fourth quarter, I think hopefully we're going to start seeing some pick up. I definitely believe that -- and the mills are trying for that -- we really are seeing effected their OSP guide, there is lot of adjusting now of their output schedules. We're getting some of that with the lumber guys. I think a big issue is going to be what's the Canadian lumber guys are going to do, especially with the dollar exchange difference between our currency and theirs. Are they going to push a lot of excess material into the U.S. just to make up for that and also to cover some of the weakness in the China market? I don't know, but I know everyone on the commodity producing side is experiencing financial results that are not long-term acceptable. So they got to start changing, they just to have to get their supply more in line with the demand. I think the industry is trying and we desperately need to see inflation come into this side of the business. And it would make such a huge difference in our operating results. And I think 2016 we will begin to see, really see that trend. Don't really think we're going to get a lot of help out of it, the rest of this year.

And the starts, completions by region, kind of how do you see that in the second half? Thanks.

I'm really -- in our region ProBuild right now I think we're going to see that good steady recovery and the Mid West is maybe a little bit flatter than other parts of the country but for the most parts, I think it seems to be a uniform recovery all over the country.

And we'll take our next question from Matt McCall with BB&T Capital Markets.

Good morning, this is Reuben Garner in for Matt. I just wanted to -- if you could -- if we look at the combined entity of ProBuild and Builders over the last couple of years on a pro forma basis, revenue per housing starts kind of been increasing low to mid single-digits. What's your outlook for that post the closure of the deal?

I think it will be similar trends. I think both, as Floyd mentioned earlier both companies in the recent quarter's really has been focused on profitable sales and not necessarily as much on market share gains but -- and I think that trend will continue, we're both certainly going to go after the more profitable business. And at times that maybe at the expense of some share gains. But I think those trends will be pretty similar to what you've just quoted.

And then just a sort of a follow-up to Mr. Baugh’s question, the Builders sort of exceeding a higher margin products. What level do you think you can get the ProBuild locations to I know it is about 55% in the business now. And it’s, I think grocery is third last I saw for ProBuild. Is it something that you can get that closer to 50%, how quickly do you think you can do that?

I think it's not going to happen overnight definitely it is where you place your focus and your emphasis -- that we'll be starting on that -- on obviously right out of the gate. It took us five-six years to really build our business and I think we will see noticeable changes in our first year but I think it will be one of those things that takes a little bit to get going and then as you gain the momentum you’re going to move in that direction, they have got good facilities they certainly have the really good people. Everything is in place for it and I think a lot of it is where you placed the direction and the emphasis and how you structure the salesforce to sell it. So all of those things we will be working and obviously that’s one of the real keys and one of the things that we really liked about this -- the combination of our two businesses is the ability to bring in some large skill sets to match up with also their skill sets in other areas. And so I think we overtime we’re not going to get it up to right away up to 54% of the business but I think what you will see noticeable improvements.

And then my last question is now that you’re getting a little closer to closing on the deal. How confident are you in the initial synergy projections you gave? And I know you kind of gave the timing for the synergies as a whole. Is there different timing for each of the three buckets you gave and then is there a particular area no other ex procurement or the SG&A that may have more risk than the others?

The work we continue to do and the planning that we’ve done has been extensive and I would say if anything it has increased our confidence in being able to achieve those numbers. I think the majority of them as we stated will be achievable in the first 12 months, I don’t really think our picture on that has changed from what we have previously announced. The biggest risk, there is a lot of people involved anytime you bring two companies together like that from the personnel standpoint I think that’s where the most risk is. But I feel like we have done a good job of identifying those areas and we have plans in place to address those risks. But if I had to point to one particular area that I would say would contain the most risk it’s more on the G&A side and the people management side of things.

And we’ll next to Jay McCanless with Sterne Agee CRT.

The first one I had, I wanted to pick up on what Floyd was saying with Canada. With the dollar strength, is that giving you guys the ability to maybe go in and buy -- do some larger buys in Canada and help protect some of the gross margin?

Because again more is it part of the reason why the overall market is priced where it is I am sure it is because it’s -- they're trying to push as much as their product into this country as they can. And I think it’s still going to come down if we want to get an improvement we’ve got to start getting the demand and supply in balance. And the lumber side is a lot further from getting this done I think right now than the panel guys are.

And then the second question I had is on ProBuild and Builder post transaction. If you think about the seasonality and how we should be modeling the combined company, is there going to be a dramatic shift for how Builder and ProBuild look post deal versus the way that we model Builders FirstSource as a stand-alone company?

I think there will be an increase in seasonality just because of their footprint versus ours to what degree I’d probably say an incremental 15% or so of seasonality would be my best guess right now.

And then in terms of, all right. So seasonality, I asked that. And then the lumber, are you seeing any curtailments? You said, Floyd, that people were changing production schedules a little bit. Are we seeing actual shutdowns in the lumber producing market yet or are people just try to put a little less product onto the market?

No, I think what we’re seeing is shorter schedules I know with the lot number of the panel producers they’ve started reducing the number that they are beyond four, all four working reduced number of hours, 32 hour shifts and that type of thing. And I think that’s how they’re bringing it in. The lumber guys we don’t have as much visibility and we don’t hear as much what they’re doing other than some of the U.S. producers we have definitely have heard that they’ve been adjusting their production schedules. The Canadians we don’t have as much of the insight into that but I got to believe they’re starting to do the same thing. I don’t think anybody is going to walk away from any of the mills that have been opened, I think the and especially some of the new mills that were opened in 2000 and then towards the end of 2012-2013, they are such great investment that went into the start up of those operations and that's certainly contributed a lot of the excess that we're, but I don't think we're going to see any mill shutdowns. I think it will all be adjusted work schedule.

And we'll take our next question from Paul Carrolls of Whitebox Advisors.

Most of the questions actually I had were answered. Can you just step through just on the timing? What is left to get done and the timing again on the deal? What is left, if anything, to get completed before the deal does get closed?

Well we expect to price our bonds this afternoon we still hope to close around the end of the month first week of August so between now and then we would have to go out with and raise the additional equity that should be it.

Between now and then, get out and raise -- say that again?

Well raise the additional equity that we've disclosed that we will be raising prior to closing the transaction.

And has that been sized up yet?

In our original projection it was $100 million additional new equity.

[Operator Instructions] We'll go now to Justin Bergner with Gabelli & Company.

I do have a few questions some of them are just quick factual questions. On the quick factual questions, do you have the quarter-end share count, basic and diluted?

I do not have that. Are you talking other than what's in the press release already?

Well, that has the average share count. I know you mentioned all the warrants were exercised. I'll wait for the Q, then on that. Secondly, in terms of the synergies and the timing, when you say that the majority are expected to be realized in the first 12 months post close, you are referring to kind of the run rate of the synergies 12 months post close, right? You're not referring to the total synergies in year one?

I still think from a majority standpoint we'll be able to achieve probably more than half, but you're correct on a run rate basis that's probably going to be closer to 75% or so we'll achieve on a run rate basis. But I still think even on an actual basis we'll be able to grab a significant amount in year one.

And then in terms of the SG&A, if we pull out all the factors that you called out, I guess SG&A still increased 70 basis points year on year. Is part of that tied to just a slightly higher SG&A composition for value-added sales or how should we think about that remaining 70 basis point increase in SG&A?

I think 40 to 50 basis points were due to commodity price deflation and the impact it had on our top-line. The only other real outlier was a little bit higher on the group health expense that was another 30 basis points or so. I don't really think the increase in prefab will have an impact on the OpEx.

So SG&A over sales shouldn't be impacted by the value-added mix materially?

No.

And then finally, I'm not sure if you can answer this question, but in the 8-K that you put out a week ago, you offered some preliminary results for ProBuild. And the margins looked good, but I guess the sales pattern was a little weak, I guess -- down 1.5% to 3%, excluding facility closures, but some commodity price deflation there. It seems like ProBuild might be sort of undergrowing the housing start pace a bit. And I was just curious if there's anything you could offer to provide perspective around that?

As you mentioned, they did have an impact on a year-over-year basis from the closed facility. The commodity price deflation impact for them is a little greater than it was for us, so I think by the time you factor those two in you're probably looking at somewhere around 2% sales growth for them and then combined with that as we've discussed from the builder standpoint a continued focus on really going after the more profitable business and walking away from some of the lower margin business. So when you take those three things into consideration their numbers came in about right where I'd expect them to.

I think you also have look behind it. This whole question is that ProBuild, the offer is a higher cost operation than we are and the large builder segment is a segment then obviously is a larger piece of our business and it is of theirs. There are higher cost on operations has really pushed them away and not entirely it is still there but they had most of their direction now is towards the smaller builder, the custom builder, they really have done well because their cost -- their net set of operation and their cost of operation says that that's a more profitable business for them to go after than the large scale builder. And I think so a lot of what you're seeing is really the result of their concentrated efforts to improve their margins and they have been dramatically improving their margins and a lot of that is driven by -- you got to go after the type of business that fits your business model. We obviously are looking to change that and put them into a position where they can be fully competitive in the major builder area. And that is obviously one of the really strong points that we are looking to gain in this -- the combination of the business. So, but I think they've done a really good job in highlighting it and working on the areas of business that will improve their profitability and their profitability is definitely showing dramatic improvement.

And we'll take a follow-up from Jay McCanless with Sterne Agee CRT.

Just one follow-up question, on the value-add sales, could you remind us how much or what you all have given in the past in terms of how much of those sales are done on a fixed-price basis, where -- and what I'm getting to with that is if lumber prices continue to move down and you guys can hold the pricing on there, it seems like gross margin certainly could stay at current levels or level in Q2 and maybe go higher. How much of your sales are done on a fixed price basis for those value-added items?

Probably on the prefab components, the -- on our process we've probably 40% to 50% of that business is on 60 day and 90 day pricing. The rest of it's done on 30 day pricing, so it's very similar to what you do in quoting a lumber packet. And we have to make sure that we cover our cost and which we've been able to do and either through inventory or ranges of mills or et cetera. And so, it's still is the business that you have to really stand top of and make sure that you cover whatever price theories you're calling for. Millwork and so forth because those prices tend to be much more stable the typically for us -- you're going to be looking at 90 plus days in a lot of that pricing but we don't have any -- we don't have the same issues in that area that you do with lumber.

And we'll take another follow-up question from Justin Bergner of Gabelli & Company.

Just want to perhaps delve a little bit deeper. I guess six months ago, it seemed like there was too much supply in the market, and now things have tightened up a bit in terms of your industry. I realize that labor is an issue, but it was sort of an issue to a certain extent for Builders six months ago. So what really changed over the last six months to improve the pricing environment that you are seeing?

I think a lot of it is we said was our shift in the -- to more than a higher mix of the value-add products and anytime you can go to a builder with a more complete package as both the commodity lumber and the value added products, it's just the overall a better value to the builder. And I think gives us more leverage from our pricing standpoint now. It is still a very competitive market. And from our standpoint there's still too much supply out there chasing a relatively low level of demand still, so while things have gotten better and as they do get better, gives a little more opportunity to get a little bit better pricing. I feel like there's still a lot of upside to that I think we're going to continue to see as homebuilding continues to improve, but just kind of a steady improvement in our gross margins.

I'm inferring from your comment, then, that part of the pricing improvement is sort of an industry phenomenon and part of it is sort of a Builders FirstSource-specific phenomenon? Is that -- how else do you think…?

That's a fair statement, certainly the -- as I said the higher mix of our value-add products you are becoming more desirable supplier to the customer which should give you a little bit better opportunity for pricing.

And we will go next to Phillip Pennell with Mariner Investment Group.

You mentioned that the footprint obviously doesn't exactly overlap, which is a good thing, because it gives you some…

We can’t hear. Can you get a better connection?

Yes can you hear me now?

Yes.

You guys had mentioned that the footprints really don't overlap much on obviously the ProBuild versus Builders First. And that gives you white space to move into. I guess I'm curious if you're trying to the ProBuild guys don't have the prefab kind of value-added products, so who has been supplying those products in the areas in which they operate? I guess my point is how do you then move into those areas and take that business from somebody else without, say, having to negatively impact margins on a competition for sales?

Well obviously they have for us the panel operations and they’re involved in those products it’s not as large a percentage of their overall mix as it is with us. There are many trust operations out there and we have the same thing as we think this is the way it’s a lot of it is, is the quality of your service, the dependability of your service, the aggressiveness of your salesforce in getting the business and as Trey had said tying it in with a lot of other products. We’re not just a trust manufacturer and the more you can bundle or package for a builder then more important you become as a supplier. It’s a matter of really just saying I want to sell trust I want to sell panels instead of taking the easier approach on some which is selling a strict timing package so any time we are competing to take somebody’s business away and you say and there is going to be price competition but it is not only decided on price with components not nearly as much as what you get into lumber. So, I don’t see a more concentrated approach on components deteriorating the price schedules. The other thing is that you have a lot of builder this is a real growing part of the building material supply industry. There are many builders that have been conventional stick primers that are turning to the use of components to alleviate some of the labor issues that they’re having out on the job site. So you also have a building market and certainly I don’t see any new trust plans being built and I don’t see lot of people going into the trust business or not already in it, so from that standpoint the demand and supplier are going to be coming more in balance. So actually that’s what I can answer that for you.

Do you see that that move that you have with ProBuild then basically increasing the penetration in those areas that they previously were in by themselves? Increasing that penetration in terms of the trusses et cetera?

Right, and I’d say it -- and I think of more a substitution of lumber with components.

So do you guys view -- I know there's been some dislocation in the high-yield market. Has what's going on in the market -- and I know you mentioned earlier in the call that you expected to price the bonds. And I guess there's a bank loan component of this financing as well. Has what you've been led to believe where pricing is going to be, has that changed the return profile in this acquisition at all for you?

No, from our standpoint this is great for Builders FirstSource I think it’s going to be great for ProBuild I think it’s going to be very good for the industry. So, no, the value duration I can see coming out of this I still feel like is quite significant and now nothing we’ve seen in our financing efforts to-date with lead me to believe that’s going to be significantly different.

And so pro forma, we're still on the same schedule in terms of the sources of funds for the acquisition as before. We don't expect to have to up the share component of it at all?

No I don’t expect that.

And with no further questions in the queue, I’d like to turn the conference back to Mr. Sherman for any additional or closing remarks.

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

Again, that does conclude today’s presentation. We thank you for your participation.