UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
Form 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017

OR

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

For the transition period from ___ to ___
Commission file number 001-36050
BMC Stock Holdings, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
26-4687975
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
Two Lakeside Commons
980 Hammond Drive NE, Suite 500
Atlanta, Georgia
30328
(Address of principal executive offices)
(Zip Code)

(678) 222-1219
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x      No o
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x      No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
o
Non-accelerated filer
o   (Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares outstanding of the Registrant’s common stock, par value $0.01 per share, at May 5, 2017 was 66,897,704 shares.
 





BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
Table of Contents to Form 10-Q
 
PART I - FINANCIAL INFORMATION
 
Item 1
 
 
 
 
 
Item 2
Item 3
Item 4
 
PART II - OTHER INFORMATION
 
Item 1
Item 1A
Item 2
Item 3
Item 4
Item 5
Item 6
 

i




PART I. FINANCIAL INFORMATION
ITEM 1    FINANCIAL STATEMENTS
BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share amounts)
 
March 31,
2017
 
December 31,
2016
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
4,778

 
$
8,917

Accounts receivable, net of allowances
 
343,246

 
313,304

Inventories, net
 
294,851

 
272,276

Costs in excess of billings on uncompleted contracts
 
25,959

 
26,373

Income taxes receivable
 
2,208

 
2,437

Prepaid expenses and other current assets
 
44,550

 
43,635

Total current assets
 
715,592

 
666,942

Property and equipment, net of accumulated depreciation
 
286,798

 
286,741

Deferred income taxes
 

 
550

Customer relationship intangible assets, net of accumulated amortization
 
164,377

 
164,191

Other intangible assets, net of accumulated amortization
 
2,917

 
3,024

Goodwill
 
257,134

 
254,832

Other long-term assets
 
17,795

 
18,734

Total assets
 
$
1,444,613

 
$
1,395,014

Liabilities and Stockholders' Equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
196,996

 
$
165,540

Accrued expenses and other liabilities
 
74,664

 
88,786

Billings in excess of costs on uncompleted contracts
 
18,467

 
15,691

Interest payable
 
10,441

 
5,619

Current portion:
 
 
 
 
Long-term debt and capital lease obligations
 
9,327

 
11,155

Insurance reserves
 
15,589

 
16,021

Total current liabilities
 
325,484

 
302,812

Insurance reserves
 
39,943

 
39,184

Long-term debt
 
363,791

 
344,827

Long-term portion of capital lease obligations
 
19,940

 
20,581

Deferred income taxes
 
210

 

Other long-term liabilities
 
7,437

 
7,009

Total liabilities
 
756,805

 
714,413

Commitments and contingencies (Note 8)
 

 

Stockholders' equity
 
 
 
 
Preferred stock, $0.01 par value, 50.0 million shares authorized, no shares issued and outstanding at March 31, 2017 and December 31, 2016
 

 

Common stock, $0.01 par value, 300.0 million shares authorized, 67.1 million and 66.8 million shares issued, and 66.9 million and 66.7 million outstanding at March 31, 2017 and December 31, 2016, respectively
 
671

 
668

Additional paid-in capital
 
652,972

 
649,280

Retained earnings
 
36,926

 
33,182

Treasury stock, at cost, 0.2 million and 0.1 million shares at March 31, 2017 and December 31, 2016, respectively
 
(2,761
)
 
(2,529
)
Total stockholders' equity
 
687,808

 
680,601

Total liabilities and stockholders' equity
 
$
1,444,613

 
$
1,395,014


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


1



BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 
Three Months Ended March 31,
(in thousands, except per share amounts)
 
2017
 
2016
Net sales
 
 
 
 
Building products
 
$
572,120

 
$
553,379

Construction services
 
185,580

 
174,039

 
 
757,700

 
727,418

Cost of sales
 
 
 
 
Building products
 
426,083

 
420,531

Construction services
 
153,420

 
140,270

 
 
579,503

 
560,801

Gross profit
 
178,197

 
166,617

 
 
 
 
 
Selling, general and administrative expenses
 
148,888

 
141,781

Depreciation expense
 
10,561

 
8,792

Amortization expense
 
3,821

 
5,245

Merger and integration costs
 
4,441

 
2,836

Impairment of assets
 

 
11,883

 
 
167,711

 
170,537

Income (loss) from operations
 
10,486

 
(3,920
)
Other income (expense)
 
 
 
 
Interest expense
 
(6,088
)
 
(8,231
)
Other income, net
 
319

 
1,455

Income (loss) before income taxes
 
4,717

 
(10,696
)
Income tax expense (benefit)
 
973

 
(3,940
)
Net income (loss)
 
$
3,744

 
$
(6,756
)
 
 
 
 
 
Weighted average common shares outstanding
 
 
 
 
Basic
 
66,692

 
65,338

Diluted
 
67,186

 
65,338

 
 
 
 
 
Net income (loss) per common share
 
 
 
 
Basic
 
$
0.06

 
$
(0.10
)
Diluted
 
$
0.06

 
$
(0.10
)
The accompanying notes are an integral part of these condensed consolidated financial statements.


2



BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
Three Months Ended March 31,
(in thousands)
 
2017
 
2016
Cash flows from operating activities
 
 
 
 
Net income (loss)
 
$
3,744

 
$
(6,756
)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
 
 
 
 
Depreciation expense
 
12,992

 
11,437

Amortization of intangible assets
 
3,821

 
5,245

Amortization of debt issuance costs
 
421

 
915

Amortization of favorable and unfavorable leases
 
(314
)
 
(9
)
Deferred income taxes
 
760

 
(5,521
)
Non-cash stock compensation expense
 
1,231

 
1,889

Loss on sale of property, equipment and real estate
 
107

 
18

Impairment of assets
 

 
11,883

Amortization of inventory step-up charges
 

 
2,884

Amortization of original issue discount
 

 
62

Gain on insurance proceeds
 

 
(1,003
)
Change in assets and liabilities, net of effects of acquisitions
 
 
 
 
Accounts receivable, net of allowances
 
(29,086
)
 
(25,920
)
Inventories, net
 
(22,030
)
 
(13,042
)
Accounts payable
 
30,868

 
43,425

Other assets and liabilities
 
(6,420
)
 
(11,878
)
Net cash (used in) provided by operating activities
 
(3,906
)
 
13,629

Cash flows from investing activities
 
 
 
 
Purchases of property, equipment and real estate
 
(10,662
)
 
(5,471
)
Purchase of business
 
(6,693
)
 

Proceeds from sale of property, equipment and real estate
 
866

 
217

Insurance proceeds
 

 
1,003

Net cash used in investing activities
 
(16,489
)
 
(4,251
)
Cash flows from financing activities
 
 
 
 
Proceeds from revolving line of credit
 
175,058

 
364,270

Repayments of proceeds from revolving line of credit
 
(155,313
)
 
(364,978
)
Principal payments on other notes
 
(2,557
)
 
(2,043
)
Payments on capital lease obligations
 
(2,667
)
 
(1,933
)
Other financing activities, net
 
1,735

 
(1,419
)
Net cash provided by (used in) financing activities
 
16,256

 
(6,103
)
Net (decrease) increase in cash and cash equivalents
 
(4,139
)
 
3,275

Cash and cash equivalents
 
 
 
 
Beginning of period
 
8,917

 
1,089

End of period
 
$
4,778

 
$
4,364

 
 
 
 
 
Supplemental disclosure of non-cash investing and financing transactions
 
 
 
 
Assets acquired under capital lease obligations
 
1,765

 
2,707

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


3



BMC STOCK HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.    Organization
These unaudited financial statements represent the financial statements of BMC Stock Holdings, Inc., and its subsidiaries. All references to “BMC,” “we,” “us,” “our” or the “Company” mean BMC Stock Holdings, Inc.
The Company distributes lumber and building materials to new construction and repair and remodeling contractors. Additionally, we provide solution-based services to our customers, including component design, product specification and installation services.
2.    Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) that permit reduced disclosure for interim periods. The condensed consolidated balance sheet as of December 31, 2016 was derived from audited financial statements, but does not include all necessary disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated financial statements include all accounts of the Company and its subsidiaries and, in the opinion of management, include all recurring adjustments and normal accruals necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the dates and periods presented. These unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (“ 2016 Annual Report on Form 10-K”). Results for interim periods are not necessarily indicative of the results to be expected during the remainder of the current year or for any future period. All material intercompany accounts and transactions have been eliminated in consolidation.
Comprehensive income (loss)
Comprehensive income (loss) is equal to the net income (loss) for all periods presented.
Recently adopted accounting pronouncements
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires that inventory within the scope of the guidance be measured at the lower of cost and net realizable value. Prior to the issuance of the standard, inventory was measured at the lower of cost or market, where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not impacted by the new guidance. Prospective application is required and early adoption is permitted. ASU 2015-11 became effective for the Company’s annual and interim periods beginning on January 1, 2017. The adoption of the guidance did not have a material impact on our financial statements.
Recently issued accounting pronouncements not yet adopted
In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), and issued subsequent amendments to the initial guidance within Accounting Standards Update 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations (“ASU 2016-08”) issued in March 2016, Accounting Standards Update 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing (“ASU 2016-10”) issued in April 2016, Accounting Standards Update 2016-12, Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”) issued in May 2016 and Accounting Standards Update 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers (“ASU 2016-20”) issued in December 2016 (ASU 2014-09, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20 collectively “Topic 606”). Topic 606 provides a comprehensive revenue recognition model requiring companies to recognize revenue for the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year, and therefore, the standard is effective for the Company’s annual and interim periods beginning on January 1, 2018. The guidance permits the use of either a full retrospective or modified retrospective transition method. We expect to adopt the standard on January 1, 2018 using the modified retrospective transition method, with the option to utilize certain practical expedients as defined in Topic 606. The modified retrospective transition method recognizes the cumulative effect of initially applying the standard in retained earnings on the date of adoption. We are continuing to evaluate the impact of the standard on our financial statements, but based on our preliminary assessment, we believe that contracts with a construction service element may be impacted. As we continue to evaluate the standard and finalize our assessment, our current conclusions are subject to change.


4



In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for the Company’s annual and interim periods beginning on January 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are in the process of evaluating the impact of the standard on our financial statements. As a lessee, certain of our various leases under existing guidance are classified as operating leases that are not recorded on the balance sheet but are recorded in the statement of operations as expense is incurred. Upon adoption of the standard, we will be required to record substantially all leases on the balance sheet as a ROU asset and a lease liability. The timing of expense recognition and classification in the statement of operations could change based on the classification of leases as either operating or financing.

In August 2016, the FASB issued Accounting Standards Update 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). ASU 2016-15 was issued to decrease the diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows by providing guidance on eight specific cash flow issues. ASU 2016-15 is effective for the Company’s annual and interim periods beginning on January 1, 2018, with early adoption permitted and retrospective application required. The adoption of the standard is not expected to have a material impact on our financial statements.

In November 2016, the FASB issued Accounting Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”). ASU 2016-18 requires that the statement of cash flows include restricted cash in the beginning and end-of-period total amounts shown and that the statement of cash flows explain the changes in restricted cash during the period. ASU 2016-18 is effective for the Company's annual and interim periods beginning on January 1, 2018. Retrospective application is required and early adoption is permitted. The adoption of the standard is not expected to have a material impact on our financial statements.

In January 2017, the FASB issued Accounting Standards Update 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 provides guidance in determining when a set of assets and activities meets the definition of a business. ASU 2017-01 is effective for the Company's annual and interim periods beginning on January 1, 2018. Early application is permitted for transactions meeting certain criteria and prospective application is required. The adoption of the standard is not expected to have a material impact on our financial statements.

In January 2017, the FASB issued Accounting Standards Update 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires computation of the implied fair value of a reporting unit's goodwill. The amount of a goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for the Company's annual goodwill impairment test and any interim tests during the Company's annual and interim periods beginning on January 1, 2020. Early adoption is permitted for goodwill impairment tests performed on testing dates after January 1, 2017. Prospective application is required. The adoption of the standard is not expected to have a material impact on our financial statements.

In February 2017, the FASB issued Accounting Standards Update 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2017-05 clarifies the scope of Subtopic 610-20, which provides guidance for recognizing gains and losses from the sale or transfer of nonfinancial assets in contracts with noncustomers. ASU 2017-05 also provides guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for the Company’s annual and interim periods beginning on January 1, 2018 and we are required to adopt ASU 2017-05 at the same time that we adopt ASU 2014-09. The guidance permits the use of either a retrospective or cumulative effect transition method. We are evaluating the impact of the standard on our financial statements.

3.    Acquisition of Code Plus Components, LLC
On March 27, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Code Plus Components, LLC (“Code Plus”), a manufacturer of structural components located in Martinsburg, West Virginia, for a preliminary purchase price of $7.1 million . The purchase price includes an initial holdback of $0.4 million due to the sellers one year from the closing date. The holdback amount may be reduced under certain circumstances. Additionally, the acquisition includes an earnout provision which would require the Company to pay the sellers up to an additional $0.8 million upon the acquired operations achieving certain performance targets. The Company funded the transaction through borrowings on the Company’s revolving line of credit.

5



The acquisition was accounted for using the acquisition method of accounting under ASC 805, Business Combinations, whereby the results of operations of Code Plus are included in the Company’s consolidated financial statements beginning on the acquisition date. Due to the timing of the close of the acquisition, the initial purchase accounting for intangible assets and property and equipment is not complete. The preliminary purchase price allocation resulted in the initial recognition of goodwill of $2.3 million , a customer relationship intangible asset of $3.4 million and a non-compete agreement intangible asset of $0.5 million , as well as other operating assets and liabilities. All of the goodwill recognized is expected to be deductible for tax purposes. The impact of the acquisition was not significant for the reporting of pro forma financial information. The results of operations of Code Plus included in the Company’s consolidated statements of operations since the acquisition date are not material.

For the year ended December 31, 2016, Code Plus generated net sales of approximately $14.2 million . The Company incurred transaction costs of $0.1 million for the three months ended March 31, 2017 , which are included in selling, general and administrative expenses in the condensed consolidated statements of operations.

4.    Accounts Receivable
Accounts receivable consist of the following at March 31, 2017 and December 31, 2016 :
(in thousands)
 
March 31, 
 2017
 
December 31, 
 2016
Trade receivables
 
$
354,940

 
$
323,725

Allowance for doubtful accounts
 
(4,006
)
 
(4,162
)
Other allowances
 
(7,688
)
 
(6,259
)
 
 
$
343,246

 
$
313,304

5.    Impairment of BMHC ERP System
During 2013, Building Materials Holding Corporation (“BMHC” or “Legacy BMHC”) selected a new third-party software vendor for its planned Enterprise Resource Planning (“New ERP”) system and began incurring costs related to design, development and implementation of the New ERP. BMHC also began paying an annual licensing fee. During March 2016, the Company decided to integrate all operations under the Enterprise Resource Planning system utilized by Stock Building Supply Holdings, Inc. (“SBS” and the “Legacy SBS ERP system”) and to discontinue use of the New ERP. In connection with this decision, the Company recorded asset impairment charges of approximately $11.9 million in its condensed consolidated statement of operations for the three months ended March 31, 2016 related to capitalized software development costs for New ERP functionality that the Company had intended to implement in future periods. These costs had previously been recorded as construction-in-progress within property and equipment on the condensed consolidated balance sheets.

As of March 31, 2017 , the Company had approximately $1.2 million of unamortized prepaid expenses related to the New ERP recorded within prepaid expenses and other current assets on its condensed consolidated balance sheet. These unamortized prepaid expenses relate to license and service contracts that will continue to be utilized by the Company until the time the Company ceases using the New ERP system. The Company is also obligated under a non-cancellable agreement to make future payments through the third quarter of 2017 of approximately $2.0 million related to New ERP software licenses. The Company may be required to accelerate the expense recognition of any unamortized prepaid costs and future contractual costs once we cease using the New ERP.

6.    Debt
Long-term debt as of March 31, 2017 and December 31, 2016 consists of the following:
(in thousands)
 
March 31, 
 2017
 
December 31, 
 2016
Senior secured notes, due 2024
 
$
350,000

 
$
350,000

Revolving credit agreement
 
19,745

 

Other
 
406

 
2,963

 
 
370,151

 
352,963

Unamortized debt issuance costs related to senior secured notes
 
(6,265
)
 
(6,474
)
 
 
363,886

 
346,489

Less: Current portion of long-term debt
 
95

 
1,662

 
 
$
363,791

 
$
344,827


6




Senior Secured Notes
On September 15, 2016 , the Company issued $350.0 million of senior secured notes due 2024 (the “Senior Notes”) under an unregistered private placement not subject to the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the Company and the other subsidiaries that guarantee our Credit Agreement (as defined below). Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all guarantees are full and unconditional and joint and several. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1 .

As of March 31, 2017 , the estimated market value of the Senior Notes was $7.0 million more than the carrying amount. The fair value is based on institutional trading activity and was classified as a Level 2 measurement in accordance with ASC 820.

Revolving Credit Agreement
On December 1, 2015 , we entered into a senior secured credit agreement with Wells Fargo Capital Finance, as administrative agent, and certain other lenders (the “Credit Agreement”), which includes a revolving line of credit (the “Revolver”). The Credit Agreement, as amended, has an aggregate commitment of $375.0 million . We had outstanding borrowings under the Revolver of $19.7 million with net availability of $288.2 million as of March 31, 2017 . The interest rate on outstanding borrowings was 4.25% as of March 31, 2017. We had $67.0 million in letters of credit outstanding under the Credit Agreement as of March 31, 2017 .

The carrying value of the Revolver at March 31, 2017 approximates fair value as the Revolver contains a variable interest rate. As such, the fair value of the Revolver was classified as a Level 2 measurement in accordance with ASC 820.

Other
Other long-term debt as of March 31, 2017 consists of a $0.4 million term note secured by real property with a maturity of February 2021 . The interest rate is 7.0% and is paid monthly. The estimated market value of other long-term debt approximates the carrying amount.

7.    Income Taxes
The Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required. In assessing the realizability of deferred tax assets, the Company considers both positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company had a valuation allowance of $0.1 million against its deferred tax assets related to certain state tax jurisdictions as of March 31, 2017 and December 31, 2016 . To the extent the Company generates future tax net operating losses, the Company may be required to increase the valuation allowance on deferred tax assets, which may unfavorably impact the effective tax rate.
The Company has no material uncertain tax positions as of March 31, 2017 and December 31, 2016 .

For the three months ended March 31, 2017 , the Company’s effective tax rate was 20.6% , which varied from the federal statutory rate of 35% primarily due to excess tax windfall benefits from stock compensation of $0.8 million offset by state income tax expense. For the three months ended March 31, 2016 , the effective tax rate was 36.8% , which varied from the federal statutory rate of 35% primarily due to state taxes and non-deductible costs related to the merger of BMHC and SBS (the “Merger”).

8.    Commitments and Contingencies
From time to time, various claims, legal proceedings and litigation are asserted or commenced against the Company principally arising from alleged product liability, warranty, casualty, construction defect, contract, tort, employment and other disputes. In determining loss contingencies, management considers the likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recorded when it is considered probable that such a liability has been incurred and when the amount of loss can be reasonably estimated. It is not certain that the Company will prevail in these matters. However, the Company does not currently believe that the ultimate outcome of any pending matters will have a material adverse effect on its consolidated financial position, results of operations or cash flows.

7



9.    Stock Based Compensation
The following table highlights the expense related to stock based compensation for the three months ended March 31, 2017 and 2016 :
 
 
Three Months Ended March 31,
(in thousands)
 
2017
 
2016
Restricted stock
 
$
136

 
$
692

Restricted stock units
 
817

 
879

Performance-based restricted stock units
 
187

 
2

Stock options
 
91

 
316

Stock based compensation
 
$
1,231

 
$
1,889

During the three months ended March 31, 2017 , in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted stock units that vest on Ma rch 15, 2020 . The grant date fair value of the performance-based restricted stock units was $21.35 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a maximum of 158,402 , based 50% upon the Company’s average return on invested capital (“ROIC”) over the three year period from January 1, 2017 through December 31, 2019 and 50% upon the Company’s cumulative adjusted earnings per share (“Adjusted EPS”) over the same three year period.
During the three months ended March 31, 2016 , in addition to grants of service-based restricted stock unit awards, the Company granted performance-based restricted stock units that vest on March 15, 2019 . The number of performance-based restricted stock units that are issued on the vesting date could range from zero to a maximum of 206,250 , based upon the Company’s cumulative Adjusted EBITDA over the three year period from January 1, 2016 through December 31, 2018 .
10.    Segments
ASC 280, Segment Reporting, defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance.
Beginning January 1, 2017, the Company’s operating segments consist of the Mid-Atlantic, Southeast, Texas, Intermountain and Western divisions after the Company realigned certain of its markets, which resulted in the consolidation of the Company’s historical Mountain West division into the Intermountain division. Following the realignment, the CODM continues to review aggregate information to allocate resources and assess performance. Based on this, as well as the similar economic characteristics, nature of products, distribution methods and customers of the divisions both before and after the realignment, the Company has aggregated its operating segments into one reportable segment, “Geographic divisions.”
In addition to our reportable segment, the Company’s consolidated results include “Other reconciling items.” Other reconciling items is comprised of our corporate activities and other income and expenses not allocated to the operating segments.
The following tables present Net Sales, Adjusted EBITDA and certain other measures for the reportable segment and total Company operations for the three months ended March 31, 2017 and 2016 . Adjusted EBITDA is used as a performance metric by the CODM in determining how to allocate resources and assess performance.
 
 
Three Months Ended March 31, 2017
(in thousands)
 
Net Sales
 
Gross Profit
 
Depreciation & Amortization
 
Adjusted EBITDA
Geographic divisions
 
$
757,700

 
$
178,197

 
$
16,227

 
$
47,403

Other reconciling items
 

 

 
586

 
(13,840
)
 
 
$
757,700

 
$
178,197

 
$
16,813

 
 

8



 
 
Three Months Ended March 31, 2016
(in thousands)
 
Net Sales
 
Gross Profit
 
Depreciation & Amortization
 
Adjusted EBITDA
Geographic divisions
 
$
727,418

 
$
166,617

 
$
15,606

 
$
52,979

Other reconciling items
 

 

 
1,076

 
(19,270
)
 
 
$
727,418

 
$
166,617

 
$
16,682

 
 
Reconciliation to consolidated financial statements:
 
 
Three Months Ended March 31,
(in thousands)
 
2017
 
2016
Income (loss) before income taxes
 
$
4,717

 
$
(10,696
)
Interest expense
 
6,088

 
8,231

Depreciation and amortization
 
16,813

 
16,682

Merger and integration costs
 
4,441

 
2,836

Non-cash stock compensation expense
 
1,231

 
1,889

Acquisition costs
 
273

 

Impairment of assets
 

 
11,883

Inventory step-up charges
 

 
2,884

Adjusted EBITDA of other reconciling items
 
13,840

 
19,270

Adjusted EBITDA of geographic divisions reportable segment
 
$
47,403

 
$
52,979

11.    Earnings Per Share
Basic net income (loss) per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted average shares outstanding during the period. Diluted EPS is calculated by adjusting weighted average shares outstanding for the dilutive effect of potential common shares, determined using the treasury-stock method. For purposes of the diluted EPS calculation, stock options, restricted stock and restricted stock unit awards are considered to be potential common shares. During periods of net loss, no effect is given to potential common shares as they are anti-dilutive. Performance-based restricted stock units are not included in the calculation of diluted EPS until they are contingently issuable.
The basic and diluted EPS calculations for the three months ended March 31, 2017 and 2016 are presented below:
 
 
Three Months Ended March 31,
(in thousands, except per share amounts)
 
2017
 
2016
Income (loss) attributable to common stockholders
 
$
3,744

 
$
(6,756
)
 
 
 
 
 
Weighted average common shares outstanding, basic
 
66,692

 
65,338

Effect of dilutive securities:
 
 
 
 
Restricted stock
 
83

 

Restricted stock units
 
178

 

Stock options
 
233

 

Weighted average common shares outstanding, diluted
 
67,186

 
65,338

 
 
 
 
 
Basic income (loss) per common share
 
$
0.06

 
$
(0.10
)
Diluted income (loss) per common share
 
$
0.06

 
$
(0.10
)

9



The following table provides the securities that could potentially dilute EPS in the future, but were not included in the computation of diluted EPS for the periods presented because to do so would have been anti-dilutive. The amounts included in this table exclude performance-based restricted stock units. The number of currently outstanding performance-based restricted stock units that are issued upon vesting could range from zero to a maximum of 364,652 .
 
 
Three Months Ended March 31,
(in thousands)
 
2017
 
2016
Restricted stock
 

 
362

Restricted stock units
 
21

 
357

Stock options
 
303

 
1,222

12.    Subsequent Events
On April 3, 2017 , the Company acquired substantially all of the assets and assumed certain liabilities of Texas Plywood & Lumber Company, Inc. (“TexPly”), a supplier of production millwork and doors in the Dallas-Fort Worth area, for a preliminary purchase price of $32.1 million , of which $2.5 million was deposited in an escrow account to fund post-closing adjustments and other indemnification obligations for a period of one year from the closing date of the acquisition. The Company funded the transaction through borrowings on the Company’s Revolver. For the year ended December 31, 2016, TexPly generated net sales of approximately $55.2 million .

The results of operations of TexPly will be included in the Company’s consolidated financial statements beginning on the acquisition date. Due to the timing of the close of the acquisition, the initial purchase accounting for the acquisition is incomplete and therefore, certain disclosures required by ASC 805, Business Combinations, have not been included. The Company is in the process of performing its valuation of the acquired assets and liabilities and currently anticipates a customer relationship intangible asset and goodwill, among other operating assets and liabilities, to be recognized as part of this acquisition.


10



ITEM 2    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our historical consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements included in our 2016 Annual Report on Form 10-K.
Cautionary Statement with Respect to Forward-Looking Statements
Some of the statements contained in this Quarterly Report on Form 10-Q constitute forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts or present facts or conditions. In many cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or the negative of these terms or other comparable terminology.
The forward-looking statements reflect our views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause events or our actual activities or results to differ significantly from those expressed in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, actions, levels of activity, performance or achievements. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. These factors include without limitation:
the state of the homebuilding industry and repair and remodeling activity, the economy and the credit markets;
seasonality and cyclicality of the building products supply and services industry;
competitive industry pressures and competitive pricing pressure from our customers and competitors;
inflation or deflation of prices of our products;
our exposure to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings;
our ability to maintain profitability;
the impact of our indebtedness;
the various financial covenants in our secured credit agreement and senior secured notes indenture;
our concentration of business in the Texas, California and Georgia markets;
the potential negative impacts from the significant decline in oil prices on employment, home construction and remodeling activity in Texas (particularly the Houston metropolitan area) and other markets dependent on the energy industry;
our ability to retain our key employees and to attract and retain new qualified employees, while controlling our labor costs;
product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, and our dependence on third-party suppliers and manufacturers;
the implementation of our supply chain and technology initiatives;
the impact a housing market decline may have on our business, including the potential for impairment losses or the closing or idling of under-performing locations;
the impact of long-term non-cancelable leases at our facilities;
our ability to effectively manage inventory and working capital;
the credit risk from our customers;
the impact of pricing pressure from our customers;
our ability to identify or respond effectively to consumer needs, expectations or trends;
our ability to successfully implement our growth strategy;
the impact of federal, state, local and other laws and regulations;
the impact of changes in legislation and government policy;
the impact of unexpected changes in our tax provisions and adoption of new tax legislation;
our ability to utilize our net operating loss carryforwards;
the potential loss of significant customers or a reduction in the quantity of products they purchase;
natural or man-made disruptions to our distribution and manufacturing facilities;
our exposure to environmental liabilities and subjection to environmental laws and regulation;
the impact of disruptions to our information technology systems;
cybersecurity risks;
risks related to the continued integration of Building Materials Holdings Corporation and Stock Building Supply Holdings, Inc. and successful operation of the post-merger company; and
our ability to operate on multiple ERP information systems and convert multiple systems to a single system.

11



Certain of these and other factors are discussed in more detail in “Item 1A. Risk Factors” of our 2016 Annual Report on Form 10-K and “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. The forward-looking statements included herein are made only as of the date of this Quarterly Report on Form 10-Q and we undertake no obligation to publicly update or review any forward-looking statement made by us or on our behalf, whether as a result of new information, future developments, subsequent events or circumstances or otherwise.
Overview
We are one of the nation’s leading providers of diversified building products and services in the U.S. residential construction market. Our objective is to provide best-in-class customer service and value-added products to our customers, which are primarily single- and multi-family home builders and professional remodelers. Our product offerings include lumber and lumber sheet goods and an array of value-added products including millwork, doors, windows, structural components (such as engineered wood products (“EWP”)), floor and roof trusses and wall panels. Our whole-house framing solution, Ready-Frame ®, which is one of our fastest growing product offerings, saves builders both time and money and improves job site safety. We also offer our customers important services such as design, product specification, installation and installation management.

The 18 states in which we operate accounted for approximately 64% of 2016 U.S. single-family housing permits according to the U.S. Census Bureau. In these 18 states, we operate in 43 metropolitan areas.

Our net sales for the three months ended March 31, 2017 increased 4.2% compared to the prior year period. Our gross margin was 23.5% for the three months ended March 31, 2017 compared to 22.9% for the prior year period. We recorded income from operations of $10.5 million during the three months ended March 31, 2017 compared to a loss from operations of $3.9 million during the three months ended March 31, 2016 . See further discussion in “-Operating Results” below.
Factors Affecting Our Operating Results
Our operating results and financial performance are influenced by a variety of factors, including, among others, acquisitions, conditions in the housing market and economic conditions generally, changes in the cost of the products we sell (particularly commodity products), pricing policies of our competitors, production schedules of our customers and seasonality. Some of the more important factors are briefly discussed below.
Conditions in the housing and construction market
The building products supply and services industry is highly dependent on new single-family home and multi-family construction and repair and remodeling activity, which in turn are dependent upon a number of factors, including, among other things, interest rates, consumer confidence, employment rates, foreclosure rates, housing inventory levels, housing demand, the availability of land, the availability of construction financing and the health of the economy and mortgage markets. According to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased approximately 6.4% for the three months ended March 31, 2017 as compared to the same period in the prior year.
Overall economic conditions in the markets where we operate
Economic changes both nationally and locally in our markets impact our financial performance. Unfavorable changes in demographics, credit markets, consumer confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or local economy in which we operate and other factors beyond our control could adversely affect consumer spending, result in decreased demand for homes and adversely affect our business. We believe continued employment growth, prospective home buyers’ access to financing and improved consumer confidence will be necessary to increase household formation rates. We believe improved household formation rates in turn will increase demand for housing and stimulate new construction.
Commodity nature of our products
Many of the building products we distribute, including lumber, oriented strand board (“OSB”), plywood and particleboard, are commodities that are widely available from other manufacturers or distributors with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand factors.
The following table reflects changes in the average composite framing lumber prices (per thousand board feet) and average composite structural panel prices (per thousand square feet). These prices represent transactions between manufacturers and their customers as reported by Random Lengths and may differ in magnitude or timing from the actual selling prices or cost of goods reported in our operating results. The average composite structural panel prices are based on index prices for OSB and plywood.

12



 
 
Three Months Ended March 31,
 
 
2017 versus 2016
 
2017 average price
Framing lumber prices
 
20.1
%
 
$
383

Structural panel prices
 
10.6
%
 
$
387

Periods of increasing prices provide the opportunity for higher sales and increased gross profit, while periods of declining prices may result in declines in sales and profitability. In particular, low market prices for wood products over a sustained period can adversely affect our financial condition, operating results and cash flows, as can excessive spikes in market prices. For further discussion of the impact of commodity prices on historical periods, see “-Operating Results” below.
Consolidation of large homebuilders
Over the past ten years, the homebuilding industry has undergone consolidation and many larger homebuilders have increased their market share. We expect that trend to continue as larger homebuilders have better liquidity and land positions relative to the smaller, less capitalized homebuilders. Our focus is on maintaining relationships and market share with these customers while balancing the competitive pressures we face in our markets with certain profitability expectations. We expect that our ability to maintain strong relationships with the larger builders will be vital to our ability to expand into new markets as well as grow our market share. While we generate significant sales from these homebuilders, our gross margins on sales to them tend to be lower than our gross margins on sales to other market segments. This could impact our gross margins as homebuilding recovers if the market share held by the production homebuilders continues to increase.

Our ability to control expenses
We pay close attention to managing our working capital and operating expenses. We employ a LEAN process operating philosophy, which encourages continuous improvement in our core processes to minimize waste, improve customer service, increase expense productivity, improve working capital and maximize profitability and cash flow. We regularly analyze our workforce productivity to achieve the optimum, cost-efficient labor mix for our facilities. Further, we pay careful attention to our logistics function and have implemented GPS-based technology across certain markets to improve customer service and improve productivity of our shipping and handling costs.
Mix of products sold
We typically realize greater gross margins on more highly engineered and customized products, or ancillary products that are often purchased based on convenience and are therefore less price sensitive to our customers. For example, sales of lumber & lumber sheet goods tend to generate lower gross margins due to their commodity nature and the relatively low switching costs of sourcing those products from different suppliers. Structural components and millwork, doors & windows often generate higher gross margins relative to other products. Homebuilders often use structural components in order to realize increased efficiency and improved quality. We believe shortening cycle time from start to completion is a key goal of homebuilders during periods of strong consumer demand or limited availability of framing labor. As the residential new construction market continues to strengthen, we expect the use of structural components by homebuilders to increase.
Changes in customer sales mix
Our operating results may vary according to the amount and type of products we sell to each of our primary customer types: new single-family homebuilders, professional remodeling contractors and multi-family builders and light commercial builders. We tend to realize higher gross margins on sales to remodeling contractors due to the smaller product volumes purchased by those customers, as well as the more customized nature of the projects those customers generally undertake. Gross margins on sales to single-family, multi-family and light commercial customers can vary based on a variety of factors, including the purchase volumes of the individual customer, the mix of products sold to that customer, the size and selling price of the project being constructed and the number of upgrades added to the project before or during its construction. 
Seasonality
Our first and fourth quarters have historically been, and are generally expected to continue to be, adversely affected by weather patterns in some of our markets, causing reduced construction activity. As a result, sales are usually lower in the first and fourth quarters than in the second and third quarters.

13



Operating Results
The following table sets forth our operating results in dollars and as a percentage of net sales for the periods indicated:
 
Three Months Ended March 31,
(in thousands)
2017
 
2016
Net sales
$
757,700

 
100.0
 %
 
$
727,418

 
100.0
 %
Cost of sales
579,503

 
76.5
 %
 
560,801

 
77.1
 %
Gross profit
178,197

 
23.5
 %
 
166,617

 
22.9
 %
Operating expenses:
 
 
 
 
 
 
 
Selling, general and administrative expenses
148,888

 
19.6
 %
 
141,781

 
19.5
 %
Depreciation expense
10,561

 
1.4
 %
 
8,792

 
1.2
 %
Amortization expense
3,821

 
0.5
 %
 
5,245

 
0.7
 %
Merger and integration costs
4,441

 
0.6
 %
 
2,836

 
0.4
 %
Impairment of assets

 
0.0
 %
 
11,883

 
1.6
 %
Income (loss) from operations
10,486

 
1.4
 %
 
(3,920
)
 
(0.5
)%
Other income (expense)
 
 
 
 
 
 
 
Interest expense
(6,088
)
 
(0.8
)%
 
(8,231
)
 
(1.1
)%
Other income, net
319

 
0.0
 %
 
1,455

 
0.2
 %
Income (loss) before income taxes
4,717

 
0.6
 %
 
(10,696
)
 
(1.5
)%
Income tax expense (benefit)
973

 
0.1
 %
 
(3,940
)
 
(0.5
)%
Net income (loss)
$
3,744

 
0.5
 %
 
$
(6,756
)
 
(0.9
)%
Three months ended March 31, 2017 compared to three months ended March 31, 2016
Net sales
For the three months ended March 31, 2017 , net sales increased $30.3 million , or 4.2% , to $757.7 million from $727.4 million during the three months ended March 31, 2016 . The increase in net sales was primarily driven by the impact of commodity price inflation of approximately 2.8% and increased volume of approximately 1.4% . Excluding California and Houston, which experienced weather and macro-related year-over-year declines, respectively, the Company’s net sales increased 7.9%. We estimate approximately 73% of our net sales for the three months ended March 31, 2017 were to customers engaged in new single-family construction. According to the U.S. Census Bureau, single-family housing starts in the South and West regions of the United States, which are our primary operating regions, increased approximately 6.4% for the three months ended March 31, 2017 as compared to the same period in the prior year, while single-family houses completed increased approximately 11.5% during the same period.
The following table shows net sales classified by major product category. Certain prior year amounts have been reclassified to conform to the current year presentation.
 
 
Three Months Ended 
 March 31, 2017
 
Three Months Ended 
 March 31, 2016
 
 
(in thousands)
 
Net Sales
 
% of Sales
 
Net Sales
 
% of Sales
 
% Change
Structural components
 
$
109,891

 
14.5
%
 
$
108,890

 
15.0
%
 
0.9
 %
Lumber & lumber sheet goods
 
244,436

 
32.3
%
 
213,532

 
29.4
%
 
14.5
 %
Millwork, doors & windows
 
210,751

 
27.8
%
 
217,987

 
30.0
%
 
(3.3
)%
Other building products & services
 
192,622

 
25.4
%
 
187,009

 
25.6
%
 
3.0
 %
Total net sales
 
$
757,700

 
100.0
%
 
$
727,418

 
100.0
%
 
4.2
 %
Cost of sales
For the three months ended March 31, 2017 , cost of sales increased $18.7 million , or 3.3% , to $579.5 million from $560.8 million during the three months ended March 31, 2016 . Cost of sales for the three months ended March 31, 2016 includes $2.9 million of expense incurred in relation to the sell-through of inventory which was stepped up in value in connection with the merger of SBS and BMHC. We estimate our cost of sales sold increased approximately 3.2% as a result of commodity cost inflation and 0.6% as a result of increased sales volumes, partially offset by a 0.5% decrease as a result of the sell-through of inventory which was stepped up in value.

14



Gross profit
For the three months ended March 31, 2017 , gross profit increased $11.6 million , or 7.0% , to $178.2 million from $166.6 million for the three months ended March 31, 2016 , driven primarily by increased sales volumes. Our gross margin was 23.5% for the three months ended March 31, 2017 and 22.9% for the three months ended March 31, 2016 . Gross profit for the three months ended March 31, 2016 was impacted by $2.9 million , or 0.4% of net sales, in relation to the sell-through of inventory which was stepped up in value in connection with the Merger.
Operating expenses
For the three months ended March 31, 2017 :
selling, general and administrative expenses were $148.9 million , up $7.1 million , or 5.0% , from $141.8 million for the three months ended March 31, 2016 related primarily to higher diesel fuel prices, costs associated with newly-opened facilities in Jacksonville, Florida and Cumming, Georgia, as well as other investments in staffing and capacity to serve expected increases in sales volumes.
depreciation expense was $10.6 million compared to $8.8 million for the three months ended March 31, 2016 . This increase primarily relates to replacements and additions of delivery fleet, material handling equipment and operating equipment.
amortization expense was $3.8 million compared to $5.2 million for the three months ended March 31, 2016 . This decrease resulted from certain intangible assets that became fully amortized.
the Company incurred $4.4 million of Merger and integration costs related to the ongoing integration of BMHC and SBS, consisting primarily of severance, system integration costs and professional fees, compared to $2.8 million for the three months ended March 31, 2016 .
During the three months ended March 31, 2016, the Company recognized asset impairment charges of $11.9 million . During the first quarter of 2016, the Company decided to integrate all operations under the Legacy SBS ERP system, and to discontinue use of the New ERP (see Note 5 to the condensed consolidated financial statements included in Item 1 of this Quarterly Report for further description of the New ERP). In connection with this decision, the Company impaired capitalized software costs that had previously been recorded as construction-in-progress within property and equipment on the condensed consolidated balance sheets.
Interest expense
For the three months ended March 31, 2017 , interest expense was $6.1 million compared to $8.2 million for the prior year period. This decrease relates primarily to reduced borrowings under the Revolver and a decrease in interest expense on the Senior Notes after the Company redeemed $250.0 million of 9.0% senior secured notes with the proceeds from the issuance of $350.0 million of 5.5% Senior Notes during September 2016. Non-cash amortization of debt issuance costs, which is included in interest expense, was $0.4 million and $0.9 million for the three months ended March 31, 2017 and 2016 , respectively.
Other income, net
For the three months ended March 31, 2017 , other income, net decreased $1.1 million compared to the prior year period. This decrease primarily relates to $1.0 million of insurance proceeds received during the three months ended March 31, 2016 related to a fire at one of the Company’s facilities during 2015.
Income tax
For the three months ended March 31, 2017 , income tax expense was $1.0 million compared to an income tax benefit of $3.9 million for the three months ended March 31, 2016 . The effective tax rate for the three months ended March 31, 2017 was 20.6% , which varied from the federal statutory rate of 35% primarily due to excess tax windfall benefits from stock compensation of $0.8 million offset by state income tax expense. The effective tax rate for the three months ended March 31, 2016 was 36.8% , which varied from the federal statutory rate of 35% primarily due to state income taxes and non-deductible Merger-related costs.
Liquidity and Capital Resources
Our primary capital requirements are to fund working capital needs and operating expenses, meet required interest and principal payments and fund capital expenditures. During 2017 and 2016, our capital resources have primarily consisted of cash and cash equivalents generated through operating cash flows, proceeds from the September 2016 issuance of the Senior Notes and borrowings under our Revolver.
Our liquidity at March 31, 2017 was $293.0 million , which includes $4.8 million in cash and cash equivalents and $288.2 million of unused borrowing capacity under our Revolver.

15



We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations and working capital for at least the next 12 months.
Historical Cash Flow Information
Net current assets
Net current assets (current assets less current liabilities) were $390.1 million and $364.1 million as of March 31, 2017 and December 31, 2016 , respectively, as summarized in the following table:
(in thousands)
 
March 31,
2017
 
December 31,
2016
Cash and cash equivalents
 
$
4,778

 
$
8,917

Accounts receivable, net of allowances
 
343,246

 
313,304

Inventories, net
 
294,851

 
272,276

Other current assets
 
72,717

 
72,445

Accounts payable, accrued expenses and other current liabilities
 
(316,157
)
 
(291,657
)
Current portion of long-term debt and capital lease obligations
 
(9,327
)
 
(11,155
)
Total net current assets
 
$
390,108

 
$
364,130


Accounts receivable, net, increased $29.9 million from December 31, 2016 to March 31, 2017 primarily due to seasonal increases in sales and an increase in days sales outstanding (measured against net sales in the current fiscal quarter of each period) from 38 days at December 31, 2016 to 41 days at March 31, 2017 .

Inventories, net, increased $22.6 million from December 31, 2016 to March 31, 2017 and inventory days on hand (measured against cost of sales in the current fiscal quarter of each period) increased from 43 days at December 31, 2016 to 46 days at March 31, 2017 primarily due to commodity price inflation and seasonal increases in inventory purchases in advance of the peak residential construction season.

Accounts payable, accrued expenses and other current liabilities increased $24.5 million from December 31, 2016 to March 31, 2017 primarily due to an increase in accounts payable related to increased inventory purchases in connection with higher sales volume.
Cash flows from operating activities
Net cash (used in) provided by operating activities was $(3.9) million and $13.6 million for the three months ended March 31, 2017 and 2016 , respectively, as summarized in the following table:
 
 
Three Months Ended March 31,
(in thousands)
 
2017
 
2016
Net income (loss)
 
$
3,744

 
$
(6,756
)
Non-cash expenses
 
18,258

 
21,438

Change in deferred income taxes
 
760

 
(5,521
)
Impairment of assets
 

 
11,883

Change in working capital and other assets and liabilities
 
(26,668
)
 
(7,415
)
Net cash (used in) provided by operating activities
 
$
(3,906
)
 
$
13,629

Net cash used in operating activities increased by $17.5 million for the three months ended March 31, 2017 as compared to the three months ended March 31, 2016 primarily due to the following:
Net income (loss) increased by $10.5 million as discussed in “-Operating Results” above.
Non-cash expenses declined by $3.2 million primarily as a result of the amortization of inventory step-up charges of $2.9 million during the three months ended March 31, 2016 .
The Company recognized asset impairment charges of $11.9 million during the three months ended March 31, 2016 related to the New ERP as discussed in “-Operating Results” above.

16



The change in deferred income taxes during the three months ended March 31, 2017 and 2016 was due to a reduction in the timing differences between our income (loss) before income taxes under GAAP and our taxable income. The reduction in timing differences primarily resulted from a larger increase in depreciation expense for GAAP than for income tax purposes.
Cash outflows from changes in working capital and other assets and liabilities of $26.7 million and $7.4 million for the three months ended March 31, 2017 and March 31, 2016 , respectively, relate primarily to seasonal increases in accounts receivable and inventory offset by increases in accounts payable. See “- Net current assets” above for further discussion.
Cash flows from investing activities
Net cash used in investing activities was $16.5 million and $4.3 million for the three months ended March 31, 2017 and 2016 , respectively, as summarized in the following table:
 
 
Three Months Ended March 31,
(in thousands)
 
2017
 
2016
Purchases of property, equipment and real estate
 
$
(10,662
)
 
$
(5,471
)
Purchase of business
 
(6,693
)
 

Proceeds from sale of property, equipment and real estate
 
866

 
217

Insurance proceeds
 

 
1,003

Net cash used in investing activities
 
$
(16,489
)
 
$
(4,251
)
Cash used for the purchase of property and equipment for the three months ended March 31, 2017 and 2016 resulted primarily from the purchase of vehicles and equipment to support increased sales volume and replace aged assets, and facility and technology investments to support our operations.
In March 2017, the Company acquired substantially all of the assets and assumed certain liabilities of Code Plus, a manufacturer of structural components located in Martinsburg, West Virginia, for a preliminary purchase price of $7.1 million , less an initial holdback of $0.4 million .
During the three months ended March 31, 2016 , the Company received insurance proceeds related to a fire at one of the Company’s facilities during 2015, of which $1.0 million related to property, plant and equipment damaged in the fire.
Cash flows from financing activities
Net cash provided by (used in) financing activities was $16.3 million and $(6.1) million for the three months ended March 31, 2017 and 2016 , respectively, as summarized in the following table:
 
 
Three Months Ended March 31,
(in thousands)
 
2017
 
2016
Net borrowings (repayments) on Revolver
 
$
19,745

 
$
(708
)
Payments on capital lease obligations and other notes
 
(5,224
)
 
(3,976
)
Other financing activities, net
 
1,735

 
(1,419
)
Net cash provided by (used in) financing activities
 
$
16,256

 
$
(6,103
)
The Company made net borrowings of $19.7 million on the Revolver during the three months ended March 31, 2017 , a portion of which was used to fund the acquisition of Code Plus during March 2017.
Payments on capital lease obligations and other notes increased by $1.2 million for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 due primarily to new financing of handling equipment to support higher sales volumes as well as one-time payments during the three months ended March 31, 2017 related to the payoff of certain other notes.
Proceeds from the exercise of stock options, which are included in other financing activities, net, were $2.5 million for the three months ended March 31, 2017 compared to $0 for the three months ended March 31, 2016 . Additionally, other financing activities for the three months ended March 31, 2017 and 2016 include net repayments of secured borrowings, purchases of treasury shares and debt issuance costs.


17



Capital expenditures
Capital expenditures vary depending on prevailing business factors, including current and anticipated market conditions. We expect our 2017 capital expenditures to be approximately $60.0 million to $70.0 million (including the incurrence of capital lease obligations) primarily related to vehicles and equipment, including lease buyouts, and facility and technology investments to support our operations. For the three months ended March 31, 2017 , capital expenditures, including the incurrence of capital lease obligations, were $12.4 million .
 
Senior secured notes
On September 15, 2016, the Company issued $350.0 million of Senior Notes under an unregistered private placement not subject to the registration requirements of the Securities Act. The Senior Notes mature on October 1, 2024 and are secured by a first priority lien on certain assets of the Company and a second priority lien on the collateral that secures the Credit Agreement, which collectively approximates substantially all assets of the Company. The interest rate is fixed at 5.5% and is payable semiannually on April 1 and October 1. The Indenture contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens and guarantees, investments, distributions to equityholders, asset sales and affiliate transactions. The Senior Notes were issued by BMC East, LLC, a 100% owned subsidiary of the Company, and are guaranteed by the Company and the other subsidiaries that guarantee the Credit Agreement. Each of the subsidiary guarantors is 100% owned, directly or indirectly, by the Company, and all guarantees are full and unconditional and joint and several. We were in compliance with all covenants as of March 31, 2017 .

Revolving credit agreement
On December 1, 2015, in connection with the Merger, the Company entered into the Credit Agreement with Wells Fargo Capital Finance, as administrative agent, and certain other lenders. The Credit Agreement, as amended, which includes the Revolver, has an aggregate commitment of $375.0 million and a letters of credit sublimit of $100.0 million. The Revolver matures at the earlier of (i) December 1, 2020 and (ii) the date that is three months prior to the maturity of the Senior Notes, or if the Senior Notes are refinanced or repaid, the date that is three months prior to the new maturity date of the replacement notes or other indebtedness that replaced or refinanced the Senior Notes. The Revolver is subject to an asset-based borrowing formula on eligible accounts receivable, credit card receivables and inventory, in each case reduced by certain reserves.

Borrowings under the Revolver bear interest, at our option, at either the Base Rate (which means the higher of (i) the Federal Funds Rate plus 0.5%, (ii) the LIBOR rate plus 1.0% or (iii) the prime rate) plus a Base Rate Margin (which ranges from 0.25% to 0.75% based on Revolver availability) or LIBOR plus a LIBOR Rate Margin (which ranges from 1.25% to 1.75% based on Revolver availability).
The fee on any outstanding letters of credit issued under the Revolver ranges from 0.75% to 1.25%, depending on whether the letters of credit are fully cash collateralized. The fee on the unused portion of the Revolver is 0.25%. The Credit Agreement contains customary nonfinancial covenants, including restrictions on new indebtedness, issuance of liens, investments, distributions to equityholders, asset sales and affiliate transactions. The Credit Agreement includes a financial covenant that requires us to maintain a minimum Fixed Charge Coverage Ratio of 1.00:1:00, as defined therein. However, the covenant is only applicable if excess availability under the Credit Agreement is less than or equal to the greater of (1) $33.3 million and (2) 10% of the line cap, and remains in effect until excess availability has been greater than the greater of (1) $33.3 million and (2) 10% of the line cap for 30 consecutive days. While there can be no assurances, based upon our forecast, we do not expect the financial covenant to become applicable during the year ended December 31, 2017. We were in compliance with all covenants as of March 31, 2017 .
We had outstanding borrowings of $19.7 million with net availability of $288.2 million as of March 31, 2017 . We had $67.0 million in letters of credit outstanding under the Credit Agreement as of March 31, 2017 .

18



Contractual Obligations and Commercial Commitments
Outstanding borrowings under the Revolver increased to $19.7 million at March 31, 2017 from $0 million at December 31, 2016 .

During the three months ended March 31, 2017 , the Company acquired assets under capital leases totaling $1.8 million .

The Company was obligated under certain purchase commitments totaling approximately $27.3 million at March 31, 2017 that are non-cancellable, enforceable and legally binding on us. These purchase commitments consist primarily of obligations to purchase vehicles and a commitment for a subscription related to the New ERP.

19



Off-Balance Sheet Arrangements
At March 31, 2017 and December 31, 2016 , other than operating leases and letters of credit issued under the Credit Agreement, we had no material off-balance sheet arrangements with unconsolidated entities.
Recently issued accounting pronouncements
See Note 2 to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for a summary of recently issued accounting pronouncements.
Critical Accounting Policies
There have been no significant material changes to the critical accounting policies as disclosed in the Company’s 2016 Annual Report on Form 10-K.

20



ITEM 3     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant material changes to the market risks as disclosed in the Company’s 2016 Annual Report on Form 10-K.
ITEM 4    CONTROLS AND PROCEDURES
Disclosure controls and procedures
Our management is responsible for establishing and maintaining disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
We have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q, with the participation of our Chief Executive Officer and Chief Financial Officer, as well as other key members of our management. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2017 .
Changes in internal control over financial reporting
There was no change in our internal control over financial reporting during the three months ended March 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Consistent with the year ended December 31, 2016, the Company maintained two primary ERP systems during the three months ended March 31, 2017. During 2016, the Company made the decision to integrate all operations under the Legacy SBS ERP system and to discontinue use of the New ERP, and began implementing the Legacy SBS ERP system at Legacy BMHC locations and newly opened or acquired locations.


21



PART II. OTHER INFORMATION
ITEM 1    LEGAL PROCEEDINGS
We are currently involved in various claims, legal proceedings and lawsuits incidental to the conduct of our business in the ordinary course. We are a defendant in various pending lawsuits, legal proceedings and claims arising from assertions of alleged product liability, warranty, casualty, construction defect, contract, tort, employment and other claims. We carry insurance in such amounts in excess of our self-insurance or deductibles as we believe to be reasonable under the circumstances although insurance may or may not cover any or all of our liabilities in respect of claims and lawsuits. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our consolidated financial position, cash flows or operating results.
ITEM 1A    RISK FACTORS
There have been no material changes to our risk factors from the risk factors disclosed in our 2016 Annual Report on Form 10-K. The risks described in our 2016 Annual Report on Form 10-K, in addition to the other information set forth in this report, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
ITEM 2    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On March 28, 2017, a total of 64,930 non-qualified stock options were exercised by a former employee at an exercise price of $0.97 per share, resulting in the issuance of 64,930 shares of common stock. The stock options were granted prior to the Company’s initial public offering and therefore, the shares underlying the stock options were not part of the Company’s 2013 Incentive Plan. The shares were issued in reliance upon Section 4(a)(2) of the Securities Act of 1933.
ITEM 3    DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4    MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5    OTHER INFORMATION
None.

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ITEM 6    EXHIBITS
EXHIBIT INDEX
Exhibit No.
 
Description
10.l
 
Amended and Restated Employment Agreement, dated as of February 21, 2017, by and between Lisa M. Hamblet and BMC Stock Holdings, Inc.
10.2
 
Employment Agreement, dated as of January 7, 2017, by and between Michael P. McGaugh and BMC Stock Holdings, Inc.
31.1
 
Certification by Peter C. Alexander, President and Chief Executive Officer, pursuant to Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
 
Certification by James F. Major, Jr., Executive Vice President, Chief Financial Officer and Treasurer, pursuant to Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
 
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
 
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*
 
XBRL Instance Document
101.SCH*
 
XBRL Taxonomy Extension Schema Document
101.CAL*
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
 
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
 
XBRL Taxonomy Extension Presentation Linkbase Document
_________________
* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

23



SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
BMC STOCK HOLDINGS, INC.
Date: May 8, 2017
By:
/s/ James F. Major, Jr.
 
 
Executive Vice President, Chief Financial Officer and Treasurer
 
 
(Principal financial and accounting officer and duly authorized officer)



24







AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “ Agreement ”) is entered into as of February 21, 2017 between Lisa M. Hamblet (“ Executive ”) and BMC STOCK HOLDINGS, INC., a Delaware corporation (the “ Company ”).

RECITALS

WHEREAS, The Company entered into an Employment Agreement with Executive on October 9, 2014 and Amendment dated June 2, 2015, Addendum No. 1 dated December 15, 2015 and Addendum No. 2 dated November 30, 2016 (collectively the “ Prior Agreement ”), and

WHEREAS, Executive and the Company desire to enter into a new amended and restated Employment Agreement reflecting the new position of the Executive with the Company setting forth the terms and conditions of Executive’s employment by the Company, and

WHEREAS, in connection with this Agreement, Executive and the Company have agreed upon consideration for terminating the Prior Agreement.

NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein, the Company and Executive hereby agree that Executive’s Employment Agreement is hereby amended and restated in its entirety as follows:

TERMS AND CONDITIONS

SECTION 1
EMPLOYMENT

1.1      Employment . The Company hereby employs Executive and Executive hereby accepts such employment by the Company for the period and upon the terms and conditions contained in this Agreement.

1.2      Position and Duties . Executive shall serve the Company effective as of the date as this Agreement as Executive Vice President of eBusiness and Pro Remodeler Segment. Executive shall have all of the powers and duties in such capacity that are customary to the powers and duties of those of an Executive Vice President serving in a similar role in a company within the industry in which the Company operates. The foregoing powers and duties shall be subject to the direction of the Company’s Board of Directors (the “Board”) and its President and Chief Executive Officer. Executive shall report to the President and Chief Executive Officer of the Company or at his direction, the Executive Vice President and Chief Operating Officer. Executive shall devote Executive’s full business time and attention and full diligence and vigor and good faith efforts to the affairs of the Company and Executive shall not engage in any other material business duties or pursuits or render any services of a professional nature to any other entity or person, or serve on any other board of directors (other than a not-for-profit board of directors, and then only to the extent it does not interfere with her duties to the Company), without the prior written consent of the Chief Executive Officer.






1









1.3      Effective Date; Indefinite Term. Executive’s employment under this Agreement shall begin on mutual execution of this Agreement (“ Effective Date ”) and continue for an indefinite term, until terminated in accordance with SECTION 3 below. Certain provisions, however, as more fully set forth in SECTION 4, SECTION 5 and SECTION 6 below, continue in effect beyond the date of the termination of Executive’s employment (the “ Termination Date ”).

SECTION 2
COMPENSATION AND BENEFITS

2.1      Compensation .

(a)      Base Salary . The Company shall pay to Executive an annual base salary at the rate not less than $325,500 each calendar year (“ Base Salary ”), payable in accordance with the Company’s ordinary payroll and withholding practices from time to time in effect for its employees. During the term of employment hereunder, the Executive’s salary shall be reviewed from time to time (but no less than annually) to determine whether an increase in Executive’s salary is appropriate. Any such increase shall be at the sole discretion of the Board.

(b)      Annual Cash Bonus . During the term of employment, Executive shall be eligible to receive an annual cash bonus (“ Annual Cash Bonus ”) under the Company’s incentive award plan for management and executives as from time to time adopted by the Board (the “ Incentive Plan ”). The Annual Cash Bonus shall be determined based on a target bonus equal to 100% of Base Salary (the “ Target Bonus ”).

(c)      Annual Equity Grant . During the term of employment, Executive shall be eligible to receive an annual grant of equity (the “ Annual Equity Grant ”) under the Company’s Long Term Incentive Plan. The actual award and amount of any Annual Equity Grant will be determined the Board or the Compensation Committee of the Board, as appropriate, based upon any of the factors described in the Long Term Incentive Plan in addition to general factors relating to retention of talent.

(d)      Termination of Prior Agreement Consideration . As consideration for termination of the Prior Agreement, the Company shall within thirty (30) days following the Effective Date, grant to Executive a one-time grant of 50,000 restricted stock units under the Company’s Long-Term Incentive Plan. Executive may earn this award by continuing employment with the Company for three years, with vesting in three substantially equivalent installments as of the first three anniversaries of the date the award is granted.

2.2
Benefit .

(a)      Generally . Executive shall be eligible to participate, to the extent it is legal and permitted by the applicable benefits plans, policies or contracts, in all employee benefits programs that the Company may adopt for its employees generally providing for sick or other leave, vacation, group health, disability and life insurance benefits. Executive shall be eligible to participate in the Company’s 401(k) plan on the terms and conditions and qualifications of such plan from time to time in effect, with a Company match (if any) no less favorable than that provided to any other Company executive vice president. Executive shall be entitled to four (4) weeks of paid vacation for each full calendar year of employment, to be accrued in accordance with the Company’s regular vacation pay policy.


2








(b)      Executive . Executive shall be eligible to participate, to the extent it is legal and permitted by the applicable plans, policies or contracts, in all benefits or fringe benefits which are in effect generally for the Company’s executive personnel from time to time.

2.3      Expense Reimbursement . The Company shall pay or reimburse Executive for all reasonable expenses incurred in connection with performing her duties upon presentation of documents in accordance with the reasonable procedures established by the Company.

SECTION 3
TERMINATION

3.1      By the Company :

(a)      For Cause . The Company shall have the right at any time, exercisable upon written notice, to terminate the Executive’s employment for Cause. As used in this Agreement, “Cause” shall mean that the Executive:

(i)      has committed any act or omission that results in, or that may reasonably be expected to result in, a conviction, plea of no contest or imposition of unadjudicated probation for any felony or crime involving moral turpitude;

(ii)      has committed any act of fraud, embezzlement or misappropriation, or engaged in material misconduct or breach of fiduciary duty against the Company (or any predecessor thereto or successor thereof);

(iii)      has willfully failed to substantially perform such duties as are reasonably assigned to him under this Agreement; or

(iv)      has unlawfully used (including being under the influence) or possessed illegal drugs on BMC’s premises or while performing her duties and responsibilities for BMC;

(v)      materially fails to attempt in good faith to perform Executive’s duties required under Executive’s employment by or other relationship with the Company (it being agreed that failure of the Company to achieve operating results or similar poor performance of the Company shall not, in and of itself, be deemed a failure to perform Executive’s duties);

(vi)      fails to attempt in good faith to comply with a lawful directive of the CEO or the Board that is consistent with the Company’s business practices and Code of Ethics;

(vii)      engages in willful misconduct for which Executive receives a material and improper personal benefit at the expense of the Company, or accidental misconduct resulting in such a benefit which Executive does not promptly report to the Company and redress promptly upon becoming aware of such benefit;

(viii)      in carrying out her duties under this Agreement, has engaged in acts or omissions constituting gross negligence or willful misconduct resulting in, or which, in


3








the good faith opinion of the Board, could be expected to result in, substantial economic harm to the Company;

(ix)      has failed for any reason to correct, cease or alter any action or omission that (A) materially violates or does not conform with the Company’s policies, standards or regulations in a material way, (B) constitutes a material breach of this Agreement, including SECTION 4, or (C) constitutes a material breach of her duty of loyalty to the Company; or

(x)      has disclosed any Proprietary Information (as defined below) without authorization from the Board, Chief Executive Officer or General Counsel except as otherwise permitted by this Agreement, another agreement between the parties or any Company policy in effect at the time of disclosure.

For purposes of the definition of “Cause”, “Company” shall include any subsidiary, business unit or affiliate of the Company. The Company shall provide written notice to Executive of any act or omission that the Company believes constitutes grounds for “Cause” pursuant to clause (iii) above, and no such act or omission shall constitute “Cause” unless Executive fails to remedy such act or omission within ten (10) days of the receipt of such notice; provided that such ten (10) day cure period shall not apply with respect to any matter that is incapable of cure within such period.

(b)      Due to Death or Disability . Executive’s employment shall terminate upon Executive’s death and the Company may terminate Executive’s employment due to Executive’s Disability. As used in this Agreement, “Disability” shall mean any physical or mental disability or incapacity that is reasonably expected to render Executive incapable of fully performing the services required of Executive by the Company for a period of 180 consecutive days or for shorter periods aggregating 180 days during any twelve (12) month period. For purposes of the definition of “Disability”, “Company” shall include any subsidiary, business unit or affiliate of the Company. Any question as to the existence of a Disability upon which Executive and the Company cannot agree shall be determined by a qualified independent physician selected by Executive (or, if Executive is unable to make such selection, a selection shall be made by Executive’s spouse, if available, or if such spouse is unavailable due to death or incapacity, any other adult member of Executive’s immediate family), with the consent of the Company, which consent shall not be unreasonably withheld. The determination of such physician made in writing to the Company and Executive shall be final and conclusive for all purposes of determining Disability under this Agreement.

(c)      Without Cause . The Company may terminate Executive’s employment under this Agreement at any time Without Cause. As used in this Agreement, a termination “ Without Cause shall mean the termination of Executive’s employment by the Company other than (i) for Cause pursuant to SECTION 3.1(a) above or (ii) due to death or Disability pursuant to SECTION 3.1(b) above.

3.2
By the Executive :

(a)      Without Good Reason . Executive may terminate her employment under this Agreement at any time Without Good Reason. As used in this Agreement, a termination “Without


4








Good Reason” shall mean termination of Executive’s employment by Executive other than For Good Reason pursuant to SECTION 3.2(b) below.

(b)      For Good Reason . Executive shall have the right at any time to resign her employment under this Agreement For Good Reason. As used in this Agreement, “ For Good Reason shall mean any of the following: (i) a material diminution in the Executive’s Base Salary or Target Annual Cash Bonus, (ii) a material diminution in Executive’s title, authority, duties and responsibilities as compared to Executive’s title, authority, duties and responsibilities measured immediately after the Effective Date, (iii) any requirement that the Executive report to anyone but (A) the President and Chief Executive Officer of the ultimate parent entity, or (B) if the Company becomes a subsidiary or a division of another entity not engaged predominantly in the same business as the Company, the most senior executive of such subsidiary or division, (iv) any material breach by the Company or related entities of this Agreement or the Executive’s other agreements with the Company or related entities, (v) there is a Change in Control and the successor to the Company, if applicable, does not assume and continue this Agreement, and (vi) any requirement by the Company that Executive relocate her personal residence.

Notwithstanding the foregoing, no event shall be a Good Reason event unless (i) the Executive gives the Company written notice that she is resigning for Good Reason within ninety (90) days of the first occurrence of the Good Reason event, and (ii) either the Company (A) accepts such resignation, or (B) does not cure such Good Reason event, in either case within thirty (30) days of receiving such notice, in which case the Executive’s resignation for Good Reason shall become effective as of the earlier of (x) the date the Company accepts such resignation, or (y) the expiration of the thirty day cure period (provided the Company has not cured the Good Reason event).

3.3      Compensation Upon Termination . Upon termination of Executive’s employment with the Company, the Company’s obligation to pay compensation and benefits under SECTION 2 hereof shall terminate, except that the Company shall pay to the Executive or, if applicable, the Executive’s heirs, all earned but unpaid Base Salary under SECTION 2.l(a) and accrued but unused vacation under SECTION 2.2, in each case, through the Termination Date. In addition, Executive shall be entitled to receive (i) any vested amounts or benefits due under any tax-qualified retirement or group insurance plan or program in accordance with the terms thereof, and (ii) other than on termination for Cause or a voluntary termination by Executive without Good Reason, her annual bonus for any completed fiscal year at the same time annual bonuses would have been paid if Executive had continued in employment (it being understood that in the event of any such termination Executive is not entitled to an Annual Bonus for the then-current Fiscal Year). If the Company terminates Executive’s employment Without Cause, for Executive’s death, for Executive’s Disability, or if Executive terminates her employment for Good Reason, then, in addition, to the foregoing compensation, upon execution and delivery (and non-revocation) by Executive of the Separation Agreement and General Release as set forth in SECTION 6.10, the Company shall pay severance benefits pursuant to SECTION 3.4 below. No other payments or compensation of any kind shall be paid in respect of Executive’s employment with or termination from the Company. Notwithstanding any contrary provision contained herein, in the event of any termination of Executive’s employment, the exclusive remedies available to the Executive shall be the amounts due under this SECTION 3, which are in the nature of liquidated damages, and are not in the nature of a penalty.


5








3.4
Severance Benefits.

(a)      Termination without Cause or for Good Reason . Subject to the terms and conditions of eligibility for Executive’s receipt of severance benefits under this Agreement, including the timely execution and delivery (and non-revocation) by Executive of the Separation Agreement and General Release as set forth in SECTION 6.10, the Company shall pay to Executive, as severance benefits, which amounts are in addition to the Compensation upon Termination set forth in Section 3.3 herein:

(i)      An amount equal to her current annualized Base Salary which shall be paid to Executive on a salary continuation basis according to the Company’s normal payroll practices over the 12 month period following the date the Executive incurs a Separation from Service, but in no event less frequently than monthly.

(ii)      An amount equal to the Executive’s Target Bonus referenced in SECTION 2.1(b) (based upon her Base Salary as of the date of termination) which shall be paid to Executive when the Annual Cash Bonus for such year is paid to other executives of the Company.

(iii)      Subject to (1) the Executive’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), and (2) the Executive’s continued copayment of premiums at the same level and cost to the Executive as if the Executive were an employee of the Company (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars), continued participation in the Company’s group health plan (to the extent permitted under applicable law and the terms of such plan) which covers the Executive (and the Executive’s eligible dependents) for a period of six (6) months at the Company’s expense, provided that the Executive is eligible and remains eligible for COBRA coverage. The Company may modify its obligation under this SECTION 3.4(a)@) to the extent reasonably necessary to avoid any penalty or excise taxes imposed on it in connection with the continued payment of premiums by the Company under the Patient Protection and Affordable Care Act of 2010, as amended.

(iv)      The Company shall accelerate the vesting of the Executive’s then- outstanding and unvested stock options, stock appreciation rights, restricted stock units or shares, performance stock units or any other Company equity compensation awards, to the extent that such awards would have vested solely upon the Executive’s continued employment, such that one hundred percent (100%) of such awards become vested in full.

(v)      In addition to the benefits described in SECTION 3.4(a)(i), (ii) and (iii), in the event that there is a Change in Control of the Company and (1) the successor fails to assume and continue this Agreement; or (2) within ninety (90) days preceding or within six (6) months after the Change in Control (a) the Executive is terminated without Cause, or (b) Executive terminates for Good Reason, the Company shall (I) accelerate the vesting of the Executive’s then-outstanding and unvested stock options, stock appreciation rights, restricted stock units or shares, performance stock units or any other Company equity compensation awards, to the extent that such awards would have vested solely upon the Executive’s continued employment, such that one hundred percent (100%) of such


6








awards become vested in full, (II) continue Executive’s Base Salary, as provided under SECTION 3.4(i) for 24 months rather than 12 months, and (III) pay Executive an amount equal to the Executive’s Target Bonus (under SECTION 2.1 (b), based upon her Base Salary as of the date of termination), which amount shall be paid to Executive when the Company pays the Annual Cash Bonus for the calendar year that commences immediately after Executive’s termination (and for clarity, shall be in addition to the Target Bonus paid to Executive under Section 3.4(ii)- such that Executive receives two Target Bonuses).

(b)      Termination for Executive’s Death or Disability . In the event of Executive’s death or Disability, the Company shall accelerate the vesting of the Executive’s then-outstanding and unvested stock options, stock appreciation rights, restricted stock units or shares, performance stock units or any other Company equity compensation awards, to the extent that such awards would have vested solely upon the Executive’s continued employment, such that one hundred percent (100%) of such awards become vested in full.

(c)      Notwithstanding any other provision of this Agreement, any severance benefits that would otherwise have been paid before the Company’s first normal payroll payment date falling on or after the thirtieth (30th) day after the date on which the Executive incurs a Separation from Service (the “ First Payment Date ”) shall be made on the First Payment Date. Each separate severance installment payment and each other payment that Executive may be eligible to receive under this Agreement shall be a separate payment under this Agreement for all purposes.

(d)      Notwithstanding anything to the contrary in this Agreement, with respect to any severance benefits or amounts payable to the Executive under this Agreement, in no event shall a termination of employment occur under this Agreement unless such termination constitutes a Separation from Service. For purposes of this Agreement, a “ Separation from Service shall mean the Executive’s “separation from service” with the Company as such term is defined in Treasury Regulation Section l.409A-l(h) and any successor provision thereto.

Notwithstanding anything to the contrary in this Agreement, to the maximum extent permitted by applicable law, amounts payable to the Executive pursuant to this SECTION shall be made in reliance upon Treas. Reg. Section l .409A-l(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-l(b)(4) (Short-Term Deferrals). However, to the extent any such payments are treated as non-qualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), then if Executive is deemed at the time of her Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, then to the extent delayed commencement of any portion of the benefits to which the Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the Executive’s termination benefits shall not be provided to the Executive prior to the earlier of (i) the expiration of the six-month period measured from the date of the Executive’s Separation from Service or (ii) the date of Executive’s death. Upon the earlier of such dates, all payments deferred pursuant to this SECTION 3.4(e) shall be paid in a lump sum to the Executive. Thereafter, payments will resume in accordance with this Agreement. The determination of whether the Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of her Separation from Service shall be made by the Company in accordance with the terms of Section 409A of the Code and applicable


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guidance thereunder (including without limitation Treas. Reg. Section I.409A-l(i) and any successor provision thereto).

(e)      The Executive shall have no duty or obligation to mitigate the amounts due under SECTION 3.4(a) above and any amounts earned by Executive from other employment shall not be offset or reduce the amounts due hereunder.

(f)      The term “ Change in Control shall mean the occurrence of any of the following events: (i) the Board approves a plan of liquidation, dissolution or winding-up of the Company, (ii) the consummation of a sale or other disposition of all or substantially all of the assets of the Company and its subsidiaries, (iii) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company), becoming the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities or otherwise acquiring the power to elect or designate a majority of the members of the Board, (iv) a merger or consolidation of the Company with any other corporation or entity (a “ Merger Partner ”), as a result of which (A) the voting securities of the Merger Partner outstanding immediately prior thereto represent (either by remaining outstanding or by being
converted into voting securities of a surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (B) the shareholders of the Merger Partner immediately prior thereto have the power to elect or designate a majority of the members of the Board of the Company or such surviving entity; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in clause (iii) above) acquires more than 50% of the combined voting power of the Company’s then outstanding securities or the power to elect or designate a majority of the members of the Board shall not constitute a Change in Control of the Company.

SECTION 4
CERTAIN AGREEMENTS

4.1      Confidentiality . Executive acknowledges that the Company owns and shall own and has developed and shall develop proprietary information concerning its business and the business of its subsidiaries and affiliates and each of their employees, customers and clients (“ Proprietary Information ”). Such Proprietary Information includes, among other things, trade secrets, financial information, product plans, customer lists, marketing plans, systems, manuals, training materials, forecasts, inventions, improvements, know-how and other intellectual property, in each case, relating to the Company’s business. Executive shall, at all times, both during employment by the Company and thereafter, keep all Proprietary Information in confidence and trust and shall not use or disclose any Proprietary Information without the written consent of the Company, except as necessary in the ordinary course of Executive’s duties. Executive shall keep the terms of this Agreement in confidence and trust and shall not disclose such terms, except to Executive’s family, accountants, financial advisors, or attorneys, or as otherwise authorized or required by law. The Parties acknowledge that pursuant to the Defend Trade Secrets Act of 2016 (the “ DTSA ”), an individual may not be held criminally or civilly liable under any Federal or state


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trade secret law for disclosure of a trade secret that (i) is made (A) in confidence to a Federal, state or local governmental authority, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of applicable law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Under the DTSA, any employee, contractor, or consultant who is found to have wrongfully misappropriated trade secrets (as the terms “misappropriate” and “trade secret” are defined in the DTSA) may be liable for, among other things, exemplary damages and attorneys’ fees.

4.2      Company Property . Executive recognizes that all Proprietary Information, however stored or memorialized, and all identification cards, keys, flash drives, computers, mobile phones, Personal Data Assistants, telephone numbers, access codes, marketing materials, documents, records and other equipment or property which the Company provides are the sole property of the Company. Upon termination of employment, Executive shall (1) refrain from taking any such property from the Company’s premises, and (2) return any such property in Executive’s possession within ten (10) business days.

4.3      Assignment of Inventions to the Company . Executive shall promptly disclose to the Company all improvements, inventions, formulas, processes, computer programs, know- how and trade secrets developed, whether or not patentable, made or conceived or reduced to practice or developed by Executive, either alone or jointly with others, during and related to Executive’s employment and the Company’s business or while using the Company’s equipment, supplies, facilities or trade secret information (collectively, “ Inventions ”). All Inventions and other intellectual property rights shall be the sole property of the Company and shall be “works made for hire.” Executive hereby assigns to the Company any rights Executive may have or acquire in all Inventions and agrees to perform, during and after employment with the Company, at the Company’s expense including reasonable compensation to Executive, all acts reasonably necessary by the Company in obtaining and enforcing intellectual property rights with respect to such Inventions. Executive hereby irrevocably appoints the Company and its officers and agents as Executive’s attorney-in-fact to act for and in Executive’s name and stead with respect to such Inventions.

SECTION 5
COVENANT NOT TO ENGAGE IN CERTAIN ACTS

5.1      General . The parties understand and agree that the purpose of the restrictions contained in this SECTION 5 is to protect the goodwill and other legitimate business interests of the Company, and that the Company would not have entered into this Agreement in the absence of such restrictions. Executive acknowledges and agrees that the restrictions are reasonable and do not, and will not, unduly impair his or her ability to make a living after the termination of his or her employment with the Company. The provisions of SECTION 4 and SECTION 5 shall survive the expiration or sooner termination of this Agreement. For purposes of SECTION 4 and SECTION 5, “ Company shall include any subsidiary, business unit or affiliate of the Company with respect to which Executive performs Executive’s duties.

5.2      Non-Compete; Non-Diversion . In consideration for this Agreement to employ Executive and other valuable consideration provided hereunder, Executive agrees and covenants that during the term of employment and for a period of twelve (12) months after the Termination Date (or for twenty-four (24) months after the Termination Date if such termination is in


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connection with a Change in Control), Executive shall not, directly or indirectly, for himself or any third party, or alone or as a member of a partnership or limited liability company, or as an officer, director, shareholder, member or otherwise, engage in the following acts:

(a)      divert or attempt to divert any existing business of the Company provided that after the Termination Date this shall not prevent normal competitive sales for a non-Listed Company (as defined below);

(b)      solicit, induce or entice, or seek to solicit, induce or entice, or otherwise interfere with the Company’s business relationship with, any customer of the Company, provided that after the Termination Date this shall not prevent normal competitive sales activities for a non­Listed Company;

(c)      (1) during the term of employment, render any services (whether as an independent contractor or otherwise) on behalf of a “Listed Company” (as defined below), and (B) for a period of twelve months after the Termination Date, render any services (whether as an independent contractor or otherwise) on behalf of any Listed Company;

(d)      own or control any interest in (except as a passive investor of less than two percent (2%) of the capital stock or publicly traded notes or debentures of a publicly held company), or become an officer, director, partner, member, or joint venturer of, any Competing Business, provided that after the Termination Date this shall only apply to the Listed Companies;

(e)      advance credit or lend money to any third party for the purpose of establishing or operating any Competing Business, provided that after the Termination Date this shall only apply to the Listed Companies; or

(f)      with respect to any substantially full time independent contractor of the Company, employee of the Company or individual who was, at any time during the three months prior to the Termination Date, an employee of the Company: (A) hire or retain, or attempt to hire or retain, such individual to provide services for any third party; or (B) encourage, induce, solicit or attempt to solicit, divert, cause or attempt to cause, such individual to (1) terminate and/or leave his or her employment, (2) accept employment with any person or entity other than the Company, or (3) terminate his or her relationship with the Company or devote less than his or her full time efforts to the Company.

As used herein, “ Listed Company means one of ten (10) companies that are material competitors as identified by the Company, provided that the Company may at any time change such ten (10) companies to alternative competitors so long as the number does not exceed ten (I 0), no change can be effective after the termination of Executive’s employment with the Company and any change shall be effective thirty (30) days after Executive is given written notice thereof and only if at the end of such thirty (30) day period the Executive is employed by the Company. As of the Effective Date, the Listed Companies are limited to: 84 Lumber Co., Builders FirstSource, Inc., HD Supply, Inc., Ganahl Lumber Co., US LBM Holdings, LLC, Carter Lumber Company, Parr Lumber Company and McCoy Corporation (dba McCoy’s Building Supply).

5.3      Cessation/Reimbursement of Payments . If Executive violates any provision of SECTION 4 or SECTION 5, the Company may, upon giving written notice to Executive, immediately cease all payments and benefits that it may be providing to Executive pursuant to


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SECTION 2 or SECTION 3, and Executive shall be required to reimburse the Company for any payments received from, and the cash value of any benefits provided by, the Company between the first day of the violation and the date such notice is given; provided, however, that the foregoing shall be in addition to such other remedies as may be available to the Company and shall not be deemed to permit Executive to forego or waive such payments in order to avoid his or her obligations under SECTION 4 or SECTION 5; and provided, further, that any release of claims by Executive pursuant to SECTION 6.10 shall continue in effect.

5.4      Survival; Injunctive Relief . Executive agrees that the provisions of SECTION 4 and SECTION 5 shall survive the termination of this Agreement and the termination of the Executive’s employment. Executive acknowledges that a breach by him of the covenants contained in SECTION 4 or SECTION 5 cannot be reasonably or adequately compensated in damages in an action at law and that such breach will cause the Company immeasurable and irreparable injury and damage. Executive further acknowledges that she possesses unique skills, knowledge and ability and that competition in violation of SECTION 4 or SECTION 5 would be extremely detrimental to the Company. By reason thereof, each of the Company and Executive agrees that the other shall be entitled, in addition to any other remedies it may have under this Agreement, at law or in equity, or otherwise, to temporary, preliminary and/or permanent injunctive and other equitable relief to prevent or curtail any actual or threatened violation of SECTION 4 or SECTION 5, without proof of actual damages that have been or may be caused to the Company by such breach or threatened breach, and waives to the fullest extent permitted by law the posting or securing of any bond by the other party in connection with such remedies.    


SECTION 6
MISCELLANEOUS

6.1           Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by certified or registered mail, postage prepaid, with return receipt requested, telecopy (with hard copy delivered by overnight courier service), or delivered by hand, messenger or overnight courier service and shall be deemed given when received at the addresses of the parties set forth below, or at such other address furnished in writing to the other parties hereto:     

To the Company: BMC Stock Holdings, Inc.    
Attn: General Counsel
Two Lake Side Commons, Suite 500
980 Hammond Drive
Atlanta, GA 30328

To Executive: at the home address of Executive maintained in the
human resource records of the Company.

6.2      Severability . The parties agree that it is not their intention to violate any public policy or statutory or common law. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. Without limiting the foregoing, if any portion of


11







SECTION 5 is held to be unenforceable, the maximum enforceable restriction of time, scope of activities and geographic area will be substituted for any such restrictions held unenforceable.

6.3      Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia without regard to its principles of conflicts of laws. Executive: agrees to submit to the jurisdiction of the State of Georgia; agrees that any dispute concerning this Agreement shall be brought exclusively in a state or federal court of competent jurisdiction in Georgia; and agrees that other than disputes involving SECTION 4 or SECTION 5, all disputes shall be settled through arbitration pursuant to SECTION 6.15. Executive waives any and all objections to jurisdiction or venue.

6.4      Survival . The covenants and agreements of the parties set forth in SECTIONS 4, 5 and 6 are of a continuing nature and shall survive the expiration, termination or cancellation of this Agreement, irrespective of the reason therefor.

6.5      Entire Agreement . This Agreement contains the entire understanding between the parties hereto with respect to the terms of employment, compensation, benefits, and covenants of Executive, and supersede all other prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, between Executive and the Company relating to the subject matter of the Agreement, which such other prior and contemporaneous agreements and understandings, inducements or conditions shall be deemed terminated effective immediately. For the avoidance of doubt, the parties agree that any and all indemnification agreements between Executive and the Company shall continue in full force unimpaired by this Agreement.

6.6      Binding Effect, Etc. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and the Company’s successors and assigns, including any direct or indirect successor by purchase, merger, consolidation, reorganization, liquidation, dissolution, winding up or otherwise with respect to all or substantially all of the business or assets of the Company, and the Executive’s spouse, heirs, and personal and legal representatives.

6.7      Counterparts; Amendment . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement may be amended or modified only by written instrument duly executed by the Company and Executive.

6.8      Voluntary Agreement . Executive has read this Agreement carefully and understands and accepts the obligations that it imposes upon Executive without reservation. No other promises or representations have been made to Executive to induce Executive to sign this Agreement. Executive is signing this Agreement voluntarily and freely.

6.9      Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns (including any direct or indirect successor, spouses, heirs and personal and legal representatives. Any such successor or assign of the Company shall be included in the term “Company” as used in this Agreement.

6.10      Release of Claims . In consideration for the compensation and other benefits provided pursuant to this Agreement, Executive agrees to execute a “Separation Agreement and General Release” to be presented by the Company substantially in the form of Exhibit A attached

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hereto and incorporated herein by this reference. The Company’s obligation to pay severance benefits pursuant to SECTION 3.4 is expressly conditioned on Executive’s execution and delivery of such Separation Agreement and General Release no later than forty-five (45) days after the date the Executive incurs a Separation from Service without revoking it for a period of seven (7) days following delivery. Executive’s failure to execute and deliver such Separation Agreement and General Release within such forty-five (45) day time period (or Executive’s subsequent revocation of such Separation Agreement and General Release) will void the Company’s obligation to pay severance benefits under this Agreement.

6.11      In-kind Benefits and Reimbursements . Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of the Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of the Executive, except for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be made to the Executive as soon as administratively practicable following such submission, but in no event later than December 31st of the calendar year following the calendar year in which the expense was incurred. In no event shall the Executive be entitled to any reimbursement payments after December 31st of the calendar year following the calendar year in which the expense was incurred. This SECTION 6.12 shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to the Executive.

6.12      Section 409A . This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under this Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(l)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(l)(B) (together, referred to herein as the “ Section 409A Penalties ”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. In no event shall the Company be required to provide a tax gross-up payment to Executive or otherwise reimburse Executive with respect to Section 409A Penalties. In the event that following the date hereof the Company reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance.

6.13      Indemnification, etc . The Company shall indemnify and hold harmless Executive to the fullest extent permitted by law for any action or inaction she takes in good faith with regard to the Company or parent or any benefit plan of either, in accordance with the Company’s Articles of Incorporation and By-laws. Further, the Company shall cover Executive on its directors’ and officers’ liability insurance policies to no less extent than that which covers any other officer or director of the Company.


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6.14      Arbitration . Except with respect to the Company’s enforcement of the covenants in SECTION 4 and SECTION 5, in the event that either Executive or the Company (or their successor and assigns, or any other person claiming benefits on behalf of or through them) has a dispute, claim, question, or disagreement arising from or relating to this Agreement or the breach thereof, the parties hereto shall use their best efforts to settle the dispute, claim, question, or disagreement. To this effect, they shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties. If the parties do not reach such solution within a period of 60 days, then, upon written notice by either party to the other, all such disputes, claims, questions, or differences shall be finally settled by confidential binding arbitration administered by the American Arbitration Association in accordance with the provisions of its Employment Arbitration Rules, unless such claim is precluded by law from being settled through arbitration. Such arbitration shall take place in Atlanta, Georgia. Any arbitrator selected by the parties to arbitrate any such dispute shall have practiced predominately in the field of employment law for no less than ten years. The arbitrator will have the power to interpret this Agreement. Any determination or decision by the arbitrator shall be binding upon the parties and may be enforced in any court of law. The parties agree that this arbitration provision does not apply to the right of Executive to file a charge, testify, assist or participate in any manner in an investigation, hearing or proceeding before the Equal Employment Opportunity Commission or any other agency pertaining to any matters covered by this Agreement and within the jurisdiction of the agency. Both Parties agree that this arbitration clause has been bargained for by the Parties upon advice of their respective counsel.

[signatures on following page]


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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.


EXECUTIVE:

/s/ Lisa M. Hamblet
Lisa M. Hamblet


COMPANY:    

BMC STOCK HOLDINGS, INC.

/s/ Peter C. Alexander
Its CEO



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EXHIBIT A

SEPARATION AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release (this “ Agreement ”) is made as of by and between ___(“ Executive ”) and BMC STOCK HOLDINGS, INC. (the “ Company ”). For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.      Termination of Employment . The parties agree that Executive’s employment with the Company and all of its affiliates is terminated effective as of      (the “ Termination Date ”).

2.      Payments Due to Executive . Executive acknowledges receipt of      ($      ) from the Company, representing Executive’s accrued but unpaid Base Salary through the Termination Date. In addition, the Executive shall receive (a) her annual bonus (if any) for the fiscal year completed prior to the Termination Date, to be paid at the same time annual bonuses would have been paid if Executive had continued in employment, and (b) shall receive any vested benefits due under any tax-qualified retirement or group insurance plan or program in accordance with the term thereof. Other than as expressly set forth in this Section, Executive is not entitled to any consulting fees, wages, accrued vacation pay, benefits or any other amounts with respect to her employment through the Termination Date.

3.      Severance Benefits and Continuing Health Insurance Coverage . In consideration of Executive’s execution and non-revocation of this Agreement, the Company agrees to pay to Executive the amounts provided in SECTION 3.4 of that certain Employment Agreement, dated as of    by and between the Executive and the Company, which amounts are, to the extent known, stated on Exhibit A hereto.

4.
General Release .

(a) Executive, on behalf of Executive, his or her heirs, executors, personal representatives, administrators and assigns, irrevocably, knowingly and unconditionally releases, remises and discharges the Company, its parents, all current or former affiliated or related companies of the Company and its parent, partnerships, or joint ventures, and, with respect to each of them, all of the Company’s or such related entities’ predecessors and successors, and with respect to each such entity, its officers, directors, managers, Executives, equity holders, advisors and counsel (collectively, the “ Company Parties ”) from any and all actions, causes of action, charges, complaints, claims, damages, demands, debts, lawsuits, rights, understandings and obligations of any kind, nature or description whatsoever, known or unknown (collectively, the “Claims”), arising out of or relating to the Executive’s employment with the Company and/or the separation of Executive from the Company.

(b) This general release of Claims by Executive includes, without limitation, (i) all Claims based upon actions or omissions (or alleged actions or omissions) that have occurred up to and including the date of this Agreement, regardless of ripeness or other


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limitation on immediate pursuit of any Claim in the absence of this Agreement; (ii) all Claims relating to or arising out of Executive’s employment with and separation from the Company; (iii) all Claims (including Claims for discrimination, harassment, and retaliation) arising under any federal, state or local statute, regulation, ordinance, or the common law, including without limitation, Claims arising under Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination in Employment Act, as amended, the Family and Medical Leave Act and the Executive Retirement Income Security Act of 1974, the Civil Rights Act of 1991, the Equal Pay Act, the Fair labor Standards Act, 42 U.S.C. § 1981, and any other federal or state law, local ordinance or common law including for wrongful discharge, breach of implied or express contract, intentional or negligent infliction of emotional distress, defamation or other tort; and (iv) all Claims for reinstatement, attorney’s fees, interest, costs, wages or other compensation.

(c) Executive agrees that there is a risk that each and every injury which he or she may have suffered by reason of his or her employment relationship might not now be known, and there is a further risk that such injuries, whether known or unknown at the date of this Agreement, might become progressively worse, and that as a result thereof further damages may be sustained by Executive; nevertheless, Executive desires to forever and fully release and discharge the Company Parties, and he or she fully understands that by the execution of this Agreement no further claims for any such injuries may ever be asserted.

(d) This general release does not release any Claim that relates to: (i) Executive’s right to enforce this Agreement; (ii) any rights Executive may have to indemnification from personal liability or to protection under any insurance policy maintained by the Company, including without limitation any general liability, EPLI, or directors and officers insurance policy or any contractual indemnification agreement; (iii) Executive’s right, if any, to government- provided unemployment and worker’s compensation benefits; or (iv) Executive’s rights under any Company Executive benefit plans (i.e. health, disability or retirement plans), which by their explicit terms survive the termination of Executive’s employment.

(e) Executive agrees that the consideration set forth in Paragraph 3 above shall constitute the entire consideration provided under this Agreement, and that Executive will not seek from the Company Parties any further compensation or other consideration for any claimed obligation, entitlement, damage, cost or attorneys’ fees in connection with the matters encompassed by this Agreement.

(f) Executive understands and agrees that if any facts with respect to this Agreement or Executive’s prior treatment by or employment with the Company are found to be different from the facts now believed to be true, Executive expressly accepts, assumes the risk of, and agrees that this Agreement shall remain effective notwithstanding such differences. Executive agrees that the various items of consideration set forth in this Agreement fully compensate for said risks, and that Executive will have no legal recourse against the Company in the event of discovery of a difference in facts.

(g) Executive agrees to the release of all known and unknown claims, including expressly the waiver of any rights or claims arising out of the Federal Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq. (“ ADEA ”), and in connection with such waiver of


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ADEA claims, and as provided by the Older Worker Benefit Protection Act, Executive understands and agrees as follows:

(i)      Executive has the right to consult with an attorney before signing this Agreement, and is hereby advised to do so;

(ii)      Executive shall have a period of forty-five (45) days from the Termination Date (or from the date of receipt of this Agreement if received after the Termination Date) in which to consider the terms of the Agreement (the “ Review Period ”). Executive may at his or her option execute this Agreement at any time during the Review Period. If the Executive does not return the signed Agreement to the Company prior to the expiration of the 45 day period, then the offer of severance benefits set forth in this Agreement shall lapse and shall be withdrawn by the Company;

(iii)      Executive may revoke this Agreement at any time during the first seven (7) days following Executive’s execution of this Agreement, and this Agreement and release shall not be effective or enforceable with respect to any Claim under the ADEA until the seven-day period has expired (“ Revocation Period Expiration Date ”). Notice of a revocation by the Executive must be made to the designated representative of the Company (as described below) within the seven (7) day period after Executive signs this Agreement. If Executive revokes this Agreement, it shall not be effective or enforceable against the Company Parties. Accordingly, the “Effective Date” of this Agreement shall be on the eighth (8th) day after Executive signs the Agreement and returns it to the Company, and provided that Executive does not revoke the Agreement during the seven (7) day revocation period;

In the event Executive elects to revoke this release pursuant to Paragraph 4(g)iii above, Executive shall notify Company by hand-delivery, express courier or certified mail, return receipt requested, within seven (7) days after signing this Agreement to: ATTN: General Counsel, Legal Department, BMC Stock Holdings, Inc., Two Lake Side Commons, Suite 500, 980 Hammond Drive, Atlanta, Georgia 30328. In the event that Executive exercises his or her right to revoke this release pursuant to Paragraph 4(g)iii above, any and all obligations of Company under this Agreement shall be null and void. Executive agrees that by signing this Agreement prior to the expiration of the forty-five (45) day period he or she has voluntarily waived his or her right to consider this Agreement for the full forty-five (45) day period.

EXECUTIVE AGREES THAT THE CONSIDERATION RECEIVED BY HIM OR HER UNDER THIS AGREEMENT, INCLUDING THE PAYMENTS DESCRIBED ABOVE, IS IN FULL AND COMPLETE SATISFACTION OF ANY CLAIMS THAT EXECUTIVE MAY HAVE, OR MAY HAVE HAD, ARISING OUT OF EXECUTIVE’S EMPLOYMENT WITH COMPANY (INCLUDING FOR THE AVOIDANCE OF DOUBT, ALL OF ITS SUBSIDIARIES OR AFFILIATES) OR THE TERMINATION OF THAT EMPLOYMENT, UP TO THE DATE OF EXECUTION OF THIS AGREEMENT. EXECUTIVE ACKNOWLEDGES THAT HE OR SHE UNDERSTANDS THAT, BY ENTERING INTO THIS AGREEMENT, HE OR SHE NO LONGER HAS THE RIGHT TO ASSERT ANY



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CLAIM OR LAWSUIT OF ANY KIND ATTEMPTING TO RECOVER MONEY OR ANY OTHER RELIEF AGAINST THE COMPANY PARTIES FOR ACTS OR INJURIES ARISING OUT OF EXECUTIVE’S FORMER EMPLOYMENT BY COMPANY (INCLUDING FOR THE AVOIDANCE OF DOUBT, ALL OF ITS SUBSIDIARIES OR AFFILIATES) OR THE TERMINATION OF THAT EMPLOYMENT.

Such claims further include any claims Executive may have pursuant to an internal grievance procedure at Company (including for the avoidance of doubt, all of its subsidiaries or affiliates). Executive does not waive any rights or claims that may arise after the date this Agreement is executed.

5.      Review of Agreement; No Assignment of Claims . Executive represents and warrants that he or she (a) has carefully read and understands all of the provisions of this Agreement and has had the opportunity for it to be reviewed and explained by counsel to the extent Executive deems it necessary, (b) is voluntarily entering into this Agreement, (c) has not relied upon any representation or statement made by the Company or any other person with regard to the subject matter or effect of this Agreement, (d) has not transferred or assigned any Claims and (e) has not filed any complaint or charge against any of the Company Parties with any local, state, or federal agency or court.

6.      No Claims . Each party represents that it has not filed any Claim against the other Party with any state, federal or local agency or court and that it will not file any Claim at any time regarding the matters covered by this Agreement; provided, however, that nothing in this Agreement shall be construed to prohibit Executive from filing a Claim, including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission or participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission; provided, further, that Executive acknowledges that she will not be entitled to recover any monetary or other damages in connection with or as a result of any such EEOC or state FEP agency proceeding.

7.      Interpretation . This Agreement shall take effect as an instrument under seal and shall be governed and construed in accordance with the laws of the State of Georgia without regard to provisions or principles thereof relating to conflict of laws.

8.      Agreement as Defense . This Agreement may be pleaded as a full and complete defense to any subsequent action or other proceeding arising out of, relating to, or having anything to do with any and all Claims, counterclaims, defenses or other matters capable of being alleged, which are specifically released and discharged by this Agreement. This Agreement may also be used to abate any such action or proceeding and/or as a basis of a cross­ complaint for damages.

9.      Nondisclosure of Agreement . The terms and conditions of this Agreement are confidential. Executive agrees not to disclose the terms of this Agreement to anyone except immediate family members and Executive’s attorneys and financial advisers. Executive further agrees to inform these people that the Agreement is confidential and must not be disclosed to anyone else. Executive may disclose the terms of this Agreement if compelled to do so by a court, but Executive agrees to notify the Company immediately if anyone seeks to compel Executive’s testimony in this regard, and to cooperate with the Company if the Company decides


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to oppose such effort. Executive agrees that disclosure by Executive in violation of this Agreement would cause so much injury to the Company that money alone could not fully compensate the Company and that the Company is entitled to injunctive and equitable relief. Executive also agrees that the Company would be entitled to recover money from Executive if this Agreement were violated.

10.      Ongoing Covenants . Executive acknowledges that nothing in this Agreement shall limit or otherwise impact Executive’s continuing obligations of confidentiality to the Company in accordance with Company policy and applicable law, or any applicable Company policies or agreements between the Company and Executive with respect to non-competition or non-solicitation, and Executive covenants and agrees to abide by all such continuing obligations.

11.      No Adverse Comments . For two (2) years, Executive agrees not to make, issue, release or authorize any written or oral statements, derogatory or defamatory in nature, about the Company, its affiliates or any of their respective products, services, directors, officers or executives, provided that the foregoing shall not be violated by truthful testimony in response to legal process, normal competitive statements, rebuttal of statements by the other or actions to enforce her rights. Nothing herein prohibits Executive from communicating, without notice to or approval by the Company, with any federal government agency about a potential violation of a federal law or regulation.

12.      Integration; Severability . The terms and conditions of this Agreement constitute the entire agreement between Company and Executive and supersede all previous communications, either oral or written, between the parties with respect to the subject matter of this Agreement. No agreement or understanding varying or extending the terms of this Agreement shall be binding upon either party unless in writing signed by or on behalf of such party. In the event that a court finds any portion of this Agreement unenforceable for any reason whatsoever, Company and Executive agree that the other provisions of the Agreement shall be deemed to be severable and will continue in full force and effect to the fullest extent permitted by law.

EXECUTIVE ACKNOWLEDGES THE FOLLOWING: HE OR SHE HAS ENTERED INTO THIS AGREEMENT KNOWINGLY, VOLUNTARILY AND OF HIS OR HER OWN FREE WILL WITH A FULL UNDERSTANDING OF ITS TERMS; HE OR SHE HAS READ THIS AGREEMENT; THAT HE OR SHE FULLY UNDERSTANDS ITS TERMS; THAT EXECUTIVE IS ADVISED TO CONSULT AN ATTORNEY FOR ADVICE; THAT HE OR SHE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT; THAT HE OR SHE HAS HAD AMPLE TIME TO CONSIDER HIS OR HER DECISION BEFORE ENTERING INTO THE AGREEMENT. EXECUTIVE ACKNOWLEDGES THAT HE OR SHE IS SATISFIED WITH THE TERMS OF THIS AGREEMENT AND AGREES THAT THE TERMS ARE BINDING UPON HIM OR HER.

IN WITNESS WHEREOF, the parties have executed this Agreement with effect as of the date first above written.

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EXECUTIVE ACKNOWLEDGES THAT SHE HAS BEEN ADVISED BY THE COMPANY OF HER ABILITY TO TAKE ADVANTAGE OF THE CONSIDERATION PERIOD AFFORDED BY PARAGRAPH 4 ABOVE AND THAT SHE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT.

IN WITNESS WHEREOF, the parties have executed this Agreement with effect as of the date first above written.

__________________________


BMC STOCK HOLDINGS, INC.

By: ________________
Name: ________________
Title: ________________






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SEVERANCE AGREEMENT
EXHIBIT A

The following severance benefits are payable pursuant to Section 3.4 of the Executive’s Employment Agreement:    


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EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “ Agreement ”) is entered into as of Janu a ry 7, 2 017 between Michael McGau g h (“ E x ecutive ) and BMC STOCK HOLDINGS, INC. , a Delaware corporation (the “ C omp a n y ) .

RECITALS

WHEREAS , T h e C omp a n y off e r e d Ex ecuti v e by l e tter dated Januar y 7, 2 01 7, the position with the Company of Executive Vice President and Chi e f Operating Officer and E x e c utive accepted th e offer , and

WHEREA S , Executive and the Company desir e to e nter into an Employm e nt Agreement setting forth the terms and conditions of Executive s employment by th e Compan y,

NOW , THEREFORE , in consideration of the promises and mutual co v enants cont a ined herein , the Company and E x ecutive hereby agree as follo w s:

TERMS AND CONDITIONS

SECTION 1
EMPLOYMENT

1.1     Employment . The Company hereby employs Executive and Executive hereby accepts such employment by the Company for the period and upon the terms and conditions contained in this Agreement.

1.2     Position and Duties . Executive shall serve the Company as its Executive Vice President and Chief Operat i ng Officer . Executive shall have all of the powers and duties in such capacity that are customary to the powers and duties of those of an Executive Vice President and Chief Operating Officer serving in a similar role in a company within the industry in which the Company operates . The foregoing powers and duties shall be subject to the direction of the Company s Board of Directors (the “ Board ”) and its President and Chief Executive Officer. Executive shall report to the President and Chief Execut i ve Officer of the Company or his successor . Executive shall devote Executive s full business time and attention and full diligence and vigor and good faith efforts to the affairs of the Company and Executive shall not engage in any other material business duties or pursuits or render any services of a professional nature to any other ent i ty or person , or serve on any other board of directors (other than a not - for - profit board of d i rectors, and then only to the extent it does not interfere with his duties to the Company), without the prior written consent of the Chief Executive Officer .

1.3     Effective Date; Indefinite Term . E x ecutive’s employment under this Agreement shall begin on a mutually agreed date on or before Febru ary 20, 2 017 (“ Effective Date ”) and continue for an indefinite term, until terminated in accordance with SECT I ON 3 below . Certain provisions , however, as more full y set forth in SECTION 4, SECTION 5 and SECTION 6 below, continue in effect beyond the date of the termination of Executive’s employment (the “ Termination Date ”) .

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SECTION 2
COMPENSATION AND BENEFITS

2.1     Compensation .

(a)     Base Salary . The Company shall pay to Executive an annual base salary at the rate not less than $550,000 each calendar year (“ Base Salary ”), payable in accordance with the Company’s ordinary payroll and withholding practices from time to time in effect for its employees. During the term of employment hereunder, the Executive’s salary shall be reviewed from time to time (but no less than annually) to determine whether an increase in Executive’s salary is appropriate. Any such increase shall be at the sole discretion of the Board.

(b)     Annual Cash Bonus . During the term of employment, Executive shall be eligible to receive an annual cash bonus (“ Annual Cash Bonus ”) under the Company’s incentive award plan for management and executives as from time to time adopted by the Board (the “ Incentive Plan ”). The Annual Cash Bonus shall be determined based on a target bonus equal to 100% of Base Salary (the Target Bonus ”).

(c)     Annual Equity Grant . During the term of employment , Executive shall be eligible to receive an annual grant of equity (the Annual Equity Grant ”) under the Company’s Long Term Incentive Plan. The actual award and amount of any Annual Equity Grant will be determined the Board or the Compensation Committee of the Board, as appropriate, based upon any of the factors described in the Long Term Incentive Plan in addition to general factors relating to retention of talent. The Annual Equity Grant shall be determined based on a target value equal to 150% of Base Salary.

(d)     Sign-On Equity Grant . As of the thirtieth (30 th ) day following the Effective Date, Executive shall be eligible to reserve a one-time grant of 42,500 restricted stock units under the Company’s Long-Term Incentive Plan . Executive may earn this award by continuing employment with the Company for three years, with vesting in three substantially equivalent installments (of 14,166, 14 , 166 and 14,168, respectively) as of the first three anniversaries of the date the award is granted .

(e)     One-time Sign - on Bonus . The Company shall pay Executive a one-time bonus equal to one-hundred thousand dollars ($100 , 000), provided Executive relocates his immediate family’s primary residence to the Atlanta, Georgia metropolitan area no later than December 31, 2017. Such bonus shall be payable to Executive solely in 2017 , and it may be paid to Executive in advance of the relocation, provided such relocation is consummated within thirty (30) days of payment. If Executive voluntarily terminates his employment within twelve months following rece i pt of receiving this bonus, he will be responsible for reimbursing the full amount to the Company within ten (10) days of his termination.

2.2     Benefit .

(a)     Generally . Executive shall be eligible to participate , to the extent it is legal and permitted by the applicable benefits plans , policies or contracts, in all employee benefits programs that the Company may adopt for its employees generally providing for sick or other leave, vacation , group health , disability and life insurance benefits. Executive shall be eligible to participate in the Company’s 401(k) plan on the terms and conditions and qualifications of such


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plan from time to time in effect, with a Company match (if any) no less favorable than that provided to any other Company executive vice president. Executive shall be entitled to four (4) weeks of paid vacation for each full calendar year of employment , to be accrued in accordance with the Company’s regular vacation pay policy.

(b)     Executive . Executive shall be eligible to participate, to the extent it is legal and permitted by the applicable plans, policies or contracts, in all benefits or fringe benefits which are in effect generally for the Company’s executive personnel from time to time.

2.3     Expense Reimbursement . The Company shall pay or reimburse Executive for all reasonable expenses incurred in connection with performing his duties upon presentation of documents in accordance with the reasonable procedures established by the Company.

SECTION 3
TERMINATION

3.1     By the Company :

(a)     For Cause . The Company shall have the right at any time, exercisable upon written notice, to terminate the Executive’s employment for Cause. As used in this Agreement, Cause shall mean that the Executive:

(i)    has committed any act or omission that results in, or that may reasonably be expected to result in, a conviction, plea of no contest or imposition of unadjudicated probation for any felony or crime involving moral turpitude;

(ii)    has committed any act of fraud, embezzlement or misappropriation, or engaged in material misconduct or breach of fiduciary duty against the Company (or any predecessor thereto or successor thereof) ;

(iii)    has willfully failed to substantially perform such duties as are reasonably assigned to him under this Agreement; or

(iv)    has unlawful used (including being under the influence) or possessed illegal drugs on BMC’s premises or while performing his duties and responsibilities for BMC;

(v)    materially fails to attempt in good faith to perform Executive’s duties required
under Executive’s employment by or other relationship with the Company (it being agreed that
failure of the Company to achieve operating results or similar poor performance of the Company shall
not, in and of itself, be deemed a failure to perform Executive’s duties);

(vi)    fails to attempt in good faith to comply with a lawful directive of the CEO or the Board that is consistent with the Company’s business practices and Code of Ethics;

(vii)    engages in willful misconduct for which Executive receives a material and improper personal benefit at the expense of the Company, or accidental


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misconduct resulting in such a benefit which Executive does not promptly report to the Company and redress promptly upon becoming aware of such benefit ;

(viii)    in carrying out his duties under this Agreement, has engaged in acts or omissions constituting gross negligence or willful misconduct resulting in, or which, in the good faith opinion of the Board, could be expected to result in , substant i al economic harm to the Company;

(ix)    has failed for any reason to correct, cease or alter any action or omission that (A) materially violates or does not conform with the Company’s policies, standards or regulations in a material way, (B) constitutes a material breach of this Agreement, including SECTION 4, or (C) constitutes a material breach of his duty of loyalty to the Company; or

(x)    has disclosed any Proprietary Information (as defined below) without authorization from the Board, Chief Executive Officer or General Counsel except as otherwise permitted by this Agreement, another agreement between the parties or any Company policy in effect at the time of disclosure.

For purposes of the definition of “Cause”, “Company” shall include any subsidiary, business unit or affiliate of the Company. The Company shall provide written notice to Executive of any act or omission that the Company believes constitutes grounds for “Cause” pursuant to clause (iii) above, and no such act or omission shall constitute “Cause” unless Executive fails to remedy such act or omission within ten (10) days of the receipt of such notice; provided that such ten (10) day cure period shall not apply with respect to any matter that is incapable of cure within such period .

(b)     Due to Death or Disability . Executive’s employment shall terminate upon Executive’s death and the Company may terminate Executive’s employment due to Executive’s Disability . As used in this Agreement, “ Disability shall mean any physical or mental disability or incapacity that is reasonably expected to render Executive incapable of fully performing the services required of Executive by the Company for a period of 180 consecutive days or for shorter periods aggregating 180 days dur i ng any twelve (12) month period . For purposes of the definition of “Disability”, “Company” shall include any subsidiary, business unit or affiliate of the Company. Any question as to the existence of a Disability upon which Executive and the Company cannot agree shall be determined by a qualified independent physician selected by Executive (or, if Executive is unable to make such selection, a selection shall be made by Executive’s spouse, if available , or if such spouse is unavailable due to death or incapacity, any other adult member of Executive’s immediate family), with the consent of the Company, which consent shall not be unreasonably withheld . The determination of such physician made in writing to the Company and Executive shall be final and conclusive for all purposes of determining Disability under this Agreement.

(c)     Without Cause . The Company may terminate Executive’s employment under this Agreement at any time Without Cause. As used in his Agreement , a termination “ Without Cause shall mean the termination of Executive’s employment by the Company other than (i) for Cause pursuant to SECTION 3.1(a) above or (ii) due to death or Disability pursuant to SECTION 3 . 1(b) above .


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3.2     By the Executive :

(a)     Without Good Reason . Executive may terminate his employment under this Agreement at any time Without Good Reason . As used in this Agreement, a termination “Without Good Reason” shall mean termination of Executive’s employment by Executive other than For Good Reason pursuant to SECTION 3.2(b) below .

(b)     For Good Reason . Executive shall have the right at any time to resign his employment under this Agreement For Good Reason. As used in this Agreement, For Good Reason shall mean any of the following : (i) a material diminution in the Executive s Base Salary or Target Annual Cash Bonus, (ii) a material diminution in Executive’s title, authority, duties and responsibilities as compared to Executive’s title , authority, duties and responsibilities measured immediately after the Effective Date, (iii) any requirement that the Executive report to anyone but (A) the President and Chief Executive Officer of the ultimate parent entity, or (B) if the Company becomes a subsidiary or a division of another entity not engaged predominantly in the same business as the Company, the most senior executive of such subsidiary or division, (iv) any material breach by the Company or related entities of this Agreement or the Executive’s other agreements w i th the Company or related entities, (v) there is a Change in Control and the successor to the Company, if applicable, does not assume and continue this Agreement, and (vi) any requirement by the Company that Executive relocate his personal residence.

Notwithstanding the foregoing, no event shall be a Good Reason event unless the Executive gives the Company written notice thereof within ninety (90) days of the first occurrence thereof, the Company does not cure such event within thirty (30) days of the giving of such notice, the Executive does not terminate employment prior to sixty (60) days after the end of the cure period, and the Executive resigns within ninety days after the cure period expires .

3.3     Compensation Upon Termination . Upon termination of Executive s employment with the Company, the Company’s obligation to pay compensation and benefits under SECTION 2 hereof shall terminate, except that the Company shall pay to the Executive or, if applicable, the Executive’s heirs , all earned but unpaid Base Salary under SECTION 2.l(a) and accrued but unused vacation under SECTION 2.2, in each case , through the Termination Date. In addition, Executive shall be entitled to receive (i) any vested amounts or benefits due under any tax-qualified retirement or group insurance plan or program in accordance with the terms thereof, and (ii) other than on termination for Cause or a voluntary termination by Executive without Good Reason, his annual bonus for any completed fiscal year at the same time annual bonuses would have been paid if Executive had continued in employment (it being understood that in the event of any such termination Executive is not entitled to an Annual Bonus for the then-current Fiscal Year). If the Company terminates Executive’s employment Without Cause, for Executive’s death, for Executive’s Disability, or if Executive terminates his employment for Good Reason, then , in addition, to the foregoing compensation , upon execution and delivery (and non-revocation) by Executive of the Separation Agreement and General Release as set forth in SECTION 6 . 10 , the Company shall pay severance benefits pursuant to SECTION 3.4 below . No other payments or compensation of any kind shall be paid in respect of Executive’s employment with or termination from the Company. Notwithstanding any contrary provision contained herein, in the event of any termination of Executive’s employment, the exclusive remedies available to the Executive shall be the amounts due under this SECTION 3, which are in the nature of liquidated damages, and are not in the nature of a penalty.

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3.4     Severance Benefits .

(a)     Termination without Cause or for Good Reason . Subject to the terms and conditions of eligibility for Executive’s receipt of severance benefits under this Agreement, including the timely execution and delivery (and non-revocation) by Executive of the Separation Agreement and General Release as set forth in SECTION 6.10, the Company shall pay to Executive, as severance benefits:

(i)    An amount equal to his current annualized Base Salary which shall be paid to Executive on a salary continuation basis according to the Company’s normal payroll practices over the 12 month period following the date the Executive incurs a Separation from Service, but in no event less frequently than monthly.

(ii)    An amount equal to the Executive’s Target Bonus referenced in SECTION 2.1(b) (based upon his Base Salary as of the date of termination) which shall be paid to Executive when the Annual Cash Bonus for such year is paid to other executives of the Company.

(iii)    Subject to (1) the Executive’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), and (2) the Executive’s continued copayment of premiums at the same level and cost to the Executive as if the Executive were an employee of the Company (excluding, for purposes of calculating cost, an employee’s ability to pay premiums with pre-tax dollars), continued participation in the Company’s group health plan (to the extent permitted under applicable law and the terms of such plan) which covers the Executive (and the Executive’s eligible dependents) for a period of six (6) months at the Company’s expense, provided that the Executive is eligible and remains eligible for COBRA coverage. The Company may modify its obligation under this SECTION 3.4(a)(ii) to the extent reasonably necessary to avoid any penalty or excise taxes imposed on it in connection with the continued payment of premiums by the Company under the Patient Protection and Affordable Care Act of 2010, as amended.

(iv)    The Company shall accelerate the vesting of the Executive’s then- outstanding and unvested stock options, stock appreciation rights, restricted stock units or shares, performance stock units or any other Company equity compensation awards, to the extent that such awards would have vested solely upon the Executive’s continued employment, such that one hundred percent (100%) of such awards become vested in full.

(v)    In addition to the benefits described in SECTION 3.4(a)(i), (ii) and (iii), in the event that there is a Change in Control of the Company and (1) the successor fails to assume and continue this Agreement, or (2) within six (6) months after the Change in Control (a) the successor terminates Executive without Cause, or (b) Executive terminates for Good Reason, the Company shall (I) accelerate the vesting of the Executive’s then-outstanding and unvested stock options, stock appreciation rights, restricted stock units or shares, performance stock units or any other Company equity compensation awards, to the extent that such awards would have vested solely upon the Executive’ s continued employment, such that one hundred percent (100%) of such awards become vested in full, (II) continue Executive’s Base Salary, as provided under SECTION 3.4(i) for 24 months


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rather than 12 months, and (III) pay Executive an amount equal to the Executive’s Target Bonus (under SECTION 2.1 (b), based upon his Base Salary as of the date of termination), which amount shall be paid to Executive when the Company pays the Annual Cash Bonus for the calendar year that commences immediately after Executive s termination (and for clarity, shall be in addition to the Target Bonus paid to Executive under Section 3.4(ii)­ such that Executive receives two Target Bonuses).

(b)    Termination for Executive’s Death or Disability. In the event of Executive’s death or Disability, the Company shall accelerate the vesting of the Executive’s then-outstanding and unvested stock options, stock appreciation rights, restricted stock units or shares, performance stock units or any other Company equity compensation awards, to the extent that such awards would have vested solely upon the Executive’s continued employment, such that one hundred percent (100%) of such awards become vested in full.

(c)    Notwithstanding any other provision of this Agreement , any severance benefits that would otherwise have been paid before the Company s first normal payroll payment date falling on or after the thirtieth (30th) day after the date on which the Executive incurs a Separation from Service (the “ First Payment Date ”) shall be made on the First Payment Date . Each separate severance installment payment and each other payment that Executive may be eligible to recei v e under this Agreement shall be a separate payment under this Agreement for all purposes.

(d)    Notwithstanding anything to the contrary in this Agreement , with respect to any severance benefits or amounts payable to the Executive under this Agreement, in no event shall a termination of employment occur under this Agreement unless such termination constitutes a Separation from Service . For purposes of this Agreement , a “ Separation from Service shall mean the Executive s “separation from service” with the Company as such term is defined in Treasury Regulation Section 1.409A-l(h) and any successor provision thereto .

Notwithstanding anything to the contrary in this Agreement, to the maximum extent permitted by applicable law, amounts payable to the Executive pursuant to this SECTION shall be made in reliance upon Treas . Reg . Section 1.409A - l(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-l(b)(4) (Short - Term Deferrals). However , to the extent any such payments are treated as non-qualified deferred compensation subject to Section 409A of the Int e rnal Re v enue Code of 1986, as amended (the “Code ), then if Executive is deemed at the time of his Separation from Service to be a “specified employee” for purposes of Section 409A(a)( 2 )(B)(i) of the Code, then to the extent delayed commencement of any portion of the benefits to which the Executive is entitled under this Agreement is required i n order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the Executive’s termination benefits shall not be provided to the Executive prior to the earlier of (i) the expiration of the six - month period measured from the date of the Executive’s Sepa r ation from Service or (ii) the date of Executive’s death. Upon the earlier of such dates, all payments deferred pursuant to this SECTION 3.4(e) shall be paid in a lump sum to the Executive. Thereafter , payments will resume in acco r dance with this Agreement. The determination of whether the Executive is a “specified employee” for purpos e s of Section 409A(a)(2)(B)(i) of the Code as of the time of his Separation from Service shall be made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (includ i ng without limitation Treas . Re g . Section 1.409A-l(i) and any successor provision thereto).

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(e)    The Executive shall have no duty or obligation to mitigate the amounts due under SECTION 3.4(a) above and any amounts earned by Executive from other employment shall not be offset or reduce the amounts due hereunder.

(f)    The term Change in Control shall mean the occurrence of any of the following events: (i) the Board approves a plan of liquidation, dissolution or winding-up of the Company, (ii) the consummation of a sale or other disposition of all or substantially all of the assets of the Company and its subsidiaries, (iii) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company), becoming the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities or otherwise acquiring the power to elect or designate a majority of the members of the Board , (iv) a merger or consolidation of the Company with any other corporation or entity (a “ Merger Partner ”), as a result of which (A) the voting securities of the Merger Partner outstanding immediately prior thereto represent (either by remaining outstanding or by being converted into voting securities of a surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (B) the shareholders of the Merger Partner immediately prior thereto have the power to elect or designate a majority of the members of the Board of the Company or such surviving entity; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in clause (iii) above) acquires more than 50% of the combined voting power of the Company’s then outstanding securities or the power to elect or designate a majority of the members of the Board shall not constitute a Change in Control of the Company.

SECTION 4
CERTAIN AGREEMENTS

4.1     Confidentiality . Executive acknowledges that the Company owns and shall own and has developed and shall develop proprietary information concerning its business and the business of its subsidiaries and affiliates and each of their employees, customers and clients (“Proprietary Information”). Such Proprietary Information includes, among other things, trade secrets, financial information, product plans, customer lists, marketing plans , systems , manuals, training materials, forecasts, inventions, improvements, know - how and other intellectual property, in each case, relating to the Company’s business . Executive shall, at all times, both during employment by the Company and thereafter, keep all Proprietary Information in confidence and trust and shall not use or disclose any Proprietary Information without the written consent of the Company, except as necessary in the ordinary course of Executive’s duties. Executive shall keep the terms of this Agreement in confidence and trust and shall not disclose such terms, except to Executive’s family, accountants, financial advisors, or attorneys, or as otherwise authorized or required by law. The Parties acknowledge that pursuant to the Defend Trade Secrets Act of 2016 (the “ DTSA ”), an individual may not be held criminally or civilly liable under any Federal or state trade secret law for disclosure of a trade secret that (i) is made (A) in confidence to a Federal, state or local governmental authority, either directly or indirectly, or to an attorney; and (B) solely for the purpose of reporting or investigating a suspected violation of applicable law; or (ii) is made in a


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complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Under the DTSA, any employee, contractor , or consultant who is found to have wrongfully misappropriated trade secrets (as the terms “misappropriate” and “trade secret” are defined in the DTSA) may be liable for, among other things, exemplary damages and attorneys’ fees.

4.2     Company Property . Executive recognizes that all Proprietary Information, however stored or memorialized, and all identification cards, keys, flash drives, computers, mobile phones, Personal Data Assistants, telephone numbers, access codes, marketing materials, documents , records and other equipment or property which the Company provides are the sole property of the Company . Upon termination of employment, Executive shall (1) refrain from taking any such property from the Company’s premises, and (2) return any such property in Executive’s possession within ten (10) business days.

4.3     Assignment of Inventions to the Company . Executive shall promptly disclose to the Company all improvements, inventions, formulas, processes, computer programs, know-how and trade secrets developed, whether or not patentable, ma e or conceived or reduced to practice or developed by Executive, either alone or jointly with others, during and related to Executive’s employment and the Company’s business or while using the Company’s equipment, supplies, facilities or trade secret information (collectively , Inventions ”). All Inventions and other intellectual property rights shall be the sole property of the Company and shall be “works made for hire . ” Executive hereby assigns to the Company any rights Executive may have or acquire in all Inventions and agrees to perform, during and after employment with the Company, at the Company’s expense including reasonable compensation to Executive, all acts reasonably necessary by the Company in obtaining and enforcing intellectual property rights with respect to such Inventions. Executive hereby irrevocably appoints the Company and its officers and agents as Executive’s attorney-in-fact to act for and in Executive’s name and stead with respect to such Inventions.

SECTION 5
COVENANT NOT TO ENGAGE IN CERTAIN ACTS

5.1     General . The parties understand and agree that the purpose of the restrictions contained in this SECTION 5 is to protect the goodwill and other legitimate business interests of the Company, and that the Company would not have entered into this Agreement in the absence of such restrictions . Executive acknowledges and agrees that the restrictions are reasonable and do not, and will not, unduly impair his ability to make a living after the termination of his or her employment with the Company. The provisions of SECTION 4 and SECTION 5 shall survive the expiration or sooner termination of this Agreement. For purposes of SECTION 4 and SECTION 5 , Company ” shall include any subsidiary, business unit or affiliate of the Company with respect to which Executive performs Executive’s duties.

5.2     Non-Compete; Non-Diversion . In consideration for this Agreement to employ Executive and other valuable consideration provided hereunder, Executive agrees and covenants that during the term of employment and for a period of twelve (12) months after the Termination Date (or for twenty-four (24) months after the Termination Date if such termination is in connection with a Change in Control), Executive shall not, directly or indirectly, for himself or any third party, or alone or as a member of a partnership or limited liability company, or as an officer, director, shareholder, member or otherwise, engage in the following acts:


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(a)     divert or attempt to divert any existing business of the Company provided that after the Termination Date this shall not prevent normal competitive sales for a non-Listed Company (as defined below);     ·

(b)     solicit, induce or entice, or seek to solicit, induce or entice, or otherwise interfere with the Company’s business relationship with, any customer of the Company, provided that after the Termination Date this shall not prevent normal competitive sales activities for a non­Listed Company;

(c)     (1) during the term of employment, render any services (whether as an independent contractor or otherwise) on behalf of a “Listed Company” (as defined below), and (B) for a period of twelve months after the Termination Date, render any services (whether as an independent contractor or otherwise) on behalf of any Listed Company;

(d)     own or control any interest in (except as a passive investor of less than two percent (2%) of the capital stock or publicly traded notes or debentures of a publicly held company), or become an officer, director, partner, member , or joint venturer of, any Competing Business, provided that after the Termination Date this shall only apply to the Listed Companies;

(e)     advance credit or lend money to any third party for the purpose of establishing or operating any Competing Business, provided that after the Termination Date this shall only apply to the Listed Companies; or

(f)     with respect to any substantially full time independent contractor of the Company, employee of the Company or individual who was, at any time during the three months prior to the Termination Date, an employee of the Company: (A) hire or retain, or attempt to hire or retain, such individual to provide services for any third party; or (B) encourage, induce, solicit or attempt to solicit, divert, cause or attempt to cause, such individual to (1) terminate and/or leave his or her employment, (2) accept employment with any person or entity other than the Company, or (3) terminate his or her relationship with the Company or devote less than his or her full time efforts to the Company.

As used herein, “Listed Company” means one of ten (10) companies that are material competitors as identified by the Company, provided that the Company may at any time change such ten (10) companies to alternative competitors so long as the number does not exceed ten (10), no change can be effective after the termination of Executive’s employment with the Company and any change shall be effective thirty (30) days after Executive is given written notice thereof and only if at the end of such thirty (30) day period the Executive is employed by the Company. As of the Effective Date, the Listed Companies are limited to: 84 Lumber Co., Builders FirstSource, Inc., HD Supply, Inc . , Ganahl Lumber Co . , US LBM Holdings, LLC, Carter Lumber Company, Parr Lumber Company and McCoy Corporation (dba McCoy’s Building Supply).

5.3     Cessation/Reimbursement of Payments . If Executive violates any provision of SECTION 4 or SECTION 5, the Company may, upon giving written notice to Executive, immediately cease all payments and benefits that it may be providing to Executive pursuant to SECTION 2 or SECTION 3, and Executive shall be required to reimburse the Company for any payments received from, and the cash value of any benefits provided by, the Company between the first day of the violation and the date such notice is given; provided, however, that the foregoing


10









shall be in addition to such other remedies as may be available to the Company and shall not be deemed to permit Execut i ve to forego or waive such payments in order to avoid his or her obligations under SECTION 4 or SECTION 5; and provided, further, that any release of claims by Executive pursuant to SECTION 6.10 shall continue in effect.

5.4     Surviva l: Injunctive Relief . Executive agrees that the provisions of SECTION 4 and SECTION 5 shall survive the termination of this Agreement and the termination of the Executive’s employment. Executive acknowledges that a breach by him of the covenants contained in SECTION 4 or SECTION 5 cannot be reasonably or adequately compensated in damages in an action at law and that such breach will cause the Company immeasurable and irreparable injury and damage. Executive further acknowledges that he possesses unique skills, knowledge and ability and that competition in violation of SECTION 4 or SECTION 5 would be extremely detrimental to the Company . By reason thereof, each of the Company and Executive agrees that the other shall be entitled, in addition to any other remedies it may have under this Agreement, at law or in equity, or otherwise, to temporary , preliminary and/or permanent injunctive and other equitable relief to prevent or curtail any actual or threatened violation of SECTION 4 or SECTION 5, without proof of actual damages that have been or may be caused to the Company by such breach or threatened breach, and waives to the fullest extent permitted by law the posting or securing of any bond by the other party in connection with such remedies .

SECTION 6
MISCELLANEOUS

6.1     Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by certified or registered mail, postage prepaid, with return receipt requested, telecopy (with hard copy delivered by overnight courier service), or delivered by hand, messenger or overnight courier service, and shall be deemed given when received at the addresses of the parties set forth below , or at such other address furnished in writing to the other parties hereto :

To the Company: BMC Stock Holdings , Inc .
Attn: General Counsel
Two Lake Side Commons, Suite 500
980 Hammond Drive
Atlanta, GA 303 2 8

To Executive: at the home address of Executive maintained in the
human resource records of the Company.

6.2     Severability . The parties agree that it is not their intention to violate any public policy or statutory or common law. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. Without limiting the foregoing , if any portion of SECTION 5 is held to be unenforceable , the maximum enforceable restriction of time, scope of activities and geographic area will be substituted for any such restrictions held unenforceable .


11









6.3     Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Georgia without regard to its principles of conflicts of laws . Executive: agrees to submit to the jurisdiction of the State of Georgia; agrees that any dispute concerning this Agreement shall be brought exclusively in a state or federal court of competent jurisdiction in Georgia; and agrees that other than disputes involving SECTION 4 or SECTION 5, all disputes shall be settled through arbitration pursuant to SECTION 6.15. Executive waives any and all objections to jurisdiction or venue .

6.4     Survival . The covenants and agreements of the parties set forth in SECTIONS 4, 5 and 6 are of a continuing nature and shall survive the expiration , termination or cancellation of this Agreement, irrespective of the reason therefor .

6.5     Entire Agreement . This Agreement contains the entire understanding between the parties hereto with respect to the terms of employment, compensation, benefits, and covenants of Executive, and supersede all other prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, between Executive and the Company relating to the subject matter of the Agreement, which such other prior and contemporaneous agreements and understandings, inducements or conditions shall be deemed terminated effective immediately. For the avoidance of doubt, the parties agree that any and all indemnification agreements between Executive and the Company shall continue in full force unimpaired by this Agreement.

6.6     Binding Effect, Etc . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and the Company’s successors and assigns, including any direct or indirect successor by purchase, merger, consolidation, reorganization , liquidation, dissolution, winding up or otherwise with respect to all or substantially all of the business or assets of the Company, and the Executive’s spouse, heirs, and personal and legal representatives.

6.7     Counterparts; Amendment . This Agreement may be executed in one or more counterparts , each of which shall be deemed an original , but all of which together shall constitute one and the same instrument. This Agreement may be amended or modified only by written instrument duly executed by the Company and Executive.

6.8     Voluntary Agreement . Executive has read this Agreement carefully and understands and accepts the obligations that it imposes upon Executive without reservation. No other promises or representations have been made to Executive to induce Executive to sign this Agreement. Executive is signing this Agreement voluntarily and freely.

6.9     Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns (including any direct or indirect successor, spouses, heirs and personal and legal representatives. Any such successor or assign of the Company shall be included in the term “Company” as used in this Agreement.

6.10     Release of Claims . In consideration for the compensation and other benefits provided pursuant to this Agreement, Executive agrees to execute a “Separation Agreement and General Release” to be presented by the Company substantially in the form of Exhibit A attached hereto and incorporated herein by this reference . The Company’s obligation to pay severance benefits pursuant to SECTION 3.4 is expressly conditioned on Executive’s execution and delivery


12









of such Separation Agreement and General Release no later than forty-five (45) days after the date the Executive incurs a Separation from Service without revoking it for a period of seven (7) days following delivery. Executive’s failure to execute and deliver such Separation Agreement and General Release within such forty-five (45) day time period (or Executive’s subsequent revocation of such Separation Agreement and General Release) will void the Company’s obligation to pay severance benefits under this Agreement.

6.11     Confidentiality Of Previous Employers’ Information . The Company acknowledges that the Executive may have had access to confidential and proprietary information of his previous employer(s) and that Executive may be obligated to maintain the confidentiality of such information, not use such information or not to provide certain services to the Company, in each case pursuant to applicable law and/or any contractual relationship between Executive and a previous employer. The Company hereby instructs Executive as follows: (1) Executive shall not disclose any such confidential or proprietary information to the Company or any of its affiliates, (2) Executive shall not use any such confidential or proprietary information in connection with his employment with the Company, and (3) Executive shall not perform any services for the benefit of the Company that would cause Executive to be in breach of his obligations owed to any previous employer or other third party . If the Company requests Executive to provide any such services or to disclose any such information, Executive will advise the Company that he or she is prohibited from doing so . Executive agrees to indemnify, defend and hold the Company and its affiliates harmless from and against any claims, losses or liabilities (including reasonable attorneys’ fees) incurred by the Company or any of its affiliates as a result of any breach by Executive of this SECTION 6 . 11.

6.12     In-kind Benefits and Reimbursements . Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of the Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of the Executive, except for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement , reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be made to the Executive as soon as administratively practicable following such submission , but in no event later than December 31st of the calendar year following the calendar year in which the expense was incurred. In no event shall the Executive be entitled to any reimbursement payments after December 31st of the calendar year following the calendar year in which the expense was incurred. This SECTION 6 . 12 shall only apply to in - kind benefits and reimbursements that would result in taxable compensation income to the Executive.

6.13     Section 409A . This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under this Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(l)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(l)(B) (together , referred to herein as the Section409A Penalties ), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties . In no event shall the Company be required to provide a tax gross - up payment to Executive or otherwise reimburse Executive with respect to Section 409A Penalties. In the event that following the date hereof the Company reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A of the Code, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including


13










amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comp ly with the requirements of Section 409A of the Code and related Department of Treasury guidance.

6.14     Indemnification, etc . The Company shall indemnify and hold harmless Executive to the fullest exte nt permitted by la w for any action or inaction h e takes in good faith with regard to the Company or parent or any benefit plan of either, in accordance with the Company’s Articles of Incorporation and By-laws. Further, the Company shall cover Executive on its directors’ and
Officers’ liability insurance policies to no less extent than that which covers any other officer or director of the Company.
    
6.15     Arbitration . Except w ith respect to the Company’s enforcement of the cove nant s in SECTION 4 and SECTION 5, in the event that either Executive or the Company ( or their successor and assigns , or any other person claiming benefits on behalf of or through them) has a dispute, claim, question, or disagreement arising from or relating to this Agreement or the breach thereof, the parties hereto shall use their best efforts to settle the dispute , claim, question, or disagreement. To t hi s effect, they shall consult and negotiate with each other in good faith and, recogni z ing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties . If the parties do not reach such solution w i thin a period of 60 days, then , upon written notice by either party to the other, all such disputes , claims, questions, or differences shall be finally settled by confidential binding arbitration administered by the American Arbitration Association in accordance with the provisions of its Employment Arbitrat i on Rules, unless such claim is precluded by law from being settled through arbitration. Such arbitrat ion shal l take place in Atlanta, Georgia. Any arbitrator selected by the parties to arb it rate any such dispute sha ll have practiced predominately in the field of employment law for no less than ten years. The arbitrator will have the power to interpret this Agreement. Any determination or decision by the arbitrator shall be binding upon the parties and may be enforced in any court of law. The parties agree that this arbitration provision does not app ly to the right of Executive to file a charge, testify, assist or participate in any manner in an investigation, hearing or proceeding before the Equal Employment Opportunity Commission or any other agency pertaining to any matters covered by this Agreement and within the jurisdiction of the agency. Both Parties agree that this arbitration clause has been bargained for by the Parties upon advice of their respective counsel.


[ signatures on following page]


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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

EXECUTIVE:

/s/ Michael McGaugh


COMPANY:    

BMC STOCK HOLDINGS, INC.

/s/ Peter Alexander     
Its Chief Executive Officer



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EXHIBIT A

SEPARATION AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release (this “ Agreement ”) is made as of by and between ________ (“ Executive ”) and BMC STOCK HOLDINGS, INC . (the Company ”). For good and valuable consideration , the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.     Termination of Employment . The parties agree that Executive’s employment with the Company and all of its affiliates is terminated effective as of (the “ Termination Date ”).

2.     Payments Due to Executive . Executive acknowledges receipt of ______ ($_____) from the Company, representing Executive’s accrued but unpaid Base Salary through the Termination Date. Other than as expressly set forth in this Section, Executive is not entitled to any consulting fees, wages, accrued vacation pay, benefits or any other amounts with respect to his employment through the Termination Date.

3.     Severance Benefits and Continuing Health Insurance Coverage . In consideration of Executive’s execution and non - revocation of this Agreement, the Company agrees to pay to Executive the amounts provided in SECTION 3.4 of that certain Employment Agreement, dated as of    by and between the Executive and the Company.

4.      General Release .

(a)    Executive , on behalf of E x ecutive , his or her heirs , executors, personal representatives, administrators and assigns, irrevocably , knowingly and unconditionally releases, remises and discharges the Company, its parents, all current or former affiliated or related companies of the Company and its parent, partnerships , or joint ventures, and , with respect to each of them, all of the Company’s or such related entities’ predecessors and successors, and with respect to each such entity , its officers, directors , managers , Executives, equity holders, advisors and counsel (collectively, the Company Parties ) from any and all actions , causes of action, charges , complaints, claims , damages, demands , debts, lawsuits, rights, understandings and obligations of any kind, nature or description whatsoever , known or unknown (collectively , the Claims ) , arising out of or relating to the Executive’s employment with the Company and / or the separation of Executive from the Company.

(b)    This general release of Claims by Executive includes, without limitation, (i) all Claims based upon actions or omissions (or alleged actions or omissions) that have occurred up to and including the date of this Agreement, regardless of ripeness or other limitation on immediate pursuit of any Claim in the absence of this Agreement; (ii) all Claims relating to or arising out of Executive’s employment with and separation from the Company; (iii) all Claims (including Claims for discrimination , harassment, and retaliation) arising under any federal , state or local statute , regulation , ordinance , or the common law, including without limitation , Claims arising under Title VII of the Civil Rights Act of 1964 ,


16










the Americans With Disabilities Act, the Age Discrimination in Employment Act , as amended , the Family and Medical Leave Act and the Executive Retirement Income Security Act of 1974, the Civil Rights Act of 1991, the Equal Pay Act, the Fair labor Standards Act , 42 U.S . C. § 1981 , and any other federal or state law, local ordinance or common law including for wrongful discharge , breach of implied or express contract, intentional or negligent infliction of emotional distress , defamation or other tort ; and (iv) all Claims for reinstatement, attorney s fees , interest, costs , wages or other compensation.

(c)    Executive agrees that there is a risk that each and every injury which he or she may have suffered by reason of his or her employment relationship might not now be known , and there is a further risk that such injuries , whether known or unknown at the date of this Agreement , might become progressively worse, and that as a result thereof further damages may be sustained by Executive ; nevertheless , Executive desires to forever and fully release and discharge the Company Parties, and he or she fully understands that by the execution of this Agreement no further claims for any such injuries may ever be asserted .

(d)    This general release does not release any Claim that relates to : (i) Executive’s right to enforce this Agreement; (ii) any rights Executive may have to indemnification from personal liability or to protection under any insurance policy maintained by the Company , including without limitation any general liability, EPLI , or directors and officers insurance policy or any contractual indemnification agreement; (iii) Executive’s right, if any , to government- provided unemployment and worker’s compensation benefits; or (iv) Executive’s rights under any Company Executive benefit plans (i.e . health , disability or retirement plans), which by their explicit terms survive the termination of E x ecutive’ s employment.

(e)    Executive agrees that the consideration set forth in Paragraph 3 above shall constitute the entire consideration provided under this Agreement, and that Executive will not seek from the Company Parties any further compensation or other consideration for any claimed obligation , entitlement , damage , cost or attorneys’ fees in connection with the matters encompassed by this Agreement.

(f)    Executive understands and agrees that if any facts with respect to this Agreement or Executive’s prior treatment by or employment with the Company are found to be different from the facts now believed to be true, Executive e x pressly accepts, assumes the risk of, and agrees that this Agreement shall remain effective notwithstanding such differences. Executive agrees that the various items of consideration set forth in this Agreement fully compensate for said risks , and that Executive will have no legal recourse against the Company in the event of discovery of a difference in facts.

(g)    Executive agrees to the release of all known and unknown claims , including expressly the waiver of any rights or claims arising out of the Federal Age Discrimination in Employment Act , 29 U.S.C. § 621 , et seq . ( ADEA”) , and in connection with such waiver of ADEA claims , and as provided by the Older Worke r Benefit Protection Act , Executive understands and agrees as follows :

(i)     Executive has the right to consult with an attorney before signing this Agreement, and is hereby advised to do so;


17











(ii)     Executive shall have a period of forty-five (45) days from the Termination Date (or from the date of receipt of this Agreement if received after the Termination Date) in which to consider the terms of the Agreement (the “Review Period”) . Executive may at his or her option execute this Agreement at any time during the Review Period . If the Executive does not return the signed Agreement to the Company prior to the expiration of the 45 day period, then the offer of severance benefits set forth in this Agreement shall lapse and shall be withdrawn by the Company;

(iii)     Executive may revoke this Agreement at any time during the first seven (7) days following Executive’s execution of this Agreement, and this Agreement and release shall not be effective or enforceable with respect to any Claim under the ADEA until the seven - day period has expired ( Revocation Period Expiration Date ) . Notice of a revocation by the Executive must be made to the designated representative of the Company (as described below) within the seven (7) day period after E x ecutive signs this Agreement. If Executive revokes this Agreement, it shall not be effective or enforceable against the Company Parties. Accordingly, the “Effective Date” of this Agreement shall be on the eighth (8th) day after Executive si g ns the Agreement and returns it to the Company, and provided that Executive does not revoke the Agreement during the seven (7) day revocation period;

In the event Executive elects to revoke this release pursuant to Paragraph 4(g)iii above, Executive shall notify Company by hand-delivery, express courier or certified mail, return receipt requested , within seven (7) days after signing this Agreement to : ATTN: General Counsel, Legal Department , BMC Stock Holdings , Inc. , Two Lake Side Commons , Suite 500 , 980 Hammond Drive , Atlanta, Georgia 30328 . In the event that Executive exercises his or her right to revoke this release pursuant to Paragraph 4(g)iii above, any and all obligations of Company under this Agreement shall be null and void. Executive agrees that by signing this Agreement prior to the expiration of the forty-five (45) day period he or she has voluntarily waived his or her right to consider this Agreement for the full forty-five (45) day period .

EXECUTIVE AGREES THAT THE CONSIDERATION RECEIVED BY HIM OR HER UNDER THIS AGREEMENT, INCLUDING THE PAYMENTS DESCRIBED ABOVE , IS IN FULL AND COMPLETE SATISFACTION OF ANY CLAIMS THAT EXECUTIVE MAY HAVE , OR MAY HAVE HAD, ARISING OUT OF EXECUTIVE’S EMPLOYMENT WITH COMPANY (INCLUDING FOR THE AVOIDANCE OF DOUBT, ALL OF ITS SUBSIDIARIES OR AFFILIATES) OR THE TERMINATION OF THAT EMPLOYMENT , UP TO THE DATE OF EXECUTION OF THIS AGREEMENT. EXECUTIVE ACKNOWLEDGES THAT HE OR SHE UNDERSTANDS THAT , BY ENTERING INTO THIS AGREEMENT, HE OR SHE NO LONGER HAS THE RIGHT TO ASSERT ANY CLAIM OR LAWSUIT OF ANY KIND ATTEMPTING TO RECOVER MONEY OR ANY OTHER RELIEF AGAINST THE COMPANY PARTIES FOR ACTS OR INJURIES ARISING OUT OF EXECUTIVE’S FORMER EMPLOYMENT BY COMPANY (INCLUDING FOR THE AVOIDANCE OF DOUBT, ALL OF ITS SUBSIDIARIES OR AFFILIATES) OR THE TERMINATION OF THAT EMPLOYMENT.
    


18










Such claims further include any claims Executive may have pursuant to an internal grievance pro ce dure at Company (including for the avoidance of doubt , all of its subsidiaries or affiliates). Executive does not waive any rights or claims that may arise after the date this A gr eement is executed .

5.     Review of Agreement; No Assignment of Claims . Executive r epresents and warrants that he or she (a) has carefully read and understands all of the provisions of this Agreement and has had the opportunity for it to be reviewed and explained by counsel to the extent Executive deems it necessary , (b) is voluntarily entering into this Agreement, ( c) has not relied upon any representation or statement made by the Company or an y other person with regard to the subject matter or effect of this Agreement, (d) has not transferred or assigned any Claims and (e) has not filed any complaint or charge against any of the Company Parties with any local , state , or federal agency or court.

6.     No Claims . Each party represents that it has not filed any Claim against the other Party with any state , federal or local agency or court and that it will not file any Claim at any time regarding the matters covered by this Agreement ; provided, however, that nothing in this Agreement shall be construed to prohibit Executive from filing a Claim , including a challenge to the validity of this Agreement, with the Equal Employment Opportunity Commission or participating in any investigation or proceeding conducted by the E qual Employment Opportunity Commission ; provided , further , that Executive acknowledges that he will not be entitled to recover any monetary or other damages in connection with or as a result of any such EEOC or state FEP agency proceeding.

7.     Interpretation . This Agreement shall take effect as an instrument under seal and shall be governed and construed in accordance with the laws of the State of Georgia without regard to provisions or principles thereof relating to conflict of laws.

8.     Agreement as Defense . This Agreement may be pleaded as a full and complete defense to any subsequent action or other proceeding arising out of, relating to , or having anything to do with any and all Claims , counterclaims , defenses or other matters capable of being alleged, which are specifically released and discharged by this Agreement. This Agreement may also be used to abate any such action or proceeding and/or as a basis of a cross­ complaint for damages .

9.     Nondisclosure of Agreement . The terms and conditions of this Agreement are confidential. Executive agrees not to disclose the terms of this Agreement to anyone except immediate family members and Executive’s attorneys and financial advisers . Executive further agrees to inform these people that the A g reement is confidential and must not be disclosed to anyone else. Executive may disclose the terms of this Agreement if compelled to do so by a court , but Executive agrees to notify the Company immediately if anyone seeks to compel E x ecutive s testimony in this regard, and to cooperate with the Company if the Company decides to oppose such effort. E x ecutive agrees that di s closure by E x ecutive in violation of this Agreement would cause so much injury to the Company that money alone could not fully compensate the Company and that the Company is entitled to injuncti v e and equitable relief. Executive also agrees that the Company would be entitled to recover money from Executive if this Agreement were violated .


19










10.     Ongoing Covenants . Executive acknowledges that nothing in this Agreement shall limit or otherwise impact Executive’s continuing obligations of confidentiality to the Company in accordance with Company policy and applicable law, or any applicable Company policies or agreements between the Company and Executive with respect to non - competition o r non - solicitation, and Executive covenants and agrees to abide by all such continuing obligations.

11.     No Adverse Comments . For two (2) years , Executive agrees not to make , issue , release or authorize any written or oral statements, derogatory or defamatory in nature, about the Company , its affiliates or any of their respective products, services, directors , officers or executives , provided that the foregoing shall not be violated by truthful testimony in response to legal process , normal competitive statements, rebuttal of statements by the other or actions to enforce his rights. Nothing herein prohibits E x ecutive from communicating, without notice to or approval by the Company, with any federal government agency about a potential violation of a federal law or regulation .

12.     Integration; Severability . The terms and conditions of this Agreement constitute the entire agreement between Company and Executive and supersede all previous communications , either oral or written, between the parties with respect to the subject matter of this Agreement. No agreement or understanding varying or extending the terms of this Agreement shall be binding upon either party unless in writing signed by or on behalf of such party . In the event that a court finds any portion of this Agreement unenforceable for any reason whatsoever, Company and Executive agree that the other provisions of the Agreement shall be deemed to be severable and will continue in full force and effect to the fullest extent permitted by law.

EXECUTIVE ACKNOWLEDGES THE FOLLOWING: HE OR SHE HAS ENTERED
INTO THIS AGREEMENT KNOWINGLY, VOLUNTARILY AND OF HIS OR HER OWN
FREE WILL WITH A FULL UNDERSTANDING OF ITS TERMS; HE OR SHE HAS READ THIS AGREEMENT; THAT HE OR SHE FULLY UNDERSTANDS ITS TERMS; THAT EXECUTIVE IS ADVISED TO CONSULT AN ATTORNEY FOR ADVICE; THAT HE OR SHE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT; THAT HE OR SHE HAS HAD AMPLE TIME TO CONSIDER HIS OR HER DECISION BEFORE ENTERING INTO THE AGREEMENT. EXECUTIVE ACKNOWLEDGES THAT HE OR SHE IS SATISFIED WITH THE TERMS OF THIS AGREEMENT AND AGREES THAT THE TERMS ARE BINDING UPON HIM OR HER.

IN WITNESS WHEREOF , the parties have executed this Agreement with effect as of the date first above written.


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EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY THE COMPANY OF HIS ABILITY TO TAKE ADVANTAGE OF THE CONSIDERATION PERIOD AFFORDED BY PARAGRAPH 4 ABOVE AND THAT HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT .

IN WITNESS WHEREOF , the parties have executed this Agreement with effect as of the date first above written.

___________________________    
    

BMC STOCK HOLDINGS , INC.

By:    ______________________
Name:    ______________________
Title:    ______________________


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EXHIBIT 31.1
CERTIFICATION

I, Peter C. Alexander, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of BMC Stock Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 8, 2017
/s/ Peter C. Alexander    
Peter C. Alexander
President and Chief Executive Officer
(principal executive officer)





EXHIBIT 31.2

CERTIFICATION

I, James F. Major, Jr., certify that:
1.
I have reviewed this quarterly report on Form 10-Q of BMC Stock Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 8, 2017
/s/ James F. Major, Jr.    
James F. Major, Jr.
Executive Vice President, Chief
Financial Officer and Treasurer
(principal financial officer)





EXHIBIT 32.1


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of BMC Stock Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017 , as filed with the Securities and Exchange Commission (the “Report”), I, Peter C. Alexander, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 8, 2017
/s/ Peter C. Alexander    
Peter C. Alexander
President and Chief Executive Officer
(principal executive officer)
A signed original of this written statement required by Section 906 has been provided to BMC Stock Holdings, Inc. and will be retained by BMC Stock Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.





EXHIBIT 32.2


CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of BMC Stock Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2017 , as filed with the Securities and Exchange Commission (the “Report”), I, James F. Major, Jr., Executive Vice President, Chief Financial Officer and Treasurer of the Company, certify pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 8, 2017
/s/ James F. Major, Jr.    
James F. Major, Jr.
Executive Vice President, Chief
Financial Officer and Treasurer
(principal financial officer)
A signed original of this written statement required by Section 906 has been provided to BMC Stock Holdings, Inc. and will be retained by BMC Stock Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.