Building Products Industry - Cherry Tree...12/14/2017 SRS Distribution, Inc. Venture Roofing &...

Building Products IndustryQ4 2017

• The Macroeconomic Picture• Building Products Industry Update• Tax Reform and the Building Products Industry• Mergers & Acquisitions• Cherry Tree Building Products Index

Inside this report:

Cherry Tree Research | Building Products Industry Report

Sources: Federal Reserve Bank of St. Louis, Capital IQ, Bureau of Economic Analysis, Bloomberg, American Institute for Economic Research

S&P 500 CONSUMER CONFIDENCE

U.S. INTEREST RATES UNEMPLOYMENT RATE & JOB GROWTH

Figures in thousands

The U.S. economy finished 2017 strongly. The S&P 500, which continued to set record highs during the fourthquarter, ended the year up 19.4%, compared to its 9.5% increase in 2016. Despite the large gains in the equitymarkets throughout the year, consumer confidence dipped slightly in the quarter. Economists attribute this dipto a slight drop in optimism about future job opportunities and short-term income prospects. Whilethe unemployment rate remained steady at 4.1%, payrolls added failed to meet expectations. With economistsforecasting the addition of 190,000 payrolls, only 148,000 payrolls were added in December due to a decreasein retail positions during the holiday season. The fourth quarter also saw the federal funds rate reach 1.3%in December – its highest level since September 2008. The Federal Reserve raised this rate three times in 2017,and indicated that it plans on three additional rate increases next year, and two more increases each year in 2019and 2020.

SUMMARY

The Macroeconomic Picture

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10-Year Treasury Rate

30-Year Conventional Mortgage Rate

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Sources: Capital IQ, Cherry Tree & Associates Research

PUBLIC COMPANY EQUITY PERFORMANCE PUBLIC COMPANY HISTORICAL ENTERPRISE VALUE/EBITDA

The building products industry had a very good year in 2017. The Cherry Tree Building Products Index, which

tracks publicly traded building products companies, ended the year up 28.6%, outperforming the S&P 500’s

19.4% gain. The industry also saw significant M&A activity during the year. During 2017, there were a total

of 217 deals involving building products companies. The fourth quarter was particularly busy, with 55 announced

transactions. Lennar’s $9.9 billion merger with CalAtlantic in October was the largest transaction of the

year. Three other deals surpassed the billion-dollar mark in the fourth quarter, as Potlatch combined with Deltic

Timber in a $1.4 billion transaction, and Owens Corning acquired Paroc Group for nearly $1.1 billion. In total,

there were $13 billion worth of disclosed transactions in the final quarter, driven largely by the Lennar/

CalAtlantic merger.

INDUSTRY UPDATE

Building Products Industry Update

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Cherry Tree Building Products Index

S&P 500

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Cherry Tree Building Products Index - TEV/EBITDA

Tax Reform and the Building Products Industry

4Cherry Tree Research | Building Products Industry Report

On December 22, 2017 the Republican tax bill, named the Tax Cuts and Jobs Act of 2017, was signed into law,

representing the biggest tax overhaul in over 30 years. The new law is largely focused on reducing income tax rates

for individuals and corporations, as well as removing many deductions in an effort to simplify the tax code. Under

the law, the corporate tax rate has been cut from 35% to 21%, the largest one-time reduction in U.S. history that will

amount to a roughly $1 trillion tax cut over the next decade. While supporters of the new law claim that it will pay

for itself (due to the tax cuts creating more growth and thus more taxable dollars), some estimate that the new law

will increase the deficit by $500 billion to $1.5 trillion.

The new law also significantly changes the deductions available to individuals. In particular, there are four deduction

changes affecting homeownership that the building products industry should be aware of.

Mortgage Interest Deduction – One major deduction change in the new law is that the mortgage interest deduction

(MID) will be lowered. Previously, homeowners electing to itemize and claim the MID could deduct the interest on

mortgages of up to $1 million. The new law reduces the cap to $750,000, though it will only apply to new mortgages

(not existing mortgages). This reduction will likely discourage homeowners from taking on new mortgages of more

than $750,000, which could decrease activity in the housing market. However, according to Attom Data Solutions,

mortgages of over $750,000 accounted for only 4% of mortgages in 2017, meaning the new law’s reduced cap will

probably only affect a select group of building products companies.

Standard Deduction – The new law also changes the standard deduction. Previously, the standard deduction was

$6,350 for individuals and $12,700 for couples filing jointly. Under the new law, those deductions increase to

$12,000 and $24,000, respectively. While this change is not directly tied to the housing market or the building

products industry, it will impact whether individuals use an itemized deduction (which includes the MID) or the

standard deduction (which does not include the MID). According to Zillow, before the law was passed, 44% of

homes were worth enough to make the homeowner benefit from using the MID and itemizing their deductions.

Under the new law, that number falls to 14.4%. Thus, the increase in the standard deduction makes it more difficult

for homeowners to justify itemizing and taking the MID. The reduced usefulness of claiming the MID means that

home ownership is now less beneficial from a tax standpoint.

Interest on Home-Equity Debt Deduction – Another significant change in the new law is the elimination of the

deduction for interest on home-equity debt. Prior to the new law, interest on home equity debt (loans that

homeowners can take out using the equity that they have built up in their homes as collateral), was deductible up to

$100,000. However, the new law eliminates this deduction. Unlike the new mortgage interest deduction, there is no

grandfather clause – going forward, interest paid on home equity loans taken out before 2018 will no longer be

deductible. According to the New York Federal Reserve, the market for home equity lines of credit (a.k.a. HELOCs)

in 2017 was $448 billion. HELOCs are often used to finance home renovations, with the U.S. Census Bureau

estimating that 45% of HELOCs are used to make improvements and repairs to property. The elimination of this

deduction could discourage homeowners from renovating their homes.

Sources: Washington Post, NY Times, Seeking Alpha, Wall Street Journal, Zillow, Marketplace, New York Federal Reserve, US Census Bureau

Tax Reform and the Building Products Industry

4Cherry Tree Research | Building Products Industry Report

State and Local Taxes Deduction – Finally, the new law changes the state and local taxes deduction (a.k.a. the

SALT deduction). Before the new law was passed, the SALT deduction was unlimited. Under the new law, the

SALT deduction is capped at $10,000. Because property taxes are included in the SALT deduction, owning a

home will now provide less of a tax benefit, as the amount of the SALT deduction will decrease for many

Americans. In particular, those living in high tax states will be hit the hardest by the new SALT cap.

Sources: CNN Money, Tax Foundation, NY Times, Chicago Tribune, CNBC, U.S. Census Bureau

Overall, the new law’s changes are expected to negatively impact homeownership. Reducing the effectiveness of the

MID and capping the SALT deduction will make homeownership more expensive, which experts believe will

increase rental demand and discourage current homeowners from upgrading. As such, it would not be surprising to

also see a decline in single family housing starts as a result. Furthermore, the elimination of the home equity debt

interest deduction could discourage major renovations and repairs to houses.

Building products companies that generate a significant amount of revenue from materials used to build and repair

single family houses could be harmed by the new tax law due to the reduction in tax benefits associated with

homeownership and home repair. On the other hand, building products companies that focus on serving the

multifamily rental market stand to benefit from the expected shift in demand towards rental units. The extent to

which these deduction changes affect the different types of building products companies is yet to be seen, though the

entire industry should see a benefit from the reduced corporate tax rate.

MEAN EFFECTIVE PROPERTY TAX RATES

Cherry Tree Research | Building Products Industry Report 5

Mergers and Acquisitions: 2017-Q4

Announced Enterprise Enterprise Value/

Date Acquirer Target Target Description Value Revenue EBITDA

12/29/2017 Installed Building Products, Inc. Blind Ambitions LLC and Allpro Insulation Garage door and blind installer - - -

12/22/2017 Blue Water Industries LLCTennessee Assets and An Aggregates Quarry in Abingdon of Aggregates USA

Construction aggregates producer 290.0 - -

12/20/2017 Stanley Martin Communities, LLC All Assets of FrontDoor Communities Homebuilder in GA, SC, and FL - - -

12/19/2017 - Indigo Products Ltd. UK-based window & door manufacturer - - -

12/19/2017Majestic Marble And Glass Company

Piedmont Marble Inc. and Tiffany Marble & Glass Co

Marble and glass products manufacturer - - -

12/19/2017 Henry Company LLC Fortifiber, LLCMoisture protection building products manufacturer

- - -

12/18/2017 SiteOne Landscape Supply, Inc. Pete Rose, Inc. Stone and hardscape materials supplier - - -

12/18/2017 Jefferson Homebuilders, Inc.Residential Lumber Division of Cox Industries, Inc.

Lumber products manufacturer - - -

12/14/2017 SRS Distribution, Inc. Venture Roofing & Building Supply Tulsa, Roofing materials supplier - - -

12/13/2017 CalAtlantic Group, Inc.Atlanta Homebuilding Operations of Home South Communities LLC

Homebuilder in GA - - -

12/13/2017 Fenplast Inc. Les Boiseries Conrad Lajeunesse Inc.Canada-based window and door manufacturer

- - -

12/11/2017 Patrick Industries, Inc. All Assets of Nickell Moulding Company Inc. Custom hardwood moldings & trim manuf. 11.0 - -

12/11/2017 - Owens Flooring Company, LLC Wooden flooring manufacturer - - -

12/08/2017 Eastern Metal Supply, Inc. Enduris Inc., Endeck Product Line PVC decking manufacturer - - -

12/08/2017 -Concrete Production Facility of Ballistics Technology International Ltd.

Concrete manufacturer - - -

12/06/2017 Western Forest Products Inc.Processing and Distribution Centre of Hampton Lumber Mills-Washington, Inc. in Arlington, Washington

Lumber processing and distribution center - - -

12/05/2017 Victura Construction Group, Inc. North Texas Builders and Remodelers Homebuilder in TX - - -

12/01/2017 Wilsonart LLC Shore Laminates Ltd. Fixtures and panels manufacturer - - -

11/30/2017 Moulure Alexandria Moulding Inc. All assets of House of Fara Incorporated Hardwood moldings manufacturer - - -

11/22/2017 Natural Stone Veneers International Michels Stone Landscape stone retailer - - -

11/21/2017 Centuri Construction Group, Inc. New England Utility Constructors, Inc. Construction services provider - - -

11/21/2017 Idaho Forest Group, LLC Tricon Timber, LLC, Stud Mill in St. Regis Lumber products manufacturer - - -

11/20/2017 Knauf International Gmbh

Armstrong World Industries, Inc., Business in Europe, the Middle East and Africa and the Pacific Rim & Worthington Armstrong Venture, Business in United Kingdom, France, China and India

Ceilings product manufacturer - - -

11/20/2017 JES Construction LLC Tar Heel Basement Systems LLC Waterproofing and insulation srvs provider - - -

11/20/2017 Sequatchie Concrete Service, Inc. Cleveland Ready Mix Cement, LLC Limestone and ready mix manufacturer - - -

11/17/2017 Campbell, Inc. The Enterprise Corporation HVAC services provider - - -

$ in millions




$ in millions

6

Announced Enterprise Enterprise Value/

Date Acquirer Target Target Description Value Revenue EBITDA

11/16/2017 Atlas Engineered Products Ltd. Selkirk Truss 2010 Ltd.Engineered wood product and roof truss system manufacturer

0.6 - -

11/16/2017 The Cook & Boardman Group, LLC Pinnacle Door & Hardware, Inc. Door and hardware products distributor - - -

11/16/2017 The Cook & Boardman Group, LLC Specialized Architectural Products, LLC Door and hardware products distributor - - -

11/15/2017 Mattamy Group Corporation Royal Oaks Building Group, LLC Homebuilder in NC - - -

11/14/2017 Exchange Income Corporation Quest Window Systems Inc.Canada-based unitized window manufacturer

78.4 - 6.7x

11/14/2017 USG Corporation Ceilings Plus Inc. Ceilings and wall product manufacturer - - -

11/14/2017 ICC Inc. Hawaii Industrial Structures, Inc. General contractor - - -

11/09/2017 - Rescon Holdings, LLC Restoration & construction services. provider - - -

11/08/2017 P. Flanigan & Sons, Inc. Stancills Inc. Aggregate materials manufacturer - - -

11/06/2017 Tecta America Corp. Architectural Roofing & Sheetmetal. Commercial roofing manufacturer - - -

11/06/2017 Kodiak Building Partners American Builders Supply, Inc.Building products manufacturer and distributor

- - -

11/03/2017 Installed Building Products, Inc. Protective Coating Specialists, Inc.Resinous floor and wall coating systems developer

- - -

11/03/2017 VESTA Housing Solutions, LLC Touax Modular Buildings USA, LLCPrefabricated and portable buildings developer

- - -

11/03/2017 Installed Building Products, Inc. Building Solutions, LLC Insulation installation services provider - - -

11/02/2017 Foundation Building Materials, Inc.MCS Door & Hardware and Del-Pro Building Supplies, Inc.

Door and building products suppliers - - -

11/02/2017 AXIOS Industrial Group, LLC Sky Industrial Services, LLC Insulation and scaffolding services provider - - -

11/01/2017 Century Communities, Inc. Sundquist Homes, LLC Homebuilder in WA 51.5 - -

10/31/2017 GCP Applied Technologies Inc. Ductilcrete Technologies, LLC Concrete flooring services provider 32.0 - -

10/31/2017 Andersen Corporation Fenetres MQ Inc. Canada-based window and door manuf. - - -

10/30/2017 Lennar Corporation CalAtlantic Group, Inc. Homebuilder in US 9,561.1 1.5x 13.1x

10/30/2017 Installed Building Products, Inc. A+ Insulation, LLC Insulation services provider - - -

10/29/2017 Owens Corning Paroc Group Oy Stone wool insulation product manufacturer 1,042.4 2.4x 10.0x

10/25/2017 Gilford-Johnson Flooring LLC Mastercraft Flooring Distributors, Inc. Flooring products manufacturer - - -

10/23/2017 Potlatch Corporation Deltic Timber Corporation Lumber products manufacturer - - -

10/13/2017 Pella Corporation Bonelli Enterprises Aluminum window and door manufacturer - - -

10/11/2017 JELD-WEN Holding, inc. Domoferm International GmbH Austria-based door manufacturer - - -

10/09/2017 Chandler Aggregates, Inc. Kennedy Hills Materials Aggregates product manufacturer - - -

10/02/2017 NorCal Materials, Inc.Harbor Ready-Mix Inc. and A-1 Materials, Inc. and L.C. Frey Co Inc

Ready-mixed concrete manufacturer - - -

10/02/2017 Masonite International Corporation A&F Wood Products, Inc. Door and frame manufacturer - - -

Mergers and Acquisitions: 2017–Q4 (continued)



As of January 1, 2018

($ in millions) Market Enterprise LTM LTM LTM Gross EBITDA Enterprise Value/ 3-Yr Rev

Company Cap Value Revenue Gross Profit EBITDA Margin Margin Revenue EBITDA Growth

Cherry Tree Building Products Index $3,631.2 $4,858.4 $3,270.1 $792.4 $391.6 25.3% 12.3%

Median Summary

Distributors $1,538.5 $1,804.4 $2,467.7 $577.5 $187.5 23.8% 5.6% 0.6x 11.2x 7.5%

Homebuilders $6,221.8 $9,868.5 $5,815.1 $1,223.3 $685.1 20.2% 11.0% 1.5x 14.1x 17.5%

HVAC $15,492.8 $17,460.6 $8,891.7 $2,738.5 $1,264.5 30.7% 14.8% 2.2x 12.7x 4.8%

Roofing, Siding & Insulation $6,825.1 $7,163.1 $2,925.2 $900.2 $470.6 27.5% 17.7% 2.1x 12.2x 4.8%

Windows & Doors $868.8 $1,124.7 $866.6 $248.6 $116.8 23.1% 11.1% 1.3x 11.2x 13.2%

Plumbing & Cabinetry $10,186.1 $10,518.2 $5,217.9 $1,956.9 $739.6 35.5% 14.2% 2.0x 14.3x 10.4%

Floors & Surfaces $2,088.6 $2,426.6 $2,171.6 $612.7 $160.2 29.3% 10.1% 1.4x 14.1x 4.6%

Lumber & Wood Products $3,187.0 $3,331.2 $3,616.4 $730.4 $537.6 28.6% 20.5% 1.3x 7.4x 10.6%

Cement, Concrete & Aggregates $12,586.9 $17,340.3 $3,742.5 $1,035.4 $961.9 32.7% 20.2% 2.4x 10.7x 12.2%

Distributors

Beacon Roofing Supply, Inc. $4,318.7 $4,944.9 $4,376.7 $1,075.9 $380.4 24.6% 8.7% 1.1x 13.0x 23.1%

Bluelinx Holdings Inc. $88.8 $433.0 $1,803.6 $230.1 $38.9 12.8% 2.2% 0.2x 11.1x (4.3%)

BMC Stock Holdings, Inc. $1,696.0 $2,104.9 $3,272.7 $780.2 $187.5 23.8% 5.7% 0.6x 11.2x -

Boise Cascade Company $1,538.5 $1,804.4 $4,259.6 $574.7 $194.6 13.5% 4.6% 0.4x 9.3x 6.4%

Builders FirstSource, Inc. $2,461.0 $4,302.9 $6,802.2 $1,687.7 $367.1 24.8% 5.4% 0.6x 11.7x 62.8%

CanWel Building Materials Group Ltd. $454.5 $592.5 $859.4 $107.1 $45.2 12.5% 5.3% 0.7x 13.1x 12.3%

Foundation Building Materials, Inc. $634.0 $1,239.2 $2,006.3 $577.5 $123.4 28.8% 6.1% 0.6x 10.0x -

GMS Inc. $1,544.4 $2,135.2 $2,467.7 $804.6 $191.3 32.6% 7.8% 0.9x 11.2x -

Goodfellow Inc. $55.9 $113.7 $420.4 $55.4 ($10.3) 13.2% (2.5%) 0.3x - -

Hardwoods Distribution Inc. $342.7 $427.8 $823.3 $152.7 $46.3 18.6% 5.6% 0.5x 9.2x 32.2%

Huttig Building Products, Inc. $172.1 $274.4 $738.4 $154.6 $12.2 20.9% 1.7% 0.4x - 7.3%

Watsco, Inc. $5,577.7 $6,076.2 $4,291.2 $1,052.8 $370.6 24.5% 8.6% 1.4x 16.4x 3.8%

Ferguson plc $17,816.7 $18,554.8 $20,063.8 $5,812.0 $1,548.5 29.0% 7.7% 0.9x 12.0x 7.5%

25th Percentile $342.7 $433.0 $859.4 $154.6 $45.2 13.5% 4.6% 0.4x 10.6x 6.4%

Median $1,538.5 $1,804.4 $2,467.7 $577.5 $187.5 23.8% 5.6% 0.6x 11.2x 7.5%

75th Percentile $2,461.0 $4,302.9 $4,291.2 $1,052.8 $367.1 24.8% 7.7% 0.9x 12.5x 23.1%

Homebuilders

Beazer Homes USA, Inc. $615.8 $1,651.0 $1,916.3 $315.3 $78.6 16.5% 4.1% 0.9x 21.0x 11.4%

CalAtlantic Group, Inc. $6,221.8 $10,127.3 $6,517.3 $1,348.9 $719.3 20.7% 11.0% 1.6x 14.1x 44.9%

D.R. Horton, Inc. $19,202.5 $21,101.6 $14,091.0 $2,851.7 $1,686.0 20.2% 12.0% 1.5x 12.5x 22.6%

KB Home $2,763.7 $4,772.0 $4,157.3 $683.9 $268.9 16.4% 6.5% 1.1x 17.7x 21.6%

Lennar Corporation $14,806.3 $21,051.7 $12,237.4 $2,592.7 $1,401.4 21.2% 11.5% 1.7x 15.0x 20.8%

M/I Homes, Inc. $946.7 $1,617.5 $1,863.5 $383.6 $149.5 20.6% 8.0% 0.9x 10.8x 17.5%

M.D.C. Holdings, Inc. $1,788.4 $2,359.7 $2,589.8 $465.7 $197.3 18.0% 7.6% 0.9x 12.0x 15.2%

Meritage Homes Corporation $2,064.7 $3,253.8 $3,174.6 $578.0 $252.8 18.2% 8.0% 1.0x 12.9x 17.0%

NVR, Inc. $13,120.2 $13,106.1 $6,254.8 $1,223.3 $859.9 19.6% 13.7% 2.1x 15.2x 12.0%

PulteGroup, Inc. $9,774.4 $13,070.6 $8,272.8 $1,990.1 $1,137.0 24.1% 13.7% 1.6x 11.5x 12.7%

Toll Brothers, Inc. $7,355.4 $9,868.5 $5,815.1 $1,267.5 $685.1 21.8% 11.8% 1.7x 14.4x 18.7%

25th Percentile $1,926.6 $2,806.7 $2,882.2 $521.8 $225.0 18.1% 7.8% 1.0x 12.2x 13.9%

Median $6,221.8 $9,868.5 $5,815.1 $1,223.3 $685.1 20.2% 11.0% 1.5x 14.1x 17.5%

75th Percentile $11,447.3 $13,088.3 $7,395.0 $1,669.5 $998.5 20.9% 11.9% 1.6x 15.1x 21.2%

7

Cherry Tree Building Products Index





HVAC

AAON, Inc. $1,925.6 $1,885.7 $392.7 $118.8 $89.8 30.3% 22.9% 4.8x - 5.0%

Daikin Industries,Ltd. $34,603.2 $36,429.5 $19,303.6 $6,790.8 $2,935.8 35.2% 15.2% 1.9x 12.4x 4.7%

Ingersoll-Rand Plc $22,285.7 $25,157.5 $13,938.3 $4,343.9 $1,977.8 31.2% 14.2% 1.8x 12.7x 3.2%

Lennox International Inc. $8,699.8 $9,763.6 $3,845.1 $1,133.1 $551.2 29.5% 14.3% 2.5x 17.7x 5.1%

25th Percentile $7,006.3 $7,794.1 $2,982.0 $879.5 $435.9 30.1% 14.3% 1.9x 12.6x 4.3%

Median $15,492.8 $17,460.6 $8,891.7 $2,738.5 $1,264.5 30.7% 14.8% 2.2x 12.7x 4.8%

75th Percentile $25,365.1 $27,975.5 $15,279.6 $4,955.6 $2,217.3 32.2% 17.1% 3.1x 15.2x 5.0%

Roofing, Siding & Insulation

Continental Building Products, Inc. $1,061.7 $1,265.3 $476.0 $122.7 $132.6 25.8% 27.9% 2.7x 9.5x 5.0%

James Hardie Industries plc $7,796.5 $8,396.3 $1,981.6 $672.5 $430.5 33.9% 21.7% 4.2x 19.5x 8.8%

Kingspan Group plc $7,838.9 $8,426.1 $3,867.3 $1,127.9 $478.6 29.2% 12.4% 2.2x 17.6x 20.5%

Owens Corning $10,227.5 $12,643.5 $6,161.0 $1,530.0 $1,130.0 24.8% 18.3% 2.1x 11.2x 4.5%

Rockwool International A/S $5,853.7 $5,553.8 $2,743.4 $1,803.0 $470.2 65.7% 17.1% 2.0x 11.8x 2.9%

USG Corporation $5,261.0 $5,930.0 $3,107.0 $645.0 $471.0 20.8% 15.2% 1.9x 12.6x (5.4%)

25th Percentile $5,409.2 $5,647.8 $2,172.1 $651.9 $440.4 25.1% 15.7% 2.0x 11.3x 3.3%

Median $6,825.1 $7,163.1 $2,925.2 $900.2 $470.6 27.5% 17.7% 2.1x 12.2x 4.8%

75th Percentile $7,828.3 $8,418.6 $3,677.2 $1,429.5 $476.7 32.7% 20.9% 2.5x 16.4x 7.8%

Windows & Doors

Deceuninck NV $492.0 $625.4 $775.1 $227.9 $73.3 29.4% 9.5% 0.8x 8.5x 7.7%

JELD-WEN Holding, inc. $4,150.2 $5,189.4 $3,761.1 $870.5 $345.6 23.1% 9.2% 1.4x 15.0x -

Masonite International Corporation $2,111.1 $2,600.4 $2,005.5 $403.4 $230.0 20.1% 11.5% 1.3x 11.3x 4.5%

PGT Innovations, Inc. $836.8 $1,023.5 $486.5 $148.7 $74.9 30.6% 15.4% 2.1x 13.7x 21.7%

Ply Gem Holdings, Inc $1,266.7 $2,085.6 $2,001.7 $461.9 $222.3 23.1% 11.1% 1.0x 9.4x 11.5%

Quanex Building Products Corporation $815.2 $1,037.2 $866.6 $194.4 $92.4 22.4% 10.7% 1.2x 11.2x 15.5%

Tyman plc $868.8 $1,124.7 $671.5 $248.6 $116.8 37.0% 17.4% 1.7x 9.6x 14.8%

25th Percentile $826.0 $1,030.4 $723.3 $211.2 $83.7 22.8% 10.1% 1.1x 9.5x 8.7%

Median $868.8 $1,124.7 $866.6 $248.6 $116.8 23.1% 11.1% 1.3x 11.2x 13.2%

75th Percentile $1,688.9 $2,343.0 $2,003.6 $432.6 $226.1 30.0% 13.4% 1.5x 12.5x 15.3%

Plumbing & Cabinetry

American Woodmark Corporation $2,090.0 $1,887.7 $1,059.6 $225.0 $127.0 21.2% 12.0% 1.8x 14.9x 12.3%

Fortune Brands Home & Security, Inc. $10,389.2 $11,575.9 $5,202.4 $1,918.1 $840.8 36.9% 16.2% 2.2x 13.8x 10.4%

Masco Corporation $13,822.0 $15,909.0 $7,529.0 $2,568.0 $1,249.0 34.1% 16.6% 2.1x 12.7x (0.8%)

Toto Ltd. $9,982.9 $9,460.6 $5,233.4 $1,995.7 $638.4 38.1% 12.2% 1.8x 14.8x -

25th Percentile $8,009.6 $7,567.3 $4,166.7 $1,494.8 $510.6 30.9% 12.1% 1.8x 13.5x 4.8%

Median $10,186.1 $10,518.2 $5,217.9 $1,956.9 $739.6 35.5% 14.2% 2.0x 14.3x 10.4%

75th Percentile $11,247.4 $12,659.2 $5,807.3 $2,138.7 $942.9 37.2% 16.3% 2.1x 14.8x 11.4%

8

Cherry Tree Building Products IndexAs of January 1, 2018





Floors & Surfaces

Armstrong Flooring, Inc. $435.3 $487.8 $1,142.7 $180.9 $31.7 15.8% 2.8% 0.4x 15.4x -

Interface, Inc. $1,515.3 $1,671.7 $969.7 $374.2 $143.1 38.6% 14.8% 1.7x 11.7x (0.9%)

Mohawk Industries, Inc. $20,509.9 $23,179.9 $9,304.8 $2,970.7 $1,798.6 31.9% 19.3% 2.5x 12.9x 5.7%

Tarkett S.A. $2,661.8 $3,181.4 $3,200.5 $851.1 $177.3 26.6% 5.5% 1.0x 17.9x 4.6%

25th Percentile $1,245.3 $1,375.7 $1,099.5 $325.9 $115.3 23.9% 4.8% 0.9x 12.6x 1.9%

Median $2,088.6 $2,426.6 $2,171.6 $612.7 $160.2 29.3% 10.1% 1.4x 14.1x 4.6%

75th Percentile $7,123.9 $8,181.0 $4,726.5 $1,381.0 $582.6 33.6% 15.9% 1.9x 16.0x 5.1%

Lumber & Wood Products

Canfor Corporation $2,543.7 $2,854.5 $3,616.4 $1,197.8 $537.6 33.1% 14.9% 0.8x 5.3x 11.5%

Louisiana-Pacific Corporation $3,804.4 $3,331.2 $2,573.3 $730.4 $527.3 28.4% 20.5% 1.3x 6.3x 7.9%

Norbord Inc. $2,919.0 $3,337.8 $2,063.0 $589.0 $575.0 28.6% 27.9% 1.6x 5.8x 10.6%

Trex Company, Inc. $3,187.0 $3,161.5 $538.3 $230.6 $154.5 42.8% 28.7% 5.9x 20.5x 12.1%

Universal Forest Products, Inc. $2,301.4 $2,457.5 $3,834.7 $536.0 $227.6 14.0% 5.9% 0.6x 10.8x 12.9%

West Fraser Timber Co. Ltd. $4,799.6 $5,196.6 $3,892.3 $1,461.7 $705.7 37.6% 18.1% 1.3x 7.4x 10.1%

Weyerhaeuser Co. $26,615.3 $32,624.3 $6,971.0 $1,765.0 $1,790.0 25.3% 25.7% 4.7x 18.2x (2.4%)

25th Percentile $2,731.3 $3,008.0 $2,318.2 $562.5 $377.4 26.9% 16.5% 1.0x 6.1x 9.0%

Median $3,187.0 $3,331.2 $3,616.4 $730.4 $537.6 28.6% 20.5% 1.3x 7.4x 10.6%

75th Percentile $4,302.0 $4,267.2 $3,863.5 $1,329.8 $640.3 35.3% 26.8% 3.1x 14.5x 11.8%

Cement, Concrete & Aggregates

Boral Limited $7,129.2 $8,947.7 $3,267.4 $1,073.9 $456.5 32.9% 14.0% 2.7x 19.6x 0.4%

CEMEX, S.A.B. de C.V. $11,279.3 $22,395.0 $14,158.8 $4,892.8 $2,731.9 34.6% 19.3% 1.6x 8.2x 8.7%

CRH plc $30,148.8 $38,527.4 $31,269.8 $10,168.9 $3,606.4 32.5% 11.5% 1.2x 10.7x 14.6%

Eagle Materials Inc. $5,509.2 $6,135.0 $1,323.5 $333.0 $406.2 25.2% 30.7% 4.6x 15.1x 10.9%

HeidelbergCement AG $21,551.0 $35,034.3 $20,392.7 $12,434.1 $3,472.3 61.0% 17.0% 1.7x 10.1x 13.4%

LafargeHolcim Ltd $34,155.6 $54,084.8 $26,781.2 $11,645.0 $5,636.0 43.5% 21.0% 2.0x 9.6x 9.6%

Martin Marietta Materials, Inc. $13,894.5 $15,585.6 $3,699.1 $935.8 $970.4 25.3% 26.2% 4.2x 16.1x 21.5%

Summit Materials, Inc. $3,458.1 $5,020.8 $1,865.5 $628.2 $402.9 33.7% 21.6% 2.7x 12.5x 19.6%

U.S. Concrete, Inc. $1,326.4 $1,766.6 $1,313.5 $288.5 $173.8 22.0% 13.2% 1.3x 10.2x 25.5%

Vulcan Materials Company $16,981.4 $19,095.0 $3,785.8 $997.0 $953.3 26.3% 25.2% 5.0x - 9.0%

25th Percentile $5,914.2 $6,838.1 $2,216.0 $705.1 $418.7 25.6% 14.7% 1.6x 10.1x 9.1%

Median $12,586.9 $17,340.3 $3,742.5 $1,035.4 $961.9 32.7% 20.2% 2.4x 10.7x 12.2%

75th Percentile $20,408.6 $31,874.5 $18,834.2 $8,849.8 $3,287.2 34.3% 24.3% 3.8x 15.1x 18.3%

9

Cherry Tree Building Products IndexAs of January 1, 2018

ABOUT CHERRY TREE

History and BackgroundCherry Tree is a private investment banking and wealth management firm headquartered in Minneapolis, Minnesota. Our firm specializes in serving middle market companies and their owners, whether private, public, or divisions of larger corporations. Founded in 1980, Cherry Tree managed several successful institutional private funds focusing on platform acquisitions. Those funds led to more than 300 financings, 26 public offerings, and 41 strategic sales. In 1996 the firm diversified into investment banking services to take advantage of our long history and position in the market. In 2003 we added wealth management to our operations by acquiring and growing our existing business. Our professionals collectively have been members of more than 80 boards of directors, worked with more than 250 different companies, and advised on hundreds of financings and M&A transactions.

Broad Market ExpertiseCherry Tree has been working with middle market companies for more than 35 years. Our core M&A activity is sell-side engagements with middle market companies where ownership wants to achieve some liquidity goals or desires to recapitalize its business to better position the company for future growth. Additionally, we represent buy-side clients attempting to add acquisition strategies to complement their organic growth efforts. We are experts in the capital markets, having previously managed four private funds. Our firm primarily has been focused on investment banking transactions since 1996 and has an exceptional team of dedicated investment banking professionals. Most of our managing directors have had C-level operating experience with backgrounds as CEOs or CFOs. Collectively, they represent more than 200 years of transaction and operating experience.

ResearchWe distinguish our firm by conducting comprehensive research and publishing our findings in reports that provide in-depth analyses of selected industries and overall market conditions. For each client assignment, we apply our internal research capabilities and our deep domain expertise in relevant markets in order to provide the highest value to our clients. Some of our industry research is sponsored by our clients with an interest in specific industry segments.

Contacting Cherry TreeFor more information, please contact one of our professionals listed below, or visit us at www.cherrytree.com.

Dave Latzke Ben Ikeda James DohnalekManaging Director, Partner Senior Associate Analyst

[email protected] [email protected] [email protected] 952.253.6015 952.253.6017

Additional Recent Cherry Tree Research:

Education For-Profit: PreK-12 (Chad Johnson, [email protected], 952.253.6010)

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© Cherry Tree & Associates | 2018

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Important Disclosures

The information included in this publication has been obtained from public sources, and is not based upon private or confidential Cherry Tree information. Cherry Treegathers its data from sources it considers reliable. However, it does not guarantee the accuracy or completeness of the information provided within this publication. Anyopinions presented reflect the current judgment of the authors and are subject to change. Cherry Tree makes no warranties, expressed or implied, regarding the accuracy ofthis information or any opinions expressed by the authors. Officers, directors, partners of Cherry Tree and Cherry Tree proprietary investment funds may have positions in thesecurities of the companies discussed, and certain affiliates of Cherry Tree may recommend to specific clients the purchase and sale of securities discussed in thepublication. This publication does not constitute a recommendation with respect to the securities of any company discussed herein, and it should not be construed as such.Cherry Tree or its affiliates may from time to time provide investment banking or related services to these companies. Like all Cherry Tree employees, the authors of thispublication receive compensation that is affected by overall firm profitability. We undertake no obligation to update any information in this publication. 

The Building Products Index is a hypothetical index, and does not reflect an actual investment portfolio. Comparisons between the Building Products Index and other indicesare for illustrative purposes only.  Correlations in performance information for the Building Products Index and other indices should not be relied upon as indicative of risksinvolved in owning or holding a portfolio of securities similar to the Building Products Index. Past performance should not be relied upon as indicative of future performance.

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