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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Builders FirstSource Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	2,864,596)	1,833,934)	451,161)	374,658)	352,490)
Cost of capital²	20.83%	20.74%	21.58%	18.23%	14.21%
Invested capital³	8,565,898)	8,507,614)	3,091,935)	2,419,816)	2,393,541)

Economic profit⁴	1,080,681)	69,261)	(215,926)	(66,595)	12,476)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,864,596 – 20.83% × 8,565,898 = 1,080,681

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Builders FirstSource Inc. economic profit increased from 2020 to 2021 and from 2021 to 2022.

Builders FirstSource Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income	2,749,369)	1,725,416)	313,537)	221,809)	205,191)
Deferred income tax expense (benefit)¹	(92,461)	(34,573)	16,614)	50,994)	51,823)
Increase (decrease) in allowance for credit losses²	28,622)	15,987)	(162)	(259)	1,222)
Increase (decrease) in equity equivalents³	(63,839)	(18,586)	16,452)	50,735)	53,045)
Interest expense, net	198,373)	135,877)	135,688)	109,551)	108,213)
Interest expense, operating lease liability⁴	28,292)	25,014)	17,694)	19,708)	11,096)
Adjusted interest expense, net	226,665)	160,891)	153,382)	129,259)	119,309)
Tax benefit of interest expense, net⁵	(47,600)	(33,787)	(32,210)	(27,144)	(25,055)
Adjusted interest expense, net, after taxes⁶	179,066)	127,104)	121,172)	102,114)	94,254)
Net operating profit after taxes (NOPAT)	2,864,596)	1,833,934)	451,161)	374,658)	352,490)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in equity equivalents to net income.

⁴ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 505,221 × 5.60% = 28,292

⁵ 2022 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= 226,665 × 21.00% = 47,600

⁶ Addition of after taxes interest expense to net income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Builders FirstSource Inc. NOPAT increased from 2020 to 2021 and from 2021 to 2022.

Builders FirstSource Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Income tax expense	822,464)	526,131)	94,629)	60,946)	55,564)
Less: Deferred income tax expense (benefit)	(92,461)	(34,573)	16,614)	50,994)	51,823)
Add: Tax savings from interest expense, net	47,600)	33,787)	32,210)	27,144)	25,055)
Cash operating taxes	962,525)	594,491)	110,225)	37,096)	28,796)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Builders FirstSource Inc. cash operating taxes increased from 2020 to 2021 and from 2021 to 2022.

Builders FirstSource Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Current maturities of long-term debt	6,355)	3,660)	27,335)	13,875)	15,565)
Long-term debt, net of current maturities, discounts and issuance costs	2,977,842)	2,926,122)	1,596,905)	1,277,398)	1,545,729)
Operating lease liability¹	505,221)	471,969)	280,864)	298,601)	273,290)
Total reported debt & leases	3,489,418)	3,401,751)	1,905,104)	1,589,874)	1,834,584)
Stockholders’ equity	4,962,566)	4,802,481)	1,152,783)	824,953)	596,338)
Net deferred tax (assets) liabilities²	269,660)	362,121)	44,842)	28,228)	(22,766)
Allowance for credit losses³	50,383)	21,761)	5,774)	5,936)	6,195)
Equity equivalents⁴	320,043)	383,882)	50,616)	34,164)	(16,571)
Accumulated other comprehensive (income) loss, net of tax⁵	—)	—)	—)	—)	—)
Adjusted stockholders’ equity	5,282,609)	5,186,363)	1,203,399)	859,117)	579,767)
Construction in progress⁶	(206,129)	(80,500)	(16,568)	(29,175)	(20,810)
Invested capital	8,565,898)	8,507,614)	3,091,935)	2,419,816)	2,393,541)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of equity equivalents to stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of construction in progress.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Builders FirstSource Inc. invested capital increased from 2020 to 2021 and from 2021 to 2022.

Builders FirstSource Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	11,700,683)	11,700,683)	÷	14,880,090)	=	0.79	0.79	×	25.41%	=	19.98%
Long-term debt, including current maturities³	2,674,186)	2,674,186)	÷	14,880,090)	=	0.18	0.18	×	4.87% × (1 – 21.00%)	=	0.69%
Operating lease liability⁴	505,221)	505,221)	÷	14,880,090)	=	0.03	0.03	×	5.60% × (1 – 21.00%)	=	0.15%
Total:	14,880,090)					1.00					20.83%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt, including current maturities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	12,913,234)	12,913,234)	÷	16,462,085)	=	0.78	0.78	×	25.41%	=	19.94%
Long-term debt, including current maturities³	3,076,882)	3,076,882)	÷	16,462,085)	=	0.19	0.19	×	4.65% × (1 – 21.00%)	=	0.69%
Operating lease liability⁴	471,969)	471,969)	÷	16,462,085)	=	0.03	0.03	×	5.30% × (1 – 21.00%)	=	0.12%
Total:	16,462,085)					1.00					20.74%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt, including current maturities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	8,932,299)	8,932,299)	÷	10,965,908)	=	0.81	0.81	×	25.41%	=	20.70%
Long-term debt, including current maturities³	1,752,745)	1,752,745)	÷	10,965,908)	=	0.16	0.16	×	5.91% × (1 – 21.00%)	=	0.75%
Operating lease liability⁴	280,864)	280,864)	÷	10,965,908)	=	0.03	0.03	×	6.30% × (1 – 21.00%)	=	0.13%
Total:	10,965,908)					1.00					21.58%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt, including current maturities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	3,099,517)	3,099,517)	÷	4,766,977)	=	0.65	0.65	×	25.41%	=	16.52%
Long-term debt, including current maturities³	1,368,859)	1,368,859)	÷	4,766,977)	=	0.29	0.29	×	6.10% × (1 – 21.00%)	=	1.38%
Operating lease liability⁴	298,601)	298,601)	÷	4,766,977)	=	0.06	0.06	×	6.60% × (1 – 21.00%)	=	0.33%
Total:	4,766,977)					1.00					18.23%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt, including current maturities. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,618,495)	1,618,495)	÷	3,394,302)	=	0.48	0.48	×	25.41%	=	12.12%
Long-term debt, including current maturities³	1,502,516)	1,502,516)	÷	3,394,302)	=	0.44	0.44	×	5.23% × (1 – 21.00%)	=	1.83%
Operating lease liability⁴	273,290)	273,290)	÷	3,394,302)	=	0.08	0.08	×	4.06% × (1 – 21.00%)	=	0.26%
Total:	3,394,302)					1.00					14.21%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Long-term debt, including current maturities. See details »

⁴ Operating lease liability. See details »

Builders FirstSource Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,080,681)	69,261)	(215,926)	(66,595)	12,476)
Invested capital²	8,565,898)	8,507,614)	3,091,935)	2,419,816)	2,393,541)
Performance Ratio
Economic spread ratio³	12.62%	0.81%	-6.98%	-2.75%	0.52%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-21.30%	-19.83%	-31.33%	—	—
Caterpillar Inc.	0.02%	0.18%	-6.34%	—	—
Eaton Corp. plc	-6.06%	-5.80%	-7.89%	—	—
GE Aerospace	-10.19%	-15.15%	-4.98%	—	—
Honeywell International Inc.	-2.26%	-1.18%	-2.52%	—	—
Lockheed Martin Corp.	12.78%	13.78%	17.10%	—	—
RTX Corp.	-2.73%	-2.28%	-7.84%	—	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,080,681 ÷ 8,565,898 = 12.62%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Builders FirstSource Inc. economic spread ratio improved from 2020 to 2021 and from 2021 to 2022.

Builders FirstSource Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,080,681)	69,261)	(215,926)	(66,595)	12,476)
Net sales	22,726,418)	19,893,856)	8,558,874)	7,280,431)	7,724,771)
Performance Ratio
Economic profit margin²	4.76%	0.35%	-2.52%	-0.91%	0.16%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-16.26%	-15.73%	-25.66%	—	—
Caterpillar Inc.	0.02%	0.20%	-8.78%	—	—
Eaton Corp. plc	-8.99%	-8.70%	-12.11%	—	—
GE Aerospace	-9.23%	-15.29%	-7.95%	—	—
Honeywell International Inc.	-2.98%	-1.65%	-3.73%	—	—
Lockheed Martin Corp.	5.15%	5.88%	7.33%	—	—
RTX Corp.	-4.62%	-4.06%	-16.01%	—	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 1,080,681 ÷ 22,726,418 = 4.76%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Builders FirstSource Inc. economic profit margin improved from 2020 to 2021 and from 2021 to 2022.

Builders FirstSource Inc. (NYSE:BLDR)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin