Acquisitions

3 Months Ended

Mar. 31, 2020

For all acquisitions, the Company allocates the purchase price to assets acquired and liabilities assumed as of the date of acquisition based on the estimated fair values at the date of acquisition. The excess of the fair value of the purchase consideration over the fair values of the identifiable assets and liabilities is recorded as goodwill. Management makes significant estimates and assumptions when determining the fair value of assets acquired and liabilities assumed. These estimates include, but are not limited to, discount rates, projected future net sales, projected future expected cash flows and useful lives. During the measurement period, fair values assigned to the assets and liabilities may be adjusted as the Company receives additional information.

The Company accounts for all acquisitions using the acquisition method of accounting under ASC 805, Business Combinations, whereby the results of operations of the acquired company are included in the Company’s consolidated financial statements beginning on the acquisition date.

2019 Acquisitions

The Company completed the following acquisitions during the three months ended March 31, 2019:


•	On January 14, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Barefoot and Company (“Barefoot”), a supplier of windows, exterior doors, hardware, specialty products and installation services in the Charlotte, North Carolina metropolitan area.


•	On February 8, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Locust Lumber, a supplier of lumber products and building materials primarily to custom homebuilders and professional remodeling contractors in the Charlotte, North Carolina metropolitan area.

The Barefoot and Locust Lumber acquisitions enhance the Company’s value-added offerings and footprint in the Charlotte, North Carolina metropolitan area.

The purchase price, in aggregate, for the Barefoot and Locust Lumber acquisitions was $53.6 million. The purchase price included a holdback which, after certain post-closing adjustments, required the Company to pay $2.0 million to the sellers of Barefoot during the three months ended March 31, 2020. The Company funded the Barefoot and Locust Lumber acquisitions through available cash.

The purchase price allocation for the Barefoot and Locust Lumber acquisitions, in aggregate, resulted in the recognition of goodwill of $11.9 million, customer relationship intangible assets of $23.3 million, non-compete agreement intangible assets of $0.2 million, accounts receivable of $12.1 million, inventory of $7.7 million and property and equipment of $2.3 million, as well as other operating assets and liabilities. The customer relationship and non-compete agreement intangible assets have a weighted average useful life of 9 years and 2 years, respectively. Goodwill represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and non-contractual relationships, as well as expected future synergies. All of the goodwill is expected to be deductible for tax purposes.

Net sales and estimated pre-tax earnings for Barefoot and Locust Lumber, in aggregate, included in the unaudited condensed consolidated statements of operations during the three months ended March 31, 2019 were $18.2 million and $1.9 million, respectively. The impact of the Barefoot and Locust Lumber acquisitions was not considered significant for the reporting of pro forma financial information.