Acquisitions

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

Acquisitions

Acquisitions

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 nine months ended September 30, 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.

•On August 1, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Kingston Lumber, a supplier of lumber products, trusses and other building materials primarily to custom homebuilders and professional remodeling contractors in the Seattle, Washington metropolitan area.

•On September 3, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Heritage One Door & Carpentry (“Heritage One”), a supplier of pre-hung doors, millwork, hardware and finish carpentry services in the Sacramento, California metropolitan area.

•On September 16, 2019, the Company acquired substantially all of the assets and assumed certain liabilities of Colorado Fasteners, a supplier of fasteners, tools and other related products in the Denver, Colorado metropolitan area.

The Barefoot, Locust Lumber, Kingston Lumber, Heritage One and Colorado Fasteners acquisitions (the “Acquisitions”) enhance the Company’s value-added offerings and footprint in the respective metropolitan areas.

The purchase price, in aggregate, for the Acquisitions was $89.5 million. The aggregate purchase price included a holdback which, after certain post-closing adjustments, required the Company to pay $4.2 million, in aggregate, to the sellers of certain of

the Acquisitions during the nine months ended September 30, 2020. The Company funded the Acquisitions through available cash.

The purchase price allocation for the Acquisitions, in aggregate, resulted in the recognition of goodwill of $19.0 million, customer relationship intangible assets of $33.1 million, non-compete agreement intangible assets of $0.5 million, accounts receivable of $22.1 million, inventory of $14.6 million and property and equipment of $5.6 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 4 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 the Acquisitions, in aggregate, included in the unaudited condensed consolidated statements of operations during the three months ended September 30, 2019 were $38.7 million and $2.9 million, respectively. Net sales and estimated pre-tax earnings for the Acquisitions, in aggregate, included in the unaudited condensed consolidated statements of operations during the nine months ended September 30, 2019 were $84.6 million and $7.1 million, respectively. The impact of the Acquisitions was not considered significant for the reporting of pro forma financial information.