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liI

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

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

For the quarterly period ended June 30, 2021

OR

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 001-40620

 

BUILDERS FIRSTSOURCE, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

52-2084569

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

2001 Bryan Street, Suite 1600

 

 

Dallas, Texas

 

75201

(Address of principal executive offices)

 

(Zip Code)

(214880-3500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Common stock, par value $0.01 per share

BLDR

New York Stock Exchange

 

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  

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

 

  

Accelerated filer

 

Non-accelerated filer

 

  

Small reporting company

 

Emerging growth company

 

 

 

 

 

 

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. 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    Yes      No  

The number of shares of the issuer’s common stock, par value $0.01, outstanding as of August 3, 2021 was 207,208,436.

 

 

 

 

 

 


 

 

BUILDERS FIRSTSOURCE, INC.

Index to Form 10-Q

 

 

 

 

 

Page

 

 

PART I — FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements

 

3

 

 

Condensed Consolidated Statement of Operations (Unaudited) for the Three and Six Months Ended June 30, 2021 and 2020

 

3

 

 

Condensed Consolidated Balance Sheet (Unaudited) as of June 30, 2021 and December 31, 2020

 

4

 

 

Condensed Consolidated Statement of Cash Flows (Unaudited) for the Six Months Ended June 30, 2021 and 2020

 

5

 

 

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) for the Three and Six Months Ended June 30, 2021 and 2020

 

6

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

28

Item 4.

 

Controls and Procedures

 

28

 

 

PART II — OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

29

Item 1A.

 

Risk Factors

 

29

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

29

Item 6.

 

Exhibits

 

30

 

 

 

2


 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements (unaudited)

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

(In thousands, except per share amounts)

 

Net sales

 

$

5,576,682

 

 

$

1,945,643

 

 

$

9,750,457

 

 

$

3,732,664

 

Cost of sales

 

 

3,993,531

 

 

 

1,428,311

 

 

 

7,097,752

 

 

 

2,749,919

 

Gross margin

 

 

1,583,151

 

 

 

517,332

 

 

 

2,652,705

 

 

 

982,745

 

Selling, general and administrative expenses

 

 

902,913

 

 

 

388,077

 

 

 

1,724,511

 

 

 

792,543

 

Income from operations

 

 

680,238

 

 

 

129,255

 

 

 

928,194

 

 

 

190,202

 

Interest expense, net

 

 

27,795

 

 

 

26,812

 

 

 

59,639

 

 

 

78,743

 

Income before income taxes

 

 

652,443

 

 

 

102,443

 

 

 

868,555

 

 

 

111,459

 

Income tax expense

 

 

155,208

 

 

 

23,519

 

 

 

198,740

 

 

 

23,768

 

        Net income

 

$

497,235

 

 

$

78,924

 

 

$

669,815

 

 

$

87,691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.40

 

 

$

0.68

 

 

$

3.24

 

 

$

0.75

 

Diluted

 

$

2.39

 

 

$

0.67

 

 

$

3.21

 

 

$

0.75

 

Weighted average common shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

207,114

 

 

 

116,634

 

 

 

206,844

 

 

 

116,446

 

Diluted

 

 

208,318

 

 

 

117,547

 

 

 

208,470

 

 

 

117,520

 

 

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

 

 

3


 

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

 

 

 

June 30,

2021

 

 

December 31,

2020

 

 

 

(Unaudited)

 

 

 

(In thousands, except per share amounts)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

90,266

 

 

$

423,806

 

Accounts receivable, less allowances of $33,494 and $17,637 at June 30, 2021 and December 31, 2020, respectively

 

 

2,174,674

 

 

 

880,018

 

Other receivables

 

 

137,304

 

 

 

76,436

 

Inventories, net

 

 

2,074,448

 

 

 

784,527

 

Other current assets

 

 

438,383

 

 

 

58,895

 

Total current assets

 

 

4,915,075

 

 

 

2,223,682

 

Property, plant and equipment, net

 

 

1,300,680

 

 

 

749,130

 

Operating lease right-of-use assets, net

 

 

429,940

 

 

 

274,562

 

Goodwill

 

 

2,535,360

 

 

 

785,305

 

Intangible assets, net

 

 

1,422,649

 

 

 

119,882

 

Other assets, net

 

 

22,390

 

 

 

21,110

 

Total assets

 

$

10,626,094

 

 

$

4,173,671

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,318,446

 

 

$

600,357

 

Accrued liabilities

 

 

831,852

 

 

 

385,536

 

Current portion of operating lease liabilities

 

 

91,134

 

 

 

61,625

 

Current maturities of long-term debt

 

 

11,316

 

 

 

27,335

 

Total current liabilities

 

 

2,252,748

 

 

 

1,074,853

 

Noncurrent portion of operating lease liabilities

 

 

347,823

 

 

 

219,239

 

Long-term debt, net of current maturities, discounts and issuance costs

 

 

2,043,817

 

 

 

1,596,905

 

Deferred income taxes

 

 

362,061

 

 

 

49,495

 

Other long-term liabilities

 

 

137,190

 

 

 

80,396

 

Total liabilities

 

 

5,143,639

 

 

 

3,020,888

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 10,000 shares authorized; zero shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.01 par value, 300,000 shares authorized; 207,196 and 116,829 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

 

2,072

 

 

 

1,168

 

Additional paid-in capital

 

 

4,248,194

 

 

 

589,241

 

Retained earnings

 

 

1,232,189

 

 

 

562,374

 

Total stockholders' equity

 

 

5,482,455

 

 

 

1,152,783

 

Total liabilities and stockholders' equity

 

$

10,626,094

 

 

$

4,173,671

 

 

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

 

 

4


 

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

669,815

 

 

$

87,691

 

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

261,553

 

 

 

57,875

 

Deferred income taxes

 

 

(32,753

)

 

 

2,248

 

Stock-based compensation expense

 

 

18,867

 

 

 

6,720

 

Other non-cash adjustments

 

 

3,534

 

 

 

6,748

 

Changes in assets and liabilities, net of assets acquired and liabilities assumed:

 

 

 

 

 

 

 

 

Receivables

 

 

(867,143

)

 

 

(69,991

)

Inventories

 

 

(840,283

)

 

 

(53,685

)

Other current assets

 

 

(53,672

)

 

 

2,987

 

Other assets and liabilities

 

 

10,201

 

 

 

39,452

 

Accounts payable

 

 

448,527

 

 

 

108,152

 

Accrued liabilities

 

 

177,578

 

 

 

(18,311

)

Net cash (used in) provided by operating activities

 

 

(203,776

)

 

 

169,886

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(98,293

)

 

 

(54,809

)

Proceeds from sale of property, plant and equipment

 

 

9,321

 

 

 

1,451

 

Cash acquired in BMC Merger

 

 

167,490

 

 

 

 

Prepayments for acquisitions

 

 

(225,000

)

 

 

 

Cash used for acquisitions

 

 

(24,833

)

 

 

(15,893

)

Net cash used in investing activities

 

 

(171,315

)

 

 

(69,251

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings under revolving credit facility

 

 

1,769,000

 

 

 

791,000

 

Repayments under revolving credit facility

 

 

(1,233,000

)

 

 

(818,000

)

Proceeds from long-term debt and other loans

 

 

 

 

 

895,625

 

Repayments of long-term debt and other loans

 

 

(470,330

)

 

 

(557,964

)

Payments of debt extinguishment costs

 

 

(2,475

)

 

 

(22,686

)

Payments of loan costs

 

 

(4,272

)

 

 

(13,800

)

Exercise of stock options

 

 

335

 

 

 

708

 

Repurchase of common stock

 

 

(17,707

)

 

 

(4,153

)

Net cash provided by financing activities

 

 

41,551

 

 

 

270,730

 

Net change in cash and cash equivalents

 

 

(333,540

)

 

 

371,365

 

Cash and cash equivalents at beginning of period

 

 

423,806

 

 

 

14,096

 

Cash and cash equivalents at end of period

 

$

90,266

 

 

$

385,461

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

 

53,600

 

 

 

55,356

 

Cash paid for income taxes

 

 

191,070

 

 

 

335

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

 

 

 

Non-cash consideration for the BMC Merger

 

 

3,658,362

 

 

 

 

Accrued purchases of property, plant and equipment

 

 

9,616

 

 

 

1,900

 

Right-of-use assets obtained in exchange for operating lease obligations

 

 

29,146

 

 

 

25,960

 

Assets acquired under finance lease obligations

 

 

1,644

 

 

 

10,132

 

 

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

5


 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Total

 

 

 

(Unaudited)

 

 

 

(In thousands)

 

Balance at December 31, 2019

 

 

116,052

 

 

$

1,161

 

 

$

574,955

 

 

$

248,837

 

 

$

824,953

 

Vesting of restricted stock units

 

 

579

 

 

 

6

 

 

 

(6

)

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

3,254

 

 

 

 

 

3,254

 

Exercise of stock options

 

 

82

 

 

 

 

 

398

 

 

 

 

 

398

 

Shares withheld for restricted stock units vested

 

 

(168

)

 

 

(2

)

 

 

(3,832

)

 

 

 

 

(3,834

)

Net income

 

 

 

 

 

 

 

 

8,767

 

 

 

8,767

 

Balance at March 31, 2020

 

 

116,545

 

 

 

1,165

 

 

 

574,769

 

 

 

257,604

 

 

 

833,538

 

Vesting of restricted stock units

 

 

130

 

 

 

2

 

 

 

(2

)

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

3,466

 

 

 

 

 

3,466

 

Exercise of stock options

 

 

48

 

 

 

 

 

325

 

 

 

 

 

325

 

Shares withheld for restricted stock units vested

 

 

(22

)

 

 

 

 

(319

)

 

 

 

 

(319

)

Net income

 

 

 

 

 

 

 

 

78,924

 

 

 

78,924

 

Balance at June 30, 2020

 

 

116,701

 

 

$

1,167

 

 

$

578,239

 

 

$

336,528

 

 

$

915,934

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

116,829

 

 

$

1,168

 

 

$

589,241

 

 

$

562,374

 

 

$

1,152,783

 

Merger consideration

 

 

89,586

 

 

 

896

 

 

 

3,657,466

 

 

 

 

 

3,658,362

 

Vesting of restricted stock units

 

 

648

 

 

 

6

 

 

 

(6

)

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

10,402

 

 

 

 

 

10,402

 

Exercise of stock options

 

 

27

 

 

 

1

 

 

 

234

 

 

 

 

 

235

 

Shares withheld for restricted stock units vested

 

 

(232

)

 

 

(2

)

 

 

(10,415

)

 

 

 

 

(10,417

)

Net income

 

 

 

 

 

 

 

 

172,580

 

 

 

172,580

 

Balance at March 31, 2021

 

 

206,858

 

 

 

2,069

 

 

 

4,246,922

 

 

 

734,954

 

 

 

4,983,945

 

Vesting of restricted stock units

 

 

472

 

 

 

5

 

 

 

(5

)

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

8,465

 

 

 

 

 

8,465

 

Exercise of stock options

 

 

16

 

 

 

 

 

 

99

 

 

 

 

 

99

 

Shares withheld for restricted stock units vested

 

 

(150

)

 

 

(2

)

 

 

(7,287

)

 

 

 

 

(7,289

)

Net income

 

 

 

 

 

 

 

 

497,235

 

 

 

497,235

 

Balance at June 30, 2021

 

 

207,196

 

 

$

2,072

 

 

$

4,248,194

 

 

$

1,232,189

 

 

$

5,482,455

 

 

 

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

 

 

6


 

 

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

1. Basis of Presentation

Builders FirstSource, Inc., a Delaware corporation formed in 1998, is a leading supplier and manufacturer of building materials, manufactured components and construction services to professional homebuilders, sub-contractors, remodelers and consumers. The Company operates approximately 550 locations in 39 states across the United States. In this quarterly report, references to the “Company,” “we,” “our,” “ours” or “us” refer to Builders FirstSource, Inc. and its consolidated subsidiaries unless otherwise stated or the context otherwise requires.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements 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. 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. Intercompany transactions are eliminated in consolidation.

The condensed consolidated balance sheet as of December 31, 2020 is derived from the audited consolidated financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. This condensed consolidated balance sheet as of December 31, 2020 and the unaudited condensed consolidated financial statements included herein should be read in conjunction with the more detailed audited consolidated financial statements for the year ended December 31, 2020 included in our most recent annual report on Form 10-K, as amended (“Form 10-K”). Accounting policies used in the preparation of these unaudited condensed consolidated financial statements are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our Form 10-K.

Segments

We offer an integrated solution to our customers by providing manufacturing, supply, and installation of a full range of structural and related building products directly to homebuilder customers. We manufacture floor trusses, roof trusses, wall panels, stairs, millwork, windows, and doors. We also provide a full range of construction services. These product and service offerings are distributed across our approximately 550 locations operating in 39 states across the United States. Following the merger with BMC Stock Holdings, Inc. on January 1, 2021, which is discussed in Note 2 to these condensed consolidated financial statements, the Company reorganized the structure of its internal organization.

Given the span and depth of our geographical reach, our locations are organized into three geographical divisions (East, Central, and West), which are also our operating segments. Our operating divisions are organized on a geographical basis to facilitate a disaggregated management of the Company and to respond to the local needs of the customers in the markets we serve. All of our segments have similar customers, products and services, and distribution methods.

Due to these similarities, along with the similar economic profitability achieved across all our operating segments, we aggregate our three operating segments into one reportable segment. Centralized financial and operational oversight, including resource allocation and assessment of performance on an income before income taxes basis, is performed by our CEO, whom we have determined to be our chief operating decision maker (“CODM”).

The accounting policies of our operating segments are consistent with the accounting policies described in the Notes to Consolidated Financial Statements included in our Form 10-K. Since the Company operates in one reportable segment, the primary measures reviewed by the CODM, including revenue, gross margin and income before income taxes, are shown in these condensed consolidated financial statements.

Business Combinations

When they meet the requirements under ASC 805, Business Combinations, merger and acquisition transactions are accounted for using the acquisition method, and accordingly the results of operations of the acquiree are included in the Company’s consolidated financial statements from the acquisition date. The consideration transferred is allocated to the identifiable assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with any excess recorded as goodwill. Transaction-related costs are expensed in the period the costs are incurred. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding adjustment to goodwill.

7


 

Comprehensive Income

Comprehensive income is equal to the net income for all periods presented.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

Other Current Assets

Other current assets consist primarily of our prepayment on acquisitions expected to be closed within one year, refer to Note 2 for more details, held-for-sale assets expected to be disposed within one year, and prepaid expenses.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The purpose of ASU 2020-04 is to provide optional guidance for a period of time related to accounting for reference rate reform on financial reporting. It is intended to reduce the potential burden of reviewing contract modifications related to discontinued rates. The amendments and expedients in this update are effective as of March 12, 2020 through December 31, 2022 and may be elected by topic. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

In December 2019, the FASB issued an update to existing guidance under the Income Taxes topic of the FASB Accounting Standards Codification (“Codification”). This updated guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in the Income Taxes topic. This guidance is effective for public companies annual and interim periods beginning after December 15, 2020 with early adoption permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements.

2. Business Combinations and Dispositions

On January 1, 2021, we completed our previously announced all stock merger transaction with BMC Stock Holdings, Inc., a Delaware corporation (“BMC”), pursuant to the Agreement and Plan of Merger, dated as of August 26, 2020 (as amended, restated, supplemented, or otherwise modified from time to time, the “Merger Agreement”), by and among Builders FirstSource, Inc., Boston Merger Sub I Inc., a Delaware corporation and direct wholly owned subsidiary of Builders FirstSource, Inc. (“Merger Sub”) and BMC. On the terms and subject to the conditions set forth in the Merger Agreement, on January 1, 2021, Merger Sub merged with and into BMC, with BMC continuing as the surviving corporation and a wholly owned subsidiary of Builders FirstSource, Inc. (the “BMC Merger”). The BMC Merger expands the Company’s geographic reach and value-added offerings.

The BMC Merger was accounted for by the acquisition method, and accordingly the results of operations have been included in the Company’s consolidated financial statements from the acquisition date. Net sales and income before income taxes attributable to BMC were $1.8 billion and $179.6 million, respectively, for the three months ended June 30, 2021. Net sales and income before income taxes attributable to BMC were $3.2 billion and $223.1 million, respectively, for the six months ended June 30, 2021. Income before income taxes attributable to BMC reflects an increase in depreciation and amortization expense related to the recording of these assets at fair value as of the acquisition date and is also impacted by changes in the business post-acquisition. The consideration transferred was allocated to the identifiable assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with the excess recorded as goodwill. The fair value of acquired intangible assets of $1.5 billion was primarily related to customer relationships. Immediately following the BMC Merger, the Company settled certain assumed long-term debt of $359.8 million using cash on hand. We incurred transaction-related costs of $0 and $17.6 million related to the BMC Merger during the three and six months ended June 30, 2021, respectively, which are included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations.

The consideration transferred was determined as the sum of the following: (A) the price per share of the Company’s common stock (“BFS common stock”) of $40.81 (based on the closing price per share of BFS common stock on December 31, 2020), multiplied by each of: (1) the approximately 88.7 million shares of BFS common stock issued to BMC stockholders in the BMC Merger (based on the number of shares of BMC common stock outstanding on December 31, 2020, multiplied by the exchange ratio as set forth in the Merger Agreement); and (2) the approximately 0.9 million shares of BFS common stock issued to holders of outstanding BMC restricted stock awards in connection with the BMC Merger (based on the number of BMC restricted stock awards outstanding as of December 31, 2020 (with performance-based awards vesting at target level of performance), multiplied by the exchange ratio as set forth in the Merger Agreement); plus (B) the fair value attributable to fully vested, outstanding options for BMC common stock held by current BMC employees that were assumed by the Company at the effective time and became options to purchase BFS common stock, with the number of shares and exercise price adjusted by the exchange ratio.

8


 

The calculation of consideration transferred is as follows (in thousands, except ratios and per share amounts):

 

 

 

 

Number of BMC common shares outstanding

 

67,568

 

Exchange ratio for common shares outstanding per Merger Agreement

 

1.3125

 

Shares of BFS common stock issued for BMC outstanding common

   stock

 

88,683

 

Number of BMC stock awards that vested as a result of the BMC

   Merger

 

688

 

Exchange ratio for stock awards expected to vest per Merger

   Agreement

 

1.3125

 

Shares of BFS common stock issued for BMC vested restricted stock awards

 

903

 

Price per share of BFS common stock

$

40.81

 

Fair value of BFS common stock issued for BMC outstanding common

   stock and vested equity awards

$

3,655,988

 

Fair value of modified BMC fully vested, unexercised options

 

2,374

 

Total consideration transferred

$

3,658,362

 

 

 

On May 3, 2021, we acquired certain assets and operations of John’s Lumber and Hardware Co. (“John’s Lumber”) for $24.8  million in cash. Located in Detroit, Michigan, John’s Lumber is a supplier of lumber and sheet goods, windows, doors, millwork, siding, decking, kitchen and bath and installation services to homebuilders, remodel contractors and retail consumers. This acquisition was funded with a combination of cash on hand and borrowings under our 2026 revolving credit facility (the “2026 facility”).

This transaction was accounted for by the acquisition method, and accordingly the results of operations have been included in the Company’s consolidated financial statements from the acquisition date. The purchase price was allocated to the assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the net assets acquired recorded as goodwill. The fair value of acquired intangible assets of $2.6 million was primarily related to customer relationships. Pro forma results of operations as well as net sales and income attributable to John’s Lumber are not presented as this acquisition did not have a material impact on our results of operations. We did not incur any significant acquisition related costs attributable to this transaction.

On June 28, 2021, we entered into an agreement to acquire WTS Paradigm, LLC (“Paradigm”), a software solutions and services provider for the building products industry for $450.0 million subject to customary adjustments. As consideration for entering into the agreement and for Paradigm forgoing other opportunities, we agreed to pay $225.0 million of the purchase price (“Exclusivity Payment”) upon signing of the agreement, which has been included within Other current assets in the condensed consolidated balance sheet as of June 30, 2021. The Exclusivity Payment is creditable against both the purchase price and a termination fee that is equal to the purchase price less the Exclusivity Payment (the “Termination Fee”), if any, and is subject to repayment in the event that the agreement is terminated by the Company in certain specified instances.

The closing of the Paradigm acquisition is subject to the satisfaction or waiver of certain customary conditions to closing, including the termination or expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Approval”). In the event that the agreement is terminated due to a failure to obtain the required HSR Approval before June 28, 2022 (subject to certain extensions) or due to the presence of a law or order related either to antitrust matters or certain customer litigation that prohibits the closing of the acquisition, we shall be required to pay the Termination Fee, subject to certain limited exceptions. In the event we pay the Termination Fee, the Paradigm business is required to be sold with the aggregate proceeds from such a sale remitted to the Company.

On July 26, 2021, we completed the sale of our standalone Eastern U.S. gypsum distribution operations (“Disposal Group”) for total cash proceeds of approximately $76 million. The disposition meets the criteria to be classified as held-for-sale as of June 30, 2021 and therefore the assets and liabilities of the Disposal Group have been included in other current assets and accrued liabilities, respectively, in the condensed consolidated balance sheet as of June 30, 2021. The disposition does not meet the criteria for discontinued operations classification, thus the results of operations for this Disposal Group are reported within the Company’s one reportable segment in the condensed consolidated statement of operations for the three and six months ended June 30, 2021.

 

9


 

 

The following table summarizes the aggregate fair values of the assets acquired and liabilities assumed for the BMC Merger and other acquisitions (in thousands):

 

 

 

BMC Merger

 

 

All Other Acquisitions

 

 

Total

 

Cash and cash equivalents

 

$

167,490

 

 

$

-

 

 

$

167,490

 

Accounts receivable

 

 

469,204

 

 

 

8,815

 

 

 

478,019

 

Other receivables

 

 

36,704

 

 

 

83

 

 

 

36,787

 

Inventories

 

 

460,146

 

 

 

7,308

 

 

 

467,454

 

Other current assets

 

 

32,891

 

 

 

56

 

 

 

32,947

 

Property, plant and equipment

 

 

555,170

 

 

 

831

 

 

 

556,001

 

Operating lease right-of-use assets

 

 

179,133

 

 

 

2,448

 

 

 

181,581

 

Goodwill

 

 

1,751,604

 

 

 

8,374

 

 

 

1,759,978

 

Intangible assets

 

 

1,470,000

 

 

 

2,550

 

 

 

1,472,550

 

Other assets

 

 

6,244

 

 

 

-

 

 

 

6,244

 

Total assets

 

$

5,128,586

 

 

$

30,465

 

 

$

5,159,051

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

279,980

 

 

$

1,673

 

 

$

281,653

 

Accrued liabilities

 

 

246,119

 

 

 

1,469

 

 

 

247,588

 

Operating lease liabilities

 

 

180,650