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Business Combination | 3 Months Ended
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Mar. 31, 2021
Business Combinations [Abstract] |
Business Combination | 2. Business Combination 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 $1.4 billion and $42.8 million, respectively, for the three months ended March 31, 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. We incurred transaction-related costs of $17.6 million related to the BMC Merger during the three months ended March 31, 2021 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. The calculation of consideration transferred is as follows:
(In thousands, except ratios and per share amounts) | Amount |
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 equity 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 |
The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed for BMC (in thousands):
(In thousands) |  | Amount |
Cash and cash equivalents | $ | 167,490 |  |
Accounts receivable |  | 469,204 |  |
Other receivables |  | 36,704 |  |
Inventories |  | 460,146 |  |
Other current assets |  | 32,891 |  |
Property, plant and equipment |  | 555,170 |  |
Operating lease right-of-use assets |  | 179,133 |  |
Goodwill |  | 1,751,604 |  |
Intangible assets |  | 1,470,000 |  |
Other assets |  | 6,244 |  |
Total assets | $ | 5,128,586 |  |
Accounts payable | $ | 279,980 |  |
Accrued liabilities |  | 246,119 |  |
Operating lease liabilities |  | 180,650 |  |
Long-term debt |  | 366,797 |  |
Deferred income taxes |  | 349,971 |  |
Other long-term liabilities |  | 46,707 |  |
Total liabilities | $ | 1,470,224 |  |
Total consideration transferred | $ | 3,658,362 |  |
The allocation of the consideration transferred for the BMC Merger is preliminary and based upon all information available to the Company at the time of filing, and is subject to change. The Company is in the process of finalizing its valuation of the identified acquired intangible assets, and therefore, the allocation of the consideration transferred for the BMC Merger is not complete. The fair value assigned above may be adjusted during the measurement period. The preliminary fair value of acquired intangible assets of $1.5 billion, primarily related to customer relationships, was estimated by applying an income approach. That measure is based on significant Level 3 inputs not observable in the market. Key assumptions developed based on the Company’s historical experience, future projections and comparable market data include future cash flows, long-term growth rates, attrition rates and discount rates. Immediately following the BMC Merger, the Company settled certain assumed long-term debt of $359.8 million using cash on hand. The following table reflects the pro forma operating results for the Company which gives effect to the BMC Merger as if it had occurred on January 1, 2020. The pro forma results are based on assumptions that the Company believes are reasonable under the circumstances. The pro forma results are not necessarily indicative of future results. The pro forma financial information includes the historical results of the Company and BMC adjusted for certain items, which are described below, and does not include the effects of any synergies or cost reduction initiatives related to the BMC Merger.
| Three Months Ended March 31, |
(In thousands) | 2021 |  |  | 2020 |
Net sales | $ | 4,173,775 |  |  | $ | 2,707,900 |
Net income (loss) |  | 231,991 |  |  |  | (86,675) |
Pro forma net income (loss) reflects the following adjustments:
| • | Property, plant and equipment and intangible assets are assumed to be recorded at their estimated fair values as of January 1, 2020, and are depreciated or amortized over their estimated useful lives from that date.
| • | Transaction-related expenses of $57.7 million are assumed to have occurred on January 1, 2020, and are presented as an expense during the three months ended March 31, 2020.
| • | Interest expense related to certain assumed long-term debt settled in connection with the BMC Merger has been adjusted.
| • | Expense incurred during the three months ended March 31, 2021 in relation to the sell-through of inventory which was stepped up in value in connection with the BMC Merger has been adjusted and is presented as an expense during the three months ended March 31, 2020.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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