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.

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.

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		2,448		183,098
Long-term debt		366,797		42		366,839
Deferred income taxes		349,971		-		349,971
Other long-term liabilities		46,707		-		46,707
Total liabilities	$	1,470,224	$	5,632	$	1,475,856

Total consideration transferred	$	3,658,362	$	24,833	$	3,683,195

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 (in thousands). 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.