Business Combination

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

On October 3, 2022, we acquired all the outstanding stock of Vandermeer Forest Products (“Vandermeer”), a premier wholesale distributor of building products, for preliminary total consideration of $69.3 million. Preliminary total consideration includes a purchase price of $67.0 million plus a preliminary estimate for cash acquired and net adjustments for working capital related to the transaction. The purchase price of $67.0 million includes $63.4 million for the business and $3.6 million for a distribution facility and real estate located in Spokane, Washington, which was acquired in transaction. The acquisition was funded with cash on hand. Vandermeer was founded in 1972 and serves more than 250 customers across the Pacific Northwest, Alaska, Hawaii, British Columbia and Alberta from distribution facilities in Kent, Spokane, and Marysville, Washington. The acquisition of Vandermeer provides us with direct access to customers within Seattle and Portland, two of the top 15 highest growth repair and remodel and new construction markets in the United States. Additionally, with our acquisition of Vandermeer, we now have coast-to-coast reach and serve all 50 states.

The Vandermeer acquisition has been accounted for as a business combination using the acquisition method, and the Vandermeer results of operations are included in our results of operations from the October 3, 2022 acquisition date through the end of fiscal 2022. Vandermeer contributed revenues of $25.5 million from October 3, 2022 through the end of fiscal 2022. The assets acquired and liabilities assumed were recognized at their acquisition date fair values. The acquisition accounting, including fair value estimations, is subject to change as we finalize all assessments over the assets and liabilities that were acquired on the acquisition date. The primary area of the preliminary acquisition accounting that is not yet finalized relates to settlement of the holdback liability, specifically as it relates to adjustments for final working capital balances.

The following table summarizes the components of the preliminary consideration:


	Preliminary Consideration Transferred
	(In thousands)
Cash consideration paid to and on behalf of shareholder	$	62,929
Holdback liability(1)	6,344
Total preliminary consideration transferred	69,273

(1) Included in the total preliminary consideration as of December 31, 2022 is a $6.3 million holdback liability held in escrow for general representations and warranties of the seller that is scheduled to be settled approximately 18 months after the acquisition date.

The excess of total purchase price, which includes the aggregate cash consideration paid in excess of the fair value of the tangible and intangible assets acquired, was recorded as goodwill. The goodwill recognized is attributable to the expected operating synergies and growth potential that we expect to realize from the acquisition. Goodwill also includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce. We intend to make a 338(h)(10) tax election which will allow us to deduct goodwill generated from the acquisition for tax purposes.

When determining the fair values of assets acquired and liabilities assumed, management made estimates, judgments and assumptions. The following table summarizes the preliminary values of the assets acquired and liabilities assumed at the date of the acquisition:


	Preliminary Allocation as of Acquisition Date
	(In thousands)
Estimated fair value of identifiable assets acquired and liabilities assumed
Cash	5,506
Accounts receivable	13,180
Inventory	16,538
Property, plant and equipment	3,955
Operating lease right-of-use assets	714
Prepaid expenses and other assets	701
Intangible assets and goodwill:
Customer relationships	23,000
Trade names	1,000
Non-compete agreements	700
Goodwill	7,600
Accounts payable	(1,738)
Accrued compensation	(994)
Operating lease liability	(714)
Other current liabilities	(175)
Total estimated fair value of net assets acquired	$	69,273

The estimated useful life for the customer relationships, trade names, and non-compete agreements is 12 years, three years, and five years, respectively.