Acquisitions

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

ACQUISITIONS

ACQUISITION

On August 22, 2022, the Company purchased all the issued and outstanding membership interests of Quality Aluminum Products ("QAP"), a manufacturer of aluminum and steel products including soffit, fascia, trim coil, rain carrying products and aluminum siding. The results of QAP have been included in the Company's consolidated financial results since the date of acquisition within the Company's Residential segment. The preliminary purchase consideration for the acquisition of QAP was $52.6 million, which includes a preliminary working capital adjustment and certain other adjustments provided for in the membership interest purchase agreement.

The purchase price for the acquisition was preliminarily allocated to the assets acquired and liabilities assumed based upon their respective fair values estimated as of the date of acquisition. The Company has commenced the process to confirm the existence, condition, and completeness of the assets acquired and liabilities assumed to establish fair value of such assets and liabilities and to determine the amount of goodwill to be recognized as of the date of acquisition. Due to the timing of the acquisition, we continue to gather information supporting the acquired assets and assumed liabilities. Accordingly, all amounts recorded are provisional. These provisional amounts are subject to change if new information is obtained concerning facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. The final determination of the fair value of certain assets and liabilities will be completed within a measurement period of up to one year from the date of acquisition. The final values may also result in changes to depreciation and amortization expense related to certain assets such as property, plant and equipment and acquired intangible assets. The preliminary excess consideration was recorded as goodwill and approximated $3.5 million, all of which is deductible for tax purposes. Goodwill represents future economic benefits arising from other assets acquired that could not be individually identified including workforce additions, growth opportunities, and increased presence in the domestic building products markets. The final purchase price allocation will be completed no later than the third quarter of fiscal year 2023.

The preliminary allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed is as follows as of the date of the acquisition (in thousands):

Cash	$	1,018
Working capital	24,279
Property, plant and equipment	3,462
Acquired intangible assets	20,000
Other assets	404
Goodwill	3,476
Fair value of purchase consideration	$	52,639

The intangible assets acquired in this acquisition consisted of the following (in thousands):

	Fair Value		Weighted-Average Amortization Period
Trademarks	$	5,000	Indefinite
Customer relationships	15,000		15 years
Total	$	20,000

In determining the preliminary allocation of the purchase price to the assets acquired and liabilities assumed, the Company uses all available information to make fair value determinations using Level 3 unobservable inputs in which little or no market data exists, and therefore, engages independent valuation specialists to assist in the fair value determination of the acquired long-lived assets.

The acquisition of QAP was financed primarily through borrowings under the Company's revolving credit facility.

The Company incurred costs related to the acquisition of QAP that have been recognized in the consolidated statements of income. Within cost of sales, the Company recognizes the amortization of the purchase price allocated to the step up of inventory to fair value. Legal and consulting fees incurred as a result of the acquisition were recognized as a component of selling, general, and administrative expenses.

The acquisition-related costs consisted of the following for the three and nine months ended September 30 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Cost of sales	$	476	$	—	$	476	$	—
Selling, general and administrative costs	522		53		529		946
Total acquisition related costs	$	998	$	53	$	1,005	$	946