Item 1. Financial Statements (unaudited)

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

		Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands, except per share amounts)		2021				2020				2021				2020
Net sales		$	5,508,590			$	2,295,450			$	15,259,047			$	6,028,114
Cost of sales			3,796,138				1,724,799				10,893,890				4,474,718
Gross margin			1,712,452				570,651				4,365,157				1,553,396
Selling, general and administrative expenses			875,012				430,893				2,599,523				1,223,436
Income from operations			837,440				139,758				1,765,634				329,960
Interest expense, net			35,954				28,043				95,593				106,786
Income before income taxes			801,486				111,715				1,670,041				223,174
Income tax expense			188,341				25,783				387,081				49,551
Net income		$	613,145			$	85,932			$	1,282,960			$	173,623
Net income per share:
Basic		$	3.00			$	0.74			$	6.23			$	1.49
Diluted		$	2.98			$	0.73			$	6.18			$	1.48
Weighted average common shares:
Basic			204,268				116,731				205,976				116,542
Diluted			205,630				118,026				207,513				117,690

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

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(in thousands, except per share amounts)		September 30, 2021				December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents		$	224,735			$	423,806
Accounts receivable, less allowances of $38,627 and $17,637 at September 30, 2021 and December 31, 2020, respectively			2,134,269				880,018
Other receivables			167,309				76,436
Inventories, net			1,616,553				784,527
Other current assets			88,368				58,895
Total current assets			4,231,234				2,223,682
Property, plant and equipment, net			1,336,890				749,130
Operating lease right-of-use assets, net			444,073				274,562
Goodwill			3,141,594				785,305
Intangible assets, net			1,629,363				119,882
Other assets, net			25,994				21,110
Total assets		$	10,809,148			$	4,173,671
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	1,004,521			$	600,357
Accrued liabilities			930,189				385,536
Current portion of operating lease liabilities			94,651				61,625
Current maturities of long-term debt			3,819				27,335
Total current liabilities			2,033,180				1,074,853
Noncurrent portion of operating lease liabilities			360,271				219,239
Long-term debt, net of current maturities, discounts and issuance costs			2,419,664				1,596,905
Deferred income taxes			330,998				49,495
Other long-term liabilities			141,609				80,396
Total liabilities			5,285,722				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; 196,288 and 116,829 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively			1,963				1,168
Additional paid-in capital			4,254,262				589,241
Retained earnings			1,267,201				562,374
Total stockholders' equity			5,523,426				1,152,783
Total liabilities and stockholders' equity		$	10,809,148			$	4,173,671

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

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

		Nine Months Ended September 30,
(in thousands)		2021				2020
Cash flows from operating activities:
Net income		$	1,282,960			$	173,623
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			401,500				87,298
Deferred income taxes			(65,696	)			3,155
Stock-based compensation expense			25,288				12,098
Net gain on sale of assets			(32,235	)			(1,413	)
Other non-cash adjustments			4,805				7,884
Changes in assets and liabilities, net of assets acquired and liabilities assumed:
Receivables			(756,511	)			(230,627	)
Inventories			(321,068	)			(189,692	)
Other current assets			5,491				(5,076	)
Other assets and liabilities			16,653				60,439
Accounts payable			103,006				205,570
Accrued liabilities			239,024				31,887
Net cash provided by operating activities			903,217				155,146
Cash flows from investing activities:
Cash used for acquisitions, net of cash acquired			(898,113	)			(15,893	)
Proceeds from divestiture of business			76,162				—
Purchases of property, plant and equipment			(160,179	)			(83,508	)
Proceeds from sale of property, plant and equipment			11,728				3,298
Net cash used in investing activities			(970,402	)			(96,103	)
Cash flows from financing activities:
Borrowings under revolving credit facility			2,420,000				791,000
Repayments under revolving credit facility			(2,495,000	)			(818,000	)
Proceeds from long-term debt and other loans			1,000,000				895,625
Repayments of long-term debt and other loans			(471,360	)			(561,541	)
Payments of debt extinguishment costs			(2,475	)			(22,686	)
Payments of loan costs			(17,970	)			(13,800	)
Exercise of stock options			537				1,343
Repurchase of common stock			(565,618	)			(4,153	)
Net cash (used in) provided by financing activities			(131,886	)			267,788
Net change in cash and cash equivalents			(199,071	)			326,831
Cash and cash equivalents at beginning of period			423,806				14,096
Cash and cash equivalents at end of period		$	224,735			$	340,927
Supplemental disclosures of cash flow information:
Cash paid for interest		$	75,531			$	77,734
Cash paid for income taxes			414,515				21,280
Supplemental disclosures of non-cash activities:
Non-cash consideration for the BMC Merger		$	3,658,362			$	—
Accrued purchases of property, plant and equipment			13,164				1,336
Right-of-use assets obtained in exchange for operating lease obligations			49,135				33,379
Assets acquired under finance lease obligations			1,644				16,096
Amounts accrued for repurchases of common stock			30,756				—

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

BUILDERS FIRSTSOURCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

										Additional
		Common Stock								Paid-in				Retained
(in thousands)		Shares				Amount				Capital				Earnings				Total
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
Vesting of restricted stock units			13				—				—				—				—
Stock-based compensation expense			—				—				5,379				—				5,379
Exercise of stock options			89				1				619				—				620
Net income			—				—				—				85,932				85,932
Balance at September 30, 2020			116,803			$	1,168			$	584,237			$	422,460			$	1,007,865
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
Vesting of restricted stock units			38				—				—			—					—
Stock-based compensation expense		—				—					6,421			—					6,421
Repurchase of common stock (1)			(10,958	)			(109	)			—				(578,133	)			(578,242	)
Exercise of stock options			22				—				202			—					202
Shares withheld for restricted stock units vested			(10	)			—				(555	)		—					(555	)
Net income		—				—				—					613,145				613,145
Balance at September 30, 2021			196,288			$	1,963			$	4,254,262			$	1,267,201			$	5,523,426

	(1)	During the three and nine months ended September 30, 2021 we repurchased and retired 10,958,400 shares of our common stock at an average price of $52.74 per share for $578.2 million, net of fees, pursuant to the repurchase program authorized by our board of directors in August 2021.

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

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.

Comprehensive Income

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

Reclassifications

Certain prior periods’ amounts have been reclassified to conform to the current year presentation. These reclassifications had no impact on net income, total assets and liabilities, stockholders’ equity, or cash flows as previously reported.

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 elected, beginning March 12, 2020 through December 31, 2022 and may be elected by topic. We have yet to elect adoption and 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 $196.9 million, respectively, for the three months ended September 30, 2021. Net sales and income before income taxes attributable to BMC were $5.0 billion and $418.4 million, respectively, for the nine months ended September 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 nine months ended September 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 a purchase price of $24.8 million. 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”).

On July 1, 2021, we acquired all of the operating affiliates of Cornerstone Building Alliance SW, LLC (“Alliance”) for a purchase price of, $408.9 million, net of cash acquired. Alliance operates in Arizona, primarily serving the greater Phoenix, Tucson, and Prescott Valley metropolitan areas. Alliance manufactures roof trusses and distributes lumber and related products to residential homebuilders and commercial contractors. This acquisition was funded with a combination of cash on hand and borrowings under our 2026 facility.

On September 1, 2021, we acquired certain assets and operations of CTF Holdings Limited Partnership (“CTF”) for a purchase price of $182.5 million, net of cash acquired. Prior to the acquisition, CTF was the largest independent truss manufacturer in California, supplying framing contractors and builders in both the single and multifamily markets. This acquisition was funded with cash on hand.

These three transactions were 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 $176.7 million was primarily related to customer relationships. Customer relationships associated with John’s Lumber, Alliance, and CTF were $2.6 million, $108.2 million, and $52.8 million, respectively. We recorded goodwill for John’s Lumber, Alliance, and CTF of $8.4 million, $184.0 million, $98.1 million, respectively.

On August 17, 2021, we acquired certain assets and operations of WTS Paradigm, LLC (“Paradigm”), a software solutions and services provider for the building products industry for a purchase price of $449.4 million, net of cash acquired. Located in Middleton, Wisconsin, Paradigm enhances the Company’s digital capabilities and aligns with our broader vision to provide digital solutions that improve efficiency and solve pain points in the homebuilding process. This acquisition was funded with cash on hand.

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 allocation of the consideration transferred for the Paradigm acquisition 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 is not complete. The fair value assigned may be adjusted during the measurement period. 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 $124.9 million was primarily related to developed technology of $97.2 million. We recorded goodwill of $324.1 million for this transaction.

Pro forma results of operations as well as net sales and income attributable to the acquisitions discussed above are not presented as these acquisitions did not have a material impact on our results of operations. We incurred $6.5 million and $7.2 million of acquisition related costs attributable to these acquisitions in the three and nine months ended September 30, 2021, respectively, which are included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations.

On July 26, 2021, we completed the sale of our standalone Eastern U.S. gypsum distribution operations (“Gypsum Divestiture”) for total cash proceeds of $76.2 million, resulting in a gain on sale totaling $26.3 million. The disposition does not meet the criteria for discontinued operations classification, thus the results of operations for this divestiture are reported within the Company’s one reportable segment, and the gain on sale is included within selling, general and administrative expenses in the condensed consolidated statement of operations for the three and nine months ended September 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			$	34,727			$	202,217
Accounts receivable			469,204				94,316				563,520
Other receivables			36,704				2,895				39,599
Inventories			460,146				67,978				528,124
Other current assets			32,891				3,099				35,990
Property, plant and equipment			555,170				33,120				588,290
Operating lease right-of-use assets			179,133				21,277				200,410
Goodwill			1,751,604				614,609				2,366,213
Intangible assets			1,470,000				301,550				1,771,550
Other assets			6,244				619				6,863
Total assets		$	5,128,586			$	1,174,190			$	6,302,776
Accounts payable		$	279,980			$	14,726			$	294,706
Accrued liabilities			246,119				35,401				281,520
Operating lease liabilities			180,650				21,277				201,927
Long-term debt			366,797				42				366,839
Deferred income taxes			349,971				1,881				351,852
Other long-term liabilities			46,707				535				47,242
Total liabilities		$	1,470,224			$	73,862			$	1,544,086
Total consideration transferred		$	3,658,362			$	1,100,328			$	4,758,690

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.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
Net sales		$	5,508,590			$	3,385,793			$	15,259,047			$	9,019,232
Net income			642,048				76,810				1,401,823				63,613

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 nine months ended September 30, 2020.

	•	Interest expense related to certain assumed long-term debt settled in connection with the BMC Merger has been adjusted.

	•	Cost of sales related to the sell-through of inventory stepped up in value in connection with the BMC Merger has been adjusted and is presented as cost of sales during the nine months ended September 30, 2020.

3. Revenue

The following table disaggregates our sales by product category (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
Lumber & lumber sheet goods		$	2,400,538			$	851,594			$	6,726,566			$	2,026,233
Manufactured products			1,253,918				421,296				3,162,147				1,141,535
Windows, doors & millwork			864,553				420,158				2,413,107				1,215,528
Siding, metal & concrete products			414,197				212,383				1,132,232				581,844
Gypsum, roofing & insulation			168,497				149,545				510,909				386,186
Other building products & services			406,887				240,474				1,314,086				676,788
Net sales		$	5,508,590			$	2,295,450			$	15,259,047			$	6,028,114

Net sales from installation and construction services was less than 10% of the Company’s net sales for each period presented.

The timing of revenue recognition, billings and cash collections results in accounts receivable, unbilled receivables, contract assets and contract liabilities. Contract asset balances are included in accounts receivable on our condensed consolidated balance sheet and were $239.3 million and $57.3 million as of September 30, 2021 and December 31, 2020, respectively. Contract liabilities consist of deferred revenue and customer advances and deposits. Contract liability balances are included in accrued liabilities on our condensed consolidated balance sheet and were $165.7 million and $58.5 million as of September 30, 2021 and December 31, 2020, respectively. The increase in contract assets and liabilities during the three and nine months ended September 30, 2021 was primarily related to contract assets acquired and contract liabilities assumed in the BMC Merger.

4. Net Income per Common Share

Net income per common share (“EPS”) is calculated in accordance with the Earnings per Share topic of the Codification, which requires the presentation of basic and diluted EPS. Basic EPS is computed using the weighted average number of common shares outstanding during the period. Diluted EPS is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential common shares.

The table below presents the calculation of basic and diluted EPS (in thousands, except per share amounts):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
Numerator:
Net income		$	613,145			$	85,932			$	1,282,960			$	173,623
Denominator:
Weighted average shares outstanding, basic			204,268				116,731				205,976				116,542
Dilutive effect of options and RSUs			1,362				1,295				1,537				1,148
Weighted average shares outstanding, diluted			205,630				118,026				207,513				117,690
Net income per share:
Basic		$	3.00			$	0.74			$	6.23			$	1.49
Diluted		$	2.98			$	0.73			$	6.18			$	1.48
Antidilutive and contingent RSUs excluded from diluted EPS		220				299				241				389

5. Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):

		September 30, 2021				December 31, 2020
Land		$	326,337			$	206,321
Buildings and improvements			545,417				386,922
Machinery and equipment			872,534				517,543
Furniture, fixtures and information technology			129,653				102,309
Construction in progress			84,386				16,568
Finance lease right-of-use assets			6,054				43,256
Property, plant and equipment			1,964,381				1,272,919
Less: accumulated depreciation			627,491				523,789
Property, plant and equipment, net		$	1,336,890			$	749,130

Depreciation expense was $47.7 million and $24.0 million, of which $11.0 million and $5.3 million was included in cost of sales, for the three months ended September 30, 2021 and 2020, respectively. Depreciation expense was $139.9 million and $70.6 million, of which $31.9 million and $15.3 million was included in cost of sales, for the nine months ended September 30, 2021 and 2020, respectively.

Included in property, plant and equipment are certain assets held under other finance obligations. These assets are recorded at the present value of the lease payments and include land, buildings and equipment. Amortization charges associated with assets held under other finance obligations are included in depreciation expense.

The following balances held under other finance obligations are included on the accompanying condensed consolidated balance sheets (in thousands):

		September 30, 2021				December 31, 2020
Land		$	110,953			$	116,638
Buildings and improvements			119,660				131,390
Assets held under other finance obligations			230,613				248,028
Less: accumulated amortization			23,649				25,015
Assets held under other finance obligations, net		$	206,964			$	223,013

6. Goodwill

The following table sets forth the changes in the carrying amount of goodwill (in thousands):

Balance as of December 31, 2020 (1)		$	785,305
BMC Merger			1,751,604
All other acquisitions			614,609
Gypsum Divestiture			(9,924	)
Balance as of September 30, 2021 (1)		$	3,141,594

(1)Goodwill is presented net of accumulated impairment losses of $44.6 million.

In 2021, the change in the carrying amount of goodwill is attributable to the BMC Merger and other acquisitions as well as the Gypsum Divestiture. As a result of the change in segments discussed in Note 1 to these condensed consolidated financial statements, the Company has determined that the reporting units used in the analysis of goodwill impairment should align with its three operating segments. As of September 30, 2021, no triggering events have occurred. The amount allocated to goodwill is attributable to the assembled workforce, synergies and expected growth from the expanded product and service offerings of BMC and our other acquisitions. The goodwill recognized from the BMC Merger and CTF will not be deductible for tax purposes. The $516.6 million of goodwill recognized from the other acquisitions is expected to be deductible for tax purposes and will be amortizable ratably over a 15-year period for tax purposes.

7. Intangible Assets

The following table presents intangible assets (in thousands) as of:

		September 30, 2021								December 31, 2020
		Gross Carrying Amount				Accumulated Amortization				Gross Carrying Amount				Accumulated Amortization
Customer relationships		$	1,709,115			$	(266,507	)		$	195,435			$	(94,690	)
Trade names			201,861				(125,375	)			52,061				(38,138	)
Subcontractor relationships			5,440				(2,360	)			5,440				(1,944	)
Non-compete agreements			13,519				(2,586	)			3,719				(2,001	)
Developed technology			97,200				(944	)			-				-
Total intangible assets		$	2,027,135			$	(397,772	)		$	256,655			$	(136,773	)

In connection with the BMC Merger and current year acquisitions, we recorded intangible assets of $1.8 billion, which includes $1.5 billion of customer relationships, $149.8 million of trade names, $97.2 million of developed technology, and $9.8 million of non-compete agreements. The weighted average useful lives of the acquired intangible assets are 11.1 years in total, 11.3 years for customer relationships, 7.0 years for trade names, 9.0 years for developed technology and 5.7 years for non-compete agreements. The fair value of acquired customer relationship intangible assets was primarily estimated by applying the multi-period excess earnings method, which involved the use of significant estimates and assumptions primarily related to forecasted revenue growth rates, gross margin, contributory asset charges, customer attrition rates, and market-participant discount rates. These measures are 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.

In connection with the Gypsum Divestiture, we derecognized $0.5 million of intangible assets, net. Refer to Note 2 – Business Combinations and Dispositions for additional information.

During the three and nine months ended September 30, 2021, we recorded amortization expense in relation to the above-listed intangible assets of $92.3 million and $261.6 million, respectively. During the three and nine months ended September 30, 2020, we recorded amortization expense in relation to the above-listed intangible assets of $5.4 million and $16.7 million, respectively.

The following table presents the estimated amortization expense for intangible assets for the years ending December 31 (in thousands):

2021 (from October 1, 2021)		$	96,494
2022			248,732
2023			217,259
2024			187,624
2025			165,262
Thereafter			713,992
Total future net intangible amortization expense		$	1,629,363

8. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands) as of:

		September 30, 2021				December 31, 2020
Accrued payroll and other employee related expenses		$	383,356			$	176,379
Contract liabilities			165,731				58,455
Accrued business taxes			89,854				46,717
Income taxes payable			78,422				12,236
Self-insurance reserves			74,034				38,642
Accrued rebates payable			40,961				18,592
Accrued interest			26,078				13,567
Other			71,753				20,948
Total accrued liabilities		$	930,189			$	385,536

9. Long-Term Debt

Long-term debt consisted of the following (in thousands) as of:

		September 30, 2021				December 31, 2020
2026 revolving credit facility (1)		$	-			$	75,000
2027 notes			695,000				777,500
2030 notes			550,000				550,000
2032 notes			1,000,000				-
Other finance obligations			203,536				216,072
Finance lease obligations			4,153				23,873
			2,452,689				1,642,445
Unamortized debt discount/premium and debt issuance costs			(29,206	)			(18,205	)
			2,423,483				1,624,240
Less: current maturities of long-term debt and lease obligations			3,819				27,335
Long-term debt, net of current maturities, discounts and issuance costs		$	2,419,664			$	1,596,905

	(1)	The weighted average interest rate was 2.8% and 3.8% as of September 30, 2021 and December 31, 2020, respectively.

2021 Debt Transactions

On January 29, 2021, the Company amended its revolving credit facility to increase the total commitments by an aggregate amount of $500.0 million resulting in a new $1.4 billion amended credit facility, and to extend the maturity date from November 2023 to January 2026. In connection with this amendment, we expensed approximately $1.0 million of unamortized debt issuance costs related to exiting lenders to interest expense in the accompanying condensed consolidated statement of operations during the nine months ended September 30, 2021. Approximately $4.3 million of new debt issuance costs related to the amendment will be deferred through January 2026. The 2026 facility is discussed in more detail below.

On March 3, 2021, pursuant to the optional call feature in the indenture governing our 6.75% senior secured notes due 2027 (the “2027 notes”), $82.5 million of 2027 notes were redeemed at a redemption price equal to 103% of the principal amount of the notes, plus accrued and unpaid interest. In connection with this redemption, we recognized a loss on extinguishment of $3.6 million, which was recorded to interest expense in the accompanying condensed consolidated statement of operations during the nine months ended September 30, 2021. Of this loss, approximately $2.5 million was attributable to the payment of redemption premiums on the extinguished notes and $1.1 million was attributable to the write-off of unamortized net debt discount and debt issuance costs.

On July 23, 2021, the Company completed a private offering of $1.0 billion in aggregate principal amount of 4.25% senior unsecured notes due 2032 (the “2032 notes”). In connection with the offering, we incurred $13.7 million of various third-party fees and expenses. These costs have been recorded as a reduction to long-term debt and are being amortized over the contractual life of the 2032 notes using the effective interest method. The 2032 notes are discussed in more detail below.

2026 Revolving Credit Facility

The 2026 facility provides for a $1.4 billion revolving credit line to be used for working capital, general corporate purposes and funding capital expenditures and growth opportunities. In addition, we may use borrowings under the 2026 facility to facilitate debt repayment and consolidation. The available borrowing capacity, or borrowing base, is derived from a percentage of the Company’s eligible receivables and inventory, as defined by the agreement, subject to certain reserves. As of September 30, 2021, we had $0.0 million in outstanding borrowings under our 2026 facility and our net excess borrowing availability was $1,273.6 million after being reduced by outstanding letters of credit totaling $126.4 million.

Borrowings under the 2026 facility bear interest, at our option, at either a eurodollar rate or a base rate, plus, in each case, an applicable margin. The applicable margin ranges from 1.50% to 2.00% per annum in the case of eurodollar rate loans and 0.50% to 1.00% per annum in the case of base rate loans. The margin in either case is based on a measure of availability under the 2026 facility. A variable commitment fee, currently 0.375% per annum, is charged on the unused amount of the revolver based on quarterly average loan utilization. Letters of credit under the 2026 facility are assessed at a rate equal to the applicable eurodollar margin, currently 1.50%, as well as a fronting fee at a rate of 0.125% per annum. These fees are payable quarterly in arrears at the end of March, June, September, and December.

All obligations under the 2026 facility are guaranteed jointly and severally by the Company and all other subsidiaries that guarantee the 2027 notes, our 5.00% senior unsecured notes due 2030 (the “2030 notes”), and our 2032 notes (such subsidiaries, the “Credit Facility Guarantors”). All obligations and the guarantees of those obligations are secured by substantially all of the assets of the Company and the Credit Facility Guarantors subject to certain exceptions and permitted liens, including with respect to the 2026 facility, a first-priority security interest in such assets that constitute ABL Collateral (as defined below) and a second-priority security interest in such assets that constitute Notes Collateral (as defined below).

“ABL Collateral” includes substantially all presently owned and after-acquired accounts receivable, inventory, rights of unpaid vendors with respect to inventory, deposit accounts, commodity accounts, securities accounts and lock boxes, investment property, cash and cash equivalents, and general intangibles, books and records, supporting obligations and documents and related letters of credit, commercial tort claims or other claims related to and proceeds of each of the foregoing. “Notes Collateral” includes all collateral that is not ABL Collateral.

The 2026 facility contains restrictive covenants which, among other things, limit the Company’s ability to incur additional indebtedness, incur liens, engage in mergers or other fundamental changes, sell certain assets, pay dividends, make acquisitions or investments, prepay certain indebtedness, change the nature of our business, and engage in certain transactions with affiliates. In addition, the 2026 facility also contains a financial covenant requiring the satisfaction of a minimum fixed charge ratio of 1.00 to 1.00 if our excess availability falls below the greater of $80.0 million or 10% of the maximum borrowing amount, which was $140.0 million as of September 30, 2021.

Senior Unsecured Notes due 2032

As of September 30, 2021, we have $1.0 billion outstanding in aggregate principal amount of the 2032 notes, which mature on February 1, 2032. Interest accrues on the 2032 notes at a rate of 4.25% per annum and is payable semi-annually on February 1 and August 1 of each year, commencing on February 1, 2022.

The terms of the 2032 notes are governed by the indenture, dated as of the July 23, 2021 (the “Indenture”), among the Company, the guarantors named therein (the “2032 Guarantors”) and Wilmington Trust, National Association, as trustee. The 2032 notes, subject to certain exceptions, are guaranteed, jointly and severally, on a senior unsecured basis, by each of the Company’s direct and indirect wholly owned subsidiaries that guarantee its obligations under the 2026 facility, the 2027 notes and the 2030 notes. Subject to certain exceptions, future subsidiaries that guarantee the 2026 facility, the 2027 notes, the 2030 notes or certain other indebtedness will also guarantee the 2032 notes.

The 2032 notes constitute senior unsecured obligations of the Company and 2032 Guarantors, pari passu in right of payment with all of the existing and future senior indebtedness of the Company, including indebtedness under the 2026 facility, the 2027 notes and the 2030 notes, effectively subordinated to all existing and future secured indebtedness of the Company and the 2032 Guarantors (including indebtedness under the 2026 facility and the 2027 notes) to the extent of the value of the assets securing such indebtedness, senior to all of the future subordinated indebtedness of the Company and the 2032 Guarantors and structurally subordinated to any existing and future indebtedness and other liabilities, including preferred stock, of the Company’s subsidiaries that do not guarantee the 2032 notes.

The Indenture contains restrictive covenants that limit the ability of the Company and its restricted subsidiaries to, among other things, incur additional debt or issue preferred stock, create liens, create restrictions on the Company’s subsidiaries’ ability to make payments to the Company, pay dividends and make other distributions in respect of the Company’s and its subsidiaries’ capital stock, make certain investments or certain other restricted payments, guarantee indebtedness, designate unrestricted subsidiaries, sell certain kinds of assets, enter into certain types of transactions with affiliates, and effect mergers and consolidations.

At any time prior to August 1, 2026, the Company may redeem the 2032 notes in whole or in part at a redemption price equal to 100% of the principal amount of the 2032 notes plus the “applicable premium” set forth in the Indenture. At any time on or after August 1, 2026, the Company may redeem the 2032 notes at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to the redemption date. At any time prior to August 1, 2024, the Company may redeem up to 40% of the aggregate principal amount of the 2032 notes with the net cash proceeds of one or more equity offerings, as described in the Indenture, at a price equal to 104.250% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. If the Company experiences certain change of control triggering events, holders of the 2032 notes may require it to repurchase all or part of their 2032 notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.

Fair Value

As of September 30, 2021 and December 31, 2020, the Company does not have any financial instruments that are measured at fair value on a recurring basis. We have elected to report the value of our 2027 notes, 2030 notes, 2032 notes and 2026 facility at amortized cost. The fair values of the 2027 notes, 2030 notes and 2032 notes at September 30, 2021 were approximately $736.2 million, $588.8 million and $1,027.1 million, respectively, and were determined using Level 2 inputs based on market prices. The carrying value of the 2026 facility at September 30, 2021 approximates fair value as the rates are comparable to those at which we could currently borrow under similar terms, are variable and incorporate a measure of our credit risk. As such, the fair value of the 2026 facility was also classified as Level 2 in the hierarchy.

We were not in violation of any covenants or restrictions imposed by any of our debt agreements at September 30, 2021.

10. Leases and Other Finance Obligations

Right-of-use assets and lease liabilities consisted of the following (in thousands) as of:

		September 30, 2021				December 31, 2020
Assets
Operating lease right-of-use assets, net		$	444,073			$	274,562
Finance lease right-of-use assets, net (included in property, plant and equipment, net)			4,490				34,905
Total right-of-use assets		$	448,563			$	309,467
Liabilities
Current
Current portion of operating lease liabilities		$	94,651			$	61,625
Current portion of finance lease liabilities (included in current maturities of long-term debt)			1,444				12,178
Noncurrent
Noncurrent portion of operating lease liabilities			360,271				219,239
Noncurrent portion of finance lease liabilities (included in long-term debt, net of current maturities)			2,709				11,695
Total lease liabilities		$	459,075			$	304,737

Total lease costs consisted of the following (in thousands):

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
Operating lease costs (1)		$	33,820			$	21,300			$	99,292			$	64,293
Finance lease costs:
Amortization of finance lease right-of-use assets			397				1,548				1,787				4,704
Interest on finance lease liabilities			53				382				318				1,041
Variable lease costs			6,827				4,613				20,308				13,275
Total lease costs		$	41,097			$	27,843			$	121,705			$	83,313

	(1)	Includes short-term lease costs and sublease income which were not material for the three and nine months ended September 30, 2021 and 2020.

Future maturities of lease liabilities as of September 30, 2021 were as follows (in thousands):

		Finance Leases				Operating Leases
2021 (from October 1, 2021)		$	409			$	29,490
2022			1,570				112,718
2023			1,337				95,739
2024			480				78,513
2025			257				56,062
Thereafter			438				167,888
Total lease payments			4,491				540,410
Less: amount representing interest			(338	)			(85,488	)
Present value of lease liabilities			4,153				454,922
Less: current portion			(1,444	)			(94,651	)
Long-term lease liabilities, net of current portion		$	2,709			$	360,271

Weighted average lease terms and discount rates were as follows:

			September 30, 2021				December 31, 2020
Weighted average remaining lease term (years)
Operating leases			6.4				6.3
Finance leases			3.6				2.1
Weighted average discount rate
Operating leases			5.4	%			6.3	%
Finance leases			4.4	%			5.9	%

The following table presents cash paid for amounts included in the measurement of lease liabilities (in thousands):

		Nine Months Ended September 30,
			2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	90,858		$	62,185
Operating cash flows from finance leases			318			1,041
Financing cash flows from finance leases			27,565			9,961

Residual value guarantees in our lease agreements are not material. Our lease agreements do not impose any significant restrictions or covenants on us. As of September 30, 2021, we do not have any material leases that have been signed, but have not yet commenced. Leases with related parties are not significant as of September 30, 2021 nor for the three and nine months ended September 30, 2021 and 2020.

Other Finance Obligations

In addition to the operating and finance lease arrangements described above, the Company is party to 121 individual property lease agreements with a single lessor as of September 30, 2021. These lease agreements had initial terms ranging from nine to 15 years with renewal options in five-year increments providing for up to approximately 30-year total lease terms. A related agreement between the lessor and the Company gives the Company the right to acquire a limited number of the leased facilities at fair market value. These purchase rights represent a form of continuing involvement with these properties, which precluded sale-leaseback accounting. As a result, the Company treats all of the properties that it leases from this lessor as a financing arrangement.

We were deemed the owner of certain of our facilities during their construction period based on an evaluation made in accordance with the Leases topic of the Codification. Effectively, a sale and leaseback of these facilities occurred when construction was completed and the lease term began. These transactions did not qualify for sale-leaseback accounting. As a result, the Company treats the lease of these facilities as a financing arrangement.

As of September 30, 2021, other finance obligations consist of $203.5 million, with cash payments of $5.2 million and $15.9 million for the three and nine months ended September 30, 2021, respectively. These other finance obligations are included on the condensed consolidated balance sheet as part of long-term debt. The related assets are recorded as components of property, plant, and equipment on the condensed consolidated balance sheet.

Future minimum commitments for other finance obligations as of September 30, 2021 were as follows (in thousands):

2021 (from October 1, 2021)		$	4,236
2022			16,886
2023			16,893
2024			16,911
2025			16,911
Thereafter			174,344
Total		$	246,181

11. Employee Stock-Based Compensation

Time Based Restricted Stock Unit Grants

In the first nine months of 2021, our board of directors granted 577,500 restricted stock units (“RSUs”) to employees under our 2014 Incentive Plan for which vesting is based solely on continuous employment over the requisite service period. 536,000 of the RSUs vest at 33% per year at each anniversary of the grant date over the next three years, 37,000 of the RSUs vest at 50% per year at each anniversary of the grant date over the next two years, and 4,500 of the RSUs vest at 25% on each of the second and third anniversaries of the grant date and 50% on the fourth anniversary of the grant date. The weighted average grant date fair value for these RSUs was $47.56 per unit, which was based on the closing stock price on the respective grant dates.

Performance and Service Condition Based Restrictive Stock Unit Grants

In the first nine months of 2021, our board of directors granted 37,000 RSUs to employees under our 2014 Incentive Plan for which vesting is based on the Company’s achievement of certain performance targets over a two-year period (“performance condition”) as well as continued employment during the performance period. Assuming continued employment and if the performance vesting condition is achieved, the awards will vest on the second anniversary of the grant date. The actual number of shares of common stock that may be earned ranges from zero to 120% of the RSUs granted. The weighted average grant date fair value for these RSUs was $40.81 per unit, which was based on the closing stock price on the grant date.

Performance, Market and Service Condition Based Restricted Stock Unit Grants

In the first nine months of 2021, our board of directors granted 188,000 RSUs to employees under our 2014 Incentive Plan, that cliff vest on the third anniversary of the grant date based on the Company’s level of achievement of performance goals relating to return on invested capital over a three-year period (“performance condition”) as well as continued employment during the performance period. The total number of shares of common stock that may be earned from the performance condition ranges from zero to 200% of the RSUs granted. The number of shares earned from the performance condition may be further increased by 10% or decreased by 10% based on the Company’s total shareholder return relative to a peer group during the performance period (“market condition”). The average grant date fair value for these RSUs, with consideration of the market condition, was $47.85 per unit, which was determined using the Monte Carlo simulation model using the following assumptions:

Expected volatility (company)	51.3%
Expected volatility (peer group median)	42.9%
Correlation between the Company and peer group median	0.6
Expected dividend yield	0.0%
Risk-free rate	0.3%

The expected volatilities and correlation are based on the historical daily returns of our common stock and the common stocks of the constituents of the Company’s peer group over the most recent period equal to the measurement period. The expected dividend yield is based on our history of not paying regular dividends in the past and our current intention to not pay regular dividends in the foreseeable future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and has a term equal to the measurement period.

12. Income Taxes

A reconciliation of the statutory federal income tax rate to our effective rate for continuing operations is provided below:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2021				2020				2021				2020
Statutory federal income tax rate			21.0	%			21.0	%			21.0	%			21.0	%
State income taxes, net of federal income tax			2.9				3.7				2.8				3.5
Stock-based compensation windfall benefit			0.0				(0.4	)			(0.5	)			(0.9	)
Permanent differences and other			(0.4	)			(1.2	)			(0.1	)			(1.4	)
			23.5	%			23.1	%			23.2	%			22.2	%

We base our estimate of deferred tax assets and liabilities on current tax laws and rates. In certain cases, we also base our estimate on business plan forecasts and other expectations about future outcomes. Changes in existing tax laws or rates could affect our actual tax results, and future business results may affect the amount of our deferred tax liabilities or the valuation of our deferred tax assets over time. Due to uncertainties in the estimation process, particularly with respect to changes in facts and circumstances in future reporting periods, as well as the residential homebuilding industry’s cyclicality and sensitivity to changes in economic conditions, it is possible that actual results could differ from the estimates used in previous analyses.

Accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on our consolidated results of operations or financial position.

13. Commitments and Contingencies

As of September 30, 2021, we had outstanding letters of credit totaling $126.4 million under our 2026 facility that principally support our self-insurance programs.

The Company has a number of known and threatened construction defect legal claims. While these claims are generally covered under the Company’s existing insurance programs to the extent any loss exceeds the deductible, there is a reasonable possibility of loss that is not able to be estimated at this time because (i) many of the proceedings are in the discovery stage, (ii) the outcome of future litigation is uncertain, and/or (iii) the complex nature of the claims. Although the Company cannot estimate a reasonable range of loss based on currently available information, the resolution of these matters could have a material adverse effect on the Company's financial position, results of operations or cash flows.

In addition, we are involved in various other claims and lawsuits incidental to the conduct of our business in the ordinary course. We carry insurance coverage in such amounts in excess of our self-insured retention as we believe to be reasonable under the circumstances and that may or may not cover any or all of our liabilities in respect of such claims and lawsuits. Although the ultimate disposition of these other proceedings cannot be predicted with certainty, management believes the outcome of any such claims that are pending or threatened, either individually or on a combined basis, will not have a material adverse effect on our consolidated financial position, cash flows or results of operations. However, there can be no assurances that future adverse judgments and costs would not be material to our results of operations or liquidity for a particular period.

14. Related Party Transactions

Effective January 1, 2021, an executive officer of one of our customers, Ashton Woods USA, L.L.C., became a member of the Company’s board of directors. Accounts receivable due from and net sales to Ashton Woods USA, L.L.C. were approximately 1% of our total accounts receivable and our total net sales, respectively, as of and for the nine months ended September 30, 2021. Further, the Company has entered into certain leases of land and buildings with certain employees or non-affiliate stockholders. Activity associated with these related party transactions was not significant as of or for the nine months ended September 30, 2021 or 2020.

Transactions between the Company and other related parties occur in the ordinary course of business. However, the Company carefully monitors and assesses related party relationships. Management does not believe that any of these transactions with related parties had a material impact on the Company’s results for the nine months ended September 30, 2021 or 2020.