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Business Combinations | 6 Months Ended
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Jun. 30, 2020
Business Combinations |
Business Combinations | 13. BUSINESS COMBINATIONS ​ As part of our strategy to supplement our organic growth and expand our access to additional markets and products, we completed one acquisition in 2019, and two acquisitions to date in 2020. Each acquisition was accounted for as a business combination under ASC 805, “Business Combinations.” There were no acquisition related costs for the three months ended June 30, 2020 and 2019. Acquisition related costs for the six months ended June 30, 2020 and 2019, were $0.2 million and $0.1 million, respectively. Acquisition costs are included in selling, general, and administrative expense in our condensed consolidated statements of operations. ​ Acquisitions ​ On July 15, 2019, we acquired Viking, an insulation company located in Burbank, California. The purchase price of approximately $7.7 million was funded by cash on hand of $6.5 million and contingent consideration of $1.2 million. ​ On February 20, 2020, we acquired Cooper, a commercial glass company serving the Memphis market. The purchase price of approximately $11.5 million was funded by cash on hand of $10.5 million and contingent consideration of $1.0 million. We recognized goodwill of $6.4 million in connection with this acquisition during the six months ended June 30, 2020. ​ On February 24, 2020, we acquired Hunter, a residential insulation company located in Long Island, New York. The purchase price of approximately $9.1 million was funded by cash on hand. We recognized goodwill of $5.5 million in connection with this acquisition during the six months ended June 30, 2020. ​ Contingent Consideration ​ On February 27, 2017, we acquired substantially all of the assets of EcoFoam, a residential and light commercial insulation installation company with locations in Colorado Springs and Denver, Colorado. The purchase price of approximately $22.3 million was funded by cash on hand of $20.2 million and contingent consideration of $2.1 million. The contingent consideration arrangement requires additional consideration to be paid by TopBuild to the sellers of EcoFoam based on EcoFoam’s attainment of annual revenue targets over a three-year period. The total amount of undiscounted contingent consideration which TopBuild is required to pay under the arrangement is $2.5 million. The fair value of $2.1 million contingent consideration recognized on the acquisition date was estimated by applying the income approach using discounted cash flows. That measure is based on significant Level 3 inputs not observable in the market. The significant assumption includes a discount rate of 9.5%. Changes in the fair value measurement each period reflect the passage of time as well as the impact of adjustments, if any, to the likelihood of achieving the specified targets. We made the final contingent payment of $0.8 million during the three months ended June 30, 2020 and have no remaining obligation under the arrangement. ​ The acquisition of Viking included a contingent consideration arrangement that requires additional consideration to be paid by TopBuild based on the achievement of annual gross revenue targets over a three-year period. The range of undiscounted amounts TopBuild may be required to pay under the contingent consideration agreement is between zero and $1.5 million. The fair value of the contingent consideration recognized on the acquisition date of $1.2 million was estimated by applying the income approach using discounted cash flows. That measure is based on significant Level 3 inputs not observable in the market. The significant assumption includes a discount rate of 10.0%. Changes in the fair value measurement each period reflect the passage of time as well as the impact of adjustments, if any, to the likelihood of achieving the specified targets. ​ The acquisition of Cooper includes a contingent consideration arrangement that requires additional consideration to be paid by TopBuild based on the achievement of annual gross revenue targets over a two-year period. The range of undiscounted amounts TopBuild may be required to pay under the contingent consideration agreement is between zero and $1.0 million, which also represents the fair value recognized on the acquisition date. ​ The following table presents the fair value of contingent consideration, in thousands: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | EcoFoam |  | Viking | ​ | Cooper
Date of Acquisition | ​ | February 27, 2017 | ​ | July 15, 2019 | ​ | February 20, 2020
Fair value of contingent consideration recognized at acquisition date | ​ | $ | 2,110 | ​ | $ | 1,243 | ​ | $ | 1,000
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Contingent consideration at December 31, 2019 | ​ | $ | 822 | ​ | $ | 1,304 | ​ | $ | —
Additions | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 1,000
Change in fair value of contingent consideration during the six months ended June 30, 2020 | ​ | ​ | 19 | ​ | ​ | 64 | ​ | ​ | —
Payment of contingent consideration during the six months ended June 30, 2020 | ​ | ​ | (841) | ​ | ​ | — | ​ | ​ | —
Liability balance for contingent consideration at June 30, 2020 | ​ | $ | — | ​ | $ | 1,368 | ​ | $ | 1,000
​

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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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