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Business Combinations | 12 Months Ended
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Dec. 31, 2017
Business Combinations [Abstract] |
Business Combinations | NOTE 15 – BUSINESS COMBINATIONS As part of our ongoing strategy to expand geographically and increase market share in certain markets, we completed ten, nine and eight business combinations during the years ended December 31, 2017, 2016 and 2015, respectively, as well as insignificant tuck-in acquisitions merged into existing operations in 2017 and 2015, in which we acquired 100% of the voting equity interests in each acquired entity. Acquisition-related costs amounted to $3.9 million, $2.3 million and $1.1 million for the years ended December 31, 2017, 2016 and 2015, respectively, and are included in Administrative expenses on the Consolidated Statements of Operations and Comprehensive Income. The goodwill to be recognized in conjunction with these business combinations represents the excess cost of the acquired entity over the net amount assigned to assets acquired and liabilities assumed. We expect to deduct $47.2 million of goodwill for tax purposes as a result of 2017 acquisitions. The largest of our 2017 acquisitions were Alpha, Columbia Shelving & Mirror Inc. and Charleston Shelving & Mirror, Inc. (collectively, “Columbia”) and All In Insulation, LLC d/b/a Astro Insulation (collectively, “Astro”). The remaining acquisitions were individually insignificant but material in the aggregate, as follows. Net Income (Loss), as noted below, includes amortization, taxes and interest allocations. For the twelve months ended December 31, 2017 (in thousands):
Name |  | Date |  |  | Acquisition Type |  |  | Cash Paid |  |  | Seller Obligations |  |  | Fair Value of Common Stock Issued |  |  | Total Purchase Price |  |  | Revenue |  |  | Net Income (Loss) |
Alpha (1) |  |  | 1/5/2017 |  |  |  | Share |  |  | $ | 103,810 |  |  | $ | 2,002 |  |  | $ | 10,859 |  |  | $ | 116,671 |  |  | $ | 116,070 |  |  | $ | (1,148 | )
Columbia |  |  | 6/26/2017 |  |  |  | Asset |  |  |  | 8,768 |  |  |  | 225 |  |  |  | — |  |  |  | 8,993 |  |  |  | 6,046 |  |  |  | 86 |
Astro |  |  | 9/18/2017 |  |  |  | Asset |  |  |  | 9,144 |  |  |  | 482 |  |  |  | — |  |  |  | 9,626 |  |  |  | 1,829 |  |  |  | 11 |
Other |  |  | Various |  |  |  | Asset |  |  |  | 15,645 |  |  |  | 2,419 |  |  |  | — |  |  |  | 18,064 |  |  |  | 20,457 |  |  |  | 573 |
Total |  |  |  |  |  |  |  |  |  | $ | 137,367 |  |  | $ | 5,128 |  |  | $ | 10,859 |  |  | $ | 153,354 |  |  | $ | 144,402 |  |  | $ | (478 | )
(1) | The cash paid included $21.7 million in contingent consideration to satisfy purchase price adjustments related to cash and net working capital requirements, earnout consideration based on Alpha’s change in EBITDA from 2015 and a customary holdback. These payments were based on fair value of each contingent payment at the time of acquisition and subsequently adjusted during the measurement period. We issued 282,577 shares of our common stock with a fair value of $10.9 million.
For the twelve months ended December 31, 2016 (in thousands):
Name |  | Date |  |  | Acquisition Type |  |  | Cash Paid |  |  | Seller Obligations |  |  | Total Purchase Price |  |  | Revenue |  |  | Net Income (Loss) |
Alpine Insulation Co., Inc. |  |  | 4/12/2016 |  |  |  | Asset |  |  | $ | 21,151 |  |  | $ | 1,560 |  |  | $ | 22,711 |  |  | $ | 21,359 |  |  | $ | 1,370 |
East Coast |  |  | 10/17/2016 |  |  |  | Asset |  |  |  | 15,589 |  |  |  | 600 |  |  |  | 16,189 |  |  |  | 4,701 |  |  |  | 21 |
Other |  |  | Various |  |  |  | Asset |  |  |  | 18,753 |  |  |  | 2,299 |  |  |  | 21,052 |  |  |  | 19,974 |  |  |  | (592 | )
Total |  |  |  |  |  |  |  |  |  | $ | 55,493 |  |  | $ | 4,459 |  |  | $ | 59,952 |  |  | $ | 46,034 |  |  | $ | 799 |
For the twelve months ended December 31, 2015 (in thousands):
Name |  | Date |  |  | Acquisition Type |  |  | Cash Paid |  |  | Seller Obligations |  |  | Total Purchase Price |  |  | Revenue |  |  | Net Income (Loss) |
BDI |  |  | 3/12/2015 |  |  |  | Stock |  |  | $ | 30,680 |  |  | $ | 5,765 |  |  | $ | 36,445 |  |  | $ | 32,505 |  |  | $ | 2,023 |
CQ |  |  | 4/6/2015 |  |  |  | Stock |  |  |  | 5,193 |  |  |  | 2,319 |  |  |  | 7,512 |  |  |  | 7,839 |  |  |  | 556 |
Layman |  |  | 6/1/2015 |  |  |  | Asset |  |  |  | 9,088 |  |  |  | 600 |  |  |  | 9,688 |  |  |  | 8,211 |  |  |  | 516 |
Eastern |  |  | 8/10/2015 |  |  |  | Stock |  |  |  | 24,199 |  |  |  | 2,875 |  |  |  | 27,074 |  |  |  | 7,368 |  |  |  | 312 |
Other |  |  | Various |  |  |  | Asset |  |  |  | 16,040 |  |  |  | 1,621 |  |  |  | 17,661 |  |  |  | 6,349 |  |  |  | (97 | )
Total |  |  |  |  |  |  |  |  |  | $ | 85,200 |  |  | $ | 13,180 |  |  | $ | 98,380 |  |  | $ | 62,272 |  |  | $ | 3,310 |
Purchase Price Allocations The estimated fair values of the assets acquired and liabilities assumed for the acquisitions, as well as total purchase prices and cash paid, approximated the following (in thousands):
|  | 2017 |
|  | Alpha |  |  | Columbia |  |  | Astro |  |  | Other |  |  | Total |
Estimated fair values: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 247 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 247 |
Accounts receivable |  |  | 29,851 |  |  |  | 1,004 |  |  |  | 924 |  |  |  | 3,195 |  |  |  | 34,974 |
Inventories |  |  | 1,852 |  |  |  | 704 |  |  |  | 296 |  |  |  | 1,544 |  |  |  | 4,396 |
Other current assets |  |  | 4,500 |  |  |  | 8 |  |  |  | 36 |  |  |  | 96 |  |  |  | 4,640 |
Property and equipment |  |  | 1,528 |  |  |  | 659 |  |  |  | 640 |  |  |  | 1,820 |  |  |  | 4,647 |
Intangibles |  |  | 57,200 |  |  |  | 4,760 |  |  |  | 5,168 |  |  |  | 9,688 |  |  |  | 76,816 |
Goodwill |  |  | 38,511 |  |  |  | 2,184 |  |  |  | 2,926 |  |  |  | 4,106 |  |  |  | 47,727 |
Other non-current assets |  |  | 383 |  |  |  | 32 |  |  |  | — |  |  |  | 234 |  |  |  | 649 |
Accounts payable and other current liabilities |  |  | (17,401 | ) |  |  | (358 | ) |  |  | (364 | ) |  |  | (2,619 | ) |  |  | (20,742 | )
Fair value of assets acquired |  |  | 116,671 |  |  |  | 8,993 |  |  |  | 9,626 |  |  |  | 18,064 |  |  |  | 153,354 |
Less fair value of common stock issued |  |  | 10,859 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,859 |
Less seller obligations |  |  | 2,002 |  |  |  | 225 |  |  |  | 482 |  |  |  | 2,419 |  |  |  | 5,128 |
Cash paid |  | $ | 103,810 |  |  | $ | 8,768 |  |  | $ | 9,144 |  |  | $ | 15,645 |  |  | $ | 137,367 |
|  | 2016 |
|  | Alpine |  |  | East Coast |  |  | Other |  |  | Total |
Estimated fair values: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | — |  |  | $ | 2,181 |  |  | $ | — |  |  | $ | 2,181 |
Accounts receivable |  |  | 3,959 |  |  |  | 3,093 |  |  |  | 2,502 |  |  |  | 9,554 |
Inventories |  |  | 700 |  |  |  | 332 |  |  |  | 1,183 |  |  |  | 2,215 |
Other current assets |  |  | — |  |  |  | 1 |  |  |  | 24 |  |  |  | 25 |
Property and equipment |  |  | 656 |  |  |  | 666 |  |  |  | 1,616 |  |  |  | 2,938 |
Intangibles |  |  | 12,800 |  |  |  | 6,400 |  |  |  | 11,067 |  |  |  | 30,267 |
Goodwill |  |  | 6,642 |  |  |  | 4,346 |  |  |  | 5,933 |  |  |  | 16,921 |
Other non-current assets |  |  | — |  |  |  | 116 |  |  |  | 345 |  |  |  | 461 |
Accounts payable and other current liabilities |  |  | (2,046 | ) |  |  | (946 | ) |  |  | (1,618 | ) |  |  | (4,610 | )
Fair value of assets acquired |  |  | 22,711 |  |  |  | 16,189 |  |  |  | 21,052 |  |  |  | 59,952 |
Less seller obligations |  |  | 1,560 |  |  |  | 600 |  |  |  | 2,299 |  |  |  | 4,459 |
Cash paid |  | $ | 21,151 |  |  | $ | 15,589 |  |  | $ | 18,753 |  |  | $ | 55,493 |
|  | 2015 |
|  | BDI |  |  | CQ |  |  | Layman |  |  | Eastern |  |  | Other |  |  | Total |
Estimated fair values: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | 661 |  |  | $ | 100 |  |  | $ | — |  |  | $ | 165 |  |  | $ | — |  |  | $ | 926 |
Accounts receivable |  |  | 4,735 |  |  |  | 1,423 |  |  |  | 1,245 |  |  |  | 2,768 |  |  |  | 4,093 |  |  |  | 14,264 |
Inventories |  |  | 980 |  |  |  | 152 |  |  |  | 267 |  |  |  | 335 |  |  |  | 720 |  |  |  | 2,454 |
Other current assets |  |  | 368 |  |  |  | 39 |  |  |  | — |  |  |  | 109 |  |  |  | 32 |  |  |  | 548 |
Property and equipment |  |  | 1,006 |  |  |  | 190 |  |  |  | 733 |  |  |  | 1,364 |  |  |  | 1,574 |  |  |  | 4,867 |
Intangibles |  |  | 21,280 |  |  |  | 4,350 |  |  |  | 5,330 |  |  |  | 13,871 |  |  |  | 10,534 |  |  |  | 55,365 |
Goodwill |  |  | 16,213 |  |  |  | 3,035 |  |  |  | 3,143 |  |  |  | 9,904 |  |  |  | 4,809 |  |  |  | 37,104 |
Other non-current assets |  |  | 3,736 |  |  |  | — |  |  |  | — |  |  |  | 322 |  |  |  | 60 |  |  |  | 4,118 |
Accounts payable and other current liabilities |  |  | (3,303 | ) |  |  | (1,539 | ) |  |  | (1,030 | ) |  |  | (1,681 | ) |  |  | (2,220 | ) |  |  | (9,773 | )
Deferred income tax liabilities |  |  | (5,495 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (825 | ) |  |  | (6,320 | )
Long-term debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (82 | ) |  |  | — |  |  |  | (82 | )
Other long-term liabilities |  |  | (3,736 | ) |  |  | (238 | ) |  |  | — |  |  |  | (1 | ) |  |  | — |  |  |  | (3,975 | )
Fair value of assets acquired |  |  | 36,445 |  |  |  | 7,512 |  |  |  | 9,688 |  |  |  | 27,074 |  |  |  | 18,777 |  |  |  | 99,496 |
Gain on bargain purchase |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,116 | ) |  |  | (1,116 | )
Total purchase price |  |  | 36,445 |  |  |  | 7,512 |  |  |  | 9,688 |  |  |  | 27,074 |  |  |  | 17,661 |  |  |  | 98,380 |
Less seller obligations |  |  | 5,765 |  |  |  | 2,319 |  |  |  | 600 |  |  |  | 2,875 |  |  |  | 1,621 |  |  |  | 13,180 |
Cash paid |  | $ | 30,680 |  |  | $ | 5,193 |  |  | $ | 9,088 |  |  | $ | 24,199 |  |  | $ | 16,040 |  |  | $ | 85,200 |
Contingent consideration is included as “seller obligations” in the above table or within “fair value of assets acquired” if subsequently paid during the period presented. These contingent payments consist primarily of amounts based on working capital calculations, earnouts based on performance, and non-compete agreements, all of which are based on fair value at the time of acquisition. When these payments are expected to be made over one year from the acquisition date, the contingent consideration is discounted to net present value using our weighted average cost of capital (WACC). Further adjustments to the allocation for each acquisition still under its measurement period are expected as third-party or internal valuations are finalized, certain tax aspects of the transaction are completed, contingent consideration is settled, and customary post-closing reviews are concluded during the measurement period attributable to each individual business combination. As a result, insignificant adjustments to the fair value of assets acquired, and in some cases total purchase price, have been made to certain business combinations since the date of acquisition and future adjustments may be made through the end of each measurement period. Goodwill and intangibles per the above table do not agree to the total gross increases of these assets as shown in Note 5, Goodwill and Intangibles, during the years ended December 31, 2017 and 2016 due to minor adjustments to goodwill for the allocation of certain acquisitions still under measurement, an immaterial goodwill reclassification in the year ended December 31, 2016 related to the prior period, as well as other immaterial intangible assets added during the ordinary course of business. In addition, goodwill and intangibles increased during the years ended December 31, 2017, 2016 and 2015 due to various immaterial tuck-in acquisitions that do not appear in the above tables. The provisional amounts for Alpha originally reported in our Condensed Consolidated Balance Sheets included in our Quarterly Report on Form 10-Q for the period ended March 31, 2017 were adjusted to reflect the review and ongoing analysis of the fair value measurements. As a result of our continued evaluation during the measurement period, we increased goodwill by approximately $2.1 million, offset by a corresponding net reduction in various working capital accounts. The provisional amounts for Columbia originally reported in our Condensed Consolidated Balance Sheets included in our Quarterly Report on Form 10-Q for the period ended June 30, 2017 were adjusted to reflect the review and ongoing analysis of the fair value measurements. As a result of our continued evaluation during the measurement period, we increased goodwill by approximately $0.5 million and our seller obligations by approximately $0.4 million for an adjustment to the fair value of a working capital contingent liability. These adjustments, as well as various other insignificant adjustments, resulted in a total purchase price increase for Columbia of approximately $0.6 million as reflected within the above table and were within applicable measurement period guidelines. The fair value of the net assets acquired, including identifiable intangible assets, relating to one of the 2015 business combinations included in the “Other” column in the above table was approximately $4.8 million, which exceeds the purchase price of $3.7 million. Accordingly, we recognized the excess of the fair value of the net assets acquired over purchase price paid of approximately $1.1 million as a gain on bargain purchase. The gain on bargain purchase is included in other income in our Consolidated Statements of Operations and Comprehensive Income. Prior to recognizing the gain, we reassessed the fair value of the assets acquired and liabilities assumed in the business combination including consultation with our external valuation experts. Assets were valued using the same methodology as our other business combinations, including the use of a discounted cash flow model as well as several other factors. We believe we were able to acquire this entity for less than the fair value of its net assets due to an absence of multiple bidders combined with the significant improvement of our purchasing power. Included in other noncurrent assets in the above table as of the year ended December 31, 2015 is an insurance receivable of $2.0 million and an indemnification asset in the amount of $1.7 million associated with the 2015 acquisition of BDI. These assets offset equal liabilities included in other long-term liabilities in the above table, which represent additional insurance reserves for which we may be liable. All amounts are measured at their acquisition date fair value. The indemnification asset has been reduced to $0.9 million as of December 31, 2017 due to an adjustment to an uncertain tax position related to this item. Estimates of acquired intangible assets related to the acquisitions are as follows (dollars in thousands):
|  | 2017 |  |  | 2016 |  |  | 2015 |
Acquired intangibles assets |  | Estimated Fair Value |  |  | Weighted Average Estimated Useful Life (yrs) |  |  | Estimated Fair Value |  |  | Weighted Average Estimated Useful Life (yrs) |  |  | Estimated Fair Value |  |  | Weighted Average Estimated Useful Life (yrs) |
Customer relationships |  | $ | 39,922 |  |  |  | 8 |  |  | $ | 18,511 |  |  |  | 9 |  |  | $ | 36,129 |  |  |  | 8 |
Trademarks and trade names |  |  | 20,667 |  |  |  | 15 |  |  |  | 8,983 |  |  |  | 15 |  |  |  | 14,567 |  |  |  | 15 |
Non-competition agreements |  |  | 2,628 |  |  |  | 5 |  |  |  | 2,773 |  |  |  | 5 |  |  |  | 4,668 |  |  |  | 5 |
Backlog |  |  | 13,600 |  |  |  | 1.5 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Pro Forma Information (unaudited) The unaudited pro forma information has been prepared as if the 2017 acquisitions had taken place on January 1, 2016, the 2016 acquisitions had taken place on January 1, 2015 and the 2015 acquisitions had taken place on January 1, 2014. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transactions actually taken place on January 1, 2016, 2015 and 2014 and the unaudited pro forma information does not purport to be indicative of future financial operating results (in thousands, except for per share data).
|  | Unaudited Pro Forma for the years ended December 31, |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Net revenue |  | $ | 1,169,061 |  |  | $ | 1,058,707 |  |  | $ | 786,144 |
Net income |  |  | 43,179 |  |  |  | 43,891 |  |  |  | 29,463 |
Basic and diluted net income per share |  |  | 1.36 |  |  |  | 1.39 |  |  |  | 0.94 |
Unaudited pro forma net income reflects additional intangible asset amortization expense of $1.3 million, $17.5 million and $6.6 million for the years ended December 31, 2017, 2016 and 2015, respectively, as well as additional income tax expense of $0.7 million, $3.0 million and $1.7 million for the years ended December 31, 2017, 2016 and 2015, respectively, and additional interest expense of $1.8 million for the year ended December 31, 2016 that would have been recorded had the 2017 acquisitions taken place on January 1, 2016, the 2016 acquisitions taken place on January 1, 2015 and the 2015 acquisitions taken place on January 1, 2014.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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