Business Combinations (Tables)

9 Months Ended

Sep. 30, 2018

As part of our ongoing strategy to expand geographically and increase market share in certain markets, we completed eight business combinations and one minor acquisition merged into existing operations during the nine months ended September 30, 2018 and seven business combinations and two minor acquisitions merged into existing operations during the nine months ended September 30, 2017, respectively, in which we acquired 100% of the ownership interests in each.

The largest of these acquisitions were Custom Overhead Door, LLC dba Custom Door & Gate (collectively, “CDG”) in March 2018, Trilok Industries, Inc., Alpha Insulation and Waterproofing Inc. and Alpha Insulation and Waterproofing Company (collectively, “Alpha”) in January 2017, Columbia Shelving & Mirror, Inc. and Charleston Shelving & Mirror, Inc. (collectively, “Columbia”) in June 2017, and All In Insulation, LLC d/b/a/ Astro Insulation (collectively, “Astro”) in September 2017. The remaining acquisitions were individually insignificant, but material in the aggregate, and are included in “Other” within each table below. Net Income, as noted below, includes amortization, taxes and interest allocations when appropriate.

For the three and nine months ended September 30, 2018 (in thousands):


									Total Purchase Price		Three months ended				Nine months ended
			Acquisition				Seller				September 30, 2018				September 30, 2018
2018 Acquisitions	Date		Type		Cash Paid		Obligations				Revenue		Net Income		Revenue		Net Income
CDG		3/19/2018		Asset	$	9,440	$	1,973	$	11,413	$	3,848	$	164	$	7,572	$	229
Other		Various		Shares/Asset		25,242		3,447		28,689		7,003		42		12,782		423

Total					$	34,682	$	5,420	$	40,102	$	10,851	$	206	$	20,354	$	652

For the three and nine months ended September 30, 2017 (in thousands):


									Fair Value of Common Stock		Total Purchase Price		Three months ended September 30, 2017					Nine months ended September 30, 2017
2017 Acquisitions	Date		Acquisition Type		Cash Paid		Seller Obligations		Fair Value of Common Stock		Total Purchase Price		Revenue		Net (Loss) Income			Revenue		Net Income
Alpha⁽¹⁾		1/5/2017		Share	$	103,810	$	2,002	$	10,859	$	116,671	$	29,334	$	(271	)	$	87,830	$	190
Columbia		6/26/2017		Asset		8,768		225		—		8,993		3,026		73			3,241		80
Astro		9/18/2017		Asset		9,144		482		—		9,626		264		46			264		46
Other		Various		Asset		9,812		1,042		—		10,854		6,499		84			11,671		366

Total					$	131,534	$	3,751	$	10,859	$	146,144	$	39,123	$	(68	)	$	103,006	$	682

⁽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.

Summary of Estimated Fair Value of Assets Acquired and Liabilities Assumed

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 as of September 30 (in thousands):


	2018									2017
	CDG			Other			Total			Alpha			Columbia			Astro			Other			Total
Estimated fair values:
Cash	$	—		$	—		$	—		$	247		$	—		$	—		$	—		$	247
Accounts receivable		1,731			3,306			5,037			29,851			989			924			2,070			33,834
Inventories		514			1,027			1,541			1,852			704			296			1,014			3,866
Other current assets		28			892			920			4,500			8			36			8			4,552
Property and equipment		933			1,893			2,826			1,528			659			640			1,144			3,971
Intangibles		3,711			16,681			20,392			57,200			4,760			5,168			5,939			73,067
Goodwill		4,898			6,873			11,771			38,511			2,209			2,932			2,472			46,124
Other non-current assets		36			19			55			383			36			—			176			595
Accounts payable and other current liabilities		(438	)		(2,002	)		(2,440	)		(17,401	)		(372	)		(370	)		(1,969	)		(20,112	)

Fair value of assets acquired and purchase price		11,413			28,689			40,102			116,671			8,993			9,626			10,854			146,144
Less fair value of common stock issued		—			—			—			10,859			—			—			—			10,859
Less seller obligations		1,973			3,447			5,420			2,002			225			482			1,042			3,751

Cash paid	$	9,440		$	25,242		$	34,682		$	103,810		$	8,768		$	9,144		$	9,812		$	131,534

Estimates of Acquired Intangible Assets

Estimates of acquired intangible assets related to the acquisitions are as follows for the nine months ended September 30 (dollars in thousands):


	2018				2017
Acquired intangibles assets	Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)		Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)
Customer relationships	$	14,480		8	$	37,533		8
Trademarks and trade names		3,920		14		19,403		15
Non-competition agreements		1,530		5		2,429		5
Backlog		460		2		13,400		1.5

Pro Forma Results of Operations

The unaudited pro forma information for the combined results of the Company has been prepared as if the 2018 acquisitions had taken place on January 1, 2017 and the 2017 acquisitions had taken place on January 1, 2016. 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, 2017 and 2016, respectively, and the unaudited pro forma information does not purport to be indicative of future financial operating results (in thousands, except per share data):


	Unaudited pro forma for the three months ended September 30,				Unaudited pro forma for the nine months ended September 30,
	2018		2017		2018		2017
Net revenue	$	353,609	$	316,382	$	1,006,313	$	906,283
Net income		16,215		13,020		40,305		34,277
Basic and diluted net income per share		0.52		0.41		1.28		1.08