Business Combinations (Tables)

12 Months Ended

Dec. 31, 2018

As part of our ongoing strategy to expand geographically and increase market share in certain markets, we completed ten, ten and nine business combinations during the years ended December 31, 2018, 2017 and 2016, respectively, as well as several insignificant tuck-in acquisitions merged into existing operations in 2018 and 2017, in which we acquired 100% of the voting equity interests in each acquired entity. Acquisition-related costs amounted to $2.7 million, $3.9 million and $2.3 million for the years ended December 31, 2018, 2017 and 2016, 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 $17.3 million of goodwill for tax purposes as a result of 2018 acquisitions.

The largest of our 2018 acquisitions was Custom Overhead Door, LLC dba Custom Door & Gate (collectively, “CDG”) and Advanced Fiber Technology, Inc. (collectively, “AFT”). 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 when appropriate. Below is a summary of each significant acquisition by year, including revenue and net income (loss) since date of acquisition, shown for the year of acquisition.

For the year ended December 31, 2018 (in thousands):


Name	Date	Acquisition Type	Cash Paid		Seller Obligations		Total Purchase Price		Revenue		Net Income (Loss)
CDG	3/19/2018	Asset	$	9,440	$	1,973	$	11,413	$	11,466	$	531
AFT	10/31/2018	Asset		19,707		1,510		21,217		3,530		(13	)
Other	Various	Shares/Asset		28,593		4,057		32,650		24,329		639

Total			$	57,740	$	7,540	$	65,280	$	39,325	$	1,157

For the year 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 (Loss) Income
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 year 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

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 (in thousands):


	2018
	CDG			AFT			Other			Total
Estimated fair values:
Cash	$	—		$	—		$	—		$	—
Accounts receivable		1,731			—			4,181			5,912
Inventories		514			565			1,136			2,215
Other current assets		28			—			918			946
Property and equipment		933			2,882			2,169			5,984
Intangibles		3,711			13,470			18,904			36,085
Goodwill		4,898			4,415			7,711			17,024
Other non-current assets		36			13			82			131
Accounts payable and other current liabilities		(438	)		(128	)		(2,451	)		(3,017	)

Fair value of assets acquired and purchase price		11,413			21,217			32,650			65,280
Less fair value of common stock issued		—			—			—			—
Less seller obligations		1,973			1,510			4,057			7,540

Cash paid	$	9,440		$	19,707		$	28,593		$	57,740


	2017
	Alpha			Columbia			Astro			Other			Total
Estimated fair values:
Cash	$	247		$	—		$	—		$	—		$	247
Accounts receivable		29,851			989			924			3,157			34,921
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			2,209			2,932			4,190			47,842
Other non-current assets		383			36			—			219			638
Accounts payable and other current liabilities		(17,401	)		(372	)		(370	)		(2,650	)		(20,793	)

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

Estimates of Acquired Intangible Assets

Estimates of acquired intangible assets related to the acquisitions are as follows (dollars in thousands):


	2018				2017				2016
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	$	27,149		8	$	39,922		8	$	18,511		9
Trademarks and trade names		6,075		15		20,667		15		8,983		15
Non-competition agreements		2,401		5		2,628		5		2,773		5
Backlog		460		2		13,600		1.5		—		—

Pro Forma Results of Operations

The unaudited pro forma information has been prepared as if the 2018 acquisitions had taken place on January 1, 2017, the 2017 acquisitions had taken place on January 1, 2016 and the 2016 acquisitions had taken place on January 1, 2015. 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, 2016 and 2015 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,
	2018		2017		2016
Net revenue	$	1,381,711	$	1,246,017	$	1,058,707
Net income		58,217		48,016		43,891
Basic net income per share		1.87		1.52		1.39
Diluted net income per share		1.86		1.51		1.39