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Business Combinations | 12 Months Ended
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Dec. 31, 2019
Business Combinations [Abstract] |
Business Combinations | NOTE 16 – BUSINESS COMBINATIONS As part of our ongoing strategy to expand geographically and increase market share in certain markets, we completed six, ten and ten business combinations during the years ended December 31, 2019, 2018 and 2017, respectively, as well as several insignificant tuck-in acquisitions merged into existing operations in 2019, 2018 and 2017, in which we acquired 100% of the voting equity interests in each acquired entity. Acquisition-related costs amounted to $2.1 million, $2.7 million and $3.9 million for the years ended December 31, 2019, 2018 and 2017, 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 $21.2 million of goodwill for tax purposes as a result of 2019 acquisitions. 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. The largest of our 2019 acquisitions were 1st State Insulation, LLC (“1st State Insulation”), Expert Insulation, Inc. and Expert Insulation of Brainerd, Inc. (collectively, “Expert Insulation”) and Premier Building Supply, LLC (“Premier”). In each table, “Other” represents acquisitions that were individually immaterial in that year. Net income (loss), as noted below, includes amortization, taxes and interest allocations when appropriate . For the year ended December 31, 2019 (in thousands):
2019 Acquisitions |  | Date |  |  | Acquisition Type |  |  | Cash Paid |  |  | Seller Obligations |  |  | Total Purchase Price |  |  | Revenue |  |  | Net Income ( Loss ) |
1st State Insulation |  |  | 3/18/2019 |  |  |  | Asset |  |  | $ | 5,125 |  |  | $ | 1,355 |  |  | $ | 6,480 |  |  | $ | 9,828 |  |  | $ | 476 |
Expert Insulation |  |  | 6/24/2019 |  |  |  | Asset |  |  |  | 16,165 |  |  |  | 1,993 |  |  |  | 18,158 |  |  |  | 6,484 |  |  |  | 155 |
Premier |  |  | 11/18/2019 |  |  |  | Share |  |  |  | 25,000 |  |  |  | 2,765 |  |  |  | 27,765 |  |  |  | 2,161 |  |  |  | (62 | )
Other |  |  | Various |  |  |  | Asset |  |  |  | 5,750 |  |  |  | 1,430 |  |  |  | 7,180 |  |  |  | 3,339 |  |  |  | 23 |
Total |  |  |  |  |  |  |  |  |  | $ | 52,040 |  |  | $ | 7,543 |  |  | $ | 59,583 |  |  | $ | 21,812 |  |  | $ | 592 |
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.
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):
|  | 2019 |
|  | 1st State |  |  | Expert |  |  | Premier |  |  | Other |  |  | Total |
Estimated fair values: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash |  | $ | — |  |  | $ | — |  |  | $ | 334 |  |  | $ | — |  |  | $ | 334 |
Accounts receivable |  |  | — |  |  |  | 1,796 |  |  |  | 2,930 |  |  |  | 479 |  |  |  | 5,205 |
Inventories |  |  | 291 |  |  |  | 723 |  |  |  | 1,242 |  |  |  | 410 |  |  |  | 2,666 |
Other current assets |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |  |  |  | 3 |
Property and equipment |  |  | 989 |  |  |  | 235 |  |  |  | 876 |  |  |  | 887 |  |  |  | 2,987 |
Intangibles |  |  | 3,382 |  |  |  | 6,740 |  |  |  | 14,300 |  |  |  | 3,619 |  |  |  | 28,041 |
Goodwill |  |  | 1,857 |  |  |  | 8,545 |  |  |  | 10,238 |  |  |  | 1,765 |  |  |  | 22,405 |
Other non-current assets |  |  | — |  |  |  | 161 |  |  |  | 329 |  |  |  | 41 |  |  |  | 531 |
Accounts payable and other current liabilities |  |  | (39 | ) |  |  | (42 | ) |  |  | (2,484 | ) |  |  | (24 | ) |  |  | (2,589 | )
Fair value of assets acquired and purchase price |  |  | 6,480 |  |  |  | 18,158 |  |  |  | 27,765 |  |  |  | 7,180 |  |  |  | 59,583 |
Less seller obligations |  |  | 1,355 |  |  |  | 1,993 |  |  |  | 2,765 |  |  |  | 1,430 |  |  |  | 7,543 |
Cash paid |  | $ | 5,125 |  |  | $ | 16,165 |  |  | $ | 25,000 |  |  | $ | 5,750 |  |  | $ | 52,040 |
|  | 2018 |
|  | CDG |  |  | AFT |  |  | Other |  |  | Total |
Estimated fair values: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  | $ | 1,731 |  |  | $ | — |  |  | $ | 4,104 |  |  | $ | 5,835 |
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 |  |  |  | 7,766 |  |  |  | 17,079 |
Other non-current assets |  |  | 36 |  |  |  | 13 |  |  |  | 82 |  |  |  | 131 |
Accounts payable and other current liabilities |  |  | (438 | ) |  |  | (128 | ) |  |  | (2,429 | ) |  |  | (2,995 | )
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 |
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 earnouts based on performance that are recorded at fair value at the time of acquisition, and/or non-compete agreements and amounts based on working capital calculations. 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 6, Goodwill and Intangibles, during the years ended December 31, 2019, 2018 and 2017 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, 2017 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, 2019, 2018 and 2017 due to various small acquisitions merged into existing operations that do not appear in the above tables. Estimates of acquired intangible assets related to the acquisitions are as follows (dollars in thousands):
|  | 2019 |  |  | 2018 |  |  | 2017 |
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 |  | $ | 20,659 |  |  |  | 8 |  |  | $ | 27,149 |  |  |  | 8 |  |  | $ | 39,922 |  |  |  | 8 |
Trademarks and trade names |  |  | 5,286 |  |  |  | 15 |  |  |  | 6,075 |  |  |  | 15 |  |  |  | 20,667 |  |  |  | 15 |
Non-competition agreements |  |  | 2,096 |  |  |  | 5 |  |  |  | 2,401 |  |  |  | 5 |  |  |  | 2,628 |  |  |  | 5 |
Backlog |  |  | — |  |  |  | — |  |  |  | 460 |  |  |  | 2 |  |  |  | 13,600 |  |  |  | 1.5 |
Pro Forma Information (unaudited) The unaudited pro forma information has been prepared as if the 2019 acquisitions had taken place on January 1, 2018, 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, 2018, 2017 and 2016 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, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Net revenue |  | $ | 1,549,797 |  |  | $ | 1,436,713 |  |  | $ | 1,246,017 |
Net income |  |  | 70,389 |  |  |  | 61,148 |  |  |  | 48,016 |
Basic net income per share |  |  | 2.37 |  |  |  | 1.97 |  |  |  | 1.52 |
Diluted net income per share |  |  | 2.36 |  |  |  | 1.96 |  |  |  | 1.51 |
Unaudited pro forma net income reflects additional intangible asset amortization expense of $2.1 million, $6.2 million and $5.9 million for the years ended December 31, 2019, 2018 and 2017, respectively, as well as additional income tax expense of $0.8 million, $2.0 million and $2.5 million for the years ended December 31, 2019, 2018 and 2017, respectively.

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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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