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Business Combinations | 3 Months Ended
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Mar. 31, 2020
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 two business combinations during the three months ended March 31, 2020 and one business combination during the three months ended March 31, 2019 and one insignificant tuck-in acquisition merged into existing operations during the three months ended March 31, 2019, in which we acquired 100% of the voting equity interests in each. The largest of these acquisitions were Royals Commercial Services, Inc. (“Royals”) in March 2020 and 1st State Insulation, LLC (“1st State Insulation”) in March 2019. Below is a summary of each significant acquisition by year, including revenue and net (loss)/income since date of acquisition, shown for the year acquisition. Where noted, “Other” represents acquisitions that were individually immaterial in that year. Net (loss)/income, as noted below, includes amortization, taxes and interest allocations when appropriate. For the three months ended March 31, 2020 (in thousands):
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Three months ended March 31, 2020 |
2020 Acquisitions |  | Date |  |  | Acquisition Type |  |  | Cash Paid |  |  | Seller Obligations |  |  | Total Purchase Price |  |  | Revenue |  |  | Net Loss |
Royals |  |  | 2/29/2020 |  |  |  | Asset |  |  | $ | 7,590 |  |  | $ | 2,500 |  |  | $ | 10,090 |  |  | $ | 784 |  |  | $ | (87 | )
Other |  |  | 1/13/2020 |  |  |  | Asset |  |  |  | 911 |  |  |  | 70 |  |  |  | 981 |  |  |  | 226 |  |  |  | (21 | )
|  |  |  |  |  |  |  |  |  | $ | 8,501 |  |  | $ | 2,570 |  |  | $ | 11,071 |  |  | $ | 1,010 |  |  | $ | (108 | )
For the three months ended March 31, 2019 (in thousands):
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Three months ended March 31, 2019 |
2019 Acquisitions |  | Date |  |  | Acquisition Type |  |  | Cash Paid |  |  | Seller Obligations |  |  | Total Purchase Price |  |  | Revenue |  |  | Net Income |
1st State Insulation |  |  | 3/18/2019 |  |  |  | Asset |  |  | $ | 5,125 |  |  | $ | 1,355 |  |  | $ | 6,480 |  |  | $ | 488 |  |  | $ | 23 |
Acquisition-related costs recorded within administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income amounted to $0.7 million and $0.6 million for the three months ended March 31, 2020 and 2019, respectively. The goodwill 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 approximately $3.0 million of goodwill for tax purposes as a result of 2020 acquisitions. 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):
|  | As of March 31, 2020 |  |  | As of March 31, 2019 |
|  | Royals |  |  | Other |  |  | Total |  |  | 1st State |
Estimated fair values: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  | $ | 2,848 |  |  | $ | — |  |  | $ | 2,848 |  |  | $ | — |
Inventories |  |  | 305 |  |  |  | 70 |  |  |  | 375 |  |  |  | 291 |
Other current assets |  |  | 430 |  |  |  | 11 |  |  |  | 441 |  |  |  | — |
Property and equipment |  |  | 627 |  |  |  | 119 |  |  |  | 746 |  |  |  | 989 |
Intangibles |  |  | 3,930 |  |  |  | 582 |  |  |  | 4,512 |  |  |  | 3,382 |
Goodwill |  |  | 2,986 |  |  |  | 206 |  |  |  | 3,192 |  |  |  | 1,857 |
Other non-current assets |  |  | 58 |  |  |  | 8 |  |  |  | 66 |  |  |  | — |
Accounts payable and other current liabilities |  |  | (1,059 | ) |  |  | (15 | ) |  |  | (1,074 | ) |  |  | (39 | )
Deferred income tax liabilities |  |  | (35 | ) |  |  | — |  |  |  | (35 | ) |  |  | — |
Fair value of assets acquired and purchase price |  |  | 10,090 |  |  |  | 981 |  |  |  | 11,071 |  |  |  | 6,480 |
Less seller obligations |  |  | 2,500 |  |  |  | 70 |  |  |  | 2,570 |  |  |  | 1,355 |
Cash paid |  | $ | 7,590 |  |  | $ | 911 |  |  | $ | 8,501 |  |  | $ | 5,125 |
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-complete 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), when appropriate. 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 may not agree to the total gross increases of these assets as shown in Note 5, Goodwill and Intangibles, during each of the three months ended March 31, 2020 and 2019 due to minor adjustments to goodwill for the allocation of certain acquisitions still under measurement as well as other immaterial intangible assets added during the ordinary course of business. In addition, goodwill and intangibles increased during the three months ended March 31, 2019 due to a small tuck-in acquisition merged into existing operations that does not appear in the above table as discussed above. Estimates of acquired intangible assets related to the acquisitions are as follows (in thousands):
|  | For the three months ended March 31, |
|  | 2020 |  |  | 2019 |
Acquired intangibles assets |  | Estimated Fair Value |  |  | Weighted Average Estimated Useful Life (yrs.) |  |  | Estimated Fair Value |  |  | Weighted Average Estimated Useful Life (yrs.) |
Customer relationships |  | $ | 2,611 |  |  |  | 8 |  |  | $ | 2,100 |  |  |  | 8 |
Trademarks and trade names |  |  | 1,145 |  |  |  | 15 |  |  |  | 999 |  |  |  | 15 |
Non-competition agreements |  |  | 227 |  |  |  | 5 |  |  |  | 283 |  |  |  | 5 |
Backlog |  |  | 529 |  |  |  | 2 |  |  |  | — |  |  |  | — |
Pro Forma Information The unaudited pro forma information for the combined results of the Company has been prepared as if the 2020 acquisitions had taken place on January 1, 2019 and the 2019 acquisitions had taken place on January 1, 2018. 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, 2019 and 2018, 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 March 31, |
|  | 2020 |  |  | 2019 |
Net revenue |  | $ | 399,120 |  |  | $ | 359,209 |
Net income |  |  | 16,125 |  |  |  | 9,578 |
Basic and diluted net income per share |  |  | 0.54 |  |  |  | 0.32 |
Unaudited pro forma net income reflects additional intangible asset amortization expense of $0.1 million and $1.0 million for the three months ended March 31, 2020 and 2019, respectively, as well as additional income tax expense of $49 thousand and $0.3 million for the three months ended March 31, 2020 and 2019, respectively, that would have been recorded had the 2020 acquisitions taken place on January 1, 2019 and the 2019 acquisitions taken place on January 1, 2018.

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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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