TopBuild Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Goodwill and Other Intangibles

Goodwill and Other Intangibles

12 Months Ended

Dec. 31, 2018

4. GOODWILL AND OTHER INTANGIBLES

We have two reporting units which are also our operating and reporting segments: Installation and Distribution. Both reporting units contain goodwill. Assets acquired and liabilities assumed are assigned to the applicable reporting unit based on whether the acquired assets and liabilities relate to the operations of and determination of the fair value of such unit. Goodwill assigned to the reporting unit is the excess of the fair value of the acquired business over the fair value of the individual assets acquired and liabilities assumed for the reporting unit.

In the fourth quarters of 2018 and 2017, we performed annual assessments on our goodwill resulting in no impairment.

Changes in the carrying amount of goodwill for the years ended December 31, 2018 and 2017, by segment, were as follows, in thousands:


	Gross Goodwill				Gross Goodwill		Accumulated		Net Goodwill
	at				at		Impairment		at
	December 31, 2017		Additions		December 31, 2018		Losses		December 31, 2018
Goodwill, by segment:
Installation	$	1,422,920	$	256,734	$	1,679,654	$	(762,021)	$	917,633
Distribution		416,287		30,096		446,383		—		446,383
Total goodwill	$	1,839,207	$	286,830	$	2,126,037	$	(762,021)	$	1,364,016


	Gross Goodwill				Gross Goodwill		Accumulated		Net Goodwill
	at				at		Impairment		at
	December 31, 2016		Additions		December 31, 2017		Losses		December 31, 2017
Goodwill, by segment:
Installation	$	1,390,792	$	32,128	$	1,422,920	$	(762,021)	$	660,899
Distribution		416,287		—		416,287		—		416,287
Total goodwill	$	1,807,079	$	32,128	$	1,839,207	$	(762,021)	$	1,077,186

Other intangible assets, net includes customer relationships, non-compete agreements, and trademarks. The following table sets forth our other intangible assets and associated amortization expense, in thousands:


	As of
	December 31,		December 31,		December 31,
	2018		2017		2016
Gross definite-lived intangible assets	$	218,882	$	54,872	$	20,932
Accumulated amortization		(19,495)		(21,629)		(18,683)
Net definite-lived intangible assets		199,387		33,243		2,249
Indefinite-lived intangible assets not subject to amortization		—		—		407
Other intangible assets, net	$	199,387	$	33,243	$	2,656

Amortization expense	$	15,752	$	2,994	$	795

The following table sets forth the amortization expense related to the definite-lived intangible assets during each of the next five years, in thousands:


	Amortization Expense
2019	$	20,692
2020		20,692
2021		20,572
2022		19,713
2023		18,995

See Note 16 – Business Combinations for breakout by major intangible asset class and their weighted average estimated useful lives.