TopBuild Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Business Combinations (Tables)

Business Combinations (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of revenue and net income since acquisition date included in the Condensed Consolidated Statements of Operations

Revenue and net income since the respective acquisition dates included in our Condensed Consolidated Statements of Operations were as follows, in thousands:


	Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018
2018 Acquisitions	Net Sales		Net Income		Net Sales		Net Income
ADO	$	6,631	$	67	$	17,934	$	90
Santa Rosa		1,550		116		4,438		456
USI		100,333		6,457		169,028		8,074
	$	108,514	$	6,640	$	191,400	$	8,620


	Three Months Ended September 30, 2017				Nine Months Ended September 30, 2017
2017 Acquisitions	Net Sales		Net Income		Net Sales		Net Income
Midwest	$	4,503	$	12	$	12,711	$	152
EcoFoam		6,706		669		15,943		894
Superior		3,323		260		6,189		597
Canyon		6,556		925		8,289		1,146
All others		2,808		330		5,749		707
	$	23,896	$	2,196	$	48,881	$	3,496

Schedule of pro forma results

Our pro forma results are presented below, in thousands:


	Pro Forma for the Three Months Ended September 30,				Pro Forma for the Nine Months Ended September 30,
	2018			2017	2018			2017
Net sales	$	647,289	$	594,303	$	1,878,179	$	1,743,331
Net income	$	42,658	$	37,799	$	105,410	$	72,214

Schedule of additional expense included in the pro forma operating profit and net income

Our pro forma results are presented below, in thousands:


	Pro Forma for the Three Months Ended September 30,				Pro Forma for the Nine Months Ended September 30,
	2018		2017		2018		2017
Amortization of intangible assets	$	—	$	4,088	$	5,039	$	12,263
Income tax expense (using normalized 27% ETR for 2018 and 38% ETR for 2017)	$	—	$	3,926	$	3,407	$	11,689

Schedule of estimated fair values of the assets acquired and liabilities assumed, as well as the fair value of consideration transferred

The estimated fair values of the assets acquired and liabilities assumed for the 2018 acquisitions, as well as the fair value of consideration transferred, approximated the following as of September 30, 2018, in thousands:


	2018 Acquisitions
	Completed During the Nine Months Ended September 30, 2018
	ADO		Santa Rosa		USI		Total
Estimated fair values:
Cash	$	939	$	—	$	14,817	$	15,756
Accounts receivable		3,434		1,433		62,302		67,169
Inventories		2,337		104		14,135		16,576
Prepaid and other assets		135		7		3,929		4,071
Property and equipment		951		522		34,215		35,688
Intangible assets		14,090		1,850		165,900		181,840
Goodwill		2,631		2,764		280,188		285,583
Accounts payable		(908)		(1,099)		(17,927)		(19,934)
Accrued liabilities		(609)		—		(34,686)		(35,295)
Deferred tax liability		—		—		(35,871)		(35,871)
Net assets acquired	$	23,000	$	5,581	$	487,002	$	515,583


	2018 Acquisitions
	Completed During the Nine Months Ended September 30, 2018
	ADO		Santa Rosa		USI		Total
Fair value of consideration transferred:
Cash	$	22,172	$	5,581	$	487,002	$	514,755
Deferred consideration		—		—		—		—
Contingent consideration		828		—		—		828
Total consideration transferred	$	23,000	$	5,581	$	487,002	$	515,583

The estimated fair values of the assets acquired and liabilities assumed for the 2017 acquisitions, as well as the fair value of consideration transferred, approximated the following as of September 30, 2018, in thousands:


	2017 Acquisitions
	Completed During the Nine Months Ended September 30, 2017
	Midwest		EcoFoam		Superior		Canyon		All others		Total
Estimated fair values:
Accounts receivable	$	6,576	$	3,819	$	2,012	$	8,222	$	678	$	21,307
Inventories		75		1,119		321		575		141		2,231
Prepaid and other assets		—		27		1		29		6		63
Property and equipment		655		1,544		361		460		357		3,377
Intangible assets		2,740		6,700		5,280		15,220		3,640		33,580
Goodwill		3,538		10,796		3,662		10,072		4,037		32,105
Accounts payable		(1,359)		(1,378)		(681)		(163)		(26)		(3,607)
Accrued liabilities		—		(302)		(4)		—		—		(306)
Net assets acquired	$	12,225	$	22,325	$	10,952	$	34,415	$	8,833	$	88,750


	2017 Acquisitions
	Completed During the Nine Months Ended September 30, 2017
	Midwest		EcoFoam		Superior		Canyon		All others		Total
Fair value of consideration transferred:
Cash (a)	$	12,225	$	20,822	$	10,952	$	33,532	$	8,833	$	86,364
Deferred consideration		—		—		—		883		—		883
Contingent consideration		—		1,503		—		—		—		1,503
Total consideration transferred	$	12,225	$	22,325	$	10,952	$	34,415	$	8,833	$	88,750

(a) For Canyon, includes $1,667 of deferred consideration paid during the nine months ended September 30, 2018.

Schedule of estimates of acquired intangible assets related to the acquisitions

Estimates of acquired intangible assets related to the acquisitions are as follows, as of September 30, 2018, dollars in thousands:


	Estimated Fair Value		Weighted Average Estimated Useful Life (Years)
2018 Acquisitions:
Customer relationships	$	169,320		12
Trademarks and trade names		11,260		9
Non-competition agreements		1,260		5
Total intangible assets for 2018 acquisitions	$	181,840		11

2017 Acquisitions:
Customer relationships	$	26,170		10
Trademarks and trade names		1,780		10
Non-competition agreements		5,630		5
Total intangible assets for 2017 acquisitions	$	33,580		9

Schedule of fair value of contingent consideration

The following table presents the fair value of contingent consideration, in thousands:


	EcoFoam		ADO
Date of Acquisition	February 27, 2017		January 10, 2018
Fair value of contingent consideration recognized at acquisition date	$	2,110	$	828

Contingent consideration at December 31, 2017	$	2,259	$	—
Additions		—		828
Change in fair value of contingent consideration during the nine months ended September 30, 2018		120		(493)
Payment of contingent consideration during the nine months ended September 30, 2018		(841)		—
Liability balance for contingent consideration at September 30, 2018	$	1,538	$	335