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

Annual report pursuant to Section 13 and 15(d)

Business Combinations (Tables)

Business Combinations (Tables)

12 Months Ended

Dec. 31, 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 Consolidated Statements of Operations were as follows, in thousands:


	Year Ended December 31, 2018
2018 Acquisitions	Net Sales		Net Income
ADO	$	24,766	$	252
Santa Rosa		6,034		602
USI		266,280		15,982
	$	297,080	$	16,836


	Year Ended December 31, 2017
2017 Acquisitions	Net Sales		Net Income
Midwest	$	17,122	$	304
EcoFoam		22,315		1,747
Superior		9,508		922
Canyon		13,333		1,279
All others		8,412		892
	$	70,690	$	5,144

Schedule of pro forma results

Our pro forma results are presented below, in thousands:


	Unaudited Pro Forma for the Year Ended December 31,
	2018			2017
Net sales	$	2,515,593	$		2,343,687
Net income	$	144,755	$		185,342

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

Our pro forma results are presented below, in thousands:


	Unaudited Pro Forma for the Year Ended December 31,
	2018		2017
Amortization of intangible assets	$	5,025	$	16,308
Income tax expense (using 27% and 38% effective tax rate in 2018 and 2017, respectively)	$	3,700	$	16,676

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 December 31, 2018, in thousands:


	2018 Acquisitions
	Completed During the Year Ended December 31, 2018
	ADO		Santa Rosa		USI		Total
Estimated fair values:
Cash	$	939	$	—	$	14,817	$	15,756
Accounts receivable		3,434		1,433		61,445		66,312
Inventories		2,337		104		14,084		16,525
Prepaid and other assets		135		7		3,886		4,028
Property and equipment		951		522		33,701		35,174
Intangible assets		14,090		1,850		165,400		181,340
Goodwill		2,631		3,014		281,207		286,852
Accounts payable		(908)		(1,099)		(17,927)		(19,934)
Accrued liabilities		(609)		—		(34,686)		(35,295)
Deferred tax liability		—		—		(35,389)		(35,389)
Net assets acquired	$	23,000	$	5,831	$	486,538	$	515,369


	2018 Acquisitions
	Completed During the Year Ended December 31, 2018
	ADO		Santa Rosa		USI		Total
Fair value of consideration transferred:
Cash	$	22,172	$	5,581	$	486,538	$	514,291
Deferred consideration		—		—		—		—
Contingent consideration		828		250		—		1,078
Total consideration transferred	$	23,000	$	5,831	$	486,538	$	515,369

The 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 December 31, 2018, in thousands:


	2017 Acquisitions
	Completed During the Year Ended December 31, 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 Year Ended December 31, 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 year ended December 31, 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 December 31, 2018, dollars in thousands:


	Estimated Fair Value		Weighted Average Estimated Useful Life (Years)
2018 Acquisitions:
Customer relationships	$	168,820		12
Trademarks and trade names		11,260		9
Non-competition agreements		1,260		5
Total intangible assets for 2018 acquisitions	$	181,340		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 as of December 31, 2018, in thousands:


	EcoFoam		ADO		Santa Rosa
Date of Acquisition	February 27, 2017		January 10, 2018		January 18, 2018
Fair value of contingent consideration recognized at acquisition date	$	2,110	$	828	$	250

Contingent consideration at December 31, 2017	$	2,259	$	—	$	—
Additions		—		828		250
Change in fair value of contingent consideration during the year ended December 31, 2018		155		(485)		—
Payment of contingent consideration during the year ended December 31, 2018		(841)		—		—
Liability balance for contingent consideration at December 31, 2018	$	1,573	$	343	$	250