Business Combinations

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

BUSINESS COMBINATIONS

As part of our ongoing strategy to expand geographically and increase market share in certain markets, as well as diversify our products and end markets, we completed two business combinations during the three months ended March 31, 2023 and one business combination during the three months ended March 31, 2022.

The largest of our 2023 acquisitions was Anchor Insulation Co., Inc. (Anchor) in March 2023. Below is a summary of each significant acquisition by year, including revenue and net income since date of acquisition shown for the year of acquisition. Net income includes amortization and taxes when appropriate.

For the three months ended March 31, 2023 (in thousands):


									Three months ended March 31, 2023
2023 Acquisitions	Date	Acquisition Type	Cash Paid		Seller Obligations		Total Purchase Price		Revenue		Net Income
Anchor	3/12/2023	Share	$	35,928	$	1,000	$	36,928	$	2,193	$	51
Other	2/13/2023	Asset	2,090		131		2,221		444		15






			$	38,018	$	1,131	$	39,149	$	2,637	$	66

For the three months ended March 31, 2022 (in thousands):


									Three months ended March 31, 2022
2022 Acquisitions	Date	Acquisition Type	Cash Paid		Seller Obligations		Total Purchase Price		Revenue		Net Income
Other	03/01/2022	Share	$	8,050	$	1,878	$	9,928	$	915	$	97

Acquisition-related costs recorded within administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income amounted to $0.6 million and $0.7 million for the three months ended March 31, 2023 and 2022, 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 $13.0 million of goodwill for tax purposes as a result of 2023 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):


	Three months ended March 31, 2023		Three months ended March 31, 2022
	Anchor		Other		Total		Other
Estimated fair values:
Cash	$	10	$	—	$	10	$	87
Accounts receivable	3,661		—		3,661		772
Inventories	1,527		64		1,591		684
Other current assets	1,732		—		1,732		21
Property and equipment	2,428		381		2,809		1,049
Operating lease right-of-use asset	—		28		28		—
Intangibles	16,420		1,120		17,540		4,634
Goodwill	12,870		670		13,540		2,743
Other non-current assets	184		13		197		7
Accounts payable and other current liabilities	(1,904)		(46)		(1,950)		(69)



Other long-term liabilities	—		(9)		(9)		—
Fair value of assets acquired and purchase price	36,928		2,221		39,149		9,928
Less seller obligations	1,000		131		1,131		1,878
Cash paid	$	35,928	$	2,090	$	38,018	$	8,050

Contingent consideration, non-compete agreements and/or amounts based on working capital calculations are included as “seller obligations” in the above table or within “fair value of assets acquired” if subsequently paid during the period presented. Contingent consideration payments consist primarily of earnouts based on performance that are recorded at fair value at the time of acquisition. When these payments are expected to be made over one year from the acquisition date, the contingent

consideration is discounted to net present value of future payments based on a weighted average of various future forecast scenarios.

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 and customary post-closing reviews are concluded during the measurement period attributable to each individual business combination. As a result, 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. Any acquisition acquired after March 31, 2022 is deemed to be within the measurement period and its purchase price considered preliminary. Goodwill and intangibles per the above table may not agree to the total gross increases of these assets as shown in Note 6, Goodwill and Intangibles, during each of the three months ended March 31, 2023 and 2022 due to 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. All acquisitions during the three months ended March 31, 2023 and 2022 had their respective goodwill assigned to our Installation operating segment.

Estimates of acquired intangible assets related to the acquisitions are as follows (in thousands):


	For the three months ended March 31,
	2023			2022
Acquired intangibles assets	Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)	Estimated Fair Value		Weighted Average Estimated Useful Life (yrs.)
Customer relationships	$	10,969	12	$	3,125	12
Trademarks and tradenames	5,466		15	1,136		15
Non-competition agreements	285		5	374		5
Backlog	820		1	—		0

Pro Forma Information

The unaudited pro forma information for the combined results of the Company has been prepared as if the 2023 acquisitions had taken place on January 1, 2022 and the 2022 acquisitions had taken place on January 1, 2021. 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, 2022 and 2021, 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,
	2023		2022
Net revenue	$	667,915	$	623,603
Net income	49,590		34,974
Basic net income per share	1.77		1.19
Diluted net income per share	1.75		1.18

Unaudited pro forma net income reflects additional intangible asset amortization expense of approximately $0.4 million and $1.9 million for the three months ended March 31, 2023 and 2022, respectively, as well as additional income tax expense of approximately $0.1 million and $0.4 million for the three months ended March 31, 2023 and 2022, respectively, that would have been recorded had the 2023 acquisitions taken place on January 1, 2022 and the 2022 acquisitions taken place on January 1, 2021.