Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2016 | Feb. 21, 2017 | Jun. 30, 2016 | |
Document and Entity Information | |||
Entity Registrant Name | TopBuild Corp | ||
Entity Central Index Key | 1,633,931 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 37,718,605 | ||
Entity Public Float | $ 1.4 | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 134,375 | $ 112,848 |
Receivables, net of an allowance for doubtful accounts of $3,374 and $3,399 at December 31, 2016 and December 31, 2015, respectively | 252,624 | 235,549 |
Inventories, net | 116,190 | 118,701 |
Prepaid expenses and other current assets | 23,364 | 13,263 |
Total current assets | 526,553 | 480,361 |
Property and equipment, net | 92,760 | 93,066 |
Goodwill | 1,045,058 | 1,044,041 |
Other intangible assets, net | 2,656 | 1,987 |
Deferred tax assets, net | 19,469 | 20,549 |
Other assets | 3,623 | 2,245 |
Total Assets | 1,690,119 | 1,642,249 |
Current liabilities: | ||
Accounts payable | 241,534 | 253,311 |
Current portion of long-term debt | 20,000 | 15,000 |
Accrued liabilities | 64,399 | 58,369 |
Total current liabilities | 325,933 | 326,680 |
Long-term debt | 158,800 | 178,457 |
Deferred tax liabilities, net | 193,715 | 181,254 |
Long-term portion of insurance reserves | 38,691 | 39,655 |
Other liabilities | 433 | 474 |
Total Liabilities | 717,572 | 726,520 |
Commitments and contingencies | ||
Equity: | ||
Preferred stock, $0.01 par value: 10,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2016 and December 31, 2015 | ||
Common stock, $0.01 par value: 250,000,000 shares authorized; 38,488,825 issued and 37,815,199 outstanding at December 31, 2016, and 38,217,647 shares issued and outstanding at December 31, 2015 | 385 | 377 |
Treasury stock, 673,626 shares at December 31, 2016, at cost | (22,296) | |
Additional paid-in capital | 845,476 | 838,976 |
Retained earnings | 148,982 | 76,376 |
Total equity | 972,547 | 915,729 |
Total liabilities and equity | $ 1,690,119 | $ 1,642,249 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
CONSOLIDATED BALANCE SHEETS | ||
Allowance for doubtful accounts | $ 3,374 | $ 3,399 |
Preferred Stock, Par Value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares, Issued | 0 | 0 |
Preferred Stock, Shares, Outstanding | 0 | 0 |
Common Stock, Par Value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 250,000,000 | 250,000,000 |
Common Stock, Shares, Issued | 38,488,825 | 38,217,647 |
Common Stock, Shares, Outstanding | 37,815,199 | 38,217,647 |
Treasury stock, shares at cost | 673,626 |
CONSLIDATED STATEMENT OF OPERAT
CONSLIDATED STATEMENT OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |||
Net sales | $ 1,742,850 | $ 1,616,580 | $ 1,512,077 |
Cost of sales | 1,342,506 | 1,258,551 | 1,180,409 |
Gross profit | 400,344 | 358,029 | 331,668 |
Selling, general and administrative expenses | 278,740 | 274,498 | 290,951 |
Operating profit | 121,604 | 83,531 | 40,717 |
Other income (expense), net: | |||
Interest expense | (5,608) | (9,465) | (12,404) |
Other, net | 277 | 49 | 25 |
Other expense, net | (5,331) | (9,416) | (12,379) |
Income from continuing operations before income taxes | 116,273 | 74,115 | 28,338 |
Income tax (expense) benefit from continuing operations | (43,667) | 5,008 | (17,842) |
Income from continuing operations | 72,606 | 79,123 | 10,496 |
Loss from discontinued operations, net | (152) | (1,093) | |
Net income | $ 72,606 | $ 78,971 | $ 9,403 |
Basic: | |||
Income from continuing operations | $ 1.93 | $ 2.10 | $ 0.28 |
Loss from discontinued operations, net | (0.03) | ||
Net income | 1.93 | 2.10 | 0.25 |
Diluted: | |||
Income from continuing operations | 1.92 | 2.09 | 0.28 |
Loss from discontinued operations, net | (0.03) | ||
Net income | $ 1.92 | $ 2.09 | $ 0.25 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Net Cash Provided by (Used in) Operating Activities: | |||
Net income | $ 72,606 | $ 78,971 | $ 9,403 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 12,011 | 12,108 | 26,079 |
Share-based compensation | 7,669 | 4,651 | 3,762 |
Loss on sale or abandonment of property and equipment | 2,737 | 2,334 | 364 |
Amortization of debt issuance costs | 343 | 171 | |
Provision for bad debt expense | 3,292 | 4,219 | 3,563 |
Loss from inventory obsolescence | 1,343 | 1,879 | 1,302 |
Non-cash employee benefit policy change | (9,861) | ||
Deferred income taxes, net | 13,540 | (16,556) | 16,711 |
Changes in certain assets and liabilities: | |||
Receivables, net | (19,953) | (19,591) | (19,225) |
Inventories, net | 1,370 | (13,608) | (10,287) |
Prepaids and other current assets | (10,102) | (9,054) | 100 |
Accounts payable | (11,698) | 24,008 | 44,941 |
Accrued liabilities | 3,633 | (3,746) | (4,768) |
Other, net | (6) | 86 | (84) |
Net cash provided by operating activities | 76,785 | 56,011 | 71,861 |
Cash Flows Provided by (Used in) Investing Activities: | |||
Purchases of property and equipment | (14,156) | (13,644) | (13,141) |
Acquisition of a business | (3,476) | ||
Proceeds from sale of property and equipment | 718 | 805 | 999 |
Other, net | 113 | 632 | 880 |
Net cash used in investing activities | (16,801) | (12,207) | (11,262) |
Cash Flows Provided by (Used in) Financing Activities: | |||
Net transfer (to) from Former Parent | 664 | 72,965 | (60,655) |
Cash distribution paid to Former Parent | (200,000) | ||
Proceeds from issuance of long-term debt | 200,000 | ||
Repayment of long-term debt | (15,000) | (5,000) | |
Payment of debt issuance costs | (1,715) | ||
Taxes withheld and paid on employees' equity awards | (1,825) | (171) | |
Repurchase of shares of common stock | (22,296) | ||
Net cash (used in) provided by financing activities | (38,457) | 66,079 | (60,655) |
CASH AND CASH EQUIVALENTS | |||
Increase (decrease) for the period | 21,527 | 109,883 | (56) |
Cash and cash equivalents at beginning of year | 112,848 | 2,965 | 3,021 |
Cash and cash equivalents at end of period | 134,375 | 112,848 | 2,965 |
Supplemental disclosure of cash paid for: | |||
Cash interest on long-term debt | 4,130 | 2,233 | |
Income taxes | 39,508 | 20,992 | $ 1,134 |
Supplemental disclosure of noncash investing activities: | |||
Accruals for property and equipment | $ 387 | $ 583 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands | Common Stock | Treasury Stock at Cost | Additional Paid-in Capital | Retained Earnings | Former Parent Investment | Total |
Balance at Dec. 31, 2013 | $ 1,002,682 | $ 1,002,682 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 9,403 | 9,403 | ||||
Net transfers from Former Parent | (59,794) | (59,794) | ||||
Balance at Dec. 31, 2014 | 952,291 | 952,291 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | $ 76,376 | 2,595 | 78,971 | |||
Separation-related adjustments | (118,356) | (118,356) | ||||
Reclassification of Former Parent investment in connection with the Separation | $ 836,530 | $ (836,530) | ||||
Issuance of common stock at Separation | $ 377 | (377) | ||||
Share-based compensation | 2,823 | 2,823 | ||||
Balance at Dec. 31, 2015 | 377 | 838,976 | 76,376 | 915,729 | ||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 72,606 | 72,606 | ||||
Separation-related adjustments | 664 | 664 | ||||
Share-based compensation | 7,669 | 7,669 | ||||
Issuance of restricted share awards under long-term equity incentive plan | 8 | (8) | ||||
Repurchase of 673,626 shares of common stock pursuant to Share Repurchase | $ (22,296) | (22,296) | ||||
66,196 shares of common stock withheld to pay taxes on employees' equity awards | (1,825) | (1,825) | ||||
Balance at Dec. 31, 2016 | $ 385 | $ (22,296) | $ 845,476 | $ 148,982 | $ 972,547 |
CONSOLIDATED STATEMENTS OF EQU7
CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) | 12 Months Ended |
Dec. 31, 2016shares | |
CONSOLIDATED STATEMENTS OF EQUITY | |
Repurchase of shares of common stock pursuant to Share Repurchase Program (in shares) | 673,626 |
Number of shares of common stock withheld to satisfy statutory withholding requirements (in shares) | 66,196 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2016 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. SUMMARY Basis of Presentation. On June 30, 2015 (the “Effective Date”), Masco Corporation (“Masco” or the “Former Parent”) completed the separation (the “Separation”) of its Installation and Other Services businesses (the “Services Business”) from its other businesses. On the Effective Date, TopBuild Corp., a Delaware corporation formed in anticipation of the Separation (“TopBuild” or the “Company”), became an independent public company which holds, through its consolidated subsidiaries, the assets and liabilities of the Services Business. The Separation was achieved through the distribution of 100 percent of the outstanding capital stock of TopBuild to holders of Masco common stock. References to “TopBuild,” the “Company,” “we,” “our,” and “us” refer to TopBuild Corp. and its consolidated subsidiaries. Prior to the Separation, the consolidated financial statements of TopBuild were prepared on a stand-alone basis and reflected the historical results of operations, financial position, and cash flows of the Services Business, including an allocable portion of corporate costs. We report our business in two segments, Installation and Distribution. Our Installation segment principally includes the sales and installation of insulation and other building products. Our Distribution segment principally includes the distribution of insulation and other building products. Our segments are based on our operating units, for which financial information is regularly evaluated by our corporate operating executives. Financial Statement Presentation. The consolidated financial statements have been developed in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Our financial statements for the periods prior to the Separation have been derived from the financial statements and accounting records of Masco using the historical results of operations and historical basis of assets and liabilities of the Services Business, and reflect Masco’s net investment in the Services Business. All intercompany transactions between the TopBuild entities have been eliminated. Transactions between TopBuild and Masco prior to the Separation, with the exception of purchase transactions, are reflected in the Consolidated Statements of Changes in Equity as “Former Parent Investment” and in the Consolidated Statements of Cash Flows as a financing activity in “Net transfer (to) from Former Parent.” The accompanying consolidated financial statements for the periods prior to the Separation include allocations of general corporate expenses that were incurred by Masco for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs. These general corporate expenses were allocated to TopBuild on the basis of sales. Total allocated general corporate costs were $13.6 million and $21.9 million for the years ended December 31, 2015 and 2014, respectively. These costs were included in selling, general, and administrative expense. Prior to the Separation, Masco incurred certain operating expenses on behalf of the Services Business which were allocated to TopBuild based on direct benefit or usage. These allocated operating expenses were $5.6 million and $17.8 million for the years ended December 31, 2015 and 2014, respectively. These costs were included in selling, general, and administrative expense. An estimate of these operating expenses were allocated to each of TopBuild’s reporting segments, based on a percentage of sales. For the periods prior to the Separation, these consolidated financial statements may not reflect the actual expenses that would have been incurred had we operated as a stand-alone company and may not reflect the consolidated results of operations, financial position, and cash flows had we operated as a stand-alone company. Actual costs that would have been incurred had we operated as a stand-alone company prior to the Separation would depend on multiple factors including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. During the first quarter of 2015, we identified an error related primarily to the misallocation of a favorable legal settlement to general corporate expenses of TopBuild in the fourth quarter of 2014. The impact of the error understated the allocation of corporate expenses reported as selling, general, and administrative expense and overstated operating profit by $1.9 million. The error was not considered material to the previously reported 2014 financial statements. The Company recorded the correction of the error by an out-of-period adjustment in the first quarter of 2015 which is therefore reflected in the twelve months ended December 31, 2015 Consolidated Statements of Operations and Consolidated Statements of Cash Flows. Use of Estimates and Assumptions in the Preparation of Financial Statements. The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of any contingent assets and liabilities, at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results may differ from these estimates and assumptions. Revenue Recognition. We recognize revenue for our Installation segment by order within the contract, based on the amount of material installed and associated labor costs at our customers’ locations. The amount of revenue recognized for our Installation segment, which had not been billed as of December 31, 2016 and 2015, was $28.9 million and $23.7 million, respectively. Revenue from our distribution segment is recognized when title to products and risk of loss transfers to our customers. At time of sale we record estimated reductions to revenue for customer programs and incentive offerings, including special pricing and other volume‑based incentives. Income Taxes. We account for income taxes using the asset and liability method, which requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax basis and financial reporting basis of our assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which we operate. Valuation allowances are established against deferred tax assets when it is more likely than not that the realization of those deferred tax assets will not occur. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence. If, based upon all available evidence, both positive and negative, it is more likely than not (more than 50 percent likely) such deferred tax assets will not be realized, a valuation allowance is recorded. Significant weight is given to positive and negative evidence that is objectively verifiable. A company’s three year cumulative loss position is significant negative evidence in considering whether deferred tax assets are realizable and the accounting guidance restricts the amount of reliance we can place on projected taxable income to support the recovery of the deferred tax assets. Interest and penalties on our uncertain tax positions, if recorded, are reported in income tax expense. Cash and Cash Equivalents. We consider our highly liquid investments with a maturity of three months or less at the time of purchase to be cash and cash equivalents. Receivables, net. We do business with a significant number of customers, principally homebuilders. We monitor our exposure for credit losses on our customer receivable balances and the credit worthiness of our customers on an on‑going basis and record related allowances for doubtful accounts. Allowances are estimated based upon specific customer balances where a risk of default has been identified, and also include a provision for non‑customer specific defaults based upon historical collection, return, and write‑off activity. During downturns in our markets, declines in the financial condition and creditworthiness of customers impact the credit risk of the receivables involved and we have incurred additional bad debt expense related to customer defaults. Receivables, net are presented net of certain allowances, including allowances for doubtful accounts. Inventories, net. Inventories, net consist primarily of insulation, rain gutters, garage doors, fireplaces, fireproofing and firestopping products, roofing and shingles, shower enclosures, closet shelving, accessories, and other products. We value inventory at the lower of cost or market, where cost is determined by the first in‑first out cost method. Inventory value is evaluated at each balance sheet date to ensure that it is carried at the lower of cost or market. Inventory provisions are recorded to reduce inventory to the lower of cost or market value for obsolete or slow moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions, inventory levels and turns, product spoilage, and specific identification of items such as product discontinuance, engineering/material changes, or regulatory-related changes. As of December 31, 2016 and 2015, all inventory consisted of finished goods. Property and Equipment, net. Property and equipment, net, including significant betterments to existing facilities, are recorded at cost. Upon retirement or disposal, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the Consolidated Statements of Operations. Maintenance and repair costs are charged against earnings as incurred. Gains and losses on the disposal of equipment are included in selling, general, and administrative expense. We review our property and equipment as an event occurs or circumstances change that would more likely than not reduce the fair value of the property and equipment below the carrying amount. If the carrying amount is not recoverable from its undiscounted cash flows, we would recognize an impairment loss for the difference between the carrying amount and the current fair value. Further, we evaluate the remaining useful lives of property and equipment at each reporting period to determine whether events and circumstances warrant a revision to the remaining depreciation periods. Depreciation. Depreciation expense is computed principally using the straight‑line method over the estimated useful lives of the assets. Estimated useful lives are as follows: Asset Class Estimated Useful Life Buildings and land improvements 20 – 40 years Software and company vehicles 3 – 6 years Equipment 3 – 15 years Fair Value . The fair value measurement standard defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (referred to as an “exit price”). A fair value hierarchy is established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are : Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities or other inputs that are observable or can be corroborated by market data. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. Goodwill and Other Intangible Assets. We perform our annual impairment testing of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have defined our reporting units and completed the impairment testing of goodwill at the operating segment level. Our operating segments are reporting units that engage in business activities for which discrete financial information, including long-range forecasts, are available. When assessing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform a two-step impairment test. If we conclude otherwise, then no further action is taken. We also have the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, we compare the fair value of the reporting units to the carrying value of the reporting units for goodwill impairment testing. Fair value for our reporting units is determined using a discounted cash flow method, which includes significant unobservable inputs (Level 3 inputs). Determining market values using a discounted cash flow method requires us to make significant estimates and assumptions, including long term projections of cash flows, market conditions, and appropriate discount rates. Our judgments are based upon historical experience, current market trends, consultations with external valuation specialists and other information. In estimating future cash flows, we rely on internally generated long-range forecasts for sales and operating profits, including capital expenditures, and generally utilize a one to three percent long term assumed annual growth rate of cash flows for periods after the long-range forecast. An impairment loss is recognized to the extent that a reporting unit’s recorded goodwill exceeds the implied fair value of goodwill. Intangible assets with finite useful lives are amortized using the straight‑line method over their estimated useful lives. We evaluate the remaining useful lives of amortizable intangible assets at each reporting period to determine whether events and circumstances warrant a revision to the remaining periods of amortization. For additional information, see Note 4 - Goodwill and Other Intangible Assets . Insurance Reserves. We use a combination of high deductible insurance and matching deductible insurance for a number of risks including, but not limited to, workers’ compensation, general, vehicle, and property liabilities. Our workers’ compensation insurance is primarily a high‑deductible insurance program and our primary general liability insurance is a matching deductible program. We are insured for covered claims above the deductibles and retentions. The liabilities represent our best estimate of our costs, using generally accepted actuarial reserving methods, of the ultimate obligations for reported claims plus those incurred but not reported claims through December 31, 2016 and 2015. The accruals are adjusted as new information develops or circumstances change that would affect the estimated liability. We also have an insurance receivable for claims that exceeded the stop loss limit included in other assets on our Consolidated Balance Sheets which offsets an equal liability included within the reserve amount recorded in other liabilities on our Consolidated Balance Sheet. At December 31, 2016 and 2015, the amount of this receivable and liability was $3.2 million and $1.8 million, respectively. Advertising . Advertising costs are expensed as incurred. Advertising expense, net of manufacturers support, was approximately $1.1 million, $1.5 million, and $2.5 million for the years ended December 31, 2016, 2015, and 2014, respectively, and is included in selling, general, and administrative expense. Share‑based Compensation. Our share-based compensation program currently consists of restricted share awards (RSAs) and stock option awards (“Options”). Share-based compensation expense is reported in selling, general, and administrative expense. We do not capitalize any compensation cost related to share-based compensation awards. The income tax benefits and deficiencies associated with share-based awards are reported as a component of income tax expense. Excess tax benefits and deficiencies are included in cash provided by (used in) operating activities while shares withheld for tax-withholding are reported in financing activities under the caption “Taxes withheld and paid on employees’ equity awards” in our Consolidated Statements of Cash Flows. Award forfeitures are accounted for in the period they occur. The following table details our award types and accounting policies: Award Type: Fair Value Determination Vesting Expense Expense Restricted Share Awards Service Condition Closing stock price on date of grant Ratably; Straight-line Fair value at grant date Performance Condition Closing stock price on date of grant Cliff; Straight-line; Evaluated quarterly; Market Condition Monte-Carlo Simulation Cliff; Straight-line; Fair value at grant date Stock Options† Black-Scholes Options Pricing Model Ratably; Straight-line Fair value at grant date †Stock options expire no later than 10 years after the grant date. ‡Expense is reversed if award is forfeited prior to vesting. Debt Issuance Costs. Debt issuance costs are amortized as interest expense over the life of the respective debt, which approximates the effective interest rate method. Leases . Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the Consolidated Statements of Operations on a straight-line basis over the lease term, including future option periods the Company reasonably expects to exercise, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in other liabilities. Lease termination costs are accrued over the life of the lease based on historical experience. Leasehold improvements are amortized over the lesser of the expected lease term, including cancelable option periods, or the estimated useful lives of the related assets using the straight-line method. Business Combinations . The purchase price for business combinations is allocated to the estimated fair values of acquired tangible and intangible assets, including goodwill, and assumed liabilities, where applicable. Additionally, we recognize customer relationships, trademarks and trade names, and non-competition agreements as identifiable intangible assets. These assets are recorded at fair value as of the transaction date. The fair value of these intangible assets is determined primarily using the income approach and using current industry information. Goodwill is recorded when consideration transferred exceeds the fair value of identifiable assets and liabilities. Measurement-period adjustments are recorded in the period they occur. Recently Adopted Accounting Pronouncements : In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-15 (“ASU 2014-15”), “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This update provides guidance on Management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in the event of such doubt. This standard is effective for us December 2016. Adoption of this standard did not affect our consolidated financial statements. In March 2016, FASB issued Accounting Standards Update 2016-09 (“ASU 2016-09”), “Improvements to Employee Share-Based Payment Accounting.” This update is intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This update is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted. We elected to early adopt the new guidance beginning in the third quarter of 2016. The adoption of this update resulted in certain additional disclosures in Note 14 – Share Based Compensation as well as recognizing $0.6 million in income tax benefits for current year vesting of share-based awards. In August 2016, the FASB issued Accounting Standards Update 2016-15 (“ASU 2016-15”) “Classification of Certain Cash Receipts and Cash Payments,” an amendment to existing guidance on presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This guidance is intended to reduce diversity in the classification of transactions related to debt prepayment or debt extinguishment costs, zero-coupon debt instrument settlements, contingent consideration payments made after a business combination, insurance claim settlements and corporate-owned life insurance settlements, distributions from equity method investments and beneficial interests in securitization transactions. This guidance is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We elected to early adopt the new guidance beginning in the fourth quarter of 2016. The adoption of this update did not impact our consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted : In May 2014, the FASB issued a new standard for revenue recognition, Accounting Standards Codification 606 (“ASC 606”). Subsequent to issuing ASC 606, FASB has issued a number of updates and technical improvements which do not change the core principles of the guidance. The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries. ASC 606 is effective for us for annual periods beginning January 1, 2018, (with early adoption permitted) and allows for full retrospective or modified retrospective methods of adoption. In determining the applicability of ASC 606, we considered the general nature of our orders is short-term, based on a single deliverable, and not accounted for under industry-specific guidance. Our initial review has indicated additional disclosures may be necessary. We have not yet determined an adoption date or method of adoption. In July 2015, the FASB issued Accounting Standards Update 2015-11 (“ASU 2015-11”), “Simplifying the Measurement of Inventory.” Under this guidance, inventory should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years beginning after December 15, 2016. The adoption of this amendment will not have a material impact on our financial position or results of operations. In February 2016, the FASB issued Accounting Standards Update 2016-02 (“ASU 2016-02”), “Leases.” This standard requires a lessee to recognize most leases on their balance sheet. Companies are required to use a modified retrospective transition method for all existing leases. This standard is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. We have not yet selected an adoption date and we are currently evaluating the effect on our financial position and results of operations. In June 2016, the FASB issued Accounting Standards Update 2016-13 (“ASU 2016-13”), “Financial Instruments - Credit Losses” (“ASU 2016-13”). This guidance introduces a current expected credit loss (“CECL”) model for the recognition of impairment losses on financial assets, including trade receivables. The CECL model replaces current GAAP’s incurred loss model. Under CECL, companies will record an allowance through current earnings for the expected credit loss for the life of the financial asset upon initial recognition of the financial asset. This update is effective for us at the beginning of 2020 with early adoption permitted at the beginning of 2019. We have not yet selected an adoption date and we are currently evaluating the effect on our financial position and results of operations. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions | |
Related Party Transactions | 2. RELATED PARTY TRANSACTIONS Prior to the Separation, interest was charged each month as an adjustment to Former Parent investment in TopBuild. Our Consolidated Statements of Operations reflect an interest expense charge of $6.3 million and $12.4 million for the years ended December 31, 2015 and 2014, respectively. The charge was based on the monthly average intercompany balance payable to Masco based on a 12-month LIBOR plus two percent. Transactions between us and Masco, with the exception of purchase transactions, are reflected in Consolidated Statements of Changes in Equity as “Former Parent Investment” and in the Consolidated Statements of Cash Flows as a financing activity in “Net transfer (to) from Former Parent.” TopBuild related party purchases from Masco businesses aggregated $2.6 million and $6.7 million for the years ended December 31, 2015 and 2014, respectively, and have been included in cost of sales. Subsequent to the Separation, any transactions with Masco are no longer considered related party and are reflected in our Consolidated Statements of Operations and included in the operating cash flow section of our Consolidated Statements of Cash Flows. We lease certain operating facilities from certain related parties, primarily former owners (and in certain cases, current management personnel) of companies acquired. These related party leases are immaterial to our Consolidated Statements of Operations. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2016 | |
Property and Equipment | |
Property and Equipment | 3. PROPERTY & EQUIPMENT The following table sets forth our property and equipment by class as of December 31, 2016 and 2015, in thousands: As of December 31, 2016 2015 Land and improvements $ $ Buildings Equipment Computer hardware and software Company vehicles Less: Accumulated depreciation Total property and equipment, net $ $ Depreciation expense was $11.2 million, $11.1 million, and $24.9 million for the years ended December 31, 2016, 2015, and 2014, respectively. |
Goodwill and Other Intangibles
Goodwill and Other Intangibles | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Other Intangibles | |
Goodwill and Other Intangibles | 4. GOODWILL AND OTHER INTANGIBLES Changes in the carrying amount of goodwill for the years ended December 31, 2016 and 2015, by segment, were as follows, in thousands: Gross Goodwill Gross Goodwill Accumulated Net Goodwill at at Impairment at December 31, 2015 Additions December 31, 2016 Losses December 31, 2016 Installation $ $ $ $ $ Distribution — — Total $ $ $ $ $ Gross Goodwill Gross Goodwill Accumulated Net Goodwill at at Impairment at December 31, 2014 Additions December 31, 2015 Losses December 31, 2015 Installation $ $ — $ $ $ Distribution — — Total $ $ — $ $ $ In the fourth quarters of 2016 and 2015, we completed our annual impairment testing of goodwill. The impairment tests in both 2016 and 2015 indicated there was no impairment of goodwill. 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: For the years ended December 31, 2016 2015 2014 Gross definite-lived intangible assets $ $ Accumulated amortization Net definite-lived intangible assets Indefinite-lived intangible assets not subject to amortization Other intangible assets, net $ $ Amortization expense $ $ $ 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 2017 $ 2018 2019 2020 2021 |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Dec. 31, 2016 | |
Long-Term Debt | |
Long-Term Debt | 5. LONG-TERM DEBT In connection with the Separation, the Company and wholly-owned domestic subsidiaries (collectively, the “Guarantors”) entered into a credit agreement and related collateral and guarantee documentation (collectively, the “Credit Agreement”) with PNC Bank, National Association, as administrative agent, and the other lenders and agents party thereto. The Credit Agreement was executed by the parties thereto on June 9, 2015, and became effective on June 30, 2015. The following table summarizes the key terms of the Credit Agreement, dollars in thousands: Senior secured term loan facility (original borrowing) $ Additional term loan and/or revolver capacity available under incremental facility (a) $ Interest rate as of December 31, 2016 % Scheduled maturity date 6/30/2020 Senior secured revolving credit facility ("Revolving Facility") $ Sublimit for issuance of letters of credit under Revolving Facility (b) $ Sublimit for swingline loans under Revolving Facility (b) $ (a) Subject to certain conditions (including existing or new lenders providing commitments in respect of such additional borrowing capacity). (b) Use of the sublimits for the issuance of letters of credit and swingline loans reduces the availability under the Revolving Facility . Borrowings under the credit facility are prepayable at the Company’s option without premium or penalty. The Company is required to prepay the term loan with the net cash proceeds of certain asset sales, debt issuances, or casualty events, subject to certain exceptions. The proceeds of the $200 million term loan facility were used to finance a cash distribution to Masco in connection with the Separation. We expect to use the borrowing capacity under the revolving facility from time to time for working capital and funds for general corporate purposes. Interest payable on the credit facility is based on either: · the London interbank offered rate (“LIBOR”), adjusted for statutory reserve requirements (the “Adjusted LIBOR Rate”); or · the Base Rate, which is defined as the highest of (a) the prime rate, (b) the federal funds open rate plus 0.50 percent, and (c) the daily LIBOR rate for a one-month interest period plus 1.0 percent, plus, (A) in the case of Adjusted LIBOR Rate borrowings, applicable margins ranging from 1.00 percent to 2.00 percent per annum, and (B) in the case of Base Rate borrowings, spreads ranging from 0.00 percent to 1.00 percent per annum, depending on, in each of (A) and (B), the Company’s Total Leverage Ratio, defined as the ratio of debt to EBITDA, ranging from less than or equal to 1.00:1.00 to greater than 2.50:1.00. The interest rate period with respect to the Adjusted LIBOR Rate interest rate option can be set at one-, two-, three-, or six-months, and in certain circumstances one-week or 12-months, as selected by the Company in accordance with the terms of the Credit Agreement. The interest rate as of December 31, 2016, was 2.11 percent. The effective interest rate on the term loan facility for the year ending December 31, 2016, was 2.16 percent. The following table sets forth our principal payments for the following four years, as of December 31, 2016, dollars in thousands: Future Principal Payments Schedule of Debt Maturity by Years: 2017 $ 2018 2019 2020 Total principal maturities $ The following table reconciles the principal balance of our long-term debt to our Consolidated Balance Sheets as of December 31, 2016 and 2015, dollars in thousands: 2016 2015 Current portion of long-term debt $ $ Long-term portion of long-term debt Unamortized debt issuance costs Long-term debt $ $ The Credit Agreement contains certain covenants that limit, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness or liens; to make certain investments or loans; to make certain restricted payments; to enter into consolidations, mergers, sales of material assets, and other fundamental changes; to transact with affiliates; to enter into agreements restricting the ability of subsidiaries to incur liens or pay dividends; or to make certain accounting changes. In addition, the Credit Agreement requires us to maintain a net leverage ratio, defined as the ratio of debt (less certain cash) to EBITDA, that is less than (i) from the date the Credit Agreement is entered into through December 31, 2015, 3.50:1.00; (ii) from March 31, 2016, through September 30, 2016, 3.25:1.00; and (iii) from and after December 31, 2016, 3.00:1.00. The Credit Agreement also requires us to maintain a minimum fixed charge coverage ratio of 1.10:1.00. The Credit Agreement contains customary events of default. We were compliant with all covenants as of December 31, 2016. All obligations under the Credit Agreement are guaranteed by the Guarantors, and all obligations under the Credit Agreement, including the guarantees of those obligations, are secured by substantially all of the assets of the Company and the Guarantors. The Company has outstanding standby letters of credit that secure our financial obligations related to our workers compensation, general insurance, and auto liability programs. These standby letters of credit reduce the availability under the Revolving Facility. The following table summarizes our availability under the Revolving Facility, in thousands: As of December 31, 2016 2015 Revolving Facility $ $ Less: standby letters of credit Capacity under Revolving Facility $ $ |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2016 | |
Fair Value Measurements | |
Fair Value Measurements | 6. FAIR VALUE MEASUREMENTS The fair value measurement standard defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (referred to as an “exit price”). Authoritative guidance on fair value measurements and disclosures clarifies that a fair value measurement for a liability should reflect the entity’s non-performance risk. In addition, a fair value hierarchy is established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Fair Value on Recurring Basis The carrying values of cash and cash equivalents, receivables, net, and accounts payables are considered to be representative of their respective fair values due to the short-term nature of these instruments. Fair Value on Non-Recurring Basis Fair value measurements were applied to our long-term debt. The carrying value of our long-term debt approximates the fair market value, primarily due to the fact that the non-performance risk of servicing our debt obligations, as reflected in our business and credit risk profile, has not materially changed since the debt obligations were assumed on June 30, 2015. In addition, due to the floating-rate nature of our long-term debt, the market value is not subject to variability solely due to changes in the general level of interest rates as is the case with a fixed-rate debt obligation. During the periods presented, there were no transfers between fair value hierarchical levels. |
Segment Information
Segment Information | 12 Months Ended |
Dec. 31, 2016 | |
Segment Information | |
Segment Information | 7. SEGMENT INFORMATION Our reportable segments are as follows: Installation principally includes the sale and installation of insulation and other building products. We sell primarily to the residential new construction market, but have seen increasing activity in both the commercial construction industry and repair/remodel of residential housing. In addition to insulation, our installed product lines include rain gutters, garage doors, fireplaces, fireproofing and firestopping products, shower enclosures, closet shelving, and other building products. Distribution principally includes the distribution of insulation and other building products. Our distributed products include insulation, insulation accessories, rain gutters, and roofing, among others. Distributed products are sold primarily to contractors and dealers (including lumber yards) from distribution centers in various parts of the United States. Our segments are based on our operating units, for which financial information is regularly evaluated by our corporate operating executives in determining resource allocation and assessing performance. Accounting policies for the segments are generally the same as those for the Company. The key performance metric we use to evaluate our businesses is segment operating profit. Operating profit for the individual segments includes corporate costs which are allocated to the segments based on various metrics including sales and headcount. Intercompany sales from the Distribution segment to the Installation segment are recorded by the Distribution segment with a profit margin and by our Installation segment at cost. The following table is a summary of the annual percentage of net sales by product category for the years ended December 31: 2016 2015 2014 Insulation % % % Rain gutters Accessories Afterpaint (shower enclosures, closet shelving, mirrors/glass, bath accessories, etc.) Garage doors Fireplaces Roofing materials Fireproofing and firestopping Other % % % Information about us by segment is as follows, for the years ended December 31, in thousands: Net Sales Operating Profit (b) 2016 2015 2014 2016 2015 2014 Our operations by segment were (a): Installation $ $ $ $ $ $ Distribution Intercompany eliminations and other adjustments (c) Total $ $ $ General corporate expense, net (d) Operating profit, as reported Other expense, net Income from continuing operations before income taxes $ $ $ Property Additions Depreciation and Total Assets 2016 2015 2014 2016 2015 2014 2016 2015 Our operations by segment were (a): Installation $ $ $ $ $ $ $ $ Distribution Corporate — — Total, as reported $ $ $ $ $ $ $ $ (a) All of our operations are located in the United States. (b) Segment operating profit for year ended December 31, 2016, includes an allocation of general corporate expenses attributable to the operating segments which is based on direct benefit or usage (such as salaries of corporate employees who directly support the segment). Segment operating profit for years ended December 31, 2015 and 2014 include an estimate of general corporate expense calculated based on a percentage of sales. For the years ended December 31, 2015 and 2014, the $7.2 million and $0.5 million differences, respectively, between estimated expense and actual corporate expense, are recorded in intercompany eliminations and other adjustments. (c) Intercompany eliminations include the elimination of intercompany profit of $14.4 million, $15.6 million, and $14.1 million for the years ended December 31, 2016, 2015, and 2014, respectively. Other adjustments primarily include differences between estimated and actual corporate costs allocated to the segments for years ended December 31, 2015 and 2014, as noted in footnote (b) above. (d) General corporate expense, net included expenses not specifically attributable to our segments for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs. |
Discontinued Operations
Discontinued Operations | 12 Months Ended |
Dec. 31, 2016 | |
Discontinued Operations | |
Discontinued Operations | 8. DISCONTINUED OPERATIONS The presentation of discontinued operations includes components which were sold, for which operations and cash flows can be clearly distinguished from the rest of the Company. We have no continuing involvement in these product lines or businesses. Expenses incurred subsequent to disposition are primarily related to the settlement of our self-insurance reserves. Selected financial information for discontinued operations is presented in the following table, in thousands: Year Ended December 31, 2016 2015 2014 Loss before income tax $ — $ $ Income tax benefit (expense) — Loss from discontinued operations, net $ — $ $ |
Accrued Liabilities
Accrued Liabilities | 12 Months Ended |
Dec. 31, 2016 | |
Accrued Liabilities | |
Accrued Liabilities | 9. ACCRUED LIABILITIES The following table sets forth the components of accrued liabilities at December 31, in thousands: 2016 2015 Salaries, wages, and commissions $ $ Insurance reserves Other Total accrued liabilities $ $ |
Employee Retirement Plans
Employee Retirement Plans | 12 Months Ended |
Dec. 31, 2016 | |
Employee Retirement Plans | |
Employee Retirement Plans | 10. EMPLOYEE RETIREMENT PLANS We provide a defined-contribution retirement plan for substantially all employees. In addition, we participate in 21 regional multi‑employer pension plans, principally related to building trades; none of the plans are considered significant. Prior to the Separation, Masco provided defined-benefit pension plans to certain TopBuild employees. The TopBuild liability associated with these plans is not reflected in our balance sheet as this obligation will be maintained and serviced by Masco; all future benefit accruals were frozen effective January 1, 2010. The expense related to our participation in the retirement plans was as follows, in thousands: Years Ended December 31, 2016 2015 2014 Defined contribution plans $ $ $ Multi-employer plans $ $ $ The Pension Protection Act (“PPA”) defines a zone status for multi-employer pension plans. Plans in the green zone are at least 80 percent funded, plans in the yellow zone are at least 65 percent funded and plans in the red zone are generally less than 65 percent funded. We participate in the Carpenters Pension Trust Fund for Northern California (“NCT”), which is our largest multi‑employer plan expense and is in the red zone. The NCT has implemented a funding or rehabilitation plan in accordance with government requirements. Our contributions to NCT have not exceeded 1 percent of the total contributions to the plan. Employer Identification PPA Zone Status Funding Plan Contributions (in thousands) Surcharge Pension Fund Number/Plan Number 2016 2015 Pending / Implemented 2016 2015 2014 Imposed NCT 94-6050970/001 Red Red Yes $ $ $ No |
Other Commitments and Contingen
Other Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2016 | |
Other Commitments and Contingencies | |
Other Commitments and Contingencies | 11. OTHER COMMITMENTS AND CONTINGENCIES Litigation. On May 9, 2016, the Company was named as a defendant in a breach of contract action related to our termination of an insulation supply agreement with plaintiff Owens Corning Sales, LLC. The complaint seeks damages and declaratory relief. We have counterclaimed for breach of contract related to Owens Corning’s failure to honor the supply agreement’s pricing provisions. The case is pending in the Court of Common Pleas for Lucas County, Ohio and a jury trial is presently scheduled for October 2017. We are defending this lawsuit vigorously. However, at this stage of the litigation, we are unable to predict the ultimate outcome or estimate a range of reasonably possible losses, if any. We are subject to certain other claims, charges, litigation, and other proceedings in the ordinary course of our business, including those arising from or related to contractual matters, intellectual property, personal injury, environmental matters, product liability, product recalls, construction defects, insurance coverage, personnel and employment disputes, antitrust, and other matters, including class actions. We believe we have adequate defenses in these other matters and we do not believe that the ultimate outcome of these other matters will have a material adverse effect on us. However, there is no assurance that we will prevail in any of these pending matters, and we could in the future incur judgments, enter into settlements of claims, or revise our expectations regarding the outcome of these matters, which could materially impact our liquidity and our results of operations. Other Matters . We enter into contracts, which include customary indemnities that are standard for the industries in which we operate. Such indemnities include, among other things, customer claims against builders for issues relating to our products and workmanship. In conjunction with divestitures and other transactions, we occasionally provide customary indemnities relating to various items including, among others: the enforceability of trademarks; legal and environmental issues; and asset valuations. We evaluate the probability that we may incur liabilities under these customary indemnities and appropriately record an estimated liability when deemed probable. We occasionally use performance bonds to ensure completion of our work on certain larger customer contracts that can span multiple accounting periods. Performance bonds generally do not have stated expiration dates; rather, we are released from the bonds as the contractual performance is completed. We also have bonds outstanding for licensing and insurance. The following table summarizes our outstanding bonds, in thousands: As of December 31, 2016 2015 Performance bonds $ $ Licensing, insurance, and other bonds Total $ $ Our rental expense was as follows, in thousands: Rent Expense 2016 $ 2015 2014 Future minimum lease payments at December 31, 2016 were as follows, in thousands: Minimum Lease Payments 2017 $ 2018 2019 2020 2021 2022 & Thereafter |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes | |
Income Taxes | 12. INCOME TAXES (In thousands) 2016 2015 2014 Income from continuing operations before income taxes: U.S. $ $ $ Income tax expense (benefit) on income from continuing operations: Currently payable: U.S. Federal $ $ $ State and local Deferred: U.S. Federal State and local $ $ $ Deferred tax assets at December 31: Receivables, net $ $ Inventories, net Other assets, principally share-based compensation Accrued liabilities Long-term liabilities Net operating loss carryforward Valuation allowance — Deferred tax liabilities at December 31: Property and equipment, net Intangibles, net Other Net deferred tax liability at December 31 $ $ As noted in Note 1 – Summary of Significant Accounting Policies , we early adopted ASU 2016-09 “Improvements to Employee Share-Based Payment Accounting.” As a result, a tax benefit of $0.6 million related to share-based compensation was recognized in income tax expense for 2016. At December 31, 2016 the net deferred tax liability of $174.2 million consisted of net long-term deferred tax assets of $19.5 million and net long-term deferred tax liabilities of $193.7 million. At December 31, 2015 the net deferred tax liability of $160.7 million consisted of net long-term deferred tax assets of $20.6 million and net long-term deferred tax liabilities of $181.3 million. For 2016, for the purpose of this footnote, we have changed the presentation of the deferred assets and deferred liabilities to show the State deferreds net of Federal benefit. For 2015 and prior years the Federal benefit of State deferred assets and liabilities were shown net in the Other category of deferred tax liabilities. For most categories the change in presentation is not material. However, the change in presentation in the net operating loss carry forward is significant as all are related to State net operating losses. The 2016 deferred tax asset related to the net operating loss carryforward is $27.6 million before the Federal benefit of State tax deduction is taken into account. The deferred portion of state and local taxes includes a $(0.8) million, $(33.7) million, and $(2.0) million tax benefit resulting from a change in the valuation allowance against state and local deferred tax assets in the years ending December 31, 2016, 2015, and 2014, respectively. As of December 31, 2016 there are no remaining valuation allowances in place. Accounting guidance for income taxes requires that future realization of deferred tax assets depends on the existence of sufficient taxable income in future periods. Possible sources of taxable income include taxable income in carryback periods, future reversals of existing taxable temporary differences recorded as a deferred tax liability, tax‑planning strategies that generate future income or gains in excess of anticipated losses in the carryforward period, and projected future taxable income. If, based upon all available evidence, both positive and negative, it is more likely than not (more than 50 percent likely) such deferred tax assets will not be realized, a valuation allowance is recorded. Significant weight is given to positive and negative evidence that is objectively verifiable. A company’s three‑year cumulative loss position is significant negative evidence in considering whether deferred tax assets are realizable. Accounting guidance restricts the amount of reliance we can place on projected taxable income to support the recovery of deferred tax assets. In a prior period, we had recorded a valuation allowance against certain state deferred tax assets as a non‑cash charge to income tax expense. In reaching this conclusion, we considered the significant decline in residential new construction, high level of foreclosure activity, and the slower than anticipated recovery in the U.S. housing market which led to U.S. operating losses, causing us to be in a three‑year cumulative U.S. loss position. During the years ended December, 31, 2010, 2011, and 2012, objective and verifiable negative evidence, such as continued U.S. operating losses and significant impairment charges for U.S. goodwill in 2010, continued to outweigh positive evidence necessary to reduce the valuation allowance. As a result, we recorded increases in the valuation allowance against our U.S. Federal and certain state deferred tax assets as a non‑cash charge to income tax expense during the years ended December 31, 2010, 2011, and 2012. A return to sustainable profitability in the U.S. is required before we would change our judgment regarding the need for a valuation allowance against our deferred tax assets. Although strengthening residential new construction activity resulted in profitability for our operations in 2013 and 2014, we continued to record a full valuation allowance against the U.S. Federal and certain state deferred tax assets. We arrived at this conclusion due to the Company’s (i) low amount of profit in 2013 and 2014, (ii) continued three‑year cumulative loss position through the year ended December 31, 2014, and (iii) lack of taxable income after evaluating the sources of income generally allowed under ASC 740 in determining whether or not a deferred asset may be realized. In the fourth quarter of 2015 we recorded a $35.5 million tax benefit ($13.5 million of Federal and $22.0 million of state and local net of federal benefit) from the release of the valuation allowance against its U.S. Federal and certain state deferred tax assets due primarily to a return to sustainable profitability in our U.S. operations. In reaching this conclusion, we considered the Company’s strong results in the third and fourth quarters reflecting (i) continued improvement in both new home construction and repair/remodel activity in the U.S. and (ii) the Company’s ability to function as a standalone business. We also considered our progress on strategic initiatives to reduce costs and expand the breadth of our market positions, which contributed to the continued improvement in our operations over the past few years. In the fourth quarter of 2016 we recorded a $0.8 million tax benefit from the release of the valuation allowance against certain state deferred tax assets (primarily State net operating losses) due primarily to a return to sustainable profitability in our U.S. operations. In reaching this conclusion, we considered the Company’s strong results though out the 2016 year reflecting (i) continued improvement in both new home construction and repair/remodel activity in the U.S. and (ii) the Company’s ability to function as a standalone business. We also considered our continued progress on strategic initiatives to reduce costs and expand the breadth of our market positions, which contributed to the continued improvement in our operations over the past few years. This was the Company’s last remaining valuation allowance. For activity through the first six months of 2015 we filed tax returns as a member of the Masco consolidated group for federal and certain state jurisdictions. As a result, certain tax attributes, primarily the net operating loss carryforward, are treated as an asset of the Masco group and may be utilized by the Masco group through the end of December 31, 2015, Masco’s tax year-end. All of our U.S. Federal net operating loss carryforward and certain state net operating loss carryforwards were utilized by the Masco consolidated group. In accordance, as of December 31, 2015, the deferred tax assets relating to the net operating loss carryforwards for federal and certain state jurisdictions were transferred to Masco in the amount of $401 million, with a similar transfer of the related valuation allowance. Due to the fact that TopBuild’s current income tax expense is based on a full year, notwithstanding that it was a member of Masco’s consolidated group through June 30, 2015, an adjustment of $2.6 million was required to be made to equity to record the appropriate current income tax payable on a standalone basis. Of the deferred tax asset related to the net operating loss at December 31, 2016, $18.0 million will expire between 2021 and 2036. Of the deferred tax asset related to the net operating loss at December 31, 2015, $31.2 million will expire between 2020 and 2035. A reconciliation of the U.S. Federal statutory tax rate to the income tax expense (benefit) on income from continuing operations was as follows: 2016 2015 2014 U.S. Federal statutory tax rate % % % State and local taxes, net of U.S. Federal tax benefit Valuation allowance Domestic Production Activities Deduction — — Other, net Effective tax rate % % % The reduction in the valuation allowance resulted in a negative effective tax rate for 2015. Income taxes paid were $39.5 million, $21.0 million, and $1.1 million during the years ended December 31, 2016, 2015, and 2014, respectively. The Domestic Production Activities Deduction, under IRC §199, became a material factor in the company’s effective tax rate for 2016. The company’s lower taxable income limited the Domestic Production Activities Deduction for the years ended December 31, 2015 and 2014. We file income tax returns in the U.S. Federal jurisdiction and various state and local jurisdictions. For periods prior to the Separation we, as a member of the Masco consolidated group, participated in the Compliance Assurance Program (“CAP”). CAP is a real-time audit of the U.S. Federal income tax return that allows the Internal Revenue Service (“IRS”), working in conjunction with Masco, to determine tax return compliance with the U.S. Federal tax law prior to filing the return. This program provided us with greater certainty about our tax liability for a given year within months, rather than years, of filing the annual tax return and greatly reduced the need for recording a liability for U.S. Federal uncertain tax positions. The IRS has completed their examination of the Masco consolidated U.S. Federal tax return in which we were included through the year ended December 31, 2015. With few exceptions, we are no longer subject to state income tax examinations on filed returns for years before 2011. At December 31, 2016, there are no liabilities related to uncertain tax positions. We have not incurred any interest related to the underpayment of income taxes or penalties related to tax positions not meeting the minimum statutory threshold to avoid payment of penalties in the year ended December 31, 2016. |
Income (Loss) Per Share
Income (Loss) Per Share | 12 Months Ended |
Dec. 31, 2016 | |
Income (Loss) Per Share | |
Income (Loss) Per Share | 13. INCOME (LOSS) PER SHARE Basic net income per share is calculated by dividing net income by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net income per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury stock method. For comparative purposes, the computation of basic and diluted earnings per common share for the year ended December 31, 2014, was calculated using the shares distributed at Separation. Basic and diluted income (loss) per share were computed as follows, in thousands (except share and per share amounts): Years Ended December 31, 2016 2015 2014 Income from continuing operations $ $ $ Loss from discontinued operations, net — Net income - basic and diluted $ $ $ Weighted average number of common shares outstanding - basic Dilutive effect of common stock equivalents: RSAs with service-based conditions — RSAs with market-based conditions — — RSAs with performance-based conditions — — — Stock options — Weighted average number of common shares outstanding - diluted Basic income (loss) per common share: Income from continuing operations $ $ $ Loss from discontinued operations, net — — Net income $ $ $ Diluted income (loss) per common share: Income from continuing operations $ $ $ Loss from discontinued operations, net — — Net income $ $ $ The following table summarizes shares excluded from the calculation of diluted income (loss) per share because their effect would have been anti-dilutive: Years Ended December 31, 2016 2015 2014 Anti-dilutive common stock equivalents: RSAs with service-based conditions — RSAs with market-based conditions — — RSAs with performance-based conditions — — — Stock options — Total anti-dilutive common stock equivalents: — On June 30, 2015, we distributed 37.7 million shares of our common stock to Masco shareholders in conjunction with the Separation. |
Share-Based Compensation
Share-Based Compensation | 12 Months Ended |
Dec. 31, 2016 | |
Share-Based Compensation. | |
Share-Based Compensation | 14. SHARE-BASED COMPENSATION Prior to the Separation, our eligible employees participated in the Masco share-based compensation program and received RSAs and Options. Effective July 1, 2015, our eligible employees currently participate in the 2015 TopBuild Long-Term Incentive Plan, as amended from time to time (the “2015 Plan”). The 2015 Plan authorizes the Board of Directors to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents. All grants are made by issuing new shares and no more than 4.0 million shares of common stock may be issued under the 2015 Plan. As of December 31, 2016, we had 3.0 million shares available under the 2015 plan. Prior to the Separation, share-based compensation expense was allocated to TopBuild based on the awards and options previously granted by Masco to TopBuild employees. Outstanding, unvested Masco RSAs and Options held by employees of TopBuild as of June 30, 2015, were forfeited upon Separation and replaced with TopBuild long-term incentive awards immediately subsequent to the Separation. The replacement awards are subject to the same terms and conditions in effect prior to the Separation and are of generally equivalent value. The following table presents the amounts recognized in our Consolidated Statements of Operations, in thousands: Year Ended December 31, 2016 2015 2014 Share-based compensation expense $ $ $ Income tax benefit realized from award vestings $ $ — $ — The following table presents a summary of our share-based compensation activity for the year ended December 31, 2016, in thousands, except per share amounts: Restricted Share Awards Stock Options Number of Shares Weighted Average Grant Date Fair Value Per Share Number of Shares Weighted Average Grant Date Fair Value Per Share Weighted Average Exercise Price Per Share Aggregate Balance December 31, 2015 $ $ $ $ Granted $ $ $ Converted/Exercised $ $ $ $ Forfeited $ $ $ Balance December 31, 2016 $ $ $ $ Exercisable December 31, 2016 (a) $ $ $ (a) The weighted average remaining contractual term for vested options is 6.4 years. As of December 31, 2016, we had unrecognized share-based compensation expense relating to unvested awards as shown in the following table, dollars in thousands: As of December 31, 2016 Unrecognized Compensation Expense Weighted Average Restricted stock awards $ 1.6 years Stock options 1.6 years Total unrecognized compensation expense related to unvested awards $ Our RSAs with performance-based conditions are evaluated on a quarterly basis with adjustments to compensation expense based on the likelihood of the performance target being achieved or exceeded. The following table shows the range of payouts and the related expense for our outstanding RSAs with performance-based conditions, in thousands: Payout Ranges and related expense RSAs with performance-based conditions Grant Date Fair Value 0% 25% 100% 200% February 22, 2016 $ $ — $ $ $ The fair value of our RSAs with a market-based condition granted under the 2015 Plan was determined using a Monte Carlo simulation. The following are key inputs in the Monte Carlo analysis for awards granted in 2016: 2016 Remaining measurement period (years) Risk free interest rate % Dividend yield % Estimated fair value of market-based RSAs granted $ The fair value of Options granted under the 2015 Plan was calculated using the Black-Scholes Options Pricing Model. The following table presents the assumptions used to estimate the fair values of the options granted in 2016 and 2015: 2016 2015 Risk free interest rate % % Expected volatility, using historical return volatility and implied volatility % % Expected life (in years) Dividend yield % % Estimated fair value of options granted $ $ |
Quarterly Financial Data
Quarterly Financial Data | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Data | |
Quarterly Financial Data | 15. QUARTERLY FINANCIAL DATA (UNAUDITED) The following tables set forth our quarterly results for each quarter of the years ending December 31, 2016 and 2015, in thousands (except per share amounts): 2016 Q1 Q2 Q3 Q4 Total Year (a) Net sales $ $ $ $ $ Gross profit Operating profit Income from continuing operations Net income $ $ $ $ $ Basic income per common share: Income from continuing operations $ $ $ $ $ Net income $ $ $ $ $ Diluted income per common share: Income from continuing operations $ $ $ $ $ Net income $ $ $ $ $ 2015 Q1 (b) Q2 Q3 Q4 Total Year (a) Net sales $ $ $ $ $ Gross profit Operating profit (loss) Income (loss) from continuing operations Income (loss) from discontinued operations, net — Net income (loss) $ $ $ $ $ Basic income (loss) per common share: Income (loss) from continuing operations $ $ $ $ $ Loss from discontinued operations, net — — — — Net income (loss) $ $ $ $ $ Diluted income (loss) per common share: Income (loss) from continuing operations $ $ $ $ $ Loss from discontinued operations, net — — — — Net income (loss) $ $ $ $ $ (a) Due to rounding, the sum of quarterly results may not equal the total for the year. Additionally, quarterly and year-to-date computations of per share amounts are made independently. (b) For comparative purposes, the computation of basic and diluted earnings per common share for the first quarter of 2015 was calculated using the shares distributed at Separation. |
Closure Costs
Closure Costs | 12 Months Ended |
Dec. 31, 2016 | |
Closure Costs | |
Closure Costs | 16. CLOSURE COSTS We continuously evaluate our national footprint to ensure we are strategically located throughout the U.S. to serve our customers and position ourselves for continued growth. As a result of this evaluation, management approved a plan to close 13 locations within our Installation and Distribution segments during the first half of 2016. In conjunction with this evaluation, we eliminated certain positions at our corporate headquarters located in Daytona Beach, Florida. We recognized expenses related to branch closures and position eliminations at the time of announcement or notification. Such costs included termination and other severance benefits, lease abandonment costs, and other contract termination costs. We incurred $0.9 million of closure and position elimination costs, primarily in our Installation segment, during the year ended December 31, 2016, related to this announcement. Closure costs are reflected in our Consolidated Statements of Operations as selling, general, and administrative expense. |
Business Combinations
Business Combinations | 12 Months Ended |
Dec. 31, 2016 | |
Business Combinations | |
Business Combinations | 17. BUSINESS COMBINATIONS On August 16, 2016, we acquired substantially all of the assets of Valley Insulation, Inc. (“Valley”), a Virginia-based residential insulation installer. The purchase price consisted of cash, funded by operations, of approximately $3.5 million. The Valley acquisition is immaterial to the Company’s financial position and results of operations. |
Share Repurchase Program
Share Repurchase Program | 12 Months Ended |
Dec. 31, 2016 | |
Share Repurchase Program | |
Share Repurchase Program | 18. SHARE REPURCHASE PROGRAM On March 1, 2016, our Board of Directors authorized a $50 million share repurchase program, which expired on February 28, 2017. The following table sets forth our share repurchases: Year Ended December 31, 2016 Number of shares purchased Share repurchase cost (in thousands) $ Average price per share $ |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2016 | |
Subsequent Events | |
Subsequent Events | 19. SUBSEQUENT EVENTS On January 17, 2017, we acquired substantially all of the assets of Midwest Fireproofing, LLC, a heavy commercial fireproofing and insulation company with locations in Chicago and Indianapolis. The acquisition was accounted for as a business combination under ASC Topic 805, “Business Combinations.” The purchase price consisted of cash, funded by operations, of approximately $12.2 million. During the measurement period, we expect to receive additional detailed information to complete the purchase price allocation. On February 24, 2017, the Company’s Board of Directors authorized a share repurchase program (the “2017 Share Repurchase Program”), pursuant to which the Company may purchase up to $200 million of the Company’s common stock. Share repurchases may be executed through various means including, without limitation, open market purchases, privately negotiated transactions, or otherwise. The 2017 Share Repurchase Program does not obligate the Company to purchase any shares and expires February 24, 2019. Authorization for the Share Repurchase Program may be terminated, increased, or decreased by the Company’s Board of Directors at its discretion at any time. On February 27, 2017, the Company successfully completed the acquisition of substantially all of the assets of Bella Insulations, Inc., DBA EcoFoam/Insulutions, and MR Insulfoam. EcoFoam/Insulutions is a residential and light commercial insulation installation company with locations in Colorado Springs and Denver, Colorado. MR Insulfoam is a residential insulation installation company located in Norwalk, Connecticut. While expected to be accretive to our results of operations these acquisitions are not material to our overall financial position. |
SCHEDULE II - Valuation and Qua
SCHEDULE II - Valuation and Qualifying Accounts | 12 Months Ended |
Dec. 31, 2016 | |
SCHEDULE II Valuation and Qualifying Accounts | |
SCHEDULE II Valuation and Qualifying Accounts | For the years ended December 31, 2016, 2015, and 2014 Column A Column B Column C Column D Column E Additions Balance at Charged to Charged to Balance at Beginning of Costs and Other End of Description Period Expenses Accounts Deductions Period Allowances for doubtful accounts, deducted from accounts receivable in the balance sheet: 2016 $ $ $ ― $ (a) $ 2015 $ $ $ ― $ (a) $ 2014 $ $ $ ― $ (a) $ Valuation allowance on deferred tax assets: 2016 $ $ ― $ ― $ $ ― 2015 $ $ ― $ ― $ (b) $ 2014 $ $ $ (c) $ ― $ (a) Deductions representing uncollectible accounts written off, less recoveries of accounts written off in prior years. (b) Of the $453.8 million, $47.2 million (of which $13.5 million was related to federal deferred tax assets and $33.7 million was related to state and local deferred tax assets, before federal tax benefit) is reflected in our Consolidated Statements of Operations in income tax benefit (expense) from continuing operations. The remaining $406.6 million was related to federal and state net operating losses that were utilized by Masco in their separate consolidated return and written off at the time of Separation with the related deferred assets. (c) Valuation allowance on deferred tax assets recorded primarily in equity. |
Summary of Significant Accoun28
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies | |
Basis of Presentation and Financial Statement Presentation | Basis of Presentation. On June 30, 2015 (the “Effective Date”), Masco Corporation (“Masco” or the “Former Parent”) completed the separation (the “Separation”) of its Installation and Other Services businesses (the “Services Business”) from its other businesses. On the Effective Date, TopBuild Corp., a Delaware corporation formed in anticipation of the Separation (“TopBuild” or the “Company”), became an independent public company which holds, through its consolidated subsidiaries, the assets and liabilities of the Services Business. The Separation was achieved through the distribution of 100 percent of the outstanding capital stock of TopBuild to holders of Masco common stock. References to “TopBuild,” the “Company,” “we,” “our,” and “us” refer to TopBuild Corp. and its consolidated subsidiaries. Prior to the Separation, the consolidated financial statements of TopBuild were prepared on a stand-alone basis and reflected the historical results of operations, financial position, and cash flows of the Services Business, including an allocable portion of corporate costs. We report our business in two segments, Installation and Distribution. Our Installation segment principally includes the sales and installation of insulation and other building products. Our Distribution segment principally includes the distribution of insulation and other building products. Our segments are based on our operating units, for which financial information is regularly evaluated by our corporate operating executives. Financial Statement Presentation. The consolidated financial statements have been developed in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Our financial statements for the periods prior to the Separation have been derived from the financial statements and accounting records of Masco using the historical results of operations and historical basis of assets and liabilities of the Services Business, and reflect Masco’s net investment in the Services Business. All intercompany transactions between the TopBuild entities have been eliminated. Transactions between TopBuild and Masco prior to the Separation, with the exception of purchase transactions, are reflected in the Consolidated Statements of Changes in Equity as “Former Parent Investment” and in the Consolidated Statements of Cash Flows as a financing activity in “Net transfer (to) from Former Parent.” The accompanying consolidated financial statements for the periods prior to the Separation include allocations of general corporate expenses that were incurred by Masco for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs. These general corporate expenses were allocated to TopBuild on the basis of sales. Total allocated general corporate costs were $13.6 million and $21.9 million for the years ended December 31, 2015 and 2014, respectively. These costs were included in selling, general, and administrative expense. Prior to the Separation, Masco incurred certain operating expenses on behalf of the Services Business which were allocated to TopBuild based on direct benefit or usage. These allocated operating expenses were $5.6 million and $17.8 million for the years ended December 31, 2015 and 2014, respectively. These costs were included in selling, general, and administrative expense. An estimate of these operating expenses were allocated to each of TopBuild’s reporting segments, based on a percentage of sales. For the periods prior to the Separation, these consolidated financial statements may not reflect the actual expenses that would have been incurred had we operated as a stand-alone company and may not reflect the consolidated results of operations, financial position, and cash flows had we operated as a stand-alone company. Actual costs that would have been incurred had we operated as a stand-alone company prior to the Separation would depend on multiple factors including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. During the first quarter of 2015, we identified an error related primarily to the misallocation of a favorable legal settlement to general corporate expenses of TopBuild in the fourth quarter of 2014. The impact of the error understated the allocation of corporate expenses reported as selling, general, and administrative expense and overstated operating profit by $1.9 million. The error was not considered material to the previously reported 2014 financial statements. The Company recorded the correction of the error by an out-of-period adjustment in the first quarter of 2015 which is therefore reflected in the twelve months ended December 31, 2015 Consolidated Statements of Operations and Consolidated Statements of Cash Flows. |
Use of Estimates and Assumptions in the Preparation of Financial Statements | Use of Estimates and Assumptions in the Preparation of Financial Statements. The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of any contingent assets and liabilities, at the date of the financial statements, and the reported amounts of sales and expenses during the reporting period. Actual results may differ from these estimates and assumptions. |
Revenue Recognition | Revenue Recognition. We recognize revenue for our Installation segment by order within the contract, based on the amount of material installed and associated labor costs at our customers’ locations. The amount of revenue recognized for our Installation segment, which had not been billed as of December 31, 2016 and 2015, was $28.9 million and $23.7 million, respectively. Revenue from our distribution segment is recognized when title to products and risk of loss transfers to our customers. At time of sale we record estimated reductions to revenue for customer programs and incentive offerings, including special pricing and other volume‑based incentives. |
Income Taxes | Income Taxes. We account for income taxes using the asset and liability method, which requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax basis and financial reporting basis of our assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which we operate. Valuation allowances are established against deferred tax assets when it is more likely than not that the realization of those deferred tax assets will not occur. In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence. If, based upon all available evidence, both positive and negative, it is more likely than not (more than 50 percent likely) such deferred tax assets will not be realized, a valuation allowance is recorded. Significant weight is given to positive and negative evidence that is objectively verifiable. A company’s three year cumulative loss position is significant negative evidence in considering whether deferred tax assets are realizable and the accounting guidance restricts the amount of reliance we can place on projected taxable income to support the recovery of the deferred tax assets. Interest and penalties on our uncertain tax positions, if recorded, are reported in income tax expense. |
Cash and Cash Equivalents | Cash and Cash Equivalents. We consider our highly liquid investments with a maturity of three months or less at the time of purchase to be cash and cash equivalents. |
Receivables, net | Receivables, net. We do business with a significant number of customers, principally homebuilders. We monitor our exposure for credit losses on our customer receivable balances and the credit worthiness of our customers on an on‑going basis and record related allowances for doubtful accounts. Allowances are estimated based upon specific customer balances where a risk of default has been identified, and also include a provision for non‑customer specific defaults based upon historical collection, return, and write‑off activity. During downturns in our markets, declines in the financial condition and creditworthiness of customers impact the credit risk of the receivables involved and we have incurred additional bad debt expense related to customer defaults. Receivables, net are presented net of certain allowances, including allowances for doubtful accounts. |
Inventories, net | Inventories, net. Inventories, net consist primarily of insulation, rain gutters, garage doors, fireplaces, fireproofing and firestopping products, roofing and shingles, shower enclosures, closet shelving, accessories, and other products. We value inventory at the lower of cost or market, where cost is determined by the first in‑first out cost method. Inventory value is evaluated at each balance sheet date to ensure that it is carried at the lower of cost or market. Inventory provisions are recorded to reduce inventory to the lower of cost or market value for obsolete or slow moving inventory based on assumptions about future demand and marketability of products, the impact of new product introductions, inventory levels and turns, product spoilage, and specific identification of items such as product discontinuance, engineering/material changes, or regulatory-related changes. As of December 31, 2016 and 2015, all inventory consisted of finished goods. |
Property and Equipment, net | Property and Equipment, net. Property and equipment, net, including significant betterments to existing facilities, are recorded at cost. Upon retirement or disposal, the cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the Consolidated Statements of Operations. Maintenance and repair costs are charged against earnings as incurred. Gains and losses on the disposal of equipment are included in selling, general, and administrative expense. We review our property and equipment as an event occurs or circumstances change that would more likely than not reduce the fair value of the property and equipment below the carrying amount. If the carrying amount is not recoverable from its undiscounted cash flows, we would recognize an impairment loss for the difference between the carrying amount and the current fair value. Further, we evaluate the remaining useful lives of property and equipment at each reporting period to determine whether events and circumstances warrant a revision to the remaining depreciation periods. |
Depreciation | Depreciation. Depreciation expense is computed principally using the straight‑line method over the estimated useful lives of the assets. Estimated useful lives are as follows: Asset Class Estimated Useful Life Buildings and land improvements 20 – 40 years Software and company vehicles 3 – 6 years Equipment 3 – 15 years |
Fair Value | Fair Value . The fair value measurement standard defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date (referred to as an “exit price”). A fair value hierarchy is established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are : Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Observable inputs other than Level 1 prices, such as quoted market prices for similar assets or liabilities or other inputs that are observable or can be corroborated by market data. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets. We perform our annual impairment testing of goodwill in the fourth quarter of each year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We have defined our reporting units and completed the impairment testing of goodwill at the operating segment level. Our operating segments are reporting units that engage in business activities for which discrete financial information, including long-range forecasts, are available. When assessing goodwill for impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform a two-step impairment test. If we conclude otherwise, then no further action is taken. We also have the option to bypass the qualitative assessment and only perform a quantitative assessment, which is the first step of the two-step impairment test. In the two-step impairment test, we compare the fair value of the reporting units to the carrying value of the reporting units for goodwill impairment testing. Fair value for our reporting units is determined using a discounted cash flow method, which includes significant unobservable inputs (Level 3 inputs). Determining market values using a discounted cash flow method requires us to make significant estimates and assumptions, including long term projections of cash flows, market conditions, and appropriate discount rates. Our judgments are based upon historical experience, current market trends, consultations with external valuation specialists and other information. In estimating future cash flows, we rely on internally generated long-range forecasts for sales and operating profits, including capital expenditures, and generally utilize a one to three percent long term assumed annual growth rate of cash flows for periods after the long-range forecast. An impairment loss is recognized to the extent that a reporting unit’s recorded goodwill exceeds the implied fair value of goodwill. Intangible assets with finite useful lives are amortized using the straight‑line method over their estimated useful lives. We evaluate the remaining useful lives of amortizable intangible assets at each reporting period to determine whether events and circumstances warrant a revision to the remaining periods of amortization. For additional information, see Note 4 - Goodwill and Other Intangible Assets . |
Insurance reserves | Insurance Reserves. We use a combination of high deductible insurance and matching deductible insurance for a number of risks including, but not limited to, workers’ compensation, general, vehicle, and property liabilities. Our workers’ compensation insurance is primarily a high‑deductible insurance program and our primary general liability insurance is a matching deductible program. We are insured for covered claims above the deductibles and retentions. The liabilities represent our best estimate of our costs, using generally accepted actuarial reserving methods, of the ultimate obligations for reported claims plus those incurred but not reported claims through December 31, 2016 and 2015. The accruals are adjusted as new information develops or circumstances change that would affect the estimated liability. We also have an insurance receivable for claims that exceeded the stop loss limit included in other assets on our Consolidated Balance Sheets which offsets an equal liability included within the reserve amount recorded in other liabilities on our Consolidated Balance Sheet. At December 31, 2016 and 2015, the amount of this receivable and liability was $3.2 million and $1.8 million, respectively. |
Advertising | Advertising . Advertising costs are expensed as incurred. Advertising expense, net of manufacturers support, was approximately $1.1 million, $1.5 million, and $2.5 million for the years ended December 31, 2016, 2015, and 2014, respectively, and is included in selling, general, and administrative expense. |
Share-based Compensation | Share‑based Compensation. Our share-based compensation program currently consists of restricted share awards (RSAs) and stock option awards (“Options”). Share-based compensation expense is reported in selling, general, and administrative expense. We do not capitalize any compensation cost related to share-based compensation awards. The income tax benefits and deficiencies associated with share-based awards are reported as a component of income tax expense. Excess tax benefits and deficiencies are included in cash provided by (used in) operating activities while shares withheld for tax-withholding are reported in financing activities under the caption “Taxes withheld and paid on employees’ equity awards” in our Consolidated Statements of Cash Flows. Award forfeitures are accounted for in the period they occur. The following table details our award types and accounting policies: Award Type: Fair Value Determination Vesting Expense Expense Restricted Share Awards Service Condition Closing stock price on date of grant Ratably; Straight-line Fair value at grant date Performance Condition Closing stock price on date of grant Cliff; Straight-line; Evaluated quarterly; Market Condition Monte-Carlo Simulation Cliff; Straight-line; Fair value at grant date Stock Options† Black-Scholes Options Pricing Model Ratably; Straight-line Fair value at grant date †Stock options expire no later than 10 years after the grant date. ‡Expense is reversed if award is forfeited prior to vesting. |
Debt Issuance Costs | Debt Issuance Costs. Debt issuance costs are amortized as interest expense over the life of the respective debt, which approximates the effective interest rate method. |
Leases | Leases . Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognized as an expense in the Consolidated Statements of Operations on a straight-line basis over the lease term, including future option periods the Company reasonably expects to exercise, whereby an equal amount of rent expense is attributed to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess of cash payments during the early years of a lease and rent expense less than cash payments in later years. The difference between rent expense recognized and actual rental payments is recorded as deferred rent and included in other liabilities. Lease termination costs are accrued over the life of the lease based on historical experience. Leasehold improvements are amortized over the lesser of the expected lease term, including cancelable option periods, or the estimated useful lives of the related assets using the straight-line method. |
Business Combinations | Business Combinations . The purchase price for business combinations is allocated to the estimated fair values of acquired tangible and intangible assets, including goodwill, and assumed liabilities, where applicable. Additionally, we recognize customer relationships, trademarks and trade names, and non-competition agreements as identifiable intangible assets. These assets are recorded at fair value as of the transaction date. The fair value of these intangible assets is determined primarily using the income approach and using current industry information. Goodwill is recorded when consideration transferred exceeds the fair value of identifiable assets and liabilities. Measurement-period adjustments are recorded in the period they occur. |
Recently Issued Accounting Pronouncements | Recently Adopted Accounting Pronouncements : In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-15 (“ASU 2014-15”), “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” This update provides guidance on Management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures in the event of such doubt. This standard is effective for us December 2016. Adoption of this standard did not affect our consolidated financial statements. In March 2016, FASB issued Accounting Standards Update 2016-09 (“ASU 2016-09”), “Improvements to Employee Share-Based Payment Accounting.” This update is intended to simplify several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This update is effective for annual and interim periods beginning after December 15, 2016, and early adoption is permitted. We elected to early adopt the new guidance beginning in the third quarter of 2016. The adoption of this update resulted in certain additional disclosures in Note 14 – Share Based Compensation as well as recognizing $0.6 million in income tax benefits for current year vesting of share-based awards. In August 2016, the FASB issued Accounting Standards Update 2016-15 (“ASU 2016-15”) “Classification of Certain Cash Receipts and Cash Payments,” an amendment to existing guidance on presentation and classification of certain cash receipts and cash payments in the statement of cash flows. This guidance is intended to reduce diversity in the classification of transactions related to debt prepayment or debt extinguishment costs, zero-coupon debt instrument settlements, contingent consideration payments made after a business combination, insurance claim settlements and corporate-owned life insurance settlements, distributions from equity method investments and beneficial interests in securitization transactions. This guidance is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We elected to early adopt the new guidance beginning in the fourth quarter of 2016. The adoption of this update did not impact our consolidated financial statements. Recently Issued Accounting Pronouncements Not Yet Adopted : In May 2014, the FASB issued a new standard for revenue recognition, Accounting Standards Codification 606 (“ASC 606”). Subsequent to issuing ASC 606, FASB has issued a number of updates and technical improvements which do not change the core principles of the guidance. The purpose of ASC 606 is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability across industries. ASC 606 is effective for us for annual periods beginning January 1, 2018, (with early adoption permitted) and allows for full retrospective or modified retrospective methods of adoption. In determining the applicability of ASC 606, we considered the general nature of our orders is short-term, based on a single deliverable, and not accounted for under industry-specific guidance. Our initial review has indicated additional disclosures may be necessary. We have not yet determined an adoption date or method of adoption. In July 2015, the FASB issued Accounting Standards Update 2015-11 (“ASU 2015-11”), “Simplifying the Measurement of Inventory.” Under this guidance, inventory should be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years beginning after December 15, 2016. The adoption of this amendment will not have a material impact on our financial position or results of operations. In February 2016, the FASB issued Accounting Standards Update 2016-02 (“ASU 2016-02”), “Leases.” This standard requires a lessee to recognize most leases on their balance sheet. Companies are required to use a modified retrospective transition method for all existing leases. This standard is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early adoption is permitted. We have not yet selected an adoption date and we are currently evaluating the effect on our financial position and results of operations. In June 2016, the FASB issued Accounting Standards Update 2016-13 (“ASU 2016-13”), “Financial Instruments - Credit Losses” (“ASU 2016-13”). This guidance introduces a current expected credit loss (“CECL”) model for the recognition of impairment losses on financial assets, including trade receivables. The CECL model replaces current GAAP’s incurred loss model. Under CECL, companies will record an allowance through current earnings for the expected credit loss for the life of the financial asset upon initial recognition of the financial asset. This update is effective for us at the beginning of 2020 with early adoption permitted at the beginning of 2019. We have not yet selected an adoption date and we are currently evaluating the effect on our financial position and results of operations. |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Summary of Significant Accounting Policies | |
Estimated useful lives | Asset Class Estimated Useful Life Buildings and land improvements 20 – 40 years Software and company vehicles 3 – 6 years Equipment 3 – 15 years |
Summary of award types and accounting policies | Award Type: Fair Value Determination Vesting Expense Expense Restricted Share Awards Service Condition Closing stock price on date of grant Ratably; Straight-line Fair value at grant date Performance Condition Closing stock price on date of grant Cliff; Straight-line; Evaluated quarterly; Market Condition Monte-Carlo Simulation Cliff; Straight-line; Fair value at grant date Stock Options† Black-Scholes Options Pricing Model Ratably; Straight-line Fair value at grant date †Stock options expire no later than 10 years after the grant date. ‡Expense is reversed if award is forfeited prior to vesting. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Property and Equipment | |
Schedule of property, plant and equipment | As of December 31, 2016 2015 Land and improvements $ $ Buildings Equipment Computer hardware and software Company vehicles Less: Accumulated depreciation Total property and equipment, net $ $ |
Goodwill and Other Intangibles
Goodwill and Other Intangibles (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Goodwill and Other Intangibles | |
Changes in carrying amount of goodwill by segment | Changes in the carrying amount of goodwill for the years ended December 31, 2016 and 2015, by segment, were as follows, in thousands: Gross Goodwill Gross Goodwill Accumulated Net Goodwill at at Impairment at December 31, 2015 Additions December 31, 2016 Losses December 31, 2016 Installation $ $ $ $ $ Distribution — — Total $ $ $ $ $ Gross Goodwill Gross Goodwill Accumulated Net Goodwill at at Impairment at December 31, 2014 Additions December 31, 2015 Losses December 31, 2015 Installation $ $ — $ $ $ Distribution — — Total $ $ — $ $ $ |
Schedule of other intangible assets | The following table sets forth our other intangible assets and associated amortization expense, in thousands: For the years ended December 31, 2016 2015 2014 Gross definite-lived intangible assets $ $ Accumulated amortization Net definite-lived intangible assets Indefinite-lived intangible assets not subject to amortization Other intangible assets, net $ $ Amortization expense $ $ $ |
Future amortization expense related to definite-lived intangible assets | 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 2017 $ 2018 2019 2020 2021 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Long-Term Debt | |
Summary of key terms of Credit Agreement | The following table summarizes the key terms of the Credit Agreement, dollars in thousands: Senior secured term loan facility (original borrowing) $ Additional term loan and/or revolver capacity available under incremental facility (a) $ Interest rate as of December 31, 2016 % Scheduled maturity date 6/30/2020 Senior secured revolving credit facility ("Revolving Facility") $ Sublimit for issuance of letters of credit under Revolving Facility (b) $ Sublimit for swingline loans under Revolving Facility (b) $ (a) Subject to certain conditions (including existing or new lenders providing commitments in respect of such additional borrowing capacity). (b) Use of the sublimits for the issuance of letters of credit and swingline loans reduces the availability under the Revolving Facility . |
Schedule of remaining principal payments of debt | The following table sets forth our principal payments for the following four years, as of December 31, 2016, dollars in thousands: Future Principal Payments Schedule of Debt Maturity by Years: 2017 $ 2018 2019 2020 Total principal maturities $ |
Reconciliation of principal balance of our long-term debt | The following table reconciles the principal balance of our long-term debt to our Consolidated Balance Sheets as of December 31, 2016 and 2015, dollars in thousands: 2016 2015 Current portion of long-term debt $ $ Long-term portion of long-term debt Unamortized debt issuance costs Long-term debt $ $ |
Schedule of availability under the Revolving Facility | The following table summarizes our availability under the Revolving Facility, in thousands: As of December 31, 2016 2015 Revolving Facility $ $ Less: standby letters of credit Capacity under Revolving Facility $ $ |
Segment Information (Tables)
Segment Information (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Segment Information | |
Summary of the annual percentage of net sales by product category. | 2016 2015 2014 Insulation % % % Rain gutters Accessories Afterpaint (shower enclosures, closet shelving, mirrors/glass, bath accessories, etc.) Garage doors Fireplaces Roofing materials Fireproofing and firestopping Other % % % |
Schedule of net sales and operating results by segment | Information about us by segment is as follows, for the years ended December 31, in thousands: Net Sales Operating Profit (b) 2016 2015 2014 2016 2015 2014 Our operations by segment were (a): Installation $ $ $ $ $ $ Distribution Intercompany eliminations and other adjustments (c) Total $ $ $ General corporate expense, net (d) Operating profit, as reported Other expense, net Income from continuing operations before income taxes $ $ $ Property Additions Depreciation and Total Assets 2016 2015 2014 2016 2015 2014 2016 2015 Our operations by segment were (a): Installation $ $ $ $ $ $ $ $ Distribution Corporate — — Total, as reported $ $ $ $ $ $ $ $ (a) All of our operations are located in the United States. (b) Segment operating profit for year ended December 31, 2016, includes an allocation of general corporate expenses attributable to the operating segments which is based on direct benefit or usage (such as salaries of corporate employees who directly support the segment). Segment operating profit for years ended December 31, 2015 and 2014 include an estimate of general corporate expense calculated based on a percentage of sales. For the years ended December 31, 2015 and 2014, the $7.2 million and $0.5 million differences, respectively, between estimated expense and actual corporate expense, are recorded in intercompany eliminations and other adjustments. (c) Intercompany eliminations include the elimination of intercompany profit of $14.4 million, $15.6 million, and $14.1 million for the years ended December 31, 2016, 2015, and 2014, respectively. Other adjustments primarily include differences between estimated and actual corporate costs allocated to the segments for years ended December 31, 2015 and 2014, as noted in footnote (b) above. (d) General corporate expense, net included expenses not specifically attributable to our segments for functions such as corporate human resources, finance, and legal, including salaries, benefits, and other related costs. |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Discontinued Operations | |
Selected financial information for discontinued operations | Selected financial information for discontinued operations is presented in the following table, in thousands: Year Ended December 31, 2016 2015 2014 Loss before income tax $ — $ $ Income tax benefit (expense) — Loss from discontinued operations, net $ — $ $ |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accrued Liabilities | |
Accrued Liabilities | The following table sets forth the components of accrued liabilities at December 31, in thousands: 2016 2015 Salaries, wages, and commissions $ $ Insurance reserves Other Total accrued liabilities $ $ |
Employee Retirement Plans (Tabl
Employee Retirement Plans (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Employee Retirement Plans | |
Schedule of expense related to participation in retirement plans | The expense related to our participation in the retirement plans was as follows, in thousands: Years Ended December 31, 2016 2015 2014 Defined contribution plans $ $ $ Multi-employer plans $ $ $ |
Schedule of contributions to the plan | Employer Identification PPA Zone Status Funding Plan Contributions (in thousands) Surcharge Pension Fund Number/Plan Number 2016 2015 Pending / Implemented 2016 2015 2014 Imposed NCT 94-6050970/001 Red Red Yes $ $ $ No |
Other Commitments and Conting37
Other Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Other Commitments and Contingencies | |
Summary of outstanding bonds | The following table summarizes our outstanding bonds, in thousands: As of December 31, 2016 2015 Performance bonds $ $ Licensing, insurance, and other bonds Total $ $ |
Schedule of rent expense | Our rental expense was as follows, in thousands: Rent Expense 2016 $ 2015 2014 |
Future minimum lease payments | Future minimum lease payments at December 31, 2016 were as follows, in thousands: Minimum Lease Payments 2017 $ 2018 2019 2020 2021 2022 & Thereafter |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Taxes | |
Schedule of income tax expense (benefit) and deferred tax | (In thousands) 2016 2015 2014 Income from continuing operations before income taxes: U.S. $ $ $ Income tax expense (benefit) on income from continuing operations: Currently payable: U.S. Federal $ $ $ State and local Deferred: U.S. Federal State and local $ $ $ Deferred tax assets at December 31: Receivables, net $ $ Inventories, net Other assets, principally share-based compensation Accrued liabilities Long-term liabilities Net operating loss carryforward Valuation allowance — Deferred tax liabilities at December 31: Property and equipment, net Intangibles, net Other Net deferred tax liability at December 31 $ $ |
Schedule of reconciliation of the U.S. Federal statutory tax rate to the income tax expense (benefit) | 2016 2015 2014 U.S. Federal statutory tax rate % % % State and local taxes, net of U.S. Federal tax benefit Valuation allowance Domestic Production Activities Deduction — — Other, net Effective tax rate % % % |
Income (Loss) Per Share (Tables
Income (Loss) Per Share (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income (Loss) Per Share | |
Schedule of basic and diluted income (loss) per share | Basic and diluted income (loss) per share were computed as follows, in thousands (except share and per share amounts): Years Ended December 31, 2016 2015 2014 Income from continuing operations $ $ $ Loss from discontinued operations, net — Net income - basic and diluted $ $ $ Weighted average number of common shares outstanding - basic Dilutive effect of common stock equivalents: RSAs with service-based conditions — RSAs with market-based conditions — — RSAs with performance-based conditions — — — Stock options — Weighted average number of common shares outstanding - diluted Basic income (loss) per common share: Income from continuing operations $ $ $ Loss from discontinued operations, net — — Net income $ $ $ Diluted income (loss) per common share: Income from continuing operations $ $ $ Loss from discontinued operations, net — — Net income $ $ $ |
Summary of shares excluded from the calculation of diluted income (loss) per share because their effect would have been anti-dilutive | The following table summarizes shares excluded from the calculation of diluted income (loss) per share because their effect would have been anti-dilutive: Years Ended December 31, 2016 2015 2014 Anti-dilutive common stock equivalents: RSAs with service-based conditions — RSAs with market-based conditions — — RSAs with performance-based conditions — — — Stock options — Total anti-dilutive common stock equivalents: — |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Share-Based Compensation. | |
Schedule of share based compensation expense | The following table presents the amounts recognized in our Consolidated Statements of Operations, in thousands: Year Ended December 31, 2016 2015 2014 Share-based compensation expense $ $ $ Income tax benefit realized from award vestings $ $ — $ — |
Schedule of share-based compensation activity | The following table presents a summary of our share-based compensation activity for the year ended December 31, 2016, in thousands, except per share amounts: Restricted Share Awards Stock Options Number of Shares Weighted Average Grant Date Fair Value Per Share Number of Shares Weighted Average Grant Date Fair Value Per Share Weighted Average Exercise Price Per Share Aggregate Balance December 31, 2015 $ $ $ $ Granted $ $ $ Converted/Exercised $ $ $ $ Forfeited $ $ $ Balance December 31, 2016 $ $ $ $ Exercisable December 31, 2016 (a) $ $ $ (a) The weighted average remaining contractual term for vested options is 6.4 years. |
Schedule of unrecognized share-based compensation expense relating to unvested awards | As of December 31, 2016, we had unrecognized share-based compensation expense relating to unvested awards as shown in the following table, dollars in thousands: As of December 31, 2016 Unrecognized Compensation Expense Weighted Average Restricted stock awards $ 1.6 years Stock options 1.6 years Total unrecognized compensation expense related to unvested awards $ |
Schedule of the range of payouts and the related expense for RSAs with performance-based conditions | The following table shows the range of payouts and the related expense for our outstanding RSAs with performance-based conditions, in thousands: Payout Ranges and related expense RSAs with performance-based conditions Grant Date Fair Value 0% 25% 100% 200% February 22, 2016 $ $ — $ $ $ |
Schedule of key inputs used to estimate the fair value of awards | The following are key inputs in the Monte Carlo analysis for awards granted in 2016: 2016 Remaining measurement period (years) Risk free interest rate % Dividend yield % Estimated fair value of market-based RSAs granted $ |
Schedule of assumptions used to estimate the fair values of options granted | 2016 2015 Risk free interest rate % % Expected volatility, using historical return volatility and implied volatility % % Expected life (in years) Dividend yield % % Estimated fair value of options granted $ $ |
Quarterly Financial Data (Table
Quarterly Financial Data (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Quarterly Financial Data | |
Schedule of quarterly financial information | The following tables set forth our quarterly results for each quarter of the years ending December 31, 2016 and 2015, in thousands (except per share amounts): 2016 Q1 Q2 Q3 Q4 Total Year (a) Net sales $ $ $ $ $ Gross profit Operating profit Income from continuing operations Net income $ $ $ $ $ Basic income per common share: Income from continuing operations $ $ $ $ $ Net income $ $ $ $ $ Diluted income per common share: Income from continuing operations $ $ $ $ $ Net income $ $ $ $ $ 2015 Q1 (b) Q2 Q3 Q4 Total Year (a) Net sales $ $ $ $ $ Gross profit Operating profit (loss) Income (loss) from continuing operations Income (loss) from discontinued operations, net — Net income (loss) $ $ $ $ $ Basic income (loss) per common share: Income (loss) from continuing operations $ $ $ $ $ Loss from discontinued operations, net — — — — Net income (loss) $ $ $ $ $ Diluted income (loss) per common share: Income (loss) from continuing operations $ $ $ $ $ Loss from discontinued operations, net — — — — Net income (loss) $ $ $ $ $ (a) Due to rounding, the sum of quarterly results may not equal the total for the year. Additionally, quarterly and year-to-date computations of per share amounts are made independently. For comparative purposes, the computation of basic and diluted earnings per common share for the first quarter of 2015 was calculated using the shares distributed at Separation. |
Share Repurchase Program (Table
Share Repurchase Program (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Share Repurchase Program | |
Schedule of share repurchase program | Year Ended December 31, 2016 Number of shares purchased Share repurchase cost (in thousands) $ Average price per share $ |
Summary of Significant Accoun43
Summary of Significant Accounting Policies - Basis of presentation (Details) - segment | Jun. 30, 2015 | Dec. 31, 2016 |
Summary of Significant Accounting Policies | ||
Percentage Of Capital Distribution | 100.00% | |
Number of reportable segments | 2 |
Summary of Significant Accoun44
Summary of Significant Accounting Policies - Allocation of Expenses (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Accounting Policies | ||
Allocated general corporate costs | $ 13.6 | $ 21.9 |
Allocated operating expenses | 5.6 | $ 17.8 |
Understatement of Allocation of Corporate Expense | ||
Accounting Policies | ||
Correction or error, amount | $ 1.9 |
Summary of Significant Accoun45
Summary of Significant Accounting Policies - Revenue, PPE, Insurance and Other (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Insurance receivables | |||
Insurance receivables | $ 3.2 | $ 1.8 | |
Insurance Liabilities | |||
Insurance liability | 3.2 | 1.8 | |
Advertising | |||
Advertising expense | $ 1.1 | 1.5 | $ 2.5 |
Buildings and land improvements | Minimum | |||
Property and Equipment | |||
Estimated Useful Life (in years) | 20 years | ||
Buildings and land improvements | Maximum | |||
Property and Equipment | |||
Estimated Useful Life (in years) | 40 years | ||
Software and company vehicles | Minimum | |||
Property and Equipment | |||
Estimated Useful Life (in years) | 3 years | ||
Software and company vehicles | Maximum | |||
Property and Equipment | |||
Estimated Useful Life (in years) | 6 years | ||
Equipment | Minimum | |||
Property and Equipment | |||
Estimated Useful Life (in years) | 3 years | ||
Equipment | Maximum | |||
Property and Equipment | |||
Estimated Useful Life (in years) | 15 years | ||
Installation | Unbilled Revenues | |||
Revenue Recognition | |||
Revenues | $ 28.9 | $ 23.7 |
Summary of Significant Accoun46
Summary of Significant Accounting Policiess - Share-Based Compensation (Details) | 12 Months Ended |
Dec. 31, 2016 | |
Stock Options | Minimum | |
Share-Based Compensation | |
Vesting period | 3 years |
Stock Options | Maximum | |
Share-Based Compensation | |
Vesting period | 5 years |
Expiration period | 10 years |
Service-based conditions | Restricted Stock Awards | Minimum | |
Share-Based Compensation | |
Vesting period | 3 years |
Service-based conditions | Restricted Stock Awards | Maximum | |
Share-Based Compensation | |
Vesting period | 5 years |
Performance-based conditions | Restricted Stock Awards | |
Share-Based Compensation | |
Vesting period | 3 years |
Performance-based conditions | Restricted Stock Awards | Minimum | |
Share-Based Compensation | |
Expense measurement, payout range (as percent) | 0.00% |
Performance-based conditions | Restricted Stock Awards | Maximum | |
Share-Based Compensation | |
Expense measurement, payout range (as percent) | 200.00% |
Market-based conditions | Restricted Stock Awards | |
Share-Based Compensation | |
Vesting period | 3 years |
Summary of Significant Accoun47
Summary of Significant Accounting Policiess - Recently Adopted Accounting Pronouncements (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Recently Adopted Accounting Pronouncements | |
Income tax benefit realized from award vestings | $ 588 |
ASU 2016-09 | Early Adoption | |
Recently Adopted Accounting Pronouncements | |
Income tax benefit realized from award vestings | $ 600 |
Related Party Transactions (Det
Related Party Transactions (Details) - Masco - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Interest expense - related party | $ 6.3 | $ 12.4 |
Purchases from related party | $ 2.6 | $ 6.7 |
12 month LIBOR | ||
Interest rate | 2.00% |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 293,637 | $ 293,129 | |
Less: Accumulated depreciation and property reserves | (200,877) | (200,063) | |
Total Property Plant & Equipment, net | 92,760 | 93,066 | |
Depreciation expense | 11,200 | 11,100 | $ 24,900 |
Land and improvements | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 7,907 | 7,950 | |
Buildings | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 38,865 | 39,424 | |
Equipment | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 88,472 | 85,217 | |
Computer hardware and software | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 123,725 | 123,550 | |
Company vehicles | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 34,668 | $ 36,988 |
Goodwill and Other Intangible50
Goodwill and Other Intangibles - Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Changes in the carrying amount of goodwill | |||
Gross Goodwill | $ 1,807,079 | $ 1,806,062 | $ 1,806,062 |
Additions | 1,017 | ||
Accumulated Impairment Losses | (762,021) | (762,021) | |
Net Goodwill | 1,045,058 | 1,044,041 | |
Impairment of goodwill | 0 | 0 | |
Installation | |||
Changes in the carrying amount of goodwill | |||
Gross Goodwill | 1,390,792 | 1,389,775 | 1,389,775 |
Additions | 1,017 | ||
Accumulated Impairment Losses | (762,021) | (762,021) | |
Net Goodwill | 628,771 | 627,754 | |
Distribution | |||
Changes in the carrying amount of goodwill | |||
Gross Goodwill | 416,287 | 416,287 | $ 416,287 |
Net Goodwill | $ 416,287 | $ 416,287 |
Goodwill and Other Intangible51
Goodwill and Other Intangibles - Other intangible assets (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Other intangible assets | |||
Gross definite-lived intangible assets | $ 20,932 | $ 19,472 | |
Accumulated amortization | (18,683) | (17,892) | |
Net definite-lived intangible assets | 2,249 | 1,580 | |
Indefinite-lived intangible assets not subject to amortization | 407 | 407 | |
Other intangible assets, net | 2,656 | 1,987 | |
Amortization expense | $ 795 | $ 1,026 | $ 1,166 |
Goodwill and Other Intangible52
Goodwill and Other Intangibles - Amortization expense (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Amortization expense related to the definite-lived intangible assets during each of the next five years | |
2,017 | $ 494 |
2,018 | 270 |
2,019 | 270 |
2,020 | 270 |
2,021 | $ 226 |
Long-Term Debt - Key Terms of C
Long-Term Debt - Key Terms of Credit Agreement (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2016 | |
Credit Agreement | |||
Long-Term Debt | |||
Additional term loan and/or revolver capacity available under incremental facility | $ 100,000 | ||
Interest rate | 2.11% | ||
Term Loan Facility | |||
Long-Term Debt | |||
Senior secured term loan facility | $ 200,000 | ||
Interest rate | 2.16% | ||
Proceeds from issuance of debt | $ 200,000 | ||
Revolving Facility | |||
Long-Term Debt | |||
Senior secured revolving credit facility ("Revolving Facility") | $ 125,000 | $ 125,000 | |
Sublimit for issuance of letters of credit under Revolving Facility* | 100,000 | ||
Sublimit for swingline loans under Revolving Facility* | $ 15,000 | ||
Adjusted Libor Rate Borrowings | Credit Agreement | Minimum | |||
Long-Term Debt | |||
Applicable margin based on total leverage ratio | 1.00% | ||
Leverage ratio used to determine applicable margin on borrowings | 1 | ||
Adjusted Libor Rate Borrowings | Credit Agreement | Maximum | |||
Long-Term Debt | |||
Applicable margin based on total leverage ratio | 2.00% | ||
Leverage ratio used to determine applicable margin on borrowings | 2.50 | ||
Base Rate Borrowings | Credit Agreement | Minimum | |||
Long-Term Debt | |||
Applicable margin based on total leverage ratio | 0.00% | ||
Leverage ratio used to determine applicable margin on borrowings | 1 | ||
Base Rate Borrowings | Credit Agreement | Maximum | |||
Long-Term Debt | |||
Applicable margin based on total leverage ratio | 1.00% | ||
Leverage ratio used to determine applicable margin on borrowings | 2.50 | ||
Federal Funds Open Rate | Base Rate Borrowings | Credit Agreement | |||
Long-Term Debt | |||
Basis spread | 0.50% | ||
LIBOR | Base Rate Borrowings | Credit Agreement | |||
Long-Term Debt | |||
Basis spread | 1.00% |
Long-Term Debt - Schedule of de
Long-Term Debt - Schedule of debt maturity (Details) $ in Thousands | Dec. 31, 2016USD ($) |
Schedule of Debt Maturity by Years: | |
2,017 | $ 20,000 |
2,018 | 20,000 |
2,019 | 25,000 |
2,020 | 115,000 |
Total principal maturities | $ 180,000 |
Long-Term Debt - Reconciliation
Long-Term Debt - Reconciliation (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Long-Term Debt | ||
Current portion of long-term debt | $ 20,000 | $ 15,000 |
Long-term portion of long-term debt | 160,000 | 180,000 |
Unamortized debt issuance costs | (1,200) | (1,543) |
Long-term debt | $ 178,800 | $ 193,457 |
Long-Term Debt - Other (Details
Long-Term Debt - Other (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Credit Agreement | ||
Debt covenants | ||
Minimum fixed charge coverage ratio | 1.10 | |
Revolving Facility | ||
Long-Term Debt | ||
Revolving Facility | $ 125,000 | $ 125,000 |
Less: standby letters of credit | (49,080) | (55,096) |
Capacity under Revolving Facility | $ 75,920 | $ 69,904 |
Debt Covenants Term Period One | Credit Agreement | ||
Debt covenants | ||
Maximum net leverage ratio | 3.50 | |
Debt Covenants Term Period Two | Credit Agreement | ||
Debt covenants | ||
Maximum net leverage ratio | 3.25 | |
Debt Covenants Term Period Three | Credit Agreement | ||
Debt covenants | ||
Maximum net leverage ratio | 3 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Fair Value on Non-Recurring Basis | |||
Fair value assets level 1 to 2 transfers | $ 0 | $ 0 | $ 0 |
Fair value assets level 2 to 1 transfers | 0 | 0 | 0 |
Fair value liabilities level 1 to 2 transfers | 0 | 0 | 0 |
Fair value liabilities level 2 to 1 transfers | $ 0 | $ 0 | $ 0 |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Segment information | |||||||||||
Percentage of net sales | 100.00% | 100.00% | 100.00% | ||||||||
Net sales | $ 444,135 | $ 453,102 | $ 431,589 | $ 414,024 | $ 426,471 | $ 427,888 | $ 403,761 | $ 358,460 | $ 1,742,850 | $ 1,616,580 | $ 1,512,077 |
Operating profit (loss) | $ 35,944 | $ 39,101 | $ 26,790 | $ 19,767 | $ 42,997 | $ 30,191 | $ 11,490 | $ (1,147) | 121,604 | 83,531 | 40,717 |
Other expense, net | (5,331) | (9,416) | (12,379) | ||||||||
Income from continuing operations before income taxes | 116,273 | 74,115 | 28,338 | ||||||||
Property Additions | 14,365 | 14,227 | 13,141 | ||||||||
Depreciation and Amortization | $ 12,011 | $ 12,108 | $ 26,079 | ||||||||
Insulation | |||||||||||
Segment information | |||||||||||
Percentage of net sales | 71.00% | 72.00% | 71.00% | ||||||||
Rain gutters | |||||||||||
Segment information | |||||||||||
Percentage of net sales | 7.00% | 7.00% | 7.00% | ||||||||
Accessories | |||||||||||
Segment information | |||||||||||
Percentage of net sales | 5.00% | 4.00% | 4.00% | ||||||||
Afterpaint | |||||||||||
Segment information | |||||||||||
Percentage of net sales | 3.00% | 4.00% | 4.00% | ||||||||
Garage doors | |||||||||||
Segment information | |||||||||||
Percentage of net sales | 2.00% | 3.00% | 3.00% | ||||||||
Fireplaces | |||||||||||
Segment information | |||||||||||
Percentage of net sales | 2.00% | 2.00% | 2.00% | ||||||||
Roofing materials | |||||||||||
Segment information | |||||||||||
Percentage of net sales | 2.00% | 2.00% | 2.00% | ||||||||
Fireproofing and firestopping | |||||||||||
Segment information | |||||||||||
Percentage of net sales | 2.00% | 2.00% | 1.00% | ||||||||
Other | |||||||||||
Segment information | |||||||||||
Percentage of net sales | 6.00% | 4.00% | 6.00% | ||||||||
Installation | |||||||||||
Segment information | |||||||||||
Property Additions | $ 7,584 | $ 9,802 | $ 9,270 | ||||||||
Depreciation and Amortization | 8,149 | 8,371 | 22,564 | ||||||||
Distribution | |||||||||||
Segment information | |||||||||||
Property Additions | 3,348 | 3,123 | 3,871 | ||||||||
Depreciation and Amortization | 3,604 | 3,699 | 3,515 | ||||||||
Operating Segment | |||||||||||
Segment information | |||||||||||
Operating profit (loss) | 142,406 | 106,136 | 62,665 | ||||||||
Operating Segment | Installation | |||||||||||
Segment information | |||||||||||
Net sales | 1,150,168 | 1,057,553 | 963,351 | ||||||||
Operating profit (loss) | 97,140 | 55,232 | 23,970 | ||||||||
Operating Segment | Distribution | |||||||||||
Segment information | |||||||||||
Net sales | 676,672 | 646,441 | 628,810 | ||||||||
Operating profit (loss) | 59,654 | 55,700 | 52,334 | ||||||||
Intercompany Eliminations and Other Adjustments | |||||||||||
Segment information | |||||||||||
Net sales | (83,990) | (87,414) | (80,084) | ||||||||
Operating profit (loss) | (14,388) | (4,796) | (13,639) | ||||||||
Other Adjustments | |||||||||||
Segment information | |||||||||||
Operating profit (loss) | 7,200 | 500 | |||||||||
Intercompany Eliminations | |||||||||||
Segment information | |||||||||||
Operating profit (loss) | 14,400 | 15,600 | 14,100 | ||||||||
Corporate | |||||||||||
Segment information | |||||||||||
General corporate expense, net | (20,802) | (22,605) | $ (21,948) | ||||||||
Property Additions | 3,433 | 1,302 | |||||||||
Depreciation and Amortization | $ 258 | $ 38 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | |
Selected financial information | |||||
Loss before income tax | $ (234) | $ (702) | |||
Income tax benefit (expense) | 82 | (391) | |||
Loss from discontinued operations, net | $ 82 | $ (235) | $ 1 | $ (152) | $ (1,093) |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2016 | Dec. 31, 2015 |
Accrued Liabilities | ||
Salaries, wages, and commissions | $ 20,684 | $ 16,037 |
Insurance reserves | 20,410 | 20,274 |
Other | 23,305 | 22,058 |
Total Accrued Liabilities | $ 64,399 | $ 58,369 |
Employee Retirement Plans - Pen
Employee Retirement Plans - Pension expense (Details) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016USD ($)item | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | |
Employee Retirement Plans | |||
Number of regional multi-employer pension plans in which the entity participates | item | 21 | ||
Pension Expense | $ 10,543 | $ 9,280 | $ 7,497 |
Defined-contribution plans | |||
Employee Retirement Plans | |||
Pension Expense | 3,950 | 3,451 | 2,983 |
Multi-employer plans | |||
Employee Retirement Plans | |||
Pension Expense | $ 6,593 | $ 5,829 | $ 4,514 |
Employee Retirement Plans - Mul
Employee Retirement Plans - Multiemployer plans (Details) - NCT - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Employee Retirement Plans | |||
Contribution to NCT (as a percent of total plan contribution) | 1.00% | ||
Contributions by employer | $ 1,926 | $ 1,730 | $ 1,479 |
Other Commitments and Conting63
Other Commitments and Contingenciess (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Other Commitments and Contingencies | |||
Performance bonds | $ 22,312 | $ 19,475 | |
Licensing, insurance, and other bonds | 13,480 | 9,976 | |
Total | 35,792 | 29,451 | |
Rent Expense | 51,505 | $ 46,431 | $ 39,387 |
Future minimum lease payments | |||
2,017 | 37,404 | ||
2,018 | 28,329 | ||
2,019 | 19,133 | ||
2,020 | 9,634 | ||
2,021 | 3,545 | ||
2022 and Thereafter | $ 7,384 |
Other Commitments and Conting64
Other Commitments and Contingencies (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Other Commitments and Contingencies | |||
Performance bonds | $ 22,312 | $ 19,475 | |
Licensing, insurance, and other bonds | 13,480 | 9,976 | |
Total | 35,792 | 29,451 | |
Rent Expense | 51,505 | $ 46,431 | $ 39,387 |
Future minimum lease payments | |||
2,017 | 37,404 | ||
2,018 | 28,329 | ||
2,019 | 19,133 | ||
2,020 | 9,634 | ||
2,021 | 3,545 | ||
2022 and Thereafter | $ 7,384 |
Income Taxes - Expense (benefit
Income Taxes - Expense (benefit) and deferred taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes | |||||
Income from continuing operations before income taxes: US | $ 116,273 | $ 74,115 | $ 28,338 | ||
Currently payable: | |||||
U.S. Federal | 24,594 | 9,656 | (28) | ||
State and local | 3,646 | 1,811 | 1,162 | ||
Deferred: | |||||
U.S. Federal | 10,966 | 12,633 | 14,943 | ||
State and local | 4,461 | (29,108) | 1,765 | ||
Income Tax Expense (Benefit), Total | $ (800) | $ (35,500) | 43,667 | (5,008) | $ 17,842 |
Deferred tax assets: | |||||
Receivables, net | 1,830 | 1,888 | 1,830 | 1,888 | |
Inventories, net | 1,614 | 1,484 | 1,614 | 1,484 | |
Other assets, principally share-based compensation | 2,198 | 1,883 | 2,198 | 1,883 | |
Accrued liabilities | 10,514 | 11,095 | 10,514 | 11,095 | |
Long-term liabilities | 13,731 | 15,957 | 13,731 | 15,957 | |
Deferred tax assets on operating loss carryforwards | 17,979 | 31,197 | 17,979 | 31,197 | |
Total deferred tax assets, gross | 47,866 | 63,504 | 47,866 | 63,504 | |
Deferred tax valuation allowance | 0 | (815) | 0 | (815) | |
Deferred tax assets, net | 47,866 | 62,689 | 47,866 | 62,689 | |
Deferred tax liabilities: | |||||
Property and equipment, net | 14,703 | 13,899 | 14,703 | 13,899 | |
Intangibles, net | 207,116 | 207,589 | 207,116 | 207,589 | |
Other | 293 | 1,906 | 293 | 1,906 | |
Total deferred tax liabilities, gross | 222,112 | 223,394 | 222,112 | 223,394 | |
Net deferred tax liability | 174,246 | 160,705 | 174,246 | 160,705 | |
Other disclosures | |||||
Net long-term deferred tax assets | 19,469 | 20,549 | 19,469 | 20,549 | |
Net long-term deferred tax liabilities | $ 193,715 | $ 181,254 | $ 193,715 | $ 181,254 |
Income Taxes - ASU (Details)
Income Taxes - ASU (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Recently Adopted Accounting Pronouncements | |
Income tax benefit realized from award vestings | $ 588 |
Early Adoption | ASU 2016-09 | |
Recently Adopted Accounting Pronouncements | |
Income tax benefit realized from award vestings | $ 600 |
Income Taxes - Other (Details)
Income Taxes - Other (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Other disclosures | |||||
Tax benefit resulting from a change in valuation allowance against state and local deferred tax assets | $ (800) | $ (33,700) | $ (2,000) | ||
Income tax benefit (expense) | $ 800 | $ 35,500 | (43,667) | 5,008 | $ (17,842) |
Federal income tax benefit (expense) | 13,500 | ||||
State and local income tax benefit (expense) | 22,000 | ||||
Decrease in deferred tax assets operating loss carryforwards | 401,000 | ||||
Adjustment to equity to record the appropriate current income tax payable on a standalone basis | 2,600 | ||||
Deferred tax assets, operating loss carryforward, subject to expiration | 18,000 | $ 31,200 | $ 18,000 | $ 31,200 | |
Income Tax Reconciliation | |||||
U.S. Federal statutory tax rate (as a percent) | 35.00% | 35.00% | 35.00% | ||
State and local taxes, net of U.S. Federal tax benefit (as a percent) | 5.70% | (24.40%) | 6.70% | ||
Valuation allowance (as a percent) | (0.70%) | (18.20%) | 20.10% | ||
Domestic Production Activities Deduction (as a percent) | (1.70%) | ||||
Other, net (as a percent) | (0.70%) | 0.80% | 1.20% | ||
Effective tax rate (as a percent) | 37.60% | (6.80%) | 63.00% | ||
Income taxes paid: | |||||
Income taxes paid | $ 39,508 | $ 20,992 | $ 1,134 | ||
Liabilities related to uncertain tax positions | $ 0 | $ 0 |
Income (Loss) Per Share (Detail
Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 30, 2015 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
Income from continuing operations | $ 21,307 | $ 24,566 | $ 15,615 | $ 11,116 | $ 59,669 | $ 16,624 | $ 6,630 | $ (3,800) | $ 72,606 | $ 79,123 | $ 10,496 | |
Loss from discontinued operations, net | 82 | (235) | 1 | (152) | (1,093) | |||||||
Net income | $ 21,307 | $ 24,566 | $ 15,615 | $ 11,116 | $ 59,751 | $ 16,624 | $ 6,395 | $ (3,799) | $ 72,606 | $ 78,971 | $ 9,403 | |
Weighted average number of common shares outstanding - basic | 37,585,777 | 37,674,913 | 37,667,947 | |||||||||
Dilutive effect of common stock equivalents: | ||||||||||||
Stock options | 60,423 | 12,274 | ||||||||||
Weighted average number of common shares outstanding - diluted | 37,867,212 | 37,780,875 | 37,667,947 | |||||||||
Basic earnings (loss) per common share: | ||||||||||||
Income from continuing operations | $ 0.57 | $ 0.65 | $ 0.41 | $ 0.29 | $ 1.58 | $ 0.44 | $ 0.18 | $ (0.10) | $ 1.93 | $ 2.10 | $ 0.28 | |
Loss from discontinued operations, net | (0.01) | (0.03) | ||||||||||
Net income | 0.57 | 0.65 | 0.41 | 0.29 | 1.58 | 0.44 | 0.17 | (0.10) | 1.93 | 2.10 | 0.25 | |
Diluted earnings (loss) per common share: | ||||||||||||
Income from continuing operations | 0.57 | 0.65 | 0.41 | 0.29 | 1.57 | 0.44 | 0.18 | (0.10) | 1.92 | 2.09 | 0.28 | |
Loss from discontinued operations, net | (0.01) | (0.03) | ||||||||||
Net income | $ 0.57 | $ 0.65 | $ 0.41 | $ 0.29 | $ 1.57 | $ 0.44 | $ 0.17 | $ (0.10) | $ 1.92 | $ 2.09 | $ 0.25 | |
Other disclosures | ||||||||||||
Issuance of common stock in conjunction with the Separation (in shares) | 37,700,000 | |||||||||||
Service-based conditions | ||||||||||||
Dilutive effect of common stock equivalents: | ||||||||||||
Restricted stock awards | 192,705 | 93,688 | ||||||||||
Market-based conditions | ||||||||||||
Dilutive effect of common stock equivalents: | ||||||||||||
Restricted stock awards | 28,307 |
Income (Loss) Per Share - Anti-
Income (Loss) Per Share - Anti-dilutive common stock equivalents (Details) - shares | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Anti-dilutive common stock equivalents | ||
Total anti-dilutive common stock equivalents | 473,792 | 145,238 |
Restricted Stock Awards | Service-based conditions | ||
Anti-dilutive common stock equivalents | ||
Total anti-dilutive common stock equivalents | 35,182 | 17,366 |
Restricted Stock Awards | Market-based conditions | ||
Anti-dilutive common stock equivalents | ||
Total anti-dilutive common stock equivalents | 6,323 | |
Stock Options | ||
Anti-dilutive common stock equivalents | ||
Total anti-dilutive common stock equivalents | 432,287 | 127,872 |
Share-Based Compensation - Expe
Share-Based Compensation - Expense (Details) - USD ($) $ in Thousands, shares in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Share-Based Compensation | |||
Share-based compensation expense | $ 7,669 | $ 4,651 | $ 3,762 |
Income tax benefit realized from award vestings | $ 588 | ||
2015 Plan | |||
Share-Based Compensation | |||
Number of shares authorized | 4 | ||
Number of shares available | 3 |
Share-Based Compensation - Acti
Share-Based Compensation - Activity (Details) - USD ($) | Feb. 22, 2016 | Dec. 31, 2016 | Dec. 31, 2015 |
Unrecognized share-based compensation expense | |||
Restricted stock awards, Unrecognized compensation expense | $ 11,670,000 | ||
Restricted stock awards, Weighted average remaining vesting period | 1 year 7 months 6 days | ||
Stock options, Unrecognized compensation expense | $ 4,629,000 | ||
Stock options, Weighted average remaining vesting period | 1 year 7 months 6 days | ||
Total unrecognized compensation expense related to unvested awards | $ 16,299,000 | ||
Restricted stock awards, additional disclosures | |||
Grant date fair value | $ 2,129,000 | ||
Restricted Stock Awards | |||
Restricted Stock Awards, Number of Shares | |||
Balance at beginning of period (in shares) | 586,600 | ||
Replacement awards (in shares) | 347,300 | ||
Vested (in shares) | (216,100) | ||
Forfeited (in shares) | (64,700) | ||
Balance at end of period (in shares) | 653,100 | 586,600 | |
Restricted Stock Awards, Weighted Average Grant Date Fair Value Per Share | |||
Balance at beginning of period (in dollars per share) | $ 21.97 | ||
Replacement awards (in dollars per share) | 29.03 | ||
Vested (in dollars per share) | 21.12 | ||
Forfeited (in dollars per share) | 24.91 | ||
Balance at end of period (in dollars per share) | $ 25.71 | $ 21.97 | |
Assumptions used to estimate the fair values of the awards granted: | |||
Remaining measurement period | 2 years 10 months 10 days | ||
Risk free interest rate (as a percent) | 0.90% | ||
Dividend yield (as a percent) | 0.00% | ||
Estimated fair value of awards granted (in dollars per share) | $ 33.77 | ||
Stock Options | |||
Stock Options, Number of Shares | |||
Balance at beginning of period (in shares) | 387,600 | ||
Replacement awards (in shares) | 409,300 | ||
Exercised (in shares) | (16,100) | ||
Forfeited (in shares) | (68,800) | ||
Balance at end of period (in shares) | 712,000 | 387,600 | |
Stock Options, Weighted Average Grant Date Fair Value Per Share | |||
Balance at beginning of period (in dollars per share) | $ 9.35 | ||
Replacement awards (in dollars per share) | 10.20 | ||
Vested (in dollars per share) | 10.34 | ||
Forfeited (in dollars per share) | 10.28 | ||
Balance at end of period (in dollars per share) | 9.73 | $ 9.35 | |
Stock Options, Weighted Average Exercise Price Per Share | |||
Balance at beginning of period (in dollars per share) | 24.03 | ||
Replacement awards (in dollars per share) | 26.30 | ||
Exercised (in dollars per share) | 26.75 | ||
Forfeited (in dollars per share) | 26.56 | ||
Balance at end of period (in dollars per share) | $ 25.03 | $ 24.03 | |
Stock options, additional disclosures | |||
Aggregate intrinsic value | $ 7,525,800 | $ 2,611,700 | |
Converted/Exercised aggregate intrinsic value | $ 156,200 | ||
Exercisable, Number of shares | 108,100 | ||
Exercisable, Weighted Average Grant Date Fair Value Per Share | $ 7.95 | ||
Exercisable Weighted Average Exercise Price Per Share | $ 20.31 | ||
Exercisable, Aggregate Intrinsic Value | $ 1,653,600 | ||
Weighted average remaining contractual term for vested but unexercised stock options | 6 years 4 months 24 days | ||
Assumptions used to estimate the fair values of the awards granted: | |||
Risk free interest rate (as a percent) | 1.51% | 1.82% | |
Expected volatility using historical return volatility and implied volatility (as a percent) | 38.00% | 37.00% | |
Expected life (in years) | 6 years | 6 years | |
Dividend yield (as a percent) | 0.00% | 0.00% | |
Weighted-average estimated fair value of options granted during the year (in dollars per share) | $ 10.20 | $ 10.44 | |
Performance-based conditions | Restricted Stock Awards | Payout Range-0% | |||
Restricted stock awards, additional disclosures | |||
Related expenses | $ 0 | ||
Performance-based conditions | Restricted Stock Awards | Payout Range-25% | |||
Restricted stock awards, additional disclosures | |||
Payout range (as a percent) | 25.00% | ||
Related expenses | $ 532,000 | ||
Performance-based conditions | Restricted Stock Awards | Payout Range-100% | |||
Restricted stock awards, additional disclosures | |||
Payout range (as a percent) | 100.00% | ||
Related expenses | $ 2,129,000 | ||
Performance-based conditions | Restricted Stock Awards | Payout Range-200% | |||
Restricted stock awards, additional disclosures | |||
Payout range (as a percent) | 200.00% | ||
Related expenses | $ 4,258,000 |
Quarterly Financial Data (Detai
Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2015 | Jun. 30, 2015 | Mar. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Quarterly Financial Data | |||||||||||
Net sales | $ 444,135 | $ 453,102 | $ 431,589 | $ 414,024 | $ 426,471 | $ 427,888 | $ 403,761 | $ 358,460 | $ 1,742,850 | $ 1,616,580 | $ 1,512,077 |
Gross profit | 105,062 | 108,139 | 97,688 | 89,455 | 104,521 | 94,002 | 85,690 | 73,816 | 400,344 | 358,029 | 331,668 |
Operating profit (loss) | 35,944 | 39,101 | 26,790 | 19,767 | 42,997 | 30,191 | 11,490 | (1,147) | 121,604 | 83,531 | 40,717 |
Income from continuing operations | 21,307 | 24,566 | 15,615 | 11,116 | 59,669 | 16,624 | 6,630 | (3,800) | 72,606 | 79,123 | 10,496 |
Loss from discontinued operations | 82 | (235) | 1 | (152) | (1,093) | ||||||
Net income | $ 21,307 | $ 24,566 | $ 15,615 | $ 11,116 | $ 59,751 | $ 16,624 | $ 6,395 | $ (3,799) | $ 72,606 | $ 78,971 | $ 9,403 |
Basic: | |||||||||||
Income from continuing operations | $ 0.57 | $ 0.65 | $ 0.41 | $ 0.29 | $ 1.58 | $ 0.44 | $ 0.18 | $ (0.10) | $ 1.93 | $ 2.10 | $ 0.28 |
Loss from discontinued operations, net | (0.01) | (0.03) | |||||||||
Net income | 0.57 | 0.65 | 0.41 | 0.29 | 1.58 | 0.44 | 0.17 | (0.10) | 1.93 | 2.10 | 0.25 |
Diluted: | |||||||||||
Income from continuing operations | 0.57 | 0.65 | 0.41 | 0.29 | 1.57 | 0.44 | 0.18 | (0.10) | 1.92 | 2.09 | 0.28 |
Loss from discontinued operations, net | (0.01) | (0.03) | |||||||||
Net income | $ 0.57 | $ 0.65 | $ 0.41 | $ 0.29 | $ 1.57 | $ 0.44 | $ 0.17 | $ (0.10) | $ 1.92 | $ 2.09 | $ 0.25 |
Closure Costs (Details)
Closure Costs (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2016USD ($)location | |
Closure Costs | |
Facility Closed, Number of Locations | location | 13 |
Closure costs | $ | $ 0.9 |
Business Combinations (Details)
Business Combinations (Details) - USD ($) $ in Thousands | Aug. 16, 2016 | Dec. 31, 2016 |
Business Combinations | ||
Acquisition purchase price | $ 3,476 | |
Valley | ||
Business Combinations | ||
Acquisition purchase price | $ 3,500 |
Share Repurchase Program (Detai
Share Repurchase Program (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2016 | Mar. 01, 2016 | |
Share Repurchase Program | ||
Share repurchase program, authorized amount | $ 50,000 | |
Number of shares repurchased (in shares) | 673,626 | |
Share repurchase cost | $ 22,296 | |
Average price per share (in dollars per share) | $ 33.10 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ in Thousands | Jan. 17, 2017 | Dec. 31, 2016 | Feb. 24, 2017 | Mar. 01, 2016 |
Subsequent Events | ||||
Acquisition purchase price | $ 3,476 | |||
Share repurchase program, authorized amount | $ 50,000 | |||
Subsequent Event | 2017 Share Repurchase Program | ||||
Subsequent Events | ||||
Share repurchase program, authorized amount | $ 200,000 | |||
Midwest Fireproofing, LLC | Subsequent Event | ||||
Subsequent Events | ||||
Acquisition purchase price | $ 12,200 |
SCHEDULE II - Valuation and Q77
SCHEDULE II - Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Deferred: | |||||
Income tax (expense) benefit from continuing operations | $ (800) | $ (35,500) | $ 43,667 | $ (5,008) | $ 17,842 |
U.S. Federal | 10,966 | 12,633 | 14,943 | ||
State and local | 4,461 | (29,108) | 1,765 | ||
Deferred tax assets on operating loss carryforwards | 17,979 | 31,197 | 17,979 | 31,197 | |
Allowances for doubtful accounts, deducted from accounts receivable in the balance sheet: | |||||
Valuation And Qualifying Accounts | |||||
Balance at Beginning of Period | 3,399 | 3,961 | 4,578 | ||
Additions Charged to Costs and Expenses | 3,292 | 4,219 | 3,563 | ||
Deductions | (3,317) | (4,781) | (4,180) | ||
Balance at End of Period | $ 3,374 | 3,399 | 3,374 | 3,399 | 3,961 |
Valuation allowance on deferred tax assets: | |||||
Valuation And Qualifying Accounts | |||||
Balance at Beginning of Period | 815 | 454,610 | 452,600 | ||
Additions Charged to Costs and Expenses | 3,950 | ||||
Additions Charged to Other Accounts | (1,940) | ||||
Deductions | $ (815) | (453,795) | |||
Balance at End of Period | 815 | 815 | $ 454,610 | ||
Deferred: | |||||
Income tax (expense) benefit from continuing operations | 47,200 | ||||
U.S. Federal | 13,500 | ||||
State and local | 33,700 | ||||
Deferred tax assets on operating loss carryforwards | $ 406,600 | $ 406,600 |
Uncategorized Items - bld-20161
Label | Element | Value |
Installation Segment [Member] | ||
Assets | us-gaap_Assets | $ 927,303,000 |
Assets | us-gaap_Assets | 934,499,000 |
Distribution Segment [Member] | ||
Assets | us-gaap_Assets | 574,601,000 |
Assets | us-gaap_Assets | 584,421,000 |
Corporate Non Segment [Member] | ||
Assets | us-gaap_Assets | 140,345,000 |
Assets | us-gaap_Assets | $ 171,199,000 |