Business description of TopBuild-Corp from last 10-k form

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For further information on our segments, see Item 8, Financial Statements and Supplementary Data, Note 7 - Segment Information.

Background

Demand for our insulation products and services is driven by new single-family residential and multi-family construction, remodeling and repair activity, commercial construction, building codes, and the growing need for energy efficiency.  Being a leader in both installation and distribution allows us to more effectively reach a broader set of customers, regardless of their size or geographic location within the U.S.  We recognize that competition for the installation and sale of insulation and other building products occurs in localized geographic markets throughout the country, and as such our operating model is based on branches building and maintaining local customer relationships.  At the same time, our local operations benefit from centralized functions such as information technology, credit, and purchasing. 

Competitive Advantages

The market for the distribution and installation of building products is highly fragmented and competitive.  Barriers to entry for local competitors are relatively low, increasing the risk that additional competitors will emerge.  Our ability to maintain our competitive position in our industry depends on a number of factors including our national scale, sales channels, diversified product lines, a strong local presence, and strong cash flows.

National scale.  With our national footprint, we provide products and services to each major construction line of business in the U.S.  Our national scale, together with our centralized TopBuild executive management team, allows us to compete locally by:

•Providing national and regional builders with broad geographic reach, while maintaining consistent policies and practices that enable reliable, high‑quality products and services across many geographies and building sites

•Establishing strong ties to major manufacturers of insulation and other building products that help ensure we are buying competitively, have availability of supply to our local branches and distribution centers and are driving efficiencies throughout our supply chain

•Providing consistent, customized support and geographic coverage to our customers

•Maintaining an operating capacity that allows us to ramp‑up rapidly, without major incremental investment, to target forecasted growth in housing starts and construction activity in each of our lines of business anywhere in the U.S.

•Leveraging investments in systems and processes and sharing best practices across both our installation and distribution businesses

Two avenues to reach the builder.  We believe having both an installation and distribution business provides a number of advantages to reaching our customers and driving share gains.  Our installation business customer base includes builders of all sizes.  Our branches go to market with the local brands that small builders recognize and value, and our national footprint is appealing to large builders who value consistency across a broad geography.  Our distribution business focuses on selling to small contractors who are particularly adept at cultivating the local relationships with small custom builders.  Being a leader in both installation and distribution allows us to more effectively reach a broader set of builder customers, regardless of their size or geographic location within the U.S., and leverage housing growth wherever it occurs.

Diversified lines of business.  In response to the housing downturn in prior years, we enhanced our ability to serve the residential repair/remodel and commercial construction markets.  Although the residential repair/remodel and commercial construction markets are affected by many of the same macroeconomic and local economic factors that drive residential new construction, residential repair/remodel and commercial construction have historically followed different cycles than