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Note 9 - Acquisitions and Subsidiaries and Joint Ventures with Noncontrolling Owners' Interests | 3 Months Ended
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Mar. 31, 2013
Noncontrolling Interest Disclosure [Text Block] |
9. | Acquisitions and Subsidiaries and Joint Ventures with Noncontrolling Owners’ Interests
In January 2012, RHB, a wholly-owned subsidiary, assumed six construction contracts with $25.0 million of unearned revenues from Aggregate Industries – SWR, Inc. (“AI”), an unrelated third party. In addition, Aggregate South West Holdings, LLC (“ASWH”) and RHB Properties, LLC (“RHBP”), newly formed entities owned by Richard Buenting, the President and Chief Executive Officer of RHB, acquired construction related machinery and equipment and land with quarries from AI. AI entered into a two-year non-compete agreement with respect to Utah, Idaho and Montana as well as certain areas of Nevada. On April 27, 2012, RHB merged with ASWH and acquired RHBP. In exchange, RHB granted Mr. Buenting a 50% member interest in RHB. These transactions allowed RHB to expand its operations in Nevada. The Company also agreed with Mr. Buenting to amend and restate the operating agreement for RHB. The amended agreement provides that the Company is the Manager of RHB and retains full, exclusive and complete power, authority and discretion to manage, supervise, operate and control RHB; therefore, the Company consolidates RHB with its other subsidiaries. Under the agreement, the Company will provide RHB with access to a $5 million line of credit. The Company also entered into a buy/sell and management agreement with Mr. Buenting. Under this agreement, the Company or Mr. Buenting may annually elect to make offers to buy the other owner’s 50% interest in RHB and sell their 50% interest in RHB at a price which they specify. Upon receipt of the offers, the other owner must elect either to sell their interest or purchase the interest from the owner making the offers. The agreement also requires that the Company acquire Mr. Buenting’s interest in the event of his termination without cause, death, or disability. To the extent that the redemption value under the buy/sell and management agreement exceeds the initial valuation of Mr. Buenting’s noncontrolling interest, the Company records an adjustment to retained earnings. The calculation used in the buy/sell and management agreement is the higher of the trailing twelve months of earnings before interest, taxes and depreciation and amortization (“EBITDA”) times a multiple of 4.5 or the orderly liquidation value of RHB. The valuation of the orderly liquidation value is classified as a Level 2 fair value measurement. In making this valuation, the Company obtained a third party valuation firm to value a majority of the assets held by RHB in 2012. These values have been updated based on recent sales and dispositions of assets and liabilities to obtain a current estimate of the orderly liquidation value. Based on our calculation, the trailing twelve months EBITDA times the multiple of 4.5 was the higher of the two methods. As such, a pre-tax adjustment of $3.0 million was recorded for the periodic revaluation of Mr. Buenting’s noncontrolling interest during the quarter. These transactions were accounted for as a business combination. In December 2012, the Company finalized its valuation of the assets acquired, the membership interest granted and the tax related impact of the transaction. The purchase price for the transaction was $9.8 million for the assets acquired net of a contract liability. In addition, the Company recorded a credit of $233,000 to “Additional paid in capital” resulting from the excess of the post-merger member capital over the Company’s book value of the 50% investment in RHB issued to Mr. Buenting. As a result of the merger, an additional difference between the Company’s tax basis related to RHB and its book basis was created. Accordingly, the Company recorded an additional deferred tax liability of $360,000 with an offset to goodwill. In connection with the August 1, 2011, acquisition of J. Banicki Construction, Inc. (“JBC”) by 80% owned Ralph L. Wadsworth Construction Company, LLC (“RLW”), RLW agreed to additional purchase price payments of up to $5 million to be paid over a five-year period. The additional purchase price is in the form of an earn-out which is classified as a Level 3 fair value measurement. In making this valuation, the unobservable input consisted of forecasted earnings before interest, taxes and depreciation and amortization (“EBITDA”) for the periods after the period being reported on through July 31, 2016. The additional purchase price is calculated generally as 50% of the amount by which earnings before interest, taxes, depreciation and amortization (“EBITDA”) exceeds $2 million for each of the calendar years 2011 through 2015 and $1.2 million for the seven months ended July 31, 2016. The yearly excess forecasted EBITDA in our calculation ranged from 0% to 38% of the minimum EBITDA threshold for the years 2013 through 2016. The discounted present value of the additional purchase price was estimated to be $2.2 million as of March 31, 2013. The undiscounted earn-out liability as of March 31, 2013 is estimated at $2.3 million and could increase by $2.7 million if EBITDA during the earn-out period increases $5.4 million or more and could decrease by the full amount of the liability if EBITDA does not exceed the minimum threshold in any of the periods during the earn-out period. Any significant increase or decrease in actual EBITDA compared to the forecasted amounts would result in a significantly higher or lower fair value measurement of the additional purchase price. This liability is included in other long-term liabilities in the accompanying condensed consolidated balance sheets. In connection with the December 3, 2009 acquisition of RLW, the noncontrolling interest owners of RLW, who are related and also its executive management, had the right to require the Company to buy their remaining 20.0% interest in RLW, and the Company had the right to require those owners to sell their 20.0% interest to the Company by July 2013 (the “RLW put/call”). The purchase price in each case was 20% of the product of the simple average of RLW’s EBITDA (income before interest, taxes, depreciation and amortization) for the calendar years 2010, 2011 and 2012 times a multiple of a minimum of 4 and a maximum of 4.5. Annual interest was accreted for the RLW put/call obligation based on the Company’s borrowing rate under its Credit Facility plus two percent. Such accretion amounted to $248,000 for the three months ended March 31, 2012 and was recorded in “Interest expense” in the accompanying condensed consolidated statement of operations. In addition, based on the estimated average of RLW’s EBITDA for the calendar years 2010, 2011 and 2012 and the expected multiple, the estimated fair value of the RLW put/call was decreased by $463,000 during the three months ended March 31, 2012, and this change, net of tax of $162,000, was reported as a charge to retained earnings. Under an agreement with the noncontrolling interest owners of RLW, the Company purchased their 20% interest in RLW on December 31, 2012 subject to a final determination of RLW’s EBITDA for the period from January 1, 2010 through December 31, 2012. A payment of $23.1 million was made in 2012, and the Company made a final additional payment of $509,000 in April 2013. This amount as well as undistributed earnings to the noncontrolling interest owners for 2012 is included in current liabilities under “Current obligation for noncontrolling owners’ interests in subsidiaries and joint ventures” in the accompanying condensed consolidated balance sheets. See Note 2 of the Notes to Consolidated Financial Statements included in the 2012 Form 10-K for further information regarding the acquisitions discussed above. Changes in Noncontrolling Interests The following table summarizes the changes in the obligation for noncontrolling owners’ interests in subsidiaries and joint ventures (amounts in thousands):
|  | Three Months Ended March 31, |
|  | 2013 |  |  | 2012 |
Balance, beginning of period |  | $ | 20,046 |  |  | $ | 18,375 |
Net income attributable to noncontrolling interest included in liabilities |  |  | (25 | ) |  |  | 7,713 |
Net income attributable to noncontrolling interest included in equity |  |  | 186 |  |  |  | (18 | )
Accretion of interest on RLW put/call |  |  | -- |  |  |  | 248 |
Change in fair value of RLW put/call |  |  | (58 | ) |  |  | (463 | )
Change in fair value of RHB obligation |  |  | 2,981 |  |  |  | -- |
Balance, end of period |  | $ | 23,130 |  |  | $ | 25,855 |
“Noncontrolling owners’ interest in earnings of subsidiaries and joint ventures” for the three months ended March 31, 2013 shown in the accompanying condensed consolidated statement of operations of $161,000 includes a loss of $25,000 attributable to the noncontrolling interest owners which is reflected in “Current obligations for noncontrolling owners’ interests in subsidiaries and joint ventures” and income of $186,000 attributable to other noncontrolling interest owners which is reflected in equity in “Noncontrolling interests” in the accompanying condensed consolidated balance sheet. In 2012, the Company agreed to amend RLW’s operating agreement effective January 1, 2012 to provide that any goodwill impairment, including the 2011 fourth quarter goodwill impairment, is not to be allocated to RLW for the purpose of calculating the distributions to be made to the RLW noncontrolling interest holders. This amendment resulted in an increase in the net income attributable to RLW’s noncontrolling interests of $6.7 million during the three months ended March 31, 2012. This increase was included in “Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures” in the accompanying condensed consolidated statement of operations with an increase in the “Obligation for noncontrolling owners’ interests in subsidiaries and joint ventures” in the condensed consolidated balance sheet. This increase had a related tax impact of $2.4 million which increased the tax benefit for the period.

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- Definition The entire disclosure for noncontrolling interest in consolidated subsidiaries, which could include the name of the subsidiary, the ownership percentage held by the parent, the ownership percentage held by the noncontrolling owners, the amount of the noncontrolling interest, the location of this amount on the balance sheet (when not reported separately), an explanation of the increase or decrease in the amount of the noncontrolling interest, the noncontrolling interest share of the net Income or Loss of the subsidiary, the location of this amount on the income statement (when not reported separately), the nature of the noncontrolling interest such as background information and terms, the amount of the noncontrolling interest represented by preferred stock, a description of the preferred stock, and the dividend requirements of the preferred stock. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.31) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=18733093&loc=SL4573702-111684 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 51 -Paragraph 38 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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