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Note 2 - Acquisitions and Subsidiaries and Joint Ventures with Noncontrolling Owners' Interests | 12 Months Ended
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Dec. 31, 2014
Noncontrolling Interest [Abstract] |
Noncontrolling Interest Disclosure [Text Block] |
2. | Acquisitions and Subsidiaries and Joint Ventures with Noncontrolling Owners’ Interests
RHB 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. 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. Revenues and earnings related to the contracts assumed and the acquired companies for 2012 were $26.1 million and $152,000, respectively. In connection with this transaction, AI did not agree to provide us with historical information related to the earnings from the acquired operations except for information related to the specific contracts being assumed. Furthermore, we determined that such information was not needed in order to evaluate the transaction based on our knowledge of the assets acquired and the Nevada road and highway construction market. The Company also agreed with Mr. Buenting to amend and restate the operating and management agreements for RHB. The amended agreements provide 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 amendments, 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 a charge to retained earnings, or in the absence of retained earnings, additional paid-in capital (“APIC”). Any related benefit as a result of a lower valuation of Mr. Buenting’s noncontrolling interest compared to previous valuations shall be offset to retained earnings up to the amounts previously charged 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. 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 the Company’s calculation on December 31, 2013, the trailing twelve months EBITDA times the multiple of 4.5 provided the higher result of the two methods. As such, the total charge resulted in a net pre-tax charge of $1.9 million and $2.5 million, for the periods ending December 31, 2013 and 2012, respectively. On December 30, 2013, the Company and Mr. Buenting revised the Second Amended and Restated Operating Agreement entered into on April 27, 2012 and their Management Agreement entered into on February 1, 2012. The Third Amended and Restated Operating Agreement and the amended Management Agreement eliminated the buy/sell option and instead included the obligation for the Company to purchase Mr. Buenting’s interest upon his death or permanent disability for $20 million or $18 million, respectively. In the event of Mr. Buenting’s death or permanent disability, his estate representative, trustee or designee shall become the selling representative and sell his 50% interest to the Company. In order to fund the purchase of Mr. Buenting’s interest, the Company has purchased term life insurance with a payout of $20 million in the event of Mr. Buenting death. The Company will be the beneficiary and will also pay the premiums related to this life insurance contract. The life insurance proceeds of $20 million shall be used as full payment for Mr. Buenting’s interest in the occurrence of his death. In the event of Mr. Buenting’s permanent disability, the $18 million payment will be made by using the Company’s available cash on hand, and/or to the extent necessary, the Company’s line of credit. No other transfer of Member’s interest is permitted other than to the selling representative in the event of Mr. Buenting’s death or permanent disability. In the event that Mr. Buenting resigns or is terminated without cause (i.e., termination other than through permanent disability or death) RHB shall be dissolved unless both members agree otherwise. The amended agreements were entered into in order to eliminate the earnings per share volatility caused by the buy/sell option. The amended agreements resulted in an obligation that the Company is certain to incur, either through Mr. Buenting’s permanent disability or death for Mr. Buenting’s 50% members interest; therefore, the Company has classified the noncontrolling interest as mandatorily redeemable and has recorded a liability in “Member’s interest subject to mandatory redemption and undistributed earnings” on the consolidated balance sheet. The liability consists of the following (in thousands):
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |
Member’s interest subject to mandatory redemption |  | $ | 20,000 |  |  | $ | 20,000 |
Undistributed earnings attributable to this interest |  |  | 6,079 |  |  |  | 3,989 |
Earnings distributed |  |  | (3,200 | ) |  |  | - |
Total liability |  | $ | 22,879 |  |  | $ | 23,989 |
Undistributed earnings increased by $2.1 million for the year ended December 31, 2014, and were included in “Other operating income, net” on the Company’s consolidated statement of operations. Distributions for the year ended December 31, 2014 were $3.2 million. At September 30, 2013, the total Obligation for noncontrolling owners’ interests in subsidiaries and joint ventures was $17.8 million which included $14.1 million as the fair value in the noncontrolling interest and $3.7 million in undistributed earnings. During the fourth quarter of 2013, the Company made a final entry of $5.9 million to adjust the member’s interest to its final payout value of $20.0 million. The adjustment was made to APIC as there was a retained deficit on the Company’s consolidated balance sheet. Undistributed earnings increased by $0.3 million during the fourth quarter and there was no payout of undistributed earnings. RHB Inc. On June 20, 2014, the Company sold to Mr. Buenting a 50% interest in RHB Inc. RHB Inc. is currently an ancillary company that provides certain services for RHB LLC. RHB Inc. is run as a cost center with a financial goal to break-even, and has an immaterial amount of assets. The purchase price and the accounting effects of the total transaction were immaterial to the Company. JBC In connection with the August 1, 2011, acquisition of J. Banicki Construction, Inc. (“JBC”) by 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 is classified as a Level 3 fair value measurement. In making this valuation, the unobservable input consisted of forecasted 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 EBITDA exceeds $2.0 million for each of the calendar years 2011 through 2015 and $1.2 million for the seven months ended July 31, 2016. On January 23, 2014, RLW, the former owner of JBC and the Company agreed to amend the above-mentioned earn-out agreement in order to reduce the Company’s currently recorded liability while providing the former owner, who at the time was the chief executive officer of JBC, a greater incentive to meet earnings benchmarks. The amendment resulted in a reduction of $0.6 million in the Company’s earn-out liability, thereby reducing the total earn-out liability to $1.4 million on December 31, 2013. As part of the amendment, a payment of $0.8 million was made during the first quarter of 2014. The amendment increases the total available earn-out from $5.0 million to $10.0 million if certain EBITDA benchmarks are met. The amendment extends the earn-out period through December 31, 2017 and reduces the benchmark EBITDA for 2014 and 2015 to $1.5 million and increases it to $2.0 million in 2016 and 2017. The yearly excess forecasted EBITDA in our calculation ranged from 0% to 22.4% of the minimum EBITDA threshold for the years 2015 through 2017. The discounted present value of the additional purchase price was estimated to be $2.4 million as of August 1, 2011, the acquisition date, and $0.3 million as of December 31, 2014. The undiscounted earn-out liability as of December 31, 2014 is estimated at $0.3 million and could increase by $9.0 million if EBITDA during the earn-out period increases $18.0 million or more and could decrease by the full amount of the liability for the year if EBITDA does not exceed the minimum threshold for that year. Each year is considered a discrete earnings period and future losses by JBC, if any, would not reduce the Company’s liability in years in which JBC has exceeded its earnings benchmark. 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 on the accompanying consolidated balance sheets. As part of recording the present value of this liability, the Company incurs accreted interest expense for the passage of time until the time of settlement. The Company incurred accreted interest expense of less than $0.1 million for the year ended December 31, 2013 and slightly over $0.1 million in the same period of 2012. As part of the amendment in 2014 and the fair value adjustment, the Company recorded interest income of $0.3 million for the year ended December 31, 2014. RLW 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 in 2013, and concurrently, 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 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 $1.0 million for the year ended December 31, 2012 and was recorded in “Interest expense” in the accompanying 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 increased by approximately $3.8 million for the year ended December 31, 2012 and this change, net of tax of $1.3 million was reported as a charge to retained earnings. Under the agreement with the noncontrolling interest owners of RLW, the Company purchased the 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 on December 31, 2012, and the Company made a final payment of $509,000 in April 2013. In addition, $2.3 million of undistributed earnings was also paid in April 2013. 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 owners. This amendment resulted in an increase in the net income attributable to RLW’s noncontrolling interests of $6.7 million during the year ended December 31, 2012. This increase is included in “Noncontrolling owners’ interests in earnings of subsidiaries and joint ventures” in the accompanying consolidated statement of operations with an increase in the “Current obligation for noncontrolling owners’ interests in subsidiaries and joint ventures” in the consolidated balance sheet. This increase had a related tax impacted of $2.4 million which increased the tax benefit for the period. Changes in noncontrolling interests The following table summarizes the changes in the noncontrolling owners’ interests in subsidiaries and consolidated joint ventures for the years ended December 31, 2012 through 2014 (amounts in thousands):
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Balance, beginning of period |  | $ | 4,097 |  |  | $ | 20,046 |  |  | $ | 18,375 |
Net income attributable to noncontrolling interest included in liabilities |  |  | - |  |  |  | 2,024 |  |  |  | 16,941 |
Net income attributable to noncontrolling interest included in equity |  |  | 4,556 |  |  |  | 1,879 |  |  |  | 1,068 |
Accretion of interest on puts |  |  | - |  |  |  | - |  |  |  | 993 |
Change in fair value of RLW put/call |  |  | - |  |  |  | (59 | ) |  |  | 3,797 |
Change in fair value of RHB put/call |  |  | - |  |  |  | 1,875 |  |  |  | 2,473 |
Change due to the RHB amendment |  |  | - |  |  |  | (18,103 | ) |  |  | - |
Issuance of noncontrolling interest in RHB in exchange for net assets of acquired companies |  |  | - |  |  |  | - |  |  |  | 9,767 |
Distributions to noncontrolling interests owners |  |  | (1,191 | ) |  |  | (3,056 | ) |  |  | (10,185 | )
Acquisition of RLW noncontrolling interest |  |  | - |  |  |  | (509 | ) |  |  | (23,144 | )
Other |  |  | - |  |  |  | - |  |  |  | (39 | )
Balance, end of period |  | $ | 7,462 |  |  | $ | 4,097 |  |  | $ | 20,046 |
Noncontrolling owners’ interest in earnings of subsidiaries and joint ventures for the year ended December 31, 2014 shown in the accompanying consolidated statement of operations is $4.6 million, which the Company includes in ”Equity”, “Noncontrolling interests” in the accompanying consolidated balance sheet. There were distributions of $1.2 million to certain noncontrolling interest members during the year ended December 31, 2014. Noncontrolling owners’ interest in earnings of subsidiaries and joint ventures for the year ended December 31, 2013 shown in the accompanying consolidated statement of operations of $3.9 million, includes income of $2.0 million attributable to noncontrolling interest owners, which the Company includes in liabilities and $1.9 million which the Company includes in equity. Of the $2.0 million included in liabilities, less than $0.1 million of net loss was reflected in “Current obligations for noncontrolling owners’ interests in subsidiaries and joint ventures,” and $2.1 million of net income has been reclassified from “Obligations for noncontrolling owners’ interests in subsidiaries and joint ventures,” leaving the Company with a zero balance in this account, to “Member’s interest subject to mandatory redemption” in the accompanying consolidated balance sheet. The remaining $1.9 million was attributable to noncontrolling interest owners which the Company includes in equity and was reflected in equity in “Noncontrolling interests” in the accompanying consolidated balance sheet. Noncontrolling owners’ interest in earnings of subsidiaries and joint ventures for the year ended December 31, 2012 shown in the accompanying consolidated statement of operations of $18.0 million includes $15.0 million attributable to the RLW noncontrolling interest owners, which was reflected in “Current obligation for noncontrolling owners’ interests in subsidiaries and joint ventures,” $1.9 million attributable to RHB noncontrolling interest owners, which was reflected in “Obligation for noncontrolling owners’ interest in subsidiaries and joint ventures” and income of $1.1 million attributable to Myers’ noncontrolling interest owners which was reflected in equity in “Noncontrolling interests” in the accompanying consolidated balance sheet.

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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 + Details
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