XML 55 R16.htm IDEA: XBRL DOCUMENT
v2.4.1.9

Note 9 - Acquired Subsidiaries with Noncontrolling Owners’ Interests and Earn-out Agreement | 3 Months Ended
--- | ---
Mar. 31, 2015
Noncontrolling Interest [Abstract] |
Noncontrolling Interest Disclosure [Text Block] |
9. | Acquired Subsidiaries with Noncontrolling Owners’ Interests and Earn-out Agreement
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. The Company is currently in the process of obtaining a disability insurance policy to mitigate its cash exposure if this were to occur. 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 his 50% interest in RHB or is terminated without cause (i.e., termination other than cause, 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 to purchase Mr. Buenting’s 50% member’s interest that the Company is certain to incur, either because of Mr. Buenting’s permanent disability or death; 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 condensed consolidated balance sheet. The liability consists of the following (in thousands):
|  | March 31, 2015 |  |  | December 31, 2014 |
Member’s interest subject to mandatory redemption |  | $ | 20,000 |  |  | $ | 20,000 |
Accumulated undistributed earnings attributable to this interest |  |  | 5,400 |  |  |  | 6,079 |
Earnings distributed |  |  | (3,200 | ) |  |  | (3,200 | )
Total liability |  | $ | 22,200 |  |  | $ | 22,879 |
Undistributed earnings attributable to this interest decreased by approximately $0.7 million during the first quarter of 2015 and were recorded in “Other operating income, net” on the Company’s condensed consolidated statement of operations. Changes in Noncontrolling Interests The following table summarizes the changes in the noncontrolling owners’ interests in subsidiaries (amounts in thousands):
|  | Three Months Ended March 31, |
|  | 2015 |  |  | 2014 |
Balance, beginning of period |  | $ | 7,462 |  |  | $ | 4,097 |
Net income attributable to noncontrolling interest included in equity |  |  | 292 |  |  |  | 275 |
Distributions to noncontrolling interest owners |  |  | - |  |  |  | (994 | )
Balance, end of period |  | $ | 7,754 |  |  | $ | 3,378 |
The “Noncontrolling owners’ interest in earnings of subsidiaries” for the three months ended March 31, 2015 and 2014, shown in the accompanying condensed consolidated statements of operations, was $0.3 million in both periods, which the Company includes in “Equity”, “Noncontrolling interests” in the accompanying condensed consolidated balance sheets. There was no distribution to certain noncontrolling interest members during the three months ended March 31, 2015 and a distribution of $1.0 million during the three months ended March 31, 2014. Earn-out Agreement 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 and 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 recorded liability at that time, 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. This earn-out liability continues to be classified as a Level 3 fair value measurement and the unobservable inputs continue to be the forecasted EBITDA for the periods after the period being reported on through December 31, 2017. There was no yearly excess forecasted EBITDA in our calculation at March 31, 2015 of the minimum EBITDA benchmarks for the years 2015 through 2017. The discounted present value of the additional purchase price was estimated to be $0.4 million as of March 31, 2014 which included a revaluation benefit of $0.2 million recorded in interest income on the condensed consolidated statement of operations. The undiscounted earn-out liability as of March 31, 2015 is estimated at zero and could increase by $9.3 million if EBITDA during the earn-out period increases $18.5 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 condensed 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 $0.2 million for the three months ended March 31, 2014. As part of the updated EBITDA forecast, the Company reduced its liability and recorded interest income of $0.3 million for the three months ended March 31, 2015.

X
- 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
Name: | us-gaap_MinorityInterestDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Details
Name: | us-gaap_NoncontrollingInterestAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration