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Business Combinations and Asset Acquisitions | 12 Months Ended
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Oct. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Combinations and Asset Acquisitions |
2 | Business Combinations and Asset Acquisitions
Asset Acquisitions On June 10, 2022, during the third quarter of fiscal 2022, the company completed the acquisition of certain assets of Voigt Smith Innovation LLC, a manufacturer of liquid deicing equipment, brine makers and applicators, related smart-connected technologies, and hydroseeding products. On June 20, 2022, during the third quarter of fiscal 2022, the company completed the acquisition of certain assets of Tornado Global Hydrovacs Ltd. (“Tornado”), a designer and manufacturer of hydrovac trucks. On June 21, 2022, during the third quarter of fiscal 2022, the company completed the acquisition of certain assets of River City Manufacturing, Inc., a manufacturer of custom rock saws. These asset acquisitions pertain to the company's Professional segment. On November 4, 2020, during the first quarter of fiscal 2021, the company completed the acquisition of Turflynx, Lda, a developer of innovative autonomous solutions for turf management. On March 1, 2021, during the second quarter of fiscal 2021, the company completed the acquisition of Left Hand Robotics, Inc., a developer of innovative autonomous solutions for turf and snow management. These acquisitions complement and support the development of alternative power, smart-connected, and autonomous products within the company's Professional and Residential segments. None of these acquisitions met the definition of business combinations as substantially all of the fair value of the gross assets acquired in each acquisition was concentrated in the respective finite-lived developed technology intangible assets. As a result, the company accounted for each of these transactions as an asset acquisition. In an asset acquisition, goodwill is not recognized, but rather, any excess purchase consideration over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets as of the acquisition date and any direct acquisition-related transaction costs are capitalized as part of the purchase consideration. These asset acquisitions were immaterial in relation to the company's Consolidated Financial Condition and Results of Operations and as a result, additional purchase accounting disclosures have been omitted. Intimidator Group ("Intimidator") On January 13, 2022 ("Intimidator closing date"), pursuant to an equity interest purchase agreement ("Intimidator equity agreement"), the company acquired the privately-held Intimidator. Intimidator primarily designs, manufactures, markets, and sells a commercial-grade line of zero-turn mowers under the Spartan Mowers brand, which are intended to provide innovative turf management solutions to landscape contractors and other customers who require a commercial-grade solution. The acquisition of Intimidator broadened the company's Professional segment and expanded its manufacturing footprint and dealer network. The Intimidator acquisition was structured as an equity purchase, pursuant to which the company acquired 100 percent of the equity interests of the legal entities that comprised Intimidator, with the legal entities continuing as surviving entities and wholly-owned subsidiaries of the company. As part of the Intimidator acquisition, the company also acquired the real property used by Intimidator that was owned by an affiliate of Intimidator. As of the Intimidator closing date, the aggregate purchase consideration was $398.9 million, subject to certain customary adjustments based on, among other things, the amount of actual cash, debt, and working capital in the business of Intimidator at the closing date. Such customary adjustments were finalized during the third quarter of fiscal 2022 and resulted in an aggregate purchase consideration of $399.8 million ("Intimidator purchase price"). Additionally, the aggregate purchase consideration remains subject to contingent consideration through the end of calendar year 2022, in the event of certain qualifying tax changes. As a result, the company could be subject to additional cash purchase consideration for an amount not to exceed $15.0 million and remittance of such contingent consideration, if required, is due by March 15, 2023. As of October 31, 2022, no liability was recorded within the Consolidated Balance Sheets for the contingent consideration as the contingency is not probable such that an amount has not been estimated. The company funded the Intimidator purchase price with borrowings under its existing unsecured senior revolving credit facility and cash provided by operating activities. For additional information regarding the company's unsecured senior revolving credit facility utilized to fund the purchase price, refer to Note 6, Indebtedness. As a result of the Intimidator acquisition, the company incurred immaterial acquisition-related transaction costs recorded within selling, general and administrative expense within the Consolidated Statements of Earnings during the fiscal year ended October 31, 2022. Intimidator Purchase Price Allocation The company accounted for the Intimidator acquisition in accordance with the accounting standards codification guidance for business combinations, whereby the aggregate purchase price was allocated to the acquired net tangible and intangible assets of Intimidator based on their fair values as of the closing date. These fair values are based on internal company and independent external third-party valuations and are subject to change as certain asset and liability valuations are finalized. As of October 31, 2022, the company has completed its process for measuring the fair values of the assets acquired and liabilities assumed based on information available as of the closing date, with the exception of the company's valuation of income taxes. The company expects to finalize its valuation and complete the allocation of the purchase price as soon as practicable but no later than one year from the closing date of the acquisition, as required. The following table summarizes the allocation of the Intimidator purchase price to the fair values assigned to the Intimidator assets acquired and liabilities assumed (in thousands):
|  | January 13, 2022
Cash and cash equivalents |  | $ | 975 |
Receivables |  | 6,954 |
Inventories |  | 34,608 |
Prepaid expenses and other current assets |  | 513 |
Property, plant and equipment |  | 27,447 |
Right-of-use assets |  | 344 |
Goodwill |  | 163,731 |
Indefinite-lived other intangible assets: |  |
Trade names |  | 99,100 |
Finite-lived other intangible assets: |  |
Customer-related |  | 80,500 |
Trade names |  | 3,260 |
Backlog |  | 1,340 |
Accounts payable |  | (8,535) |
Accrued liabilities |  | (9,152) |
Short-term lease liabilities |  | (100) |
Long-term liabilities |  | (244) |
Deferred income tax liabilities |  | — |
Total fair value of net assets acquired |  | 400,741 |
Less: cash and cash equivalents acquired |  | (975) |
Total purchase price |  | $ | 399,766 |
The goodwill recognized is primarily attributable to the expected future cash flows, the value of the workforce, and expected synergies, including customer and dealer growth opportunities, expanding existing product lines, and cost reduction initiatives. Key areas of expected cost synergies include increased purchasing power for commodities, components, parts, and accessories and supply chain consolidation. The goodwill resulting from the acquisition of Intimidator was recognized within the company's Professional segment, and is the primary driver for the increase in the carrying amount of Professional segment goodwill to $573.0 million from $411.1 million as of October 31, 2021. The acquisition was considered an asset acquisition for income tax purposes and as a result, the goodwill arising from the transaction is deductible. Other Intimidator Intangible Assets Acquired The allocation of the Intimidator purchase price to the net assets acquired resulted in the recognition of $184.2 million of value for other intangible assets as of the Intimidator closing date. The fair values of the acquired trade names and customer-related and backlog intangible assets were determined using the income approach whereby an intangible asset's fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. The useful lives of the other intangible assets were determined based on the period of expected cash flows used to measure the fair value of the intangible assets adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic, and/or other factors that may limit the useful life of the respective intangible asset. As of the Intimidator closing date, the acquired finite-lived intangible assets had a weighted average useful life of 9.5 years. The fair values of the trade names were determined using the relief from royalty method, which is based on the hypothetical royalty stream that would be received if the company were to license the respective trade name and were based on expected future revenues from the respective trade name. The weighted-average useful life of the finite-lived trade name intangible assets was determined to be 9.8 years as of the Intimidator closing date. The fair values of the customer-related and backlog intangible assets were determined using the excess earnings method and were based on the expected operating cash flows attributable to the respective intangible asset, which were determined by deducting expected economic costs, including operating expenses and contributory asset charges, from the revenue expected to be generated from the respective intangible asset. As of the Intimidator closing date, the weighted-average useful lives of the customer-related and backlog intangible assets were determined to be 9.6 years and nine months, respectively. Intimidator Results of Operations Intimidator's results of operations have been included within the company's Professional reportable segment in the company's Consolidated Financial Statements from the Intimidator closing date. During the fiscal year ended October 31, 2022, the company recognized $183.8 million of net sales from Intimidator. Intimidator had an immaterial impact on Professional segment earnings for the fiscal year ended October 31, 2022. Unaudited pro forma financial information has not been disclosed as the Intimidator acquisition was not considered material to the company's Consolidated Results of Operations. Venture Products, Inc. ("Venture Products") On March 2, 2020 ("Venture Products closing date"), pursuant to an Agreement and Plan of Merger ("Venture Products merger agreement") and an agreement to purchase the real property used by Venture Products ("Venture Products purchase agreement") both dated January 20, 2020, the company completed its acquisition of Venture Products ("Venture Products transaction"), a privately held Ohio corporation and the manufacturer of Ventrac-branded products. Venture Products designs, manufactures, markets, and sells articulating turf, landscape, and snow and ice management equipment for grounds, landscape contractor, golf, municipal, and rural acreage customers and provides innovative product offerings that broadened and strengthened the company's Professional segment and expanded its dealer network. The Venture Products transaction was structured as a merger, pursuant to which a wholly-owned subsidiary of the company merged with and into Venture Products, with Venture Products continuing as the surviving entity and a wholly-owned subsidiary of the company. As a result of the merger, all of the outstanding equity securities of Venture Products were canceled and only represented the right to receive the applicable consideration as described in the Venture Products merger agreement. The Venture Products purchase agreement was with an affiliate of Venture Products and was for the real estate used by Venture Products. As of the Venture Products closing date, the company paid preliminary merger consideration of $165.9 million, which consisted of a cash payment of $136.4 million ("initial cash payment") and a $29.5 million holdback to satisfy any indemnification or certain other obligations of Venture Products to the company. The preliminary merger consideration was subject to certain customary adjustments, which were finalized during the third quarter of fiscal 2020 and resulted in an aggregate merger consideration of $163.2 million ("Venture Products purchase price") and at such time, $4.5 million of the holdback set aside for such customary adjustments was released accordingly. During fiscal 2021, $24.9 million of cash consideration was paid to the former Venture Products shareholders to release the remaining holdback amount upon the satisfaction of indemnification and certain other obligations of Venture Products to the company. The company funded the cash payment with borrowings under its revolving credit facility and net cash provided by operating activities. For additional information regarding the company's revolving credit facility, refer to Note 6, Indebtedness. As a result of the acquisition, the company incurred immaterial acquisition-related transaction costs, all of which were incurred during the fiscal year ended October 31, 2020 and recorded within selling, general and administrative expense within the Consolidated Statements of Earnings for such fiscal period. Venture Products Purchase Price Allocation The company accounted for the acquisition in accordance with the accounting standards codification guidance for business combinations, whereby the Venture Products purchase price was allocated to the acquired net tangible and intangible assets of Venture Products based on their estimated fair values as of the Venture Products closing date. Such fair values were based on internal company and independent external third-party valuations. The following table summarizes the allocation of the Venture Products purchase price to the fair values assigned to the Venture Products assets acquired and liabilities assumed (in thousands):
|  | March 2, 2020
Cash and cash equivalents |  | $ | 3,476 |
Receivables |  | 6,342 |
Inventories |  | 23,000 |
Prepaid expenses and other current assets |  | 239 |
Property, plant and equipment |  | 26,976 |
Goodwill |  | 61,225 |
Other intangible assets: |  |
Finite-lived customer-related |  | 19,100 |
Indefinite-lived trade name |  | 56,200 |
Accounts payable |  | (4,075) |
Accrued liabilities |  | (5,196) |
Deferred income tax liabilities |  | (20,586) |
Total fair value of net assets acquired |  | 166,701 |
Less: cash and cash equivalents acquired |  | (3,476) |
Total Venture Products purchase price |  | $ | 163,225 |
The goodwill recognized is primarily attributable to the value of the workforce, the reputation of Venture Products, expected future cash flows, and expected synergies, including customer and dealer growth opportunities and integrating and expanding existing product lines. Key areas of expected cost synergies include increased purchasing power for commodities, components, parts, and accessories, and supply chain consolidation. The goodwill resulting from the acquisition of Venture Products was recognized within the company's Professional segment and is non-deductible for tax purposes. During the first quarter of fiscal 2021, the company completed its valuation of income taxes to finalize the Venture Products purchase price allocation, which resulted in a decrease to the carrying amount of Professional goodwill of $1.0 million from $412.1 million as of October 31, 2020. Such purchase accounting adjustment did not impact the company's Consolidated Statements of Earnings for fiscal 2021. Other Venture Products Intangible Assets Acquired The allocation of the Venture Products purchase price to the net assets acquired resulted in the recognition of $75.3 million of other intangible assets as of the Venture Products closing date. The fair values of the acquired trade name and customer-related intangible assets were determined using the income approach whereby an intangible asset's fair value is equal to the present value of future economic benefits expected to be derived from ownership of the asset. The useful lives of the acquired trade name and customer-related intangible assets were determined based on the period of expected cash flows used to measure the fair value of the respective intangible assets adjusted as appropriate for entity-specific factors including legal, regulatory, contractual, competitive, economic, and/or other factors that may limit the useful life of the respective intangible asset. The fair value of the indefinite-lived trade name was determined using the relief from royalty method, which is based on the hypothetical royalty stream that would be received if the company were to license the trade name and was based on expected future revenues. The fair value of the customer-related intangible asset was determined using the excess earnings method and was based on the expected operating cash flows attributable to the customer-related intangible asset, which was determined by deducting expected economic costs, including operating expenses and contributory asset charges, from revenue expected to be generated from the customer-related intangible asset. As of the Venture Products closing date, the weighted-average useful life of the finite-lived customer-related intangible asset was determined to be 16.0 years.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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