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Acquisitions | 12 Months Ended
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Dec. 31, 2018
Acquisitions [Abstract] |
Acquisitions | ACQUISITIONS Acquisition of TBEI On June 2, 2017, the Company completed the acquisition of all of the outstanding shares of capital stock of GenNx/TBEI Intermediate Co., a Delaware corporation, (collectively, with its subsidiaries, “TBEI”). TBEI is a leading U.S. manufacturer of dump truck bodies and trailers serving maintenance and infrastructure end markets. The Company expects that the acquisition of TBEI will enable it to strengthen the Environmental Solutions Group’s market position as a specialty vehicle manufacturer in maintenance and infrastructure markets, leverage its expertise in building chassis-based vehicles and balance the mix of revenues it generates from municipal and industrial markets. The acquisition closed on June 2, 2017, and the assets and liabilities of TBEI have been consolidated into the Consolidated Balance Sheet since that date, while the post-acquisition results of operations have been included in the Consolidated Statements of Operations, within the Environmental Solutions Group. The Company initially paid $271.8 million to acquire TBEI, inclusive of cash acquired. The purchase price was subsequently reduced by an adjustment for working capital and other post-closing items in the amount of $3.0 million, which was received in the first quarter of 2018. The Company’s purchase price allocation was finalized during the year ended December 31, 2017. The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date:
(in millions) |
Purchase price, inclusive of adjustment for working capital and other post-closing items (a) | $ | 268.8 |
Total consideration | 268.8 |
Cash | 2.6 |
Accounts receivable | 23.7 |
Inventories | 24.3 |
Prepaid expenses and other current assets | 2.6 |
Rental equipment | 0.7 |
Properties and equipment | 20.6 |
Customer relationships (b) | 90.0 |
Trade names (c) | 54.0 |
Other intangible assets | 1.7 |
Accounts payable | (18.7 | )
Accrued liabilities | (7.3 | )
Deferred tax liabilities | (61.4 | )
Net assets acquired | $ | 132.8 |
Goodwill (d) | $ | 136.0 |
(a) | $243.0 million of the purchase price was funded through borrowings under the Company’s revolving credit facility, with the remainder being funded with existing cash on hand. The purchase price includes an adjustment for working capital and other post-closing items of $3.0 million that the Company received in the first quarter of 2018.
(b) | Represents the fair value assigned to customer relationships, which are considered to be definite-lived intangible assets, with an estimated useful life of approximately 12 years.
(c) | Represents the fair value assigned to trade names, which are considered to be indefinite-lived intangible assets.
(d) | Goodwill, which is not deductible for tax purposes, has been allocated to the Environmental Solutions Group on the basis that the synergies identified will primarily benefit this segment.
Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are accounted for as expenses in the periods in which the costs are incurred. During the years ended December 31, 2018 and 2017, the Company incurred acquisition and integration-related costs of $0.4 million and $1.7 million, respectively, primarily related to the TBEI acquisition. In the year ended December 31, 2016, the Company incurred $0.9 million of acquisition and integration-related costs in connection with acquisitions completed in 2016. Such costs have been included as a component of Acquisition and integration-related expenses on the Consolidated Statement of Operations. Unaudited Pro Forma Financial Information The following table presents the unaudited pro forma combined results of operations of the Company and TBEI for the years ended December 31, 2017 and 2016, after giving effect to certain pro forma adjustments including: (i) elimination of the costs recognized related to the step-up in fair value of TBEI’s inventory that will not have a continuing impact, (ii) amortization of acquired intangible assets, (iii) the impact of certain fair value adjustments such as depreciation on the acquired property, plant and equipment, (iv) interest expense for historical long-term debt of TBEI that was repaid and interest expense on additional borrowings by the Company to fund the acquisition and (v) elimination of non-recurring acquisition and integration-related expenses. The unaudited pro forma statement of operations of the Company assuming this transaction occurred at January 1, 2016 is as follows:
| For the Year Ended December 31,
(in millions, except per share data) | 2017 |  | 2016
Net sales | $ | 987.6 |  |  | $ | 913.2 |
Income from continuing operations | 68.1 |  |  | 49.4 |
Diluted earnings from continuing operations (per share) | $ | 1.13 |  |  | $ | 0.81 |
The unaudited pro forma financial information is presented for informational purposes only and is not intended to represent or be indicative of the consolidated results of operations of the Company that would have been reported had the acquisition been completed as of the beginning of the periods presented, and should not be taken as being representative of the future consolidated results of operations of the Company. Acquisition of JJE On June 3, 2016, the Company completed the acquisition of substantially all of the assets and operations of Joe Johnson Equipment, Inc. and Joe Johnson Equipment (USA), Inc. (collectively, “JJE”), a Canadian-based distributor of maintenance equipment for municipal and industrial markets. The Company expects that JJE will facilitate sales of its existing products into new markets, expand the Company’s product and service offerings and increase the Company’s footprint across North America. The acquisition closed on June 3, 2016, and the assets and liabilities of JJE have been consolidated into the Consolidated Balance Sheet since that date, while the post-acquisition results of operations have been included in the Consolidated Statements of Operations, within the Environmental Solutions Group. The initial cash consideration paid by the Company to acquire JJE was approximately $96.6 million, inclusive of a payment of a working capital adjustment. In addition, there is a deferred payment of C$8.0 million (approximately $5.9 million) and a contingent earn-out payment of up to C$10.0 million (approximately $7.3 million). The earn-out payment is contingent upon the achievement of certain financial targets and objectives. The deferred payment, and any contingent earn-out payment, are due to be paid after the third anniversary of the closing date and are included within Other current liabilities and Other long-term liabilities on the Consolidated Balance Sheets as of December 31, 2018 and 2017, respectively. The Company’s purchase price allocation was finalized during the year ended December 31, 2016. The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date:
(in millions) |
Purchase price, inclusive of working capital adjustment (a) | $ | 96.6 |
Estimated fair value of additional consideration (b) | 10.3 |
Settlement of pre-existing contractual relationship (c) | 11.4 |
Total consideration | 118.3 |
Accounts receivable | 12.1 |
Inventories | 28.7 |
Prepaid expenses and other current assets | 0.8 |
Rental equipment (d) | 75.9 |
Properties and equipment | 2.0 |
Intangible assets (e) | 8.4 |
Capital lease obligations | (0.5 | )
Accounts payable (c) | (11.5 | )
Customer deposits | (0.8 | )
Accrued liabilities | (2.0 | )
Net assets acquired | 113.1 |
Goodwill (f) | $ | 5.2 |
(a) | The initial purchase price was funded with existing cash on hand and borrowings under the Company’s revolving credit facility.
(b) | Includes estimated fair value of contingent earn-out payment ($4.9 million) and the deferred payment ($5.4 million) as of the acquisition date. Included as a component of Other long-term liabilities on the Consolidated Balance Sheet. See Note 17 – Fair Value Measurements for discussion of the methodology used to determine the fair value of the contingent earn-out payment.
(c) | Represents the non-cash settlement of accounts receivable due from JJE to the Company as of the acquisition date. Corresponding amount payable by JJE to the Company is not included in accounts payable assumed in the table above, and the amount was settled at fair value with no impact on the Consolidated Statement of Operations.
(d) | Consists primarily of street sweepers, sewer cleaners, vacuum trucks and other maintenance equipment. Fair value was determined using a combination of a market-based approach and a cost-based approach. The specific valuation technique depended upon the nature of the asset or availability of relevant information. Under the market-based approach, an analysis of market conditions and transactions comparable to the subject asset being valued was performed, and fair value was determined where reliable and available data on comparable sales could be found. In this context, fair value was determined by comparing recent sales of similar assets and adjusting these comparable sales based on factors such as age, condition and type of sale. Under the cost-based approach, the current replacement cost for the assets was calculated, using the direct method of the cost approach. In determining fair value under the cost approach, adjustments were made for physical, functional and economic factors affecting utility and value as they might apply.
(e) | Represents the fair value assigned to the JJE trade name, which is considered to be an indefinite-lived intangible asset.
(f) | The majority of goodwill, which is primarily attributable to synergies expected to result from combining JJE’s operations with the Company’s operations, is expected to be deductible for tax purposes.
As further explained in Note 17 – Fair Value Measurements, in the years ended December 31, 2018, 2017 and 2016, the Company recognized expenses of $0.9 million, $0.8 million and $0.4 million, respectively, associated with the change in the fair value of the contingent consideration liability. In addition, in the years ended December 31, 2018, 2017 and 2016, the Company recognized expenses of $0.2 million, $0.2 million and $0.1 million, respectively, in relation to the accretion of the discount on the deferred payment obligation. These expenses have been included as a component of Acquisition and integration-related expenses on the Consolidated Statement of Operations. In connection with the acquisition of JJE, the Company entered into lease agreements for two facilities owned by affiliates of the sellers of JJE. Both agreements include an annual rent that is considered to be market-based, and are for an initial lease term of five years, with options to renew. Total rent paid under these agreements to the former shareholders of JJE, some of whom are now employees of the Company, was approximately $0.3 million, $0.4 million and $0.2 million during the years ended December 31, 2018, 2017 and 2016, respectively. In addition, during the years ended December 31, 2018, 2017 and 2016, the Company’s Environmental Solutions Group recorded net sales of $1.7 million, $0.7 million and $1.7 million, respectively, relating to products sold to Ingenieria Y Servicios Orbitec SPA, an entity which is majority-owned by affiliates of the sellers of JJE.

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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 http://asc.fasb.org/topic&trid=2303972 + Details
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