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Acquisitions | 9 Months Ended
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Sep. 30, 2019
Business Combinations [Abstract] |
Acquisitions | ACQUISITIONS Acquisition of MRL On July 1, 2019, the Company completed the acquisition of substantially all of the assets and operations of MRL, a U.S. manufacturer of truck-mounted and ride-on road-marking equipment, including its wholly-owned subsidiary HighMark Traffic Services, Inc. The Company expects that the acquisition will provide an efficient entry into a new line of product offerings and access to new markets. As the acquisition closed on July 1, 2019, the assets and liabilities of MRL have been consolidated into the Condensed Consolidated Balance Sheet as of September 30, 2019, while the post-acquisition results of operations have been included in the Condensed Consolidated Statements of Operations, within the Environmental Solutions Group. The initial cash consideration paid by the Company to acquire MRL was approximately $49.8 million, net of certain preliminary closing adjustments, including working capital. Any additional closing adjustments are expected to be finalized before the end of the fourth quarter of 2019. In addition, the transaction may include additional consideration of up to $15.5 million, contingent upon the achievement of specified financial results in future reporting periods (i.e., an earn-out). The contingent earn-out payment, if earned, would be due to be paid following the third anniversary of the closing. The acquisition is being accounted for in accordance with ASC 805, Business Combinations. Accordingly, the total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed in connection with the acquisition based on their estimated fair values as of the completion of the acquisition. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. Due to the proximity of the date of acquisition to the date of issuance of the condensed consolidated financial statements, the Company’s purchase price allocation as of September 30, 2019 reflects various provisional estimates that were based on the information that was available as of the acquisition date and the filing date of this Form 10-Q. The Company believes that information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, however the determination of those fair values is not yet finalized. Thus, the preliminary measurements of fair value set forth in the table below are subject to change during the measurement period as valuations are finalized. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:
(in millions) |
Purchase price, inclusive of preliminary closing adjustments (a) | $ | 49.8 |
Estimated fair value of additional consideration (b) | 7.9 |
Total consideration | 57.7 |
Cash | 0.2 |
Accounts receivable | 3.2 |
Inventories | 12.9 |
Prepaid expenses and other current assets | 0.3 |
Properties and equipment | 6.4 |
Operating lease right-of-use assets | 4.6 |
Other long-term assets | 0.1 |
Customer relationships (c) | 17.7 |
Trade names (d) | 9.0 |
Other intangible assets | 1.4 |
Operating lease liabilities | (4.6 | )
Accounts payable | (3.7 | )
Accrued liabilities | (1.0 | )
Customer deposits | (5.9 | )
Deferred tax liabilities | (1.4 | )
Net assets acquired | 39.2 |
Goodwill (e) | $ | 18.5 |
(a) | The initial purchase price was funded with borrowings under the Company’s revolving credit facility.
(b) | Represents the preliminary estimated fair value of the contingent earn-out payment as of the acquisition date, which is included as a component of Other long-term liabilities on the Condensed Consolidated Balance Sheet. See Note 14 – Fair Value Measurements for discussion of the methodology used to determine the fair value of the contingent earn-out payment.
(c) | Represents the preliminary fair value assigned to customer relationships, which are considered to be definite-lived intangible assets, with a preliminary estimated useful life of approximately 12 years.
(d) | Represents the preliminary fair value assigned to trade names, which are considered to be indefinite-lived intangible assets.
(e) | Goodwill, the majority of which is tax-deductible, has been allocated to the Environmental Solutions Group on the basis that the synergies identified will primarily benefit this segment.
In the period between the July 1, 2019 closing date and September 30, 2019, MRL generated approximately $22.6 million of net sales and $2.3 million of operating income. The Company has included the operating results of MRL within the Environmental Solutions Group in its condensed consolidated financial statements since the closing date. Acquisition of JJE In connection with the June 3, 2016 acquisition of substantially all of the assets and operations of Joe Johnson Equipment, Inc. and Joe Johnson Equipment (USA), Inc. (collectively, “JJE”), the Company paid initial cash consideration of approximately $96.6 million. During the third quarter of 2019, the Company paid additional consideration of C$10 million (approximately $7.6 million) to settle the contingent consideration liability, based on the achievement of specified financial results over the three-year period following the closing of the acquisition. During the third quarter of 2019, the Company also paid C$7.6 million (approximately $5.8 million) to fund substantially all of the deferred payment. Of the total $13.4 million of additional consideration funded during the third quarter of 2019, $3.1 million has been included as a component of Net cash provided by operating activities within the Condensed Consolidated Statements of Cash Flows, with the remaining $10.3 million, representing the fair value of the additional consideration established in the Company’s purchase price allocation, being included as a component of Net cash provided by (used for) financing activities.

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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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