XML 57 R12.htm IDEA: XBRL DOCUMENT

Acquisitions

12 Months Ended

Dec. 31, 2019

ACQUISITIONS

The Company’s acquisitions are accounted for in accordance with ASC 805, Business Combinations. In accordance with this guidance, the fair value of consideration transferred is allocated to assets acquired and liabilities assumed based on their estimated fair values as of the completion of the acquisition, with the remaining amount recognized as goodwill. 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.

Under ASC 805-10, acquisition-related costs (e.g., 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. Acquisition-related costs are included as a component of Acquisition and integration-related expenses on the Consolidated Statements of Operations.

Acquisition of MRL

On July 1, 2019, the Company completed the acquisition of substantially all of the assets and operations of MRL. The Company expects that MRL 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 Consolidated Balance Sheet as of December 31, 2019, 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 MRL was $49.8 million, inclusive of a preliminary adjustment for working capital and other post-closing items. The purchase price was subsequently reduced by a final adjustment for working capital and other post-closing items in the amount of $0.8 million, which the Company received in the first quarter of 2020. In addition, there is a contingent earn-out payment of up to $15.5 million, which is contingent upon the achievement of certain financial targets and objectives. The contingent earn-out payment, if earned, would be due to be paid following the third anniversary of the closing.

As of December 31, 2019, the Company’s purchase price allocation is considered to be final. 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)	$	49.0
Estimated fair value of additional consideration ^(b)	4.1
Total consideration	53.1

Cash	0.2
Accounts receivable	3.8
Inventories	13.8
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	(1.9		)
Customer deposits	(6.5		)
Deferred tax liabilities	(1.4		)
Net assets acquired	39.2

Goodwill ^(e)	$	13.9


(a)	The purchase price was funded with borrowings under the Company’s revolving credit facility. The purchase price includes adjustments for working capital and other post-closing items, which were finalized in the fourth quarter of 2019, with the Company receiving $0.8 million in the first quarter of 2020.


(b)	Represents the 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 Consolidated Balance Sheets. See Note 18 – Fair Value Measurements for discussion of the methodology used to determine the fair value of the contingent earn-out payment.


(c)	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.


(d)	Represents the 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 December 31, 2019, MRL generated approximately $39.7 million of net sales and $3.6 million of operating income. The Company has included the operating results of MRL within the Environmental Solutions Group in its consolidated financial statements since the closing date.

The following table presents the unaudited pro forma combined net sales of the Company and MRL for the years ended December 31, 2019 and 2018, assuming this transaction occurred on January 1, 2018. Pro forma combined income from continuing operations and pro forma diluted earnings per share are not presented as they would not be materially different from the results reported for the years ended December 31, 2019 and 2018.



	For the Year Ended December 31,
(in millions)	2019		2018
Net sales	$	1,252.7	$	1,156.4

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 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 acquisition of TBEI strengthens the Environmental Solutions Group’s market position as a specialty vehicle manufacturer in maintenance and infrastructure markets, leveraging its expertise in building chassis-based vehicles and balancing 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 Sheets 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.

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 on 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	$	0.82

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 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 (used for) provided by financing activities.

During the years ended December 31, 2019, 2018 and 2017, the Company’s Environmental Solutions Group recorded net sales of $3.3 million, $1.7 million and $0.7 million, respectively, relating to products sold to Ingenieria Y Servicios Orbitec SPA, an entity which is majority-owned by affiliates of the former owners of JJE.