XML 24 R9.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Acquisition | 12 Months Ended
--- | ---
Dec. 31, 2017
Business Combinations [Abstract] |
Acquisition |
3. | ACQUISITION
On July 31, 2017, through its newly-formed, wholly-owned subsidiary, Trex Commercial Products, the Company acquired certain assets and assumed certain liabilities of SC Company for $71.8 million in cash. The Company used cash on hand and $30.0 million of funding from its existing revolving credit facility, which was fully paid on August 17, 2017, to acquire the assets. The acquired business designs, engineers and markets modular architectural railing systems and solutions for the commercial and multifamily markets, and provides staging, acoustical and seating systems for commercial markets, including sports stadiums and performing arts venues. As a result of the purchase, the Company gained access to growing commercial markets, expanded its custom design and engineering capabilities, and added the contract architect and specifier communities as new channels for its products. The acquisition was accounted for using the acquisition method of accounting under U.S. Generally Accepted Accounting Principles, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The fair values of consideration transferred and net assets acquired were determined using a combination of Level 2 and Level 3 inputs as specified in the fair value hierarchy in ASC 820, “Fair Value Measurements and Disclosures.” The Company believes that the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions. The Company’s consolidated results of operations for the year ended December 31, 2017 include the operating results of the acquired business from the date of acquisition through year end. The Company’s consolidated balance sheet at December 31, 2017 includes the acquired assets and any liabilities assumed. Based on the Company’s preliminary valuation, a total estimated consideration of $71.8 million has been allocated on to the assets acquired and liabilities assumed, as follows (in thousands). During the fourth quarter, a final determination of the purchase price and the final valuation report were completed upon the final determination of working capital at closing. No adjustments were made to the fair values of assets acquired and liabilities assumed as a result:
Accounts receivable, net |  | $ | 8,357 |
Contract retainage |  |  | 1,948 |
Inventories, net |  |  | 2,344 |
Prepaid expenses and other assets |  |  | 1,223 |
Revenues in excess of billings |  |  | 3,463 |
Fixed assets, net |  |  | 1,264 |
Intangible assets |  |  | 4,900 |
Goodwill |  |  | 57,938 |
Accounts payable |  |  | (3,990 | )
Accrued liabilities and other expenses |  |  | (2,329 | )
Billings in excess of revenues |  |  | (1,752 | )
Customer Deposits |  |  | (1,562 | )
Total consideration |  | $ | 71,804 |
Goodwill of $57.9 million is primarily attributable to the potential opportunity for the Company to offer full service railing systems in the growing commercial and multi-family markets, access to a complementary product category with a track record of substantial revenue growth, the ability to achieve economies of scale around raw material procurement, an increase in the range of products the Company may offer its core customers, and intangible assets that do not qualify for separable or legal criterion, such as an assembled workforce. The amount of goodwill that was amortized and deductible for tax purposes in 2017 was $1.6 million. All of the goodwill was recorded to the Trex Commercial Products reportable segment. The fair value attributed to intangible assets, which consists of production backlog and trade names and trademarks, is being amortized straight line over 12 months and is based on the estimated economics of the assets. The fair value attributed to the intangible assets acquired and goodwill was based on assumptions and other information compiled by management, including independent valuations that utilized established valuation techniques. From July 31, 2017, through December 31, 2017, Trex Commercial Products generated $21.8 million in net sales and incurred a net loss of $2.3 million, and which included $0.5 million of acquisition-related expenses during the year ended December 31, 2017, which are included in selling, general and administrative expense. The following pro forma results are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the years presented or the results which may occur in the future. The following unaudited pro forma results of operations assume the acquisition occurred on January 1, 2016 (in thousands, except per share amounts):
|  | Year Ended December 31 |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
|  | Actual |  |  | Pro Forma |
Net sales |  | $ | 565,153 |  |  | $ | 479,616 |  |  | $ | 597,288 |  |  | $ | 534,618 |
Net income |  | $ | 95,128 |  |  | $ | 67,847 |  |  | $ | 96,608 |  |  | $ | 68,344 |
Basic earnings per common share |  | $ | 3.24 |  |  | $ | 2.31 |  |  | $ | 3.29 |  |  | $ | 2.33 |
Diluted earnings per common share |  | $ | 3.22 |  |  | $ | 2.29 |  |  | $ | 3.27 |  |  | $ | 2.31 |
Significant pro forma adjustments included in the above pro forma information include an adjustment to amortization expense for the intangible assets acquired, elimination of transaction costs related to the acquisition as such costs are considered to be non-recurring in nature, an adjustment to compensation expense related to restricted stock units granted in connection with the acquisition, the income tax effects of the adjustments based on a blended statutory rate of 38.0%.

X
- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration