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Business Combination and Acquisitions | 12 Months Ended
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Mar. 30, 2019
Business Combinations [Abstract] |
Business Combination and Acquisitions |
2. | Business Combination and Acquisitions
Skyline Corporation Transaction The Exchange between Champion Holdings and Skyline was completed on June 1, 2018 and was accounted for as a reverse acquisition under the acquisition method of accounting as provided by ASC 805. The assets acquired and liabilities assumed as a result of the Exchange were recorded at their respective fair values and added to the carrying value of Champion Holdings’ existing assets and liabilities. The Company incurred acquisition-related costs of approximately $6.9 million and $7.2 million for the fiscal years 2019 and 2018, which were recorded as incurred and have been classified as other expense in the consolidated statements of operations. Additionally, the Company incurred approximately $6.0 million in stock compensation expense related to former Skyline employees during the fiscal year 2019, which is recorded in SG&A in the consolidated statements of operations. The purchase price of the acquisition was determined with reference to the value of equity (common stock) of the Company based on the closing price on June 1, 2018 of $33.39 per share. The purchase price has been allocated on a preliminary basis to the assets acquired and liabilities assumed using their estimated fair values at June 1, 2018, the closing of the Exchange. The purchase price and the preliminary allocation have been used to prepare the accompanying consolidated financial statements. The purchase price allocation is preliminary and could be revised as a result of additional information obtained regarding liabilities assumed and revisions of provisional estimates of certain acquired tax attributes. The preliminary allocation of the purchase price is as follows:
(Dollars in thousands) |  | Initially Reported |  |  | Changes to Purchase Price and Allocation |  |  | Preliminary Allocation at March 30, 2019 |
Cash |  | $ | 9,722 |  |  | $ | — |  |  | $ | 9,722 |
Trade accounts receivable |  |  | 13,876 |  |  |  | — |  |  |  | 13,876 |
Inventory |  |  | 19,028 |  |  |  | — |  |  |  | 19,028 |
Assets held for sale |  |  | 2,086 |  |  |  | — |  |  |  | 2,086 |
Property, plant and equipment |  |  | 42,556 |  |  |  | (2,336 | ) |  |  | 40,220 |
Deferred tax assets, net |  |  | 9,733 |  |  |  | (2,737 | ) |  |  | 6,996 |
Other assets |  |  | 6,349 |  |  |  | 357 |  |  |  | 6,706 |
Accounts payable and accrued liabilities |  |  | (36,319 | ) |  |  | 292 |  |  |  | (36,027 | )
Intangibles |  |  | 43,300 |  |  |  | 8,918 |  |  |  | 52,218 |
Goodwill |  |  | 174,834 |  |  |  | (4,607 | ) |  |  | 170,227 |
Total purchase price allocation |  | $ | 285,165 |  |  | $ | (113 | ) |  | $ | 285,052 |
Preliminary estimated goodwill is primarily attributable to expected synergies from the combination of the companies, including, but not limited to, expected cost synergies through procurement activities and operational improvements through sharing of best practices. Goodwill is not deductible for income tax purposes. Cash, trade receivables, other assets, accounts payable, accrued and other liabilities were generally stated at historical carrying values given the short-term nature of these assets and liabilities. Intangible assets consist primarily of amounts recognized for the fair value of customer relationships and trade names and were based on an independent appraisal. Customer-based assets include the Company’s established relationships with its customers and the ability of those customers to generate future economic profits for the Company. The Company estimates that these intangible assets have a weighted average useful life of ten years. Fair value estimates of PP&E were based on independent appraisals and broker opinions of value, giving consideration to the highest and best use of the assets. Key assumptions used in the appraisals were based on a combination of market and cost approaches, as appropriate. Level 3 fair value estimates of $40.2 million related to property, plant and equipment and $52.2 million related to intangible assets were recorded in the accompanying consolidated balance sheet as of March 30, 2019. The Company determined $2.1 million of property acquired met the definition of held for sale and is classified in other current assets in the accompanying consolidated balance sheets at March 30, 2019. For further information on acquired assets measured at fair value, see Note 7, Goodwill and Intangible Assets. The Company allocated a portion of the purchase price to certain realizable deferred tax assets totaling $27.3 million, on a preliminary basis. Deferred tax assets are primarily federal and state net operating loss carryforwards and credits offset by a valuation allowance for certain state net operating loss carryforwards that are not expected to be realized. The deferred tax assets are offset by deferred tax liabilities of $20.3 million resulting from the purchase price allocation step-up in fair value that exceed the historical tax basis. The statement of operations for fiscal 2019 includes $218.8 million of net sales attributable to the acquired Skyline operations. A summary of the results of operations for the Company, on an as reported and on a pro forma basis, are as follows:
|  | Year Ended March 30, 2019 |  |  | Year Ended March 31, 2018 |  |
(Dollars in thousands) |  | Reported |  |  | Pro forma |  |  | Reported |  |  | Pro forma |  |
Net sales |  | $ | 1,360,043 |  |  | $ | 1,405,847 |  |  | $ | 1,064,722 |  |  | $ | 1,297,159 |  |
Net (loss) income |  |  | (58,208 | ) |  |  | (43,460) |  |  |  | 15,800 |  |  |  | 25,655 |  |
The pro forma results are based on adding the historical results of operations of Champion and Skyline and adjusting those historical amounts for the amortization of intangibles created in the Exchange; the increase in depreciation as a result of the step-up in fair value of property, plant and equipment; removing transaction costs directly associated with the Exchange; removing equity-based compensation expense directly resulting from the Exchange; reflecting the financing arrangements entered into in connection with the Exchange, and adjusting those items for income taxes. The pro forma disclosures do not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the Exchange or any integration costs. The pro forma data is intended for informational purposes and is not indicative of the future results of operations. The Exchange Agreement provided that the Company was permitted to pay a capital distribution prior to completion of the Exchange to the extent it had cash in excess of debt and other debt-like items and unpaid Exchange fees and expenses. Prior to the completion of the Exchange, the Company made a capital distribution to its members equal to an aggregate of $65.3 million (of which $22.5 million was reflected as a reduction to retained earnings and $42.8 million was reflected as a reduction to members’ contributed capital). Acquisitions On April 11, 2017, the Company completed the purchase of a manufactured housing plant in Mansfield, Texas, from Skyline for cash consideration of $2.2 million. The purchase included the land, building and equipment previously used by Skyline to build manufactured homes. The purchase enabled the Company to expand its manufacturing capacity in Texas. The purchase was accounted for as an asset acquisition. On September 29, 2016, the Company, through a series of transactions, completed the purchase of the assets of IBS for cash consideration of $14.3 million. IBS operated five modular manufacturing facilities and two retail sales centers in the Northeast and Midwest. Prior to the acquisition, IBS filed for Chapter 7 bankruptcy protection with the United States Bankruptcy Court (“Bankruptcy Court”) and ceased operations. As a result, the purchase of the business was facilitated by a Sec. 363 sale with the Bankruptcy Court. Significant acquired assets included inventory of $1.5 million, land and four manufacturing facilities of $10.2 million, machinery and equipment of $1.5 million and tradename intangibles of $0.7 million. The Company also assumed the lease of a fifth manufacturing facility. There were no additional liabilities assumed in the transaction. The Company recognized goodwill of $0.1 million related to this acquisition. During January 2017, the Company began operations at one of the acquired facilities. The Company incurred $1.7 million of fees and expenses related to the purchase of IBS, including legal, advisory and environmental inspection fees, inclusive of a $0.7 million loss on the acquisition of debt acquired from the IBS secured creditors that was settled by proceeds from the bankruptcy sale. Those expenses are included in other expense in the accompanying consolidated financial statements. On April 4, 2016, the Company purchased substantially all of the assets and business of Skyco, LLC, for cash consideration of $0.3 million. On July 28, 2016, the Company purchased substantially all of the assets and business of MLK of Panama City, Inc., for cash consideration of $0.1 million. Combined, the acquired entities operated three retail sales centers in Florida and Louisiana, allowing the Company to further expand its retail presence in those markets. The purchases included $2.1 million of new manufactured homes, $1.9 million of assumed floor plan payables and $0.2 million of other net liabilities. The Company recognized goodwill of $0.4 million from these acquisitions. The results of operations of the acquired entities are included in the accompanying consolidated financial statements since the date of acquisition.

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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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