XML 19 R9.htm IDEA: XBRL DOCUMENT
v3.19.2

Business Combination | 3 Months Ended
--- | ---
Jun. 29, 2019
Business Combinations [Abstract] |
Business Combination |
2. | Business Combination
The Exchange was completed on June 1, 2018 and was accounted for as a reverse acquisition under the acquisition method of accounting as provided by the FASB Accounting Standards Codification 805, Business Combinations. Champion Holdings was deemed to be the acquirer for accounting and financial reporting purposes. 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 $6.4 million for the three months ended June 30, 2018 which was classified as other expense in the condensed consolidated statements of operations. Additionally, the Company incurred approximately $6.0 million in stock compensation expense related to former Skyline employees during the three months ended June 30, 2018, which is recorded in selling, general and administrative expenses in the condensed consolidated statements of operations. These types of costs were not incurred in the three months ended June 29, 2019. 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 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 allocation have been used to prepare the accompanying condensed consolidated financial statements. The purchase price was allocated as follows:
(Dollars in thousands) |  | Allocation at March 30, 2019 |  |  | Changes to Allocation |  |  | Final Allocation at June 29, 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 |  |  | 40,220 |  |  |  | — |  |  |  | 40,220 |
Deferred tax assets, net |  |  | 6,996 |  |  |  | 38 |  |  |  | 7,034 |
Other assets |  |  | 6,706 |  |  |  | — |  |  |  | 6,706 |
Accounts payable and accrued liabilities |  |  | (36,027 | ) |  |  | — |  |  |  | (36,027 | )
Intangibles |  |  | 52,218 |  |  |  | (153 | ) |  |  | 52,065 |
Goodwill |  |  | 170,227 |  |  |  | 115 |  |  |  | 170,342 |
Total purchase price allocation |  | $ | 285,052 |  |  | $ | — |  |  | $ | 285,052 |
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, which is not deductible for income tax purposes, was allocated to the U.S. Factory-built Housing reporting unit. 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 property, plant, and equipment 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 $52.1 million related to intangible assets were recorded in the accompanying condensed consolidated balance sheet as of June 29, 2019. The Company determined $2.1 million of property acquired in the Exchange met the definition of held for sale at the acquisition date and was classified in other current assets. The fair value less cost to sell of this held for sale property is evaluated each reporting period to determine if it has changed. A loss of $1.0 million was recorded during the three months ended June 29, 2019 related to this held for sale property based on updated market information. Assets held for sale were $1.1 million and $2.1 million as of June 29, 2019 and March 30, 2019, respectively. For further information on acquired assets measured at fair value, see Note 5, Goodwill and Intangible Assets. The Company allocated a portion of the purchase price to certain realizable deferred tax assets totaling $27.3 million. 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 the three months ended June 30, 2018 includes $22.1 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:
|  | Three Months Ended June 30, 2018 |
(Dollars in thousands) |  | Reported |  |  | Pro forma |
Net sales |  | $ | 322,261 |  |  | $ | 368,065 |
Net (loss) income |  |  | (853 | ) |  |  | 14,256 |
The pro forma results are based on adding the historical results of operations of Champion Holdings 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 Champion Holdings 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, Champion Holdings 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).

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://fasb.org/us-gaap/role/ref/legacyRef -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