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Business Combinations | 9 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Business Combinations | Business Combinations Acquisitions Completed During the Nine Months Ended September 30, 2020 The Company completed the acquisition of privately-held Nova Cold on January 2, 2020 for total cash consideration of approximately CAD $337.4 million, net of cash received, or $259.6 million USD based upon the exchange rate between the CAD and USD on the closing date of the transaction. The preliminary purchase price allocation of consideration primarily included $171.9 million of land and buildings and equipment, $53.9 million of a customer relationship intangible asset, $33.0 million of deferred tax liabilities, and $64.6 million of goodwill, each of which are allocated to the Warehouse segment. The customer relationship asset has been preliminarily assigned a useful life of 25 years and will be amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition including the expanded presence in the Canada market and leveraging integration experience to drive synergies and further enhance the warehouse network for new and existing customers. The Nova Cold acquisition was completed through the acquisition of stock in Canada; as a result, no tax basis in goodwill exists for Canadian tax purposes. Deferred taxes may not be recorded for deductible goodwill unless the tax basis exceeds the book basis; therefore, the Company recorded no deferred taxes for tax deductible goodwill for Canadian tax purposes. Deductible goodwill will exist for U.S. federal income tax purposes and will be available to reduce taxable income at the REIT, including any Global Intangible Low-Taxed Income (“GILTI”) inclusion associated with the foreign TRS acquired. As the valuation of certain assets and liabilities for purposes of purchase price allocations are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances regarding these assets and liabilities that existed at the acquisition date. Any adjustments to our estimates of purchase price allocation will be made in the periods in which the adjustments are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. The preliminary purchase price allocation will be finalized within one year from the date of acquisition. We have included the financial results of the acquired operations in our Warehouse segment since the date of the acquisition. During the nine months ended September 30, 2020, the Company recorded a $9.0 million reduction to its opening deferred tax liability originally recorded related to basis differences in fixed assets and net operating loss carryforwards. The adjustments recorded during the measurement period did not have a significant impact on our Condensed Consolidated Financial Statements for the three or nine months ended September 30, 2020. The Company completed the acquisition of privately-held Newport on January 2, 2020 for total cash consideration of $56.7 million, net of cash received. The preliminary purchase price allocation of consideration primarily included $30.2 million of land and buildings and equipment, $18.7 million of a customer relationship asset and $7.1 million of goodwill, each of which are allocated to the Warehouse segment. The customer relationship intangible asset has been preliminarily assigned a useful life of 25 years and will be amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition including the expanded presence in the Minneapolis-St. Paul market and leveraging integration experience to drive synergies and further enhance the warehouse network for new and existing customers. The Newport acquisition was completed through the acquisition of all of the membership interests of certain limited liability companies; the acquisition of all the membership interests allowed a portion of the goodwill recorded to be deductible for federal income tax purposes. Deferred taxes may not be recorded for deductible goodwill unless the tax basis exceeds the book basis; therefore, the Company recorded no deferred taxes for tax deductible goodwill as a result. Deductible goodwill will be available to reduce taxable income at both the REIT and its domestic TRS. As the valuation of certain assets and liabilities for purposes of purchase price allocations are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances regarding these assets and liabilities that existed at the acquisition date. Any adjustments to our estimates of purchase price allocation will be made in the periods in which the adjustments are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. The preliminary purchase price allocation will be finalized within one year from the date of acquisition. We have included the financial results of the acquired operations in our Warehouse segment since the date of the acquisition. The adjustments recorded during the measurement period did not have a significant impact on our Condensed Consolidated Financial Statements for the nine months ended September 30, 2020. The Company completed the acquisition of privately-held AM-C Warehouses on August 31, 2020 for total cash consideration of $82.5 million, net of cash received. The preliminary purchase price allocation of consideration primarily included $53.7 million of land and buildings and equipment, $19.8 million of a customer relationship asset and $9.5 million of goodwill, each of which are allocated to the Warehouse segment. The customer relationship intangible asset has been preliminarily assigned a useful life of 25 years and will be amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition including the expanded presence in the Dallas - Fort Worth market and expanding the Company’s relationship with a leading global protein producer. The AM-C acquisition was completed through the acquisition of substantially all of the assets from the seller and the acquisition allowed goodwill recorded to be deductible for federal income tax purposes. Deferred taxes may not be recorded for deductible goodwill unless the tax basis exceeds the book basis; therefore, the Company recorded no deferred taxes for tax deductible goodwill as a result. Deductible goodwill will be available to reduce taxable income at both the REIT and its domestic TRS. As the valuation of certain assets and liabilities for purposes of purchase price allocations are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances regarding these assets and liabilities that existed at the acquisition date. Any adjustments to our estimates of purchase price allocation will be made in the periods in which the adjustments are determined and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. The preliminary purchase price allocation will be finalized within one year from the date of acquisition. We have included the financial results of the acquired operations in our Warehouse segment since the date of the acquisition. Acquisitions Completed During 2019 The Company completed the acquisition of privately-held Cloverleaf on May 1, 2019. A summary of the final fair value of the assets acquired and liabilities assumed for total cash consideration of $1.24 billion, as well as adjustments made during the measurement period, is as follows (in thousands):
|  | Amounts Recognized as of the Acquisition Date |  | Measurement Period Adjustments (1) |  | Final Amounts Recognized as of the Acquisition Date (as Adjusted)(2)
Assets |  |  |  |  |  |
Land |  | $ | 59,363 |  |  | $ | 1,131 |  |  | $ | 60,494 |
Building and improvements |  | 687,821 |  |  | (19,670) |  |  | 668,151 |
Machinery and equipment |  | 144,825 |  |  | 822 |  |  | 145,647 |
Assets under construction |  | 20,968 |  |  | (3,994) |  |  | 16,974 |
Operating lease right-of-use assets |  | 1,254 |  |  | — |  |  | 1,254 |
Cash and cash equivalents |  | 4,332 |  |  | — |  |  | 4,332 |
Restricted cash |  | — |  |  | 526 |  |  | 526 |
Accounts receivable |  | 21,358 |  |  | 220 |  |  | 21,578 |
Goodwill |  | 107,643 |  |  | 18,453 |  |  | 126,096 |
Acquired identifiable intangibles: |  |  |  |  |  |
Customer relationships |  | 241,738 |  |  | 8,608 |  |  | 250,346 |
Trade names and trademarks |  | 1,623 |  |  | — |  |  | 1,623 |
Other assets |  | 18,720 |  |  | (11,668) |  |  | 7,052 |
Total assets |  | 1,309,645 |  |  | (5,572) |  |  | 1,304,073 |
Liabilities |  |  |  |  |  |
Accounts payable and accrued expenses |  | 30,905 |  |  | 12,598 |  |  | 43,503 |
Notes payable |  | 17,179 |  |  | (13,301) |  |  | 3,878 |
Operating lease obligations |  | 1,254 |  |  | — |  |  | 1,254 |
Unearned revenue |  | 3,536 |  |  | — |  |  | 3,536 |
Pension and postretirement benefits |  | 2,020 |  |  | (2,020) |  |  | — |
Deferred tax liability |  | 9,063 |  |  | (39) |  |  | 9,024 |
Total liabilities |  | 63,957 |  |  | (2,762) |  |  | 61,195 |
Total consideration for Cloverleaf acquisition |  | $ | 1,245,688 |  |  | $ | (2,810) |  |  | $ | 1,242,878 |
(1) The adjustments recorded during the measurement period did not have a significant impact on our Condensed Consolidated Financial Statements for the nine months ended September 30, 2020. The measurement period ended one year after the Cloverleaf Acquisition, on April 30, 2020. (2) The measurement period adjustments were primarily due to refinements to third party appraisals and refinements in carrying amounts of certain assets and liabilities, as well as adjustments to certain tax accounts based on, among other things, adjustments to deferred tax liabilities. The net impact of the measurement period adjustments results in a net increase to goodwill. All adjustments recorded during the measurement period were not material to the Condensed Consolidated Financial Statements. The final purchase price allocation is presented within the table above. As shown above, in connection with the Cloverleaf Acquisition the Company recorded an intangible asset of approximately $250.3 million for customer relationships which has been assigned a useful life of 25 years, and approximately $1.6 million for trade names and trademarks which has been assigned a useful life of 1.5 years. These intangible assets are being amortized on a straight-line basis over their respective useful lives. Based on the discussion under goodwill above, the Cloverleaf Acquisition resulted in federal income tax deductibility for a portion of the intangible assets. The deductible intangible assets will be available to reduce taxable income for both the REIT and its domestic TRS. The Company recorded a deferred tax liability of $1.9 million for intangible assets in 2019. The unaudited pro forma financial information set forth below is based on the historical Condensed Consolidated Statements of Operations for the quarter ended September 30, 2019, adjusted to give effect to the Cloverleaf Acquisition as if it had occurred on January 1, 2019. The pro forma adjustments primarily relate to acquisition expenses, depreciation expense on acquired assets, amortization of acquired intangibles, and estimated interest expense related to financing transactions, the proceeds of which were used to fund the acquisition of Cloverleaf. On March 1, 2019, Cloverleaf acquired Zero Mountain, Inc. and Subsidiaries (Zero Mountain). As a result, we have included the results of operations of Zero Mountain in the below pro forma financial information. The pro forma adjustments made include the acquisition expenses incurred in connection with Cloverleaf’s acquisition of Zero Mountain. The accompanying unaudited pro forma consolidated financial statements exclude the results of all other acquisitions completed during 2019 and 2020, which were deemed immaterial. These statements are provided for illustrative purposes only and do not purport to represent what the actual Consolidated Statements of Operations of the Company would have been had the Cloverleaf Acquisition occurred on the dates assumed, nor are they necessarily indicative of what the results of operations would be for any future periods.
Pro forma (unaudited)
(in thousands, except per share data)
| Three Months Ended |  | Nine Months Ended
| September 30, 2019
Total revenue | $ | 466,182 |  |  | $ | 1,373,281 |
Net income available to common shareholders(1) | $ | 27,874 |  |  | $ | 36,296 |
Net income per share, diluted(2) | $ | 0.14 |  |  | $ | 0.18 |
(1) Pro forma net income available to common shareholders was adjusted to exclude $0.8 million and $26.5 million of acquisition related costs incurred by the Company during the three and nine months ended September 30, 2019. (2)Adjusted to give effect to the issuance of approximately 42.1 million common shares in connection with the Cloverleaf Acquisition. Since the date of acquisition, total revenues of approximately $53.9 million and $93.4 million and net income of approximately $2.8 million and $4.7 million associated with properties acquired in the Cloverleaf Acquisition are included in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019, respectively. Additionally, the Company completed the acquisition of privately-held Lanier on May 1, 2019 for total cash consideration of $81.9 million, net of cash received. The allocation of consideration primarily included $60.0 million of land and buildings and equipment, $6.4 million of goodwill, and $16.3 million of customer relationship intangible assets. The customer relationship asset has been assigned a useful life of 25 years and will be amortized on a straight-line basis. The goodwill recorded is primarily attributable to the strategic benefits of the acquisition including the increased presence in the north Georgia poultry market and leveraging integration experience to drive synergies and further enhance the warehouse network for new and existing customers. The Lanier acquisition was completed through the acquisition of both stock and partnership units; the acquisition of partnership units allowed a portion of the goodwill recorded to be deductible for federal income tax purposes. All adjustments recorded subsequent to the acquisition date were not material to the Condensed Consolidated Financial Statements. The final purchase price allocation was completed within one year from the date of acquisition and is reflected within our Condensed Consolidated Financial Statements as of September 30, 2020. We have included the financial results of the acquired operations in our Warehouse segment since the date of the 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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