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GM&P Acquisition | 9 Months Ended
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Sep. 30, 2018
Business Combinations [Abstract] |
GM&P Acquisition | Note 4. GM&P Acquisition On March 1, 2017, the Company entered into and consummated a purchase agreement, as amended, with Giovanni Monti, the owner of 100% of the outstanding shares of Giovanni Monti and Partners Consulting and Glazing Contractors (“GM&P”). GM&P is a consulting and glazing contracting company located in Miami, Florida with over 15 years of experience in the design and installation of various building enclosure systems such as curtain window walls and a long-standing commercial relationship with the Company, working alongside it in the past in different projects within the U.S, by providing engineering and installation services to those projects. The Company acquired all of the shares of GM&P for a purchase price of $35 million, of which the Company paid $6 million in May 2017 with the remaining $29 million of the purchase price to be paid by May 15, 2018. The Company paid an additional $6 million in cash on April 2018 and entered into a Debt Settlement Agreement to pay the remaining consideration price through a combination of stock, by issuing 1,238,095 ordinary shares valued at $10.50 per share and a $10 million Subordinated Seller´s Note. The Seller´s Note was subsequently reduced to $8.5 million to atone the Buyer for adjustments and process inefficiencies caused by changes in GM&P´s supply chain and other business optimization costs seen during the second quarter of 2018. Following our process optimization and changes in the supply chain process, we believe the associated cost impacts to be non-recurring. The Company originally intended to complete the payment for the acquisition in the short term but opted to classify the liability as long term in line with its contractual maturity as the Company prioritizes its short-term working capital needs to fund ongoing growth. The Seller’s Note bears semi-annual interest payments at approximately 6% per annum and matures in 2022. Based on the implicit price at which the shares were issued, which at the time of the issuance in June 2018 was higher than the market price of those shares, the Company recorded a gain of $2,106. Additionally, including the reduction of the nominal amount of the Seller´s Note by $1,500, the Company recorded a gain on extinguishment of debt of $3,606. The gain on extinguishment of debt was recorded into Additional Paid-In Capital per guidance of ASC 470-50-40 because it is considered a related party transaction as the former owner of GM&P holds a management position within the Company. With the acquisition of GM&P, the Company also acquired a 60% equity interest in Componenti, a subsidiary of GM&P that provides architectural specialties in the US, specializing in design-build systems for individual projects and with experience in value engineering to create products that comply with the architects’ original design intent, while maintaining focus on affordable construction methods and materials. The following table summarizes the consideration transferred to acquire GM&P and the amounts of identified assets acquired and liabilities assumed at the acquisition date, as well as the fair value of the non-controlling interest in Componenti as of the acquisition date. Under ASC 805, a company can apply measurement period adjustments during the twelve-month period after the date of acquisition. During this period, the acquirer may adjust preliminary amounts recognized at the acquisition date to their subsequently determined final fair values. The allocation of the consideration transferred was based on management’s judgment after evaluation of several factors, including a preliminary valuation assessment. The analysis has been completed and results in measurement period adjustments are included in the final purchase price allocation as shown on the table below. The goodwill from the GM&P acquisition represents the expected synergies from combining operations with Tecnoglass Inc., and is not deductible for tax purposes The following table summarizes the purchase price allocation of the total consideration transferred:
Consideration Transferred: |  |  |
Notes payable (Cash or Stock) |  | $ | 35,000 |
Fair value of the non-controlling interest in Componenti |  |  | 1,141 |
Recognized amounts of identifiable assets acquired and liabilities assumed: |  | Preliminary Purchase Price Allocation |  |  | Measurement Period Adjustments |  |  | Final Purchase Price Allocation |
Cash and equivalents |  | $ | 509 |  |  |  |  |  |  |  | 509 |
Accounts receivable |  |  | 42,314 |  |  |  |  |  |  |  | 42,314 |
Other current assets |  |  | 5,287 |  |  |  | 242 |  |  |  | 5,529 |
Property, plant, and equipment |  |  | 684 |  |  |  |  |  |  |  | 684 |
Other non-current tangible assets |  |  | 59 |  |  |  |  |  |  |  | 59 |
Trade name |  |  | 980 |  |  |  |  |  |  |  | 980 |
Non-compete agreement |  |  | 165 |  |  |  |  |  |  |  | 165 |
Contract backlog |  |  | 3,090 |  |  |  |  |  |  |  | 3,090 |
Customer relationships |  |  | 4,140 |  |  |  |  |  |  |  | 4,140 |
Accounts payable |  |  | (22,330 | ) |  |  | 275 |  |  |  | (22,055 | )
Other current liabilities assumed |  |  | (13,967 | ) |  |  | (673 | ) |  |  | (14,640 |
Non-current liabilities assumed |  |  | (3,634 | ) |  |  | (3,231 | ) |  |  | (6,865 | )
Total identifiable net assets |  |  | 17,297 |  |  |  | (3,387 | ) |  |  | 13,910 |
Goodwill (including Workforce) |  | $ | 18,844 |  |  |  | 3,387 |  |  | $ | 22,231 |
The adjustment made to the preliminary purchase price allocation to Non-current liabilities assumed is related to an adjustment in deferred tax liability and billings in excess of cost incurred. The excess of the consideration transferred over the estimated fair values of assets acquired and liabilities assumed was recorded as goodwill. The identifiable intangible asset subject to amortization was the tradename, customer relationships, non-compete agreement, and backlog, which have a remaining useful life of two to five years. See Note 6 – Goodwill and Intangible Assets for additional information. The following unaudited pro forma financial information assumes the acquisition had occurred as of January 1, 2017 which does not include GM&P actual results for the entire period. Pro forma results have been prepared by adjusting our historical results to include the results of GM&P adjusted for the amortization expense related to the intangible assets arising from the acquisition. The unaudited pro forma results below do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the earliest periods presented, nor does it indicate the results of operations in future periods. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the following unaudited pro forma results.
|  | Pro-Forma |
|  | Nine Months |
|  | Ended |
(in thousands, except per share amounts) |  | September 30, 2017 |
Pro Forma Results |  |  |  |
Net sales |  | $ | 240,164 |
Net income attributable to parent |  | $ | 3,329 |
Net income per common share: |  |  |  |
Basic |  | $ | 0.10 |
Diluted |  | $ | 0.10 |
Non-controlling interest The Company has 60% equity interest in Componenti. The 40% non-controlling interest in Componenti is included in the opening balance sheet as of the acquisition date and its fair value amounted to $1,141. When the company owns a majority of a subsidiary’s stock, the Company includes in its Consolidated Financial Statements the non-controlling interest in the subsidiary. The non-controlling interest in the Condensed Consolidated Statements of Operations and Other Comprehensive Income is equal to the non-controlling interests’ proportionate share of the subsidiary’s net income and, as included in Shareholders’ Equity on the Condensed Consolidated Balance Sheet, is equal to the non-controlling interests’ proportionate share of the subsidiary’s net assets. In determining the fair value, we used the income approach and the market approach which was performed by third party valuation specialists under management.

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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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