XML 50 R28.htm IDEA: XBRL DOCUMENT v2.4.0.6
Acquisition and Investments
 12 Months Ended
Dec. 31, 2012
Business Combinations [Abstract]  
Acquisition and Investments
ACQUISITIONS AND INVESTMENTS

Tenco

On October 18, 2011 (“Closing Date”), the Company acquired the majority of the assets and assumed certain liabilities of Tenco Group Inc. ("Tenco") located in St. Valerien, Quebec, Canada. The purchase price was approximately $5.9 million and included substantially all of the ongoing business of Tenco, including the Tenco brand name and all related product names and trademarks (the "Acquisition").

The Acquisition was accounted for in accordance with ASC Topic 805, Business Combinations (“ASC Topic 805”). Accordingly, the total purchase price was allocated on a provisional basis to assets acquired and net liabilities assumed in connection with the Acquisition based on their estimated fair values as of the completion of the Acquisition. These allocations reflected various provisional estimates that were available at the time and are subject to change during the purchase price allocation period as valuations are finalized. All valuations are now final.

The Company believes that it was able to acquire the assets of Tenco for less than the fair value because of (i) Tenco's Canadian operations had been operating under Receivership Orders from the Quebec Superior Court since July 25, 2011 and (ii) Tenco had no additional working capital to pay their vendors timely and could not operate the business in order to service their customers in the ordinary course of business. Tenco was an unprofitable venture, and the seller approached the Company in an effort to sell Tenco. With Tenco in receivership, the only options, in our opinion, available were to sell the business below market value or shut Tenco down and sell off the business in pieces which, we believe, would have been more costly and time consuming. As a result, the Company was able to agree on a favorable purchase price.

The primary reason for the Tenco acquisition was to provide the opportunity to expand the Company's presence in the snow removal equipment business in North America, particularly Canada and North East U.S. This acquisition complemented and broadened our range of products in this sector.

The fair value of the net assets acquired was approximately $13.7 million, which exceeded the preliminary estimated purchase price of approximately $5.9 million. Accordingly, the Company recognized the excess of the fair value of the net assets over the purchase price of approximately $7.7 million as a gain on bargain purchase. The gain on bargain purchase of approximately $7.7 million was shown separately within income from operations in the Consolidated Statements of Income. The recorded amount was provisional and subject to change. The Company evaluated the purchase price allocation during 2012 including the opening fair value of inventory, accounts receivable, prepaid expenses, property plant and equipment, accrued liabilities and deferred taxes which required the Company to adjust the recorded gain.


The following table summarizes the provisional amount recognized for assets acquired and liabilities assumed as of the Closing Date. Since the acquisition, net adjustments of $0.9 million were made to the fair value of the assets acquired and liabilities assumed with a corresponding adjustment to the bargain purchase gain. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company's judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company's results of operations. The December 31, 2011 financial statement balances and disclosure impacted by these adjustments have been retrospectively adjusted. The adjustments were due to final valuation of property, plant and equipment, inventory and other liabilities. The following are the final fair value of assets acquired and liabilities assumed as of the Acquisition date:
 
(in thousands)
 
Initial
Valuation
Adjustments
Adjusted Values
 
 
 
 
 
Accounts receivable
 
$
3,182

 
$
3,182

Inventory
 
7,375

218

7,593

Prepaid expenses
 
277

 
277

Property, plant & equipment
 
5,277

584

5,861

Other Liabilities
 
(2,433
)
69

(2,364
)
Net Assets acquired
 
13,678

871

14,549

Less: Purchase Price
 
5,933

 
5,933

Gain on Bargain purchase
 
$
7,745

$
871

$
8,616


Under 805-10, acquisition related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are accounted for as expenses in the periods in which the costs are incurred. The Company incurred $0.6 million of acquisition related costs in 2011. Assuming this transaction had been made at the beginning of any period presented, the consolidated pro-forma results would not be materially different from reported results.
For the year ending December 31, 2012, Tenco's net revenue was $28.4 million and net income was $0.8 million. In the period between the Closing Date and December 31, 2011, Tenco generated approximately $7.0 million of net revenue and $0.2 million net income from operations. The Company has included the operating results of Tenco in its consolidated financial statements since the Closing Date.