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Acquisitions, Goodwill And Other Intangible Assets | 12 Months Ended
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Dec. 31, 2019
Acquisitions, Goodwill And Other Intangible Assets [Abstract] |
Acquisitions, Goodwill and Other Intangible Assets | ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS Subsequent Event Polyplastic In January 2020, the Company acquired 100 percent of the equity interests of Polyplastic Group B.V. (with its subsidiaries “Polyplastic”), a premier window supplier to the caravaning industry, headquartered in Rotterdam, Netherlands. The purchase price was $97.6 million, net of cash acquired, plus contingent consideration up to $7.7 million, based on future sales by this operation. The results of the acquired business will be included primarily in the Company’s OEM Segment. The Company is in the process of determining the fair value of the assets acquired and liabilities assumed for the opening balance sheet. Acquisitions in 2019 CURT In December 2019, the Company acquired 100 percent of the equity interests of CURT Acquisition Holdings, Inc. (with its subsidiaries “CURT”), a leading manufacturer and distributor of branded towing products and truck accessories for the aftermarket, headquartered in Eau Claire, Wisconsin. The purchase price was $337.6 million, net of cash acquired, and is subject to potential post-closing adjustments related to net working capital. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s Aftermarket Segment. The Company is validating account balances and finalizing the valuation for the acquisition. The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):
Cash consideration, net of cash acquired | $ | 337,640 |
Assets Acquired |  |
Accounts receivable | $ | 28,611 |
Inventories | 88,765 |
Fixed assets | 24,036 |
Customer relationship | 112,000 |
Tradename and other identifiable intangible assets | 37,705 |
Operating lease right-of-use assets | 27,925 |
Other tangible assets | 4,060 |
Liabilities Assumed |  |
Accounts payable | (18,577) |
Current portion of operating lease obligations | (5,360) |
Accrued expenses and other current liabilities | (10,002) |
Operating lease obligations | (22,565) |
Deferred taxes | (31,877) |
Total fair value of net assets acquired | $ | 234,721 |
Goodwill (not tax deductible) | $ | 102,919 |
The fair values of the customer relationship and tradename intangible assets are being amortized over their estimated useful lives of 17 years and 20 years, respectively. The fair values of these assets were determined using a discounted cash flow model, which is a level 3 input in the fair value hierarchy. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products. The results of CURT are included in the Company’s Consolidated Statements of Income since the December 19, 2019 acquisition date and were not material to the consolidated results. The following unaudited pro forma information represents the Company’s results of operations as if the 2019 acquisition of CURT had occurred at the beginning of 2018. The disclosure of pro forma net sales and earnings does not purport to indicate the results that would actually have been obtained had the acquisition been completed on the assumed date for the periods presented, or which may be realized in the future. The unaudited pro forma information combines the reported results of the Company and CURT but does not reflect any operating efficiencies, cost savings, financing costs, step-up of assets, or other accounting related adjustments resulting from the acquisition.
| (unaudited) |  |
| Year Ended December 31, |  |
(In thousands, except per share amounts) | 2019 |  | 2018
Net sales | $ | 2,639,761 |  |  |  | $ | 2,735,378 |
Net income | $ | 144,878 |  |  |  | $ | 147,878 |
Basic net income per common share | $ | 5.80 |  |  |  | $ | 5.87 |
Diluted net income per common share | $ | 5.77 |  |  |  | $ | 5.81 |
The pro forma earnings for the year ended December 31, 2019 were adjusted to exclude $20.2 million of costs incurred directly attributable to the acquisition. Nonrecurring expenses for goodwill amortization of $5.2 million and $5.0 million were excluded from pro forma earnings for the years ended December 31, 2019 and 2018, respectively. The pro forma earnings do not reflect adjustments for any changes in CURT's historical capital structure, which included interest charges of $14.8 million and $14.0 million for the years ended December 31, 2019 and 2018, respectively. The Company incurred costs during the year ended December, 31 2019 related specifically to this acquisition of $1.0 million, which are included in selling, general, and administrative expenses in the Consolidated Statements of Income. PWR-ARM In November 2019, the Company acquired the PWR-ARM brand and electric powered Bimini business assets of Schwintek, Inc. (“PWR-ARM”), a premier electric sunshade solution for pontoon and smaller power boats. The purchase price was $45.0 million, which includes holdback payments of $5.0 million to be paid over the next two years. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. As the acquisition of PWR-ARM is not considered to have a material impact on the Company’s financial statements, pro forma results of operations and other disclosures are not presented. The Company is validating account balances and finalizing the valuation for the acquisition. The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):
Cash consideration | $ | 40,000 |
Holdback payment | 5,000 |
Total value of consideration given | $ | 45,000 |
Customer relationship and other identifiable intangible assets | $ | 7,030 |
Net tangible assets | 520 |
Total fair value of net assets acquired | $ | 7,550 |
Goodwill (tax deductible) | $ | 37,450 |
The customer relationship intangible asset is being amortized over its estimated useful life of 5 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates an increase in the markets for the acquired products. Lewmar Marine Ltd. In August 2019, the Company acquired 100 percent of the equity interests of Lewmar Marine Ltd. and related entities (collectively, “Lewmar”), a supplier of leisure marine equipment, headquartered in Havant, United Kingdom. The purchase price was $43.2 million, net of cash acquired. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. The Company is validating account balances and finalizing the valuation for the acquisition. As the acquisition of Lewmar is not considered to have a material impact on the Company’s financial statements, pro forma results of operations and other disclosures are not presented. The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):
Cash consideration, net of cash acquired | $ | 43,224 |
Customer relationship and other identifiable intangible assets | $ | 19,579 |
Net tangible assets | 3,287 |
Total fair value of net assets acquired | $ | 22,866 |
Goodwill (not tax deductible) | $ | 20,358 |
The customer relationship intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products. Other Acquisitions in 2019 During fiscal 2019, the Company completed four other acquisitions totaling $28.3 million of purchase consideration, net of cash acquired, and subject to potential post-closing adjustments related to net working capital. The preliminary purchase price allocations resulted in $11.6 million of goodwill, of which $5.8 million is not deductible for tax purposes, and $9.2 million of acquired identifiable intangible assets. The accounting for these acquisitions is incomplete at December 31, 2019. The estimated fair values of assets acquired and liabilities assumed are based on preliminary allocations and will be finalized during the respective measurement periods which will not exceed 12 months from the respective acquisition dates. As these acquisitions are not considered to have a material impact on the Company’s financial statements, pro forma results of operations and other disclosures are not presented. Acquisitions in 2018 Smoker Craft Furniture In November 2018, the Company acquired the business and certain assets of the furniture manufacturing operation of Smoker Craft Inc., a leading pontoon, aluminum fishing, and fiberglass boat manufacturer located in New Paris, Indiana. The purchase price was $28.1 million paid at closing. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. ST.LA. S.r.l. In June 2018, the Company acquired 100 percent of the equity interests of ST.LA. S.r.l., a manufacturer of bed lifts and other RV components for the European caravan market, headquartered in Pontedera, Italy. The purchase price was $14.8 million, net of cash acquired, paid at closing. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. Hehr In February 2018, the Company acquired substantially all of the business assets of Hehr International Inc., (“Hehr”), a manufacturer of windows and tempered and laminated glass for the RV, transit, specialty vehicle, and other adjacent industries, headquartered in Los Angeles, California. The purchase price was $51.5 million paid at closing. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. Taylor Made In January 2018, the Company acquired 100 percent of the equity interests of Taylor Made Group, LLC, (“Taylor Made”), a marine supplier to boat builders and the aftermarket, as well as a key supplier to a host of other industrial end markets, headquartered in Gloversville, New York. The purchase price was $90.4 million, net of cash acquired, paid at closing. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. Acquisitions in 2017 Metallarte S.r.l. In June 2017, the Company acquired 100 percent of the equity interests of Metallarte S.r.l., (“Metallarte”), a manufacturer of entry and compartment doors for the European caravan market located near Siena, Italy, and its subsidiary, RV Doors, S.r.l., a manufacturer of driver-side doors located near Venice, Italy. The purchase price was $14.1 million paid at closing, plus contingent consideration based on future sales by this operation. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. Lexington In May 2017, the Company acquired the business and certain assets of Lexington LLC, (“Lexington”), a manufacturer of high quality seating solutions for the marine, RV, transportation, medical and office furniture industries located in Elkhart, Indiana. The purchase price was $40.1 million paid at closing. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. SessaKlein S.p.A. In February 2017, the Company acquired 100 percent of the outstanding shares of SessaKlein S.p.A., (“SessaKlein”), a manufacturer of highly engineered side window systems for both high speed and commuter trains, located near Varese, Italy. The purchase price was $6.5 million paid at closing, net of cash acquired, plus contingent consideration based on future sales by this operation. The results of the acquired business have been included in the Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. Goodwill Changes in the carrying amount of goodwill by reportable segment were as follows:
(In thousands) | OEM Segment |  | Aftermarket Segment |  | Total
Net balance – December 31, 2017 | $ | 109,641 |  |  | $ | 14,542 |  |  | $ | 124,183 |
Acquisitions – 2018 | 50,698 |  |  | 5,369 |  |  | 56,067 |
Other | (82) |  |  | — |  |  | (82) |
Net balance – December 31, 2018 | 160,257 |  |  | 19,911 |  |  | 180,168 |
Acquisitions – 2019 | 57,245 |  |  | 115,178 |  |  | 172,423 |
Other | (1,882) |  |  | 405 |  |  | (1,477) |
Net balance – December 31, 2019 | $ | 215,620 |  |  | $ | 135,494 |  |  | $ | 351,114 |
The Company performed its annual goodwill impairment procedures for all of its reporting units as of November 30, 2019, 2018, and 2017, and concluded no goodwill impairment existed at that time. The Company plans to update its assessment as of November 30, 2020, or sooner if events occur or circumstances change that could more likely than not reduce the fair value of a reporting unit below its carrying value. The goodwill balance as of each of December 31, 2019, 2018, and 2017 included $50.5 million of accumulated impairment, which occurred prior to December 31, 2017. Any change in the goodwill amounts resulting from foreign currency translations and purchase accounting adjustments are presented as “Other” in the above table. Other Intangible Assets Other intangible assets, by segment, at December 31 were as follows:
(In thousands) | 2019 |  | 2018
OEM Segment | $ | 164,047 |  |  | $ | 159,803 |
Aftermarket Segment | 177,379 |  |  | 16,539 |
Other intangible assets | $ | 341,426 |  |  | $ | 176,342 |
Other intangible assets consisted of the following at December 31, 2019:
(In thousands) | Gross Cost |  | Accumulated Amortization |  | Net Balance |  | Estimated Useful Life in Years |  |
Customer relationships | $ | 319,934 |  |  | $ | 69,008 |  |  | $ | 250,926 |  |  | 6 | to | 17
Patents | 76,206 |  |  | 44,611 |  |  | 31,595 |  |  | 3 | to | 19
Trade names (finite life) | 50,917 |  |  | 7,086 |  |  | 43,831 |  |  | 3 | to | 20
Trade names (indefinite life) | 7,600 |  |  | — |  |  | 7,600 |  |  | Indefinite |  |
Non-compete agreements | 7,598 |  |  | 4,947 |  |  | 2,651 |  |  | 3 | to | 6
Other | 309 |  |  | 173 |  |  | 136 |  |  | 2 | to | 12
Purchased research and development | 4,687 |  |  | — |  |  | 4,687 |  |  | Indefinite |  |
Other intangible assets | $ | 467,251 |  |  | $ | 125,825 |  |  | $ | 341,426 |  |  |  |  |
The Company performed its annual impairment test for indefinite lived intangible assets as of November 30, 2019, 2018, and 2017, and concluded no impairment existed at that time. Other intangible assets consisted of the following at December 31, 2018:
(In thousands) | Gross Cost |  | Accumulated Amortization |  | Net Balance |  | Estimated Useful Life in Years |  |
Customer relationships | $ | 191,919 |  |  | $ | 54,889 |  |  | $ | 137,030 |  |  | 6 | to | 16
Patents | 58,787 |  |  | 40,079 |  |  | 18,708 |  |  | 3 | to | 19
Trade names (finite life) | 10,885 |  |  | 5,507 |  |  | 5,378 |  |  | 3 | to | 15
Trade names (indefinite life) | 7,600 |  |  | — |  |  | 7,600 |  |  | Indefinite |  |
Non-compete agreements | 6,919 |  |  | 4,148 |  |  | 2,771 |  |  | 3 | to | 6
Other | 309 |  |  | 141 |  |  | 168 |  |  | 2 | to | 12
Purchased research and development | 4,687 |  |  | — |  |  | 4,687 |  |  | Indefinite |  |
Other intangible assets | $ | 281,106 |  |  | $ | 104,764 |  |  | $ | 176,342 |  |  |  |  |
Amortization expense related to other intangible assets was as follows for the years ended December 31:
(In thousands) | 2019 |  | 2018 |  | 2017
Cost of sales | $ | 5,200 |  |  | $ | 5,350 |  |  | $ | 5,631 |
Selling, general and administrative expense | 18,558 |  |  | 15,912 |  |  | 13,942 |
Amortization expense | $ | 23,758 |  |  | $ | 21,262 |  |  | $ | 19,573 |
Estimated amortization expense for other intangible assets for the next five years is as follows:
(In thousands) | 2020 |  | 2021 |  | 2022 |  | 2023 |  | 2024
Cost of sales | $ | 4,469 |  |  | $ | 4,393 |  |  | $ | 4,180 |  |  | $ | 3,321 |  |  | $ | 2,566 |
Selling, general and administrative expense | 28,887 |  |  | 28,372 |  |  | 28,227 |  |  | 27,484 |  |  | 27,038 |
Amortization expense | $ | 33,356 |  |  | $ | 32,765 |  |  | $ | 32,407 |  |  | $ | 30,805 |  |  | $ | 29,604 |

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