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Acquisition | 9 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Acquisition | Acquisition On August 31, 2020, the Company acquired Partsmaster from NCH Corporation. Partsmaster is a leading maintenance, MRO solutions provider that serves approximately 16,000 customers with over 200 sales representatives. The acquisition was made primarily to expand the Company's sales coverage, expand product lines, add experienced sales representatives, and leverage the Company's infrastructure. The purchase price was $35.3 million in cash and the assumption of certain liabilities. The Company paid $2.3 million of the purchase price in cash at closing and will pay the remaining $33.0 million in May 2021. The payment obligation has been discounted to present value and is recognized as an accrued acquisition liability of $32.5 million in the Company's condensed consolidated balance sheet. P ayment has been guaranteed under the Purchase Agreement, and includes the issuance of a $33.0 million irrevocable standby letter of credit. The Company will satisfy the payment obligation with cash on hand and, to the extent necessary, any remaining portion using its existing credit facility. The purchase price of the acquisition was allocated to the fair value of Partsmaster’s assets and liabilities on the acquisition date. The fair market value appraisals of the majority of the assets and liabilities were determined by a third party valuation firm using management estimates and assumptions including intangible assets of $5.0 million for customer relationships and $2.8 million for trade names, and their estimated useful lives of 10 and 5 years, respectively. The $16.0 million allocated to goodwill reflects the purchase price less the fair market value of the identifiable net assets. The appropriate fair values of the assets acquired and liabilities assumed are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as the Company finalizes the valuations of the assets acquired and liabilities assumed. Partsmaster contributed $5.4 million of revenue and $0.4 million of operating income in the third quarter 2020 post-acquisition. A summary of the initial purchase price allocation of the acquisition is as follows (Dollars in thousands):
Cash paid and payable and liabilities assumed |  |
Cash paid and payable |  | $ | 34,711 |
Accounts payable and accrued expenses |  | 4,076 |
Deferred compensation |  | 2,938 |
|  | $ | 41,725 |
Fair value of assets acquired |  |
Goodwill |  | $ | 15,952 |
Inventories |  | 7,809 |
Accounts receivable |  | 7,656 |
Customer relationships |  | 4,961 |
Trade names |  | 2,775 |
Property, plant and equipment |  | 2,201 |
Other assets |  | 371 |
|  | $ | 41,725 |
The following table contains unaudited pro forma revenue and net income for Lawson Products assuming the Partsmaster acquisition closed on January 1, 2019.
|  | (Dollars in thousands)
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2020 |  | 2019 |  | 2020 |  | 2019
Revenue |  |  |  |  |  |  |  |
Actual |  | $ | 90,277 |  |  | $ | 94,779 |  |  | $ | 253,458 |  |  | $ | 282,219 |
Pro forma |  | 101,222 |  |  | 109,174 |  |  | 298,546 |  |  | 332,234 |
Net income |  |  |  |  |  |  |  |
Actual |  | $ | 1,738 |  |  | $ | 4,774 |  |  | $ | 14,890 |  |  | $ | 10,227 |
Pro forma |  | 1,982 |  |  | 4,598 |  |  | 16,312 |  |  | 10,166 |
The pro forma disclosures in the table above include adjustments for amortization of intangible assets, implied interest expense and acquisition costs to reflect results as if the acquisition of Partsmaster had closed on January 1, 2019 rather than on the actual acquisition date. This pro forma information utilizes certain estimates, is presented for illustrative purposes only and is not intended to be indicative of the actual results of operation. In addition, future results may vary significantly from the results reflected in the pro forma information. The unaudited pro forma financial information does not reflect the impact of future positive or negative events that may occur after the acquisition, such as anticipated cost savings from operating synergies.

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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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- References No definition available. + Details
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