2.	Business Combination

July

27,

2018,

the Company completed the acquisition of

100%

of Ameron Water Transmission Group, LLC (“Ameron”) for a purchase price of approximately

$38.1

million in cash, subject to a post-closing adjustment based on changes in net working capital. The results of Ameron’s operations have been included in the consolidated financial statements since that date. Ameron is a major supplier of engineered welded steel pressure pipe as well as reinforced concrete pipe. Headquartered in Rancho Cucamonga, California, Ameron has pipe operations in Tracy, California and San Luis Río Colorado, Mexico, as well as a protective lining facility in Brea, California. This acquisition expands the Company's footprint in a key water transmission pipe market and adds bar-wrapped concrete cylinder pipe, reinforced concrete pipe and T-Lock, a proprietary polyvinyl chloride (PVC) lining for concrete pipe sewer applications, to the Company’s product portfolio.

The following table summarizes the preliminary purchase consideration and preliminary fair value of the assets acquired and liabilities assumed as of

July

27,

2018

(in thousands):

Assets
Cash and cash equivalents	$	912
Trade and other receivables		12,806
Contract assets		11,858
Inventories		9,895
Prepaid expenses and other		452
Property and equipment		34,709
Other assets		218
Total assets acquired		70,850

Liabilities
Accounts payable		5,520
Accrued liabilities		1,894
Contract liabilities		123
Deferred income taxes		3,298
Total liabilities assumed		10,835

Bargain purchase gain		(21,880	)

Total purchase consideration	$	38,135

The asset and liability fair value measurements are preliminary and subject to change. The adjustments arising from the completion of the detailed valuations and necessary calculations

may

materially affect the preliminary allocation of the purchase price. The purchase price allocation will be finalized as soon as practicable within the measurement period, but

not

later than

one

year following the acquisition date.

The excess of the aggregate fair value of the net assets acquired over the consideration paid has been treated as a gain on bargain purchase. When it became apparent there was a potential for a bargain purchase gain, management reviewed the Ameron assets acquired and liabilities assumed as well as the assumptions utilized in estimating their fair values. Upon completion of this reassessment, the Company concluded that recording a bargain purchase gain with respect to Ameron was appropriate and required under U.S. GAAP. The Company believes the seller was motivated to complete the transaction as part of an overall repositioning of its business.

The Company incurred acquisition-related costs during the

three

and

nine

months ended

September

30,

2018

$1.9

million and

$2.0

million, respectively. These costs are included in Selling, general and administrative expense in the Condensed Consolidated Statements Operations.

Ameron operations contributed net sales of

$11.1

million and operating loss of

$0.7

million, including acquisition-related costs of

$1.9

million, to the Company for the period from

July

27,

2018

September

30,

2018.

The following unaudited pro forma summary presents the consolidated results of the Company as if the acquisition of Ameron had occurred on

January

2017

(in thousands, except per share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018			2017

Net sales	$	57,250	$	53,071	$	142,969		$	142,836
Net income (loss) from continuing operations		6,822		1,229		(18,059	)		(5,050	)
Net income (loss) from continuing operations per basic share		0.70		0.13		(1.86	)		(0.53	)
Net income (loss) from continuing operations per diluted share		0.70		0.13		(1.86	)		(0.53	)

This unaudited pro forma consolidated financial data is included only for the purpose of illustration and does

not

necessarily indicate what the operating results would have been if the acquisition had occurred on

January

2017.

Moreover, this information is

not

indicative of what the Company’s future operating results will be. The information for

2017

and

2018

prior to the acquisition is included based on prior accounting records maintained by Ameron. The pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Ameron to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on

January

2017,

and the consequential tax effects. Aside from revising the

2018

net income (loss) for the effect of the bargain purchase gain, there were

material, non-recurring adjustments to this unaudited pro forma information.