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Note 2 - Business Combination | 9 Months Ended
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Sep. 30, 2020
Notes to Financial Statements |
Business Combination Disclosure [Text Block] |
2. | Business Combination
On January 31, 2020, the Company completed the acquisition of 100% of Geneva Pipe and Precast Company (fka Geneva Pipe Company, Inc.) (“Geneva”) for a purchase price of $49.4 million in cash. Geneva is a concrete pipe and precast concrete products manufacturer based in Utah. This acquisition expanded the Company’s water infrastructure product capabilities by adding additional reinforced concrete pipe capacity and a full line of precast concrete products including storm drains and manholes, catch basins, vaults, and curb inlets as well as innovative lined products that extend the life of concrete pipe and manholes for sewer applications. Operations have continued with Geneva's previous management and workforce at the three Utah manufacturing facilities located in Salt Lake City, Orem, and St. George. Consistent with prior periods and considering the chief operating decision maker's evaluation of post-acquisition performance is based on total Company results, the Company continues to report as one segment. The following table summarizes the purchase consideration and preliminary fair value of the assets acquired and liabilities assumed as of January 31, 2020 (in thousands):
Assets |  |  |  |
Cash and cash equivalents |  | $ | 691 |
Trade and other receivables |  |  | 7,089 |
Inventories |  |  | 5,673 |
Prepaid expenses and other |  |  | 356 |
Property and equipment |  |  | 9,096 |
Operating lease right-of-use assets |  |  | 21,684 |
Intangible assets |  |  | 11,165 |
Total assets acquired |  |  | 55,754 |
Liabilities |  |  |  |
Accounts payable |  |  | 1,395 |
Accrued liabilities |  |  | 1,189 |
Operating lease liabilities |  |  | 20,454 |
Deferred income taxes |  |  | 5,343 |
Other long-term liabilities |  |  | 939 |
Total liabilities assumed |  |  | 29,320 |
Goodwill |  |  | 22,985 |
Total purchase consideration |  | $ | 49,419 |
The purchase consideration for this business combination was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase consideration recorded as goodwill. The asset and liability fair value measurements primarily related to inventories, property and equipment, operating lease right-of-use assets and liabilities, identifiable intangible assets, goodwill, and deferred income taxes, are preliminary and subject to change as additional information is obtained. As a result of additional information obtained during the measurement period about facts and circumstances that existed as of the acquisition date, the Company recorded measurement period adjustments during the three months ended June 30, 2020 which resulted in a $0.1 million balance sheet reclassification between trade and other receivables and inventories. 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 following table summarizes the components of the intangible assets acquired and their estimated useful lives:
|  | Estimated Useful Life |  |  | Fair Value |
|  | (In years) |  |  | (In thousands) |
Customer relationships |  |  | 11.0 |  |  | $ | 8,031 |
Trade names |  |  | 10.0 |  |  |  | 2,093 |
Backlog |  |  | 0.9 |  |  |  | 1,041 |
Total intangible assets |  |  | 9.9 |  |  | $ | 11,165 |
Goodwill arose from the acquisition of an assembled workforce, expansion of product offerings, and management’s industry know-how. The Company does not expect the goodwill to be deductible for tax purposes. The Company incurred transaction costs associated with this acquisition of approximately $0 and $2.6 million during the three and nine months ended September 30, 2020, respectively, and $0.5 million during the three and nine months ended September 30, 2019. These transaction costs are included in Selling, general, and administrative expense in the Condensed Consolidated Statements of Operations. Geneva operations contributed net sales of $12.5 million and $32.9 million to the Company’s continuing operations for the three months ended September 30, 2020 and the period from January 31, 2020 to September 30, 2020, respectively. It is impracticable to determine the effect on net income as a substantial portion of Geneva has been integrated into the Company’s ongoing operations. The following unaudited pro forma summary presents the consolidated results of the Company as if the acquisition of Geneva had occurred on January 1 of the year prior to the acquisition (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net sales |  | $ | 77,632 |  |  | $ | 88,053 |  |  | $ | 220,115 |  |  | $ | 241,477 |
Net income |  |  | 7,589 |  |  |  | 11,282 |  |  |  | 16,344 |  |  |  | 17,153 |
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 1 of the year prior to the acquisition. Moreover, this information is not indicative of what the Company’s future operating results will be. The information prior to the acquisition is included based on prior accounting records maintained by Geneva. The pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Geneva to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property and equipment and intangible assets had been applied on January 1 of the year prior to the acquisition. Adjustments also include an increase of interest expense as if the Company’s debt obtained in connection with the acquisition had been outstanding since January 1 of the year prior to the acquisition. The unaudited pro forma financial information includes non-recurring adjustments to remove transaction costs directly attributable to the acquisition. The provision for income taxes has also been adjusted for all periods, based upon the foregoing adjustments to historical results.

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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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