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BUSINESS COMBINATIONS

9 Months Ended

Sep. 30, 2023

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

3. BUSINESS COMBINATIONS

On May 31, 2023, the Company acquired substantially all assets and assumed certain liabilities of Southern Hydraulic Cylinder, Inc., (“SHC”), a Tennessee corporation. SHC manufactures, sells and services hydraulic cylinders and related components. The operations of SHC align with those of the Company, which management believes will bolster its efforts to enhance the stability of the Company’s supply chain.

The purchase price totaling approximately $17.8 million was comprised of cash on hand and by drawing on the existing revolving credit facility.

The preliminary allocation of the consideration for the net assets acquired from the acquisition of SHC were as follows:


Sources of financing
Cash		$	17,802
Fair value of consideration transferred			17,802

Fair value of assets and liabilities
Accounts receivable			2,244
Fixed assets			3,735
Inventory			3,384
Prepaid insurance			93
Total identifiable assets acquired			9,456

Assumed liabilities			630
Goodwill		$	8,976

The acquired business contributed revenues of $3,545 and earnings of $874 to the Company for the period from June 1, 2023 to September 30, 2023. Earnings for the period include adjustments made for the elimination of intercompany sales and profits, as well as sales of finished goods recorded at market value as part of the acquisition. The following unaudited pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2022.


	Pro Forma for Nine Months Ended September 30,
	2023			2022

	(Unaudited)
Revenue	$	863,037		$	631,814
Earnings	$	43,926		$	12,014

The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after the Company’s acquisition of SHC.

The goodwill is not deductible for tax purposes.

The fair value of the assets acquired includes trade receivables of $2,244 that are not purchased financial assets with credit deterioration. The Company does not anticipate any markdowns of trade receivables or corresponding credit losses.

The Company has obtained a third-party to perform a valuation of the assets and certain liabilities, however, the valuation has not been completed at the time of this quarterly filing. As such, any adjustments to the value of assets, such as intangible assets, fixed assets or inventory, will be disclosed in future filings.

Transaction costs incurred in the acquisition were not material and were primarily related to legal, accounting and consulting services and were expensed as incurred through September 30, 2023 and are included in Selling, General and Administrative expenses in the condensed consolidated statements of operations.

The allocations of the fair value of the acquired business were based on preliminary valuations of the estimated net fair value of the assets acquired and liabilities assumed. The fair value estimates are subject to adjustment during the measurement period (up to one year from the acquisition date). The fair values of the net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management. During the measurement period, we will adjust preliminary valuations assigned to assets and liabilities if new information is obtained about facts and circumstances that existed as of the acquisition date, if any, that, if known, would have resulted in revised values for these items as of that date. The net working capital adjustment related to the acquisitions are estimated as of the closing date and will be adjusted based on that estimate. Net working capital adjustments, if any, will be recorded in other assets on the condensed consolidated balance sheet. The impact of all changes, if any, that do not qualify as measurement period adjustments are included in current period earnings.