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BUSINESS COMBINATIONS | 9 Months Ended
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Sep. 30, 2024
BUSINESS COMBINATIONS |
BUSINESS COMBINATIONS | 2. BUSINESS COM BINATIONS On May 31, 2023, the Company acquired substantially all of the assets and assumed certain liabilities of Southern Hydraulic Cylinder, Inc. through an acquisition subsidiary formed as a Tennessee corporation, which then changed its name to SHC, Inc. (“SHC”). SHC manufactures, sells, and services hydraulic cylinders and related components. The operations of SHC align with those of the Company, which management believes will strengthen the efforts to enhance the stability of the Company’s supply chain. The purchase price totaling approximately $17.4 million was comprised of cash on hand and by drawing on the existing revolving credit facility. The allocation of the consideration for the net assets acquired by SHC from Southern Hydraulic Cylinder, Inc. were as follows:
​ | ​ | ​ | ​
(in thousands) | ​ | ​ | ​
Sources of financing: | ​ | ​ | ​
Cash | ​ | $ | 17,352
Fair value of consideration transferred | ​ | ​ | 17,352
​ | ​ | ​ | ​
Fair value of assets and liabilities: | ​ | ​ | ​
Accounts receivable | ​ | ​ | 2,245
Fixed assets | ​ | ​ | 3,735
Inventory | ​ | ​ | 3,467
Prepaid insurance | ​ | ​ | 71
Intangibles | ​ | ​ | 193
Total identifiable assets acquired | ​ | ​ | 9,711
​ | ​ | ​ | ​
Assumed liabilities | ​ | ​ | 738
Goodwill | ​ | $ | 8,379
​ Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and is deductible for tax purposes. The acquisition by SHC resulted in the recognition of $8.4 million of goodwill. The Company believes goodwill is attributable to the investment for its ability to stabilize the supply chain through vertical integration, introduce automation and improve production efficiency, as well as the experienced workforce of the acquired business. For fixed assets, the real property fair value of $3.0 million was comprised of land and buildings of $2.8 million and cranes of $0.2 million. The fair value was determined by a third-party appraisal performed using a sales comparison approach and income approach. The net book value of $0.7 million was determined to approximate fair market value for the remaining fixed assets. Identifiable intangible assets consisted of a restrictive covenant agreement of $25.0 thousand and order backlog of $168.0 thousand. The fair value of intangible assets was determined by a third-party valuation. The restrictive covenant agreement and order backlog were valued using the income approach, specifically the with-or-without method and multi-period excess earnings method, respectively. The fair value of the assets acquired included trade receivables of $2.2 million that were not purchased financial assets with credit deterioration. The Company did not have any markdowns of trade receivables or corresponding credit losses. The results of operations of SHC are included in the accompanying condensed consolidated statements of income since the acquisition date. Transaction costs associated with the acquisition were not significant. Pro Forma Consolidated Financial Information (Unaudited) The results of operations for SHC, and the estimated fair values of the assets acquired and liabilities assumed, have been included in the Company’s condensed consolidated financial statements since the date of acquisition. For the three months ended September 30, 2024, SHC contributed approximately $2.0 million to the Company’s revenues and increased pretax income by approximately $0.3 million. For the nine months ended September 30, 2024, SHC contributed approximately $6.2 million to the Company’s revenues and increased pretax income by approximately $0.7 million. Revenue and income before income taxes for the period include adjustments made for the elimination of intercompany sales and profits. The unaudited pro forma financial information in the table below summarizes the combined results of the Company’s operations and those of SHC for the periods as shown as if the acquisition by SHC had occurred on January 1, 2023. The pro forma financial information presented below is for informational purposes only, and is subject to a number of estimates, assumptions, and other uncertainties. The totals presented for the nine months ending September 30, 2023 have been amended to reflect income before income taxes. ​
​ | ​ | ​ | ​ | ​ | ​
​ | Nine Months Ended September 30
(in thousands) | ​ | 2024 | ​ | ​ | 2023
Revenue | $ | 1,035,593 | ​ | $ | 863,037
Income before income taxes | $ | 67,502 | ​ | $ | 54,926
​

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