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ACQUISITION OF SUPREME INDUSTRIES, INC. | 9 Months Ended
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Sep. 30, 2018
Business Combinations [Abstract] |
ACQUISITION OF SUPREME INDUSTRIES, INC. |
| 3. | ACQUISITION OF SUPREME INDUSTRIES, INC.
On September 27, 2017, the Company completed the acquisition of Supreme Industries, Inc. (“Supreme”) following a cash tender offer by the Company for all outstanding shares of Supreme’s Class A and Class B common stock for $21 per share and an aggregate consideration paid of $360.4 million. The Company financed the Supreme acquisition and related fees and expenses using the proceeds of the Company’s $325 million offering in aggregate principal amount of 5.50% senior unsecured notes due 2025 (as described in further detail in Note 6) and available cash and cash equivalents. Supreme is one of the nation’s leading manufacturers of specialized commercial vehicles, including cutaway and dry-freight van bodies, refrigerated units, and stake bodies. Supreme has manufacturing facilities in Goshen and Ligonier, Indiana; Jonestown, Pennsylvania; Cleburne, Texas; Griffin, Georgia; and Moreno Valley, California. Supreme is part of our new Final Mile Products reportable segment created by the Company in the fourth quarter of 2017. This acquisition allows the Company to accelerate our growth and expand our presence in the final mile space, with increased distribution paths and greater customer reach, and supports the Company’s objective to transform it into a more diversified industrial manufacturer. The Company incurred various costs related to the Supreme acquisition including fees paid to an investment banker for acquisition services and the related bridge financing commitment as well as professional fees for diligence, legal and accounting totaling $0.1 million and $8.7 million for the nine-month periods ending September 30, 2018 and 2017, respectively. These costs have been recorded as Acquisition Expenses in the Condensed Consolidated Statements of Operations. The aggregate purchase price of $360.4 million was allocated to the opening balance sheet of Supreme at September 27, 2017, the date of acquisition, as follows (in thousands):
Cash |  | $ | 36,878 |
Accounts receivable |  |  | 25,196 |
Inventories |  |  | 33,471 |
Prepaid expense and other |  |  | 23,916 |
Property, plant, and equipment |  |  | 59,891 |
Intangibles |  |  | 161,200 |
Goodwill |  |  | 167,714 |
Other assets |  |  | 127 |
Total assets acquired |  | $ | 508,393 |
Current portion of long term debt |  | $ | 7,167 |
Accounts payable |  |  | 10,546 |
Other accrued liabilites |  |  | 55,518 |
Deferred income taxes |  |  | 71,880 |
Long term liabilities |  |  | 2,918 |
Total liabilities assumed |  | $ | 148,029 |
Net assets acquired |  | $ | 360,364 |
Acquisition, net of cash acquired |  | $ | 323,486 |
Intangible assets totaling $161.2 million were recorded as a result of the acquisition and consist of the following (in thousands):
|  | Amount |  |  | Useful Life
Tradename |  | $ | 20,000 |  |  | 20 years
Customer relationships |  |  | 139,000 |  |  | 15 years
Backlog |  |  | 2,200 |  |  | Less than 1 year
|  | $ | 161,200 |  |  |
The Company plans to amortize the tradename intangible asset utilizing a straight-line approach and the customer relationship intangible asset using an accelerated method that follows the pattern in which the economic benefits of the asset is expected to be consumed. Amortization expense, including the intangible assets recorded from the Supreme acquisition, is estimated to be $20.1 million, $20.5 million, $22.1 million, $23.4 million and $18.9 million for the years 2018 through 2022, respectively. Goodwill of $167.7 million was recorded as a result of the acquisition. The amount recorded as goodwill for the Supreme acquisition is not deductible for tax purposes. Goodwill, calculated as the excess of the consideration transferred over the net assets recognized and represents future economic benefits arising from other assets acquired that could not be individually identified and separately recognized, is comprised of operational synergies that are expected to be realized in both the short and long-term and the opportunity to enter new market sectors with higher margin potential which will enable us to deliver greater value to our customers and shareholders. During the first nine months of 2018, the Company made certain adjustments to its purchase price allocation to adjust tax obligations, inventory, accrued liabilities, and accounts receivable, which resulted in a $1.5 million decrease in goodwill. Unaudited Pro forma Results The results of Supreme are included in the Condensed Consolidated Statements of Operations, including $85.1 million and $0.2 million of net sales and net loss, respectively, for the three months ended September 30, 2018 and $276.8 million and $14.2 million of net sales and net income, respectively, for the nine months ended September 30, 2018. The following unaudited pro forma information is shown below as if the acquisition of Supreme had been completed as of the beginning of the earliest period presented (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2017 |  |  | 2017 |
Net sales |  | $ | 496,761 |  |  | $ | 1,454,599 |
Net income |  | $ | 14,688 |  |  | $ | 58,341 |
The information presented above is for informational purposes only and is not necessarily indicative of the actual results that would have occurred had the acquisition been consummated at the beginning of the respective periods, nor is it necessarily indicative of future operating results of the combined companies under the ownership and management of the Company.

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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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