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 for 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 10) 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 Final Mile Products segment created by the Company in the fourth quarter of 2017. This acquisition allows the Company to accelerate our growth and greatly 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 $9.6 million for the twelve month periods ending December 31, 2018 and 2017, respectively. These costs have been recorded as Acquisition Expenses in the 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):



	Acquisition Date
Cash	$	36,878
Accounts receivable	25,196
Inventories	33,471
Prepaid expense and other	23,916
Property, plant, and equipment	59,891
Intangible assets	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 liabilities	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 of $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

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 the estimated 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 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 Consolidated Statements of Operations from the date of acquisition, including $347.3 million and $67.1 million in net sales for the years ended December 31, 2018 and 2017, respectively, and net income of $13.3 million and a net loss of $1.6 million for the year ended December 31, 2018 and 2017, respectively. 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):



	Year Ended December 31,
	2017		2016
Sales	$	1,998,043	$	2,139,404
Net income	$	117,786	$	124,323

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.