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Note 6 - Business Acquisitions

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

NOTE 6. BUSINESS ACQUISITIONS

2021 Acquisitions

During the year ended December 31, 2021, we completed three acquisitions of outdoor advertising businesses and related assets as well as the acquisition of a surety brokerage company. The outdoor advertising businesses were acquired for the purpose of expanding our presence in the outdoor advertising market in the Midwestern United States. The membership units of the surety brokerage company were acquired for the purpose of expanding our presence in the surety and fidelity insurance business in the United States. These acquisitions were accounted for as business combinations under the provisions of ASC 805. A summary of the acquisitions is provided below.

Insurance Acquisition

American Contracting Services

On April 1, 2021, our subsidiary, GIG, acquired 100% of the stock of American Contracting Services, Inc., which we refer to as "ACS," a surety brokerage company located in Ohio, for a purchase price of $3,455,000. The total purchase price consists of $2,225,000 of cash, ten percent of which was held back by GIG and will be disbursed, subject to any claims for indemnification, over an 18-month period, and $1,230,000 in contingent consideration. The fair value of the contingent consideration, classified in other long-term liabilities in the consolidated balance sheet, is dependent on the probability of ACS achieving certain financial performance targets. The contingent consideration ranges between zero and $1,275,000 and is payable twenty-four months following the closing date.

Due to the timing of the transaction, the initial accounting for the business combination is incomplete. In order to develop our preliminary fair values, we utilized asset information received from ACS and fair value allocation benchmarks from similar completed transactions. We are currently in the process of assessing ACS's documentation of contracts related to customer relationships; and therefore the initial allocation of the purchase price is subject to refinement. Our preliminary purchase price allocation related to ACS includes property, plant and equipment, intangibles, and goodwill of $87,780, $970,000 and $2,339,628, respectively, as well as other net assets of $57,592. The intangible assets include customer relationships and trade names and trademarks, each of which have a fifteen year useful life.

Outdoor Advertising Acquisitions

Thomas Outdoor

On January 26, 2021, our subsidiary, LMO, acquired from Thomas Outdoor Advertising, Inc., which we refer to as “Thomas,” 238 billboard structures and related assets located in Kansas for a purchase price of $6,102,508 paid in cash. Our purchase price allocation related to Thomas includes property, plant and equipment, intangibles, and goodwill of $1,706,708, $1,551,000 and $2,618,431, respectively, as well as other net assets of $226,369. The intangible assets include customer relationships and permits which have useful lives of fifteen years and ten years, respectively.

Keleher Outdoor

On November 19, 2021, Link Billboards Oklahoma, LLC, our wholly-owned subsidiary, which we refer to as "LBO", purchased the outdoor advertising assets of Keleher Outdoor Advertising, Inc. and Keleher Enterprises, Inc. (together "Keleher"), based in Bartlesville, OK for a purchase price of $12,220,000. Keleher was founded in 1975 and operates over 600 billboard faces in Oklahoma and southeast Kansas. Due to the timing of the transaction, the initial accounting for the business combination is incomplete. We are still in the process of obtaining and assessing documentation of the contracts for customer relationships and detailed reports for structures and permits. The provisional purchase price allocation is based on internal information derived from our previous acquisitions in the Midwestern United States.

The following is a summary of the preliminary allocation of the purchase price, which includes the fair value allocation of the assets acquired and liabilities assumed:

Keleher

Assets Acquired

Property, plant and equipment
$ 3,138,245

Customer relationships
975,000

Permits
178,950

Goodwill
8,266,086

Right of use assets
1,634,263

Other
157,864

Total Assets Acquired
14,350,408

Liabilities Assumed

Lease liabilities
1,634,263

Other
496,145

Total Liabilities Assumed
2,130,408

Total
$ 12,220,000

The intangible assets include customer relationships and permits which have useful lives of fifteen years and ten years, respectively.

Missouri Neon

On December 30, 2021, LBO purchased the outdoor advertising assets of Missouri Neon Outdoor, based in Springfield, MO. Missouri Neon Outdoor previously operated over 800 billboard faces in Missouri, Oklahoma and Arkansas. Due to the timing of the transaction, the initial accounting for the business combination is incomplete. We are still in the process of obtaining and assessing documentation of the contracts for customer relationships and detailed reports for structures and permits. The provisional purchase price allocation is based on internal information derived from our previous acquisitions in the Midwestern United States.

The following is a summary of the preliminary allocation of the purchase price, which includes the fair value allocation of the assets acquired and liabilities assumed:

Neon

Assets Acquired

Property, plant and equipment
$ 8,311,014

Customer relationships
1,972,000

Permits
421,250

Goodwill
12,013,144

Right of use assets
4,093,478

Other
205,272

Total Assets Acquired
27,016,158

Liabilities Assumed

Lease liabilities
4,093,478

Other
777,332

Total Liabilities Assumed
4,870,810

Total
$ 22,145,348

The intangible assets include customer relationships and permits which have useful lives of fifteen years and ten years, respectively.

2020 Acquisitions

During the year ended December 31, 2020, we completed two acquisitions of broadband service providers and related assets. These acquisitions were accounted for as business combinations under the provisions of ASC 805. A summary of the acquisitions is provided below.

FIF AireBeam

On March 10, 2020, FIF AireBeam, LLC, our wholly-owned subsidiary, acquired substantially all of the business assets of FibAire Communications, LLC, which we refer to as "FibAire," a broadband services provider, as well as other assets used in the business operations owned by entities related to FibAire. The acquisition was accounted for as a business combination under the provisions of ASC 805. Under the terms of the asset purchase agreement, all purchased assets were sold on a debt-free basis to AireBeam. The total purchase price of $13,712,491 was paid 90% in cash and the remaining 10% of the purchase price was paid by issuing to FibAire 10% of the outstanding equity of AireBeam. During the second quarter of 2021, we purchased the non-controlling interest in AireBeam from the non-controlling owner for $664,414. The 10% interest previously owned by FibAire is included within "Redeemable Noncontrolling interest" in our consolidated Balance Sheets as of December 31, 2020.

The following is a summary of the allocation of the purchase price, which includes the final fair value allocation of the assets acquired and liabilities assumed:

AireBeam

Assets Acquired

Property, plant and equipment
$ 3,112,459

Customer relationships
1,480,000

Permits
260,000

Trade names and trademarks
970,000

Goodwill
7,124,158

Software
990,000

Right of use assets
337,966

Other
184,737

Total Assets Acquired
14,459,320

Liabilities Assumed

Accounts payable and deferred revenue
317,768

Lease liabilities
337,966

Other
91,095

Total Liabilities Assumed
746,829

Total
$ 13,712,491

Included in our property, plant, and equipment caption are fiber, tower, and broadband equipment assets acquired in the transaction which have useful lives ranging from five to twenty years. The intangible assets include customer relationships and permits (ten year useful life) and trade names and trademarks (twenty year useful life).

FIF Utah

On December 29, 2020, FIF Utah, our wholly-owned subsidiary, acquired substantially all of the business assets of Utah Broadband, LLC, a broadband services provider, which we refer to as “UBB,” as well as other assets used in the business operations owned by entities related to UBB. Under the terms of the Agreement, FIF Utah assumed only certain liabilities of UBB. The total purchase price of $26,603,700 was paid 80% in cash and the remaining 20% of the purchase price was paid by issuing to UBB 20% of the outstanding equity of FIF Utah. A portion of the cash purchase price was held in escrow to provide a source of indemnification for any breaches of the representations and warranties, covenants, and other obligations of UBB under the Agreement. At any time, UBB has the option, but not the obligation, to sell FIF Utah its entire ownership interest in FIF Utah. FIF Utah would be obligated to purchase the units and pay for the purchase over a three-year period if UBB elects to exercise this option. Subject to the occurrence of certain future events, FIF Utah has the option, but not the obligation, to purchase UBB’s ownership interest in FIF Utah, with payment due in full upon exercise of the option. The purchase price for the units under either of these put/call options is based upon a multiple of earnings before interest, taxes, depreciation, amortization, and certain other expenses. The 20% interest outstanding owned by UBB is included within "Redeemable Noncontrolling Interest" in our consolidated Balance Sheets.

The following is a summary of the allocation of the purchase price, which includes the final fair value allocation of the assets acquired and liabilities assumed:

UBB

Assets Acquired

Property, plant and equipment
$ 7,319,000

Customer relationships
5,100,000

Trade names and trademarks
1,910,000

Goodwill
12,511,000

Right of use assets
3,226,355

Other
201,000

Total Assets Acquired
30,267,355

Liabilities Assumed

Accounts payable and deferred revenue
437,300

Lease liabilities
3,226,355

Total Liabilities Assumed
3,663,655

Total
$ 26,603,700

Measurement-period adjustments recorded during 2021 increased the fair value assigned to UBB’s property, plant and equipment and goodwill by $1,149,000 and $1,481,000, respectively, and reduced the values assigned to intangible assets by $2,630,000. Depreciation and amortization expense were not materially impacted by the change.

Included in our property, plant, and equipment caption are fiber, tower, and broadband equipment assets acquired in the transaction which have useful lives ranging from five to twenty years. The intangible assets include customer relationships and permits (ten year useful life) and trade names and trademarks (twenty year useful life).

Pro Forma Information

The following is the unaudited pro forma information assuming all business acquisitions occurred on January 1, 2020. For all of the business acquisitions depreciation and amortization have been included in the calculation of the pro forma information provided below, based upon the actual or preliminary acquisition costs. Depreciation is computed on the straight-line method over the estimated remaining economic lives of the assets, ranging from two years to forty years. Amortization is computed on the straight-line method over the estimated useful lives of the assets ranging from two to fifty years.

For the Year Ended

December 31,

2021

2020

Revenue
$ 62,867,128 $ 66,105,808

Net Income Attributable to Common Stockholders
$ 53,575,855 $ 3,606,687

Basic and Diluted Net Income per Share
$ 1.84 $ 0.14

Basic and Diluted Weighted Average Class A and Class B Common Shares Outstanding
29,046,514 25,675,820

The information included in the pro forma amounts is derived from historical information obtained from the sellers of the businesses.