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Note 9 - Acquisition of Business | 6 Months Ended
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Jun. 30, 2018
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | NOTE 9 – Acquisition of Businesses: CID Resources On May 2, 2018, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with CID Resources, Inc., a Delaware corporation (“CID”), CID Resources Holdings LLC, a Delaware limited liability company (the “Seller”), and certain of the equityholders of the Seller (such signatories, the “Equityholders”). Pursuant to the Purchase Agreement, the Company acquired all of the issued and outstanding common stock and Series A preferred stock of CID effective as of May 2, 2018. CID, headquartered in Coppell, Texas, manufactures medical uniforms, lab coats, and layers, and sells its products to specialty uniform retailers, ecommerce medical uniform retailers, and other retailers. The purchase price in the acquisition consists of the following, subject to adjustment in accordance with the terms of the Purchase Agreement: (a) approximately $84.4 million in cash, subject to adjustment for cash on hand, indebtedness, unpaid Seller expenses and working capital (excluding cash), in each case as of the closing date, and (b) the issuance of 150,094 shares of the Company’s common stock to an Equityholder (the “Buyer Shares”). Any working capital adjustment will be based on the difference between working capital as of the closing date and a target amount of approximately $39.5 million. Fair Value of Consideration Transferred
A summary of the purchase price is as follows (in thousands): |
Cash consideration at closing |  | $ | 84,430 |
Superior common stock issued |  |  | 3,763 |
Cash and working capital adjustment |  |  | 2,496 |
Total Consideration |  | $ | 90,689 |
Assets Acquired and Liabilities Assumed The total purchase price was allocated to the tangible and intangible assets and liabilities of CID based on their estimated fair values as of May 2, 2018. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was allocated to goodwill. The following table presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of CID based on their estimated fair values as of the effective date of the transaction. The assets and liabilities of CID shown below are based on our preliminary estimates of their acquisition date fair values. Our final fair value determination may be significantly different than those shown below. The following is our preliminary assignment of the aggregate consideration (in thousands):
Cash |  | $ | 1,329 |
Accounts receivable |  |  | 9,656 |
Prepaid expenses and other current assets |  |  | 1,262 |
Inventories |  |  | 30,691 |
Property, plant and equipment |  |  | 1,134 |
Contract assets |  |  | 2,535 |
Identifiable intangible assets |  |  | 39,087 |
Goodwill |  |  | 19,414 |
Total assets |  | $ | 105,108 |
Accounts payable |  |  | 4,472 |
Deferred tax liability |  |  | 8,999 |
Other current liabilities |  |  | 948 |
Total liabilities |  | $ | 14,419 |
The Company recorded $39.1 million in identifiable intangibles at fair value, consisting of $24.8 million in acquired customer relationships, $0.8 million in non-compete agreements and $13.5 million for the brand name. Goodwill was calculated as the difference between the fair value of the consideration and the values assigned to the assets acquired and liabilities assumed. This goodwill will not be deductible for tax purposes. The intangible assets associated with the customer relationships are being amortized for fifteen years beginning on May 2, 2018 and the non-compete agreement is being amortized for five years. The trade name is considered an indefinite-life asset and as such is not being amortized. The Company recognized amortization expense on these acquired intangible assets of $0.3 million for the three -month period ended June 30, 2018. On a pro forma basis as if the results of this acquisition had been included in our consolidated results for the three months ended June 30, 2018 net sales would have increased approximately $5.1 million. Net income would have increased $1.3 million in 2018, or $.08 per share. On a pro forma basis as if the results of this acquisition had been included in our consolidated results for the six months ended June 30, 2018 net sales would have increased approximately $22.3 million. Net income would have increased $2.6 million in 2018, or $.17 per share. On a pro forma basis as if the results of this acquisition had been included in our consolidated results for the three months ended June 30, 2017 net sales would have increased approximately $14.1 million. Net income would have increased $0.3 million in 2017, or $0.02 per share. On a pro forma basis as if the results of this acquisition had been included in our consolidated results for the six months ended June 30, 2017 net sales would have increased approximately $30.8 million. Net income would have decreased $0.1 million in 2017, or $0.01 per share. BAMKO On March 8, 2016, the Company closed on the acquisition of substantially all of the assets of BAMKO, Inc. The transaction had an effective date of March 1, 2016. The purchase price for the asset acquisition consisted of approximately $15.2 million in cash, net of cash acquired, the issuance of approximately 324,000 restricted shares of Superior’s common stock that vests over a five -year period, potential future payment of approximately $5.5 million in additional contingent consideration through 2021, and the assumption of certain liabilities of BAMKO, Inc. The transaction also included the acquisition of BAMKO, Inc.’s subsidiaries in Hong Kong, China, Brazil and England as well as an affiliate in India. Fair Value of Consideration Transferred
A summary of the purchase price is as follows (in thousands):
Cash consideration at closing, net of cash acquired |  | $ | 15,161 |
Restricted shares of Superior common stock issued |  |  | 4,558 |
Contingent consideration |  |  | 5,205 |
Total Consideration |  | $ | 24,924 |
Assets Acquired and Liabilities Assumed The total purchase price was allocated to the acquired tangible and intangible assets and assumed liabilities of BAMKO, Inc. based on their estimated fair values as of March 1, 2016. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was allocated to goodwill. The following table presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and assumed liabilities of BAMKO, Inc. based on their fair values as of the effective date of the transaction. The following is our assignment of the aggregate consideration (in thousands):
Accounts receivable |  | $ | 4,885 |
Prepaid expenses and other current assets |  |  | 3,200 |
Inventories |  |  | 236 |
Property, plant and equipment |  |  | 199 |
Other assets |  |  | 100 |
Identifiable intangible assets |  |  | 11,360 |
Goodwill |  |  | 6,994 |
Total assets |  | $ | 26,974 |
Accounts payable |  |  | 1,314 |
Other current liabilities |  |  | 736 |
Total liabilities |  | $ | 2,050 |
The Company recorded $11.4 million in identifiable intangibles at fair value, consisting of $2.1 million in acquired customer relationships, $0.4 million in non-compete agreements from the former owners of BAMKO, Inc., and $8.9 million for the acquired trade name. The estimated fair value for acquisition-related contingent consideration payable was $3.6 million as of June 30, 2018. The current portion of $0.8 million is expected to be paid in the second quarter of 2019. The Company will continue to evaluate this liability for remeasurement at the end of each reporting period and any change will be recorded in the Company’s consolidated statement of comprehensive income. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the estimated value of the liability. Goodwill was calculated as the difference between the fair value of the consideration and the values assigned to the assets acquired and liabilities assumed. The intangible assets associated with the customer relationships are being amortized for seven years beginning on March 1, 2016 and the non-compete agreement is being amortized for five years and ten months. The trade name is considered an indefinite-life asset and as such is not being amortized. The Company recognized amortization expense on these acquired intangible assets of $0.1 million for the each of three -month periods ended June 30, 2018 and 2017 and $0.2 million for each of the six -month periods ended June 30, 2018 and 2017. Public Identity On August 21, 2017, BAMKO acquired substantially all of the assets and assumed certain liabilities of PublicIdentity, Inc. (“Public Identity”) of Los Angeles, CA. Public Identity is a promotional products and branded merchandise agency that provides innovative, high quality merchandise and promotional products to corporate clients and universities across the country. The purchase price for the acquisition consisted of $0.8 million in cash, the issuance of approximately 54,000 restricted shares of Superior’s common stock and future payments of approximately $0.4 million in additional consideration through 2020. The majority of the shares issued vest over a three -year period. The preliminary estimated fair value of the consideration transferred is approximately $2.3 million. Based upon our estimates of their acquisition date fair values, we have assigned approximately $1.7 million to identifiable intangible assets and approximately $0.6 million to goodwill. Tangerine Promotions On November 30, 2017, BAMKO closed on the acquisition of substantially all of the assets of Tangerine Promotions, Ltd and Tangerine Promotions West, Inc (collectively “Tangerine”). The transaction had an effective date of December 1, 2017. Tangerine is a promotional products and branded merchandise agency that serves many well-known brands. The company is one of the leading providers of Point-of-Purchase (POP) and Point-of-Sale (POS) merchandise in the country. The purchase price for the asset acquisition consisted of approximately $7.2 million in cash, subject to adjustment, the issuance of approximately 83,000 restricted shares of Superior’s common stock that vests over a four -year period, the potential future payments of approximately $5.5 million in additional contingent consideration through 2021, and the assumption of certain liabilities. Fair Value of Consideration Transferred
A Summary of the purchase price is as follows (in thousands): |
Cash consideration at closing |  | $ | 7,222 |
Restricted shares of Superior common stock issued |  |  | 1,657 |
Contingent consideration |  |  | 3,209 |
Total Consideration |  | $ | 12,088 |
Assets Acquired and Liabilities Assumed The total purchase price was allocated to the acquired tangible and intangible assets and assumed liabilities of Tangerine based on their estimated fair values as of December 1, 2017. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was allocated to goodwill. The following table presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and assumed liabilities of Tangerine based on their estimated fair values as of the effective date of the transaction. The assets and liabilities of Tangerine shown below are based on our preliminary estimates of their acquisition date fair values. Our final fair value determinations may be significantly different than those shown below. The following is our preliminary assignment of the aggregate consideration (in thousands):
Accounts receivable |  | $ | 5,051 |
Prepaid expenses and other current assets |  |  | 969 |
Property, plant and equipment |  |  | 131 |
Identifiable intangible assets |  |  | 6,495 |
Goodwill |  |  | 4,169 |
Total assets |  | $ | 16,815 |
Accounts payables |  |  | 3,374 |
Other current liabilities |  |  | 1,353 |
Total liabilities |  | $ | 4,727 |
The Company recorded $6.5 million in identifiable intangibles at fair value, consisting of $3.1 million in acquired customer relationships, $0.2 million in non-compete agreements from the former owners of Tangerine, and $3.2 million for the acquired trade name. The estimated fair value for acquisition-related contingent consideration payable is $2.9 million as of June 30, 2018. The current portion of $0.6 million is expected to be paid in the second quarter of 2019. The Company will continue to evaluate this liability for remeasurement at the end of each reporting period and any change will be recorded in the Company’s consolidated statement of comprehensive income. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the estimated value of the liability. Goodwill was calculated as the difference between the fair value of the consideration and the values assigned to the assets acquired and liabilities assumed. The intangible assets associated with the customer relationships will be amortized for seven years beginning on December 1, 2017 and the non-compete agreement will be amortized for seven years. The trade name is considered an indefinite-life asset and as such will not be amortized. The Company recognized amortization expense on these acquired intangible assets of $0.1 million for the three -month period ended June 30, 2018, and $0.3 million for the six -month period ended June 30, 2018. On a pro forma basis as if the results of this acquisition had been included in our consolidated results for the three months ended June 30, 2017 net sales would have increased approximately $11.3 million. Net income would have increased $0.3 million in 2017, or $.02 per share. On a pro forma basis as if the results of this acquisition had been included in our consolidated results for the six months ended June 30, 2017 net sales would have increased approximately $19.1 million. Net income would have increased $0.4 million in 2017, or $.03 per share.

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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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