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Business Combinations | 12 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Business Combinations | Business Combinations: Acquisition of Irving Burton Associates, LLC On September 30, 2020, the Company acquired 100% of the equity interests of IBA for a net preliminary purchase price of $32.7 million, inclusive of the preliminary working capital adjustment. The acquisition was financed through a combination of: •borrowings of $33 million under the Company’s amended senior credit facility •cash on hand to pay transaction expenses and financings costs of $1.8 million The acquisition of IBA is consistent with the Company’s growth strategy, as it provided contract diversification, addition of key capabilities and increased presence in the military health market. The estimated goodwill derived from this transaction is primarily due to these attributes. We have used the acquisition method of accounting for this transaction, whereby the assets acquired and liabilities assumed are recognized based upon their estimated fair values at the acquisition date. The preliminary base purchase price for IBA was $32 million adjusted to reflect acquired cash, assumed liabilities and preliminary net working capital adjustments. Subject to certain limitations and conditions, the Company will be indemnified by the seller for damages resulting from breaches or inaccuracies of the representations, warranties, and covenants of the seller and IBA as set forth in the Purchase Agreement. The Purchase Agreement further provides that escrow funds of an aggregate amount of approximately $0.4 million were established at closing. The Company does not expect to draw on these funds as both the buyer and seller have agreed on the final purchase price. A representations and warranties insurance policy has been purchased by the Company in connection with the Purchase Agreement, under which the Company may seek recourse for breaches of the seller’s representations and warranties to supplement the indemnity escrow. The representations and warranties insurance policy is subject to certain customary exclusions and a deductible. In accordance with ASU 2017-01, which was previously adopted, the Company is accounting for this transaction as an acquisition of a business. We have not completed the process of allocating the acquisition price to the fair value of the assets and liabilities of IBA at the acquisition date. We are awaiting the fair values of the intangibles assets from the third party valuation firm. The preliminary purchase price and its allocation are shown below. Based on the unaudited financial statements of IBA on September 30, 2020, we accounted for the total acquisition consideration and allocation of fair value to the related assets and liabilities on a preliminary basis as follows:
(Amounts in thousands) |  |
Preliminary purchase price for IBA |  | $ | 32,706 |
Net assets acquired |  |
Cash and cash equivalents |  | $ | 28 |
Accounts receivable |  | 3,907 |
Other current assets |  | 124 |
Total current assets |  | 4,059 |
Accounts payable and accrued expenses |  | (758) |
Payroll liabilities |  | (1,269) |
Other current liabilities |  | (177) |
Net working capital |  | 1,855 |
Equipment and improvements, net |  | 28 |
Other long-term assets/liabilities |  | 214 |
Net identifiable assets acquired |  | 2,097 |
Goodwill and other identifiable intangible assets |  | 30,609 |
Net assets acquired |  | $ | 32,706 |
All operating units are aggregated into a single reportable segment. The acquisition of IBA did not create an additional reportable segment as all operations report to a single Chief Operating Decision Maker (CODM), serve a similar customer base, and provide similar services within a common regulatory environment. The goodwill represents intellectual capital and the acquired workforce, of which both do not qualify as a separate intangible asset. The tax deductible goodwill is in the process of being calculated. The following table presents certain results for the years ended September 30, 2019 as though the acquisition of IBA had occurred on October 1, 2018. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of our results if the acquisition had taken place on that date. The pro forma information was prepared by combining our reported historical results with the historical results of IBA for the pre-acquisition periods. In addition, the reported historical amounts were adjusted for the following items, net of associated tax effects: •The impact of acquisition financing. •The removal of certain IBA operations due to completed and nonrecurring contracts. •The impact of recording IBA's intangible asset amortization. •The impact of interest expense for the new credit facility. •The removal of transaction costs incurred by IBA for the acquisition.
|  |  |  |  |  |  |  | (unaudited) |  |
|  |  |  |  |  | (in thousands) |  |
|  |  |  |  |  | Year ended |  | Year ended |  |
|  |  |  |  |  | September 30, |  | September 30, |  |
Pro forma results |  |  |  |  |  |  |  | 2020 |  | 2019 |  |
Revenue |  |  |  |  |  |  |  | $ | 234,443 |  |  | $ | 228,117 |  |  |
Net income (loss) |  |  |  |  |  |  |  | 7,170 |  |  | 2,464 |  |  |
Number of shares outstanding - basic |  |  |  |  |  |  |  | 12,282 |  |  | 12,018 |  |  |
Number of shares outstanding - diluted |  |  |  |  |  |  |  | 13,105 |  |  | 13,041 |  |  |
Basic earnings per share (loss) |  |  |  |  |  |  |  | $ | 0.58 |  |  | $ | 0.21 |  |  |
Diluted earnings per share (loss) |  |  |  |  |  |  |  | $ | 0.55 |  |  | $ | 0.19 |  |  |

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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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- References No definition available. + Details
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