XML 30 R11.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Acquisition | 6 Months Ended
--- | ---
Dec. 31, 2018
Business Combinations [Abstract] |
Acquisition | Acquisitions Boyd Coffee Company On October 2, 2017 (“Closing Date”), the Company acquired substantially all of the assets and certain specified liabilities of Boyd Coffee Company (“Boyd Coffee” or “Seller”), a coffee roaster and distributor with a focus on restaurants, hotels, and convenience stores on the West Coast of the United States. The acquired business of Boyd Coffee (the “Boyd Business”) is expected to add to the Company’s product portfolio, improve the Company’s growth potential, deepen the Company’s distribution footprint and increase the Company’s capacity utilization at its production facilities. At closing, as consideration for the purchase, the Company paid the Seller $38.9 million in cash from borrowings under its senior secured revolving credit facility (see Note 13), and issued to Boyd Coffee 14,700 shares of the Company’s Series A Convertible Participating Cumulative Perpetual Preferred Stock, par value $1.00 per share (“Series A Preferred Stock”), with a fair value of $11.8 million as of the Closing Date. Additionally, the Company held back $3.2 million in cash (“Holdback Cash Amount”) and 6,300 shares of Series A Preferred Stock (“Holdback Stock”) with a fair value of $4.8 million as of the Closing Date, for the satisfaction of any post-closing working capital adjustment and to secure the Seller’s (and the other seller parties’) indemnification obligations under the purchase agreement. Any Holdback Cash Amount and Holdback Stock not used to satisfy indemnification claims (including pending claims) will be released to the Seller on the 18-month anniversary of the Closing Date. In addition to the Holdback Cash, as part of the consideration for the purchase, at closing the Company held back $1.1 million in cash (the “Multiemployer Plan Holdback”) to pay, on behalf of the Seller, any assessment of withdrawal liability made against the Seller following the Closing Date in respect of the Seller’s multiemployer pension plan, which amount was recorded on the Company’s consolidated balance sheets in “Other current liabilities” and “Other long-term liabilities” at December 31, 2018 and June 30, 2018, respectively. See Note 16 and Note 17. On January 8, 2019, the Seller notified the Company of the assessment of $0.5 million in withdrawal liability against the Seller, which the Company paid from the Multiemployer Plan Holdback. See Note 23. The acquisition was accounted for as a business combination. The fair value of consideration transferred was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated amount recorded as goodwill. The fair value of consideration transferred reflected the Company’s best estimate of the post-closing net working capital adjustment of $(8.1) million at June 30, 2018 when the purchase price allocation was finalized. On January 23, 2019, PricewaterhouseCoopers LLP (“PwC”), as the “Independent Expert” designated under the Asset Purchase Agreement to resolve working capital disputes, issued its determination letter with respect to adjustments to working capital. The post-closing net working capital adjustment, as determined by the Independent Expert, was ($6.3) million. See Note 23. The following table summarizes the final allocation of consideration transferred as of the acquisition date:
(In thousands) | Fair Value |  | Estimated Useful Life (years)
Cash paid | $ | 38,871 |  |  |
Holdback Cash Amount | 3,150 |  |  |
Multiemployer Plan Holdback | 1,056 |  |  |
Fair value of Series A Preferred Stock (14,700 shares)(1) | 11,756 |  |  |
Fair value of Holdback Stock (6,300 shares)(1) | 4,825 |  |  |
Estimated post-closing net working capital adjustment | (8,059 | ) |  |
Total consideration | $ | 51,599 |  |  |
Accounts receivable | $ | 7,503 |  |  |
Inventory | 9,415 |  |  |
Prepaid expense and other assets | 1,951 |  |  |
Property, plant and equipment | 4,936 |  |  |
Goodwill | 25,395 |  |  |
Intangible assets: |  |  |
Customer relationships | 16,000 |  |  | 10
Trade name/trademark—indefinite-lived | 3,100 |  |  |
Accounts payable | (15,080 | ) |  |
Other liabilities | (1,621 | ) |  |
Total consideration | $ | 51,599 |  |  |
______________ (1) Fair value of Series A Preferred Stock and Holdback Stock as of the Closing Date, estimated as the sum of (a) the present value of the dividends payable thereon and (b) the stated value of the Series A Preferred Stock or Holdback Stock, as the case may be, adjusted for both the conversion premium and the discount for lack of marketability arising from conversion restrictions. In connection with this acquisition, the Company recorded goodwill of $25.4 million, which is deductible for tax purposes. The Company also recorded $16.0 million in finite-lived intangible assets that included customer relationships and $3.1 million in indefinite-lived intangible assets that included a trade name/trademark. The amortization period for the finite-lived intangible assets is 10.0 years. See Note 11. The determination of the fair value of intangible assets acquired was primarily based on significant inputs not observable in an active market and thus represent Level 3 fair value measurements as defined under GAAP. The fair value assigned to the customer relationships was determined based on management's estimate of the retention rate utilizing certain benchmarks. Revenue and earnings projections were also significant inputs into estimating the value of customer relationships. The fair value assigned to the trade name/trademark was determined utilizing a multi-period excess earnings approach. Under the multi-period excess earnings approach, the fair value of the intangible asset is estimated to be the present value of future earnings attributable to the asset and this method utilizes revenue and cost projections including an assumed contributory asset charge. The following table presents the net sales and income before taxes from the Boyd Business operations that are included in the Company’s condensed consolidated statements of operations for the three and six months ended December 31, 2018 (unaudited):
(In thousands) | Three Months Ended |  | Six Months Ended
| December 31, 2018 |  | December 31, 2018
Net sales | $ | 24,081 |  |  | $ | 44,584 |
Income before taxes | $ | 3,505 |  |  | $ | 4,216 |
The Company considers the acquisition to be material to the Company’s financial statements and has provided certain pro forma disclosures pursuant to ASC 805, “Business Combinations.” The following table sets forth certain unaudited pro forma financial results for the Company for the three and six months ended December 31, 2018 and 2017, as if the acquisition of the Boyd Business was consummated on the same terms as of the first day of the applicable fiscal period.
|  | Three Months Ended December 31, |  | Six Months Ended December 31,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
(In thousands) |  |  |  |  |  |  |  |
Net sales |  | $ | 159,773 |  |  | $ | 167,366 |  |  | $ | 307,213 |  |  | 321,061 |
(Loss) income before taxes |  | $ | (12,825 | ) |  | $ | 2,142 |  |  | $ | (17,098 | ) |  | 3,900 |
At closing, the parties entered into a transition services agreement where the Seller agreed to provide certain accounting, marketing, human resources, information technology, sales and distribution and other administrative support during a transition period of up to 12 months. The Company also entered into a co-manufacturing agreement with the Seller for a transition period of up to 12 months as the Company transitioned production into its plants. Amounts paid by the Company to the Seller for these services totaled $3.7 million in the three and six months ended December 31, 2018 and $9.2 million in the three and six months ended December 31, 2017. The transition services and co-manufacturing agreements expired on October 2, 2018. The Company has incurred acquisition and integration costs related to the Boyd Business acquisition, consisting primarily of legal and consulting expenses, Boyd Coffee plant decommissioning and equipment relocation costs, and one-time payroll and benefit expenses of $2.7 million and $1.0 million during the three months ended December 31, 2018 and 2017, respectively, and $3.7 million and $3.4 million during the six months ended December 31, 2018 and 2017, respectively. These expenses are included in operating expenses in the Company's condensed consolidated statements of operations.

X
- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration