Note 2 - Business Combination

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

2. Business Combination

On October 5, 2021, the Company completed the acquisition of 100% of Park Environmental Equipment, LLC (ParkUSA) for a purchase price of $90.2 million in cash which is included in the Precast segment for all periods following the acquisition date. ParkUSA is a precast concrete and steel fabrication-based company that develops and manufactures water, wastewater, and environmental solutions. Operations continue with ParkUSA’s previous management and workforce at its three Texas manufacturing facilities located in Houston, Dallas, and San Antonio.

The following table summarizes the purchase consideration and fair value of the assets acquired and liabilities assumed as of October 5, 2021 (in thousands):

Assets
Cash and cash equivalents	$	278
Trade and other receivables		11,034
Inventories		12,773
Prepaid expenses and other		293
Property and equipment		8,076
Operating lease right-of-use assets		58,301
Intangible assets		31,000
Deferred income taxes		347
Total assets acquired		122,102
Liabilities
Accounts payable		2,029
Accrued liabilities		4,067
Operating lease liabilities		58,301
Total liabilities assumed		64,397
Goodwill		32,519
Total purchase consideration	$	90,224

The tangible and intangible assets acquired and liabilities assumed were recognized based on their estimated fair values on the acquisition date, with the excess purchase consideration recorded as goodwill. As a result of additional information obtained during the measurement period about facts and circumstances that existed as of the acquisition date, the Company recorded measurement period adjustments during the three and nine months ended September 30, 2022 which resulted in a $1.8 million increase in goodwill and purchase consideration related to the settlement of working capital. The measurement period for the ParkUSA acquisition was complete as of September 30, 2022.

The following table summarizes the components of the intangible assets acquired and their estimated useful lives:

	Estimated Useful Life		Fair Value
	(In years)		(In thousands)
Customer relationships		10.0	$	19,800
Trade names and trademarks		10.0		9,600
Patents		21.0		1,300
Backlog		0.6		300
Total intangible assets		10.2	$	31,000

Goodwill arose from the acquisition of an assembled workforce, expansion of product offerings, and management’s industry know-how, and is deductible for tax purposes.

The Company incurred transaction costs associated with this acquisition of $0 and $0.1 million during the three and nine months ended September 30, 2022, respectively and $0.6 million and $0.8 million during the three and nine months ended September 30, 2021, respectively. These transaction costs are included in Selling, general, and administrative expense in the Condensed Consolidated Statements of Operations.

Unaudited Pro Forma Disclosures

The following unaudited pro forma summary presents the consolidated results of the Company as if the acquisition of ParkUSA had occurred on January 1 of the year prior to the acquisition (in thousands):

	Three Months Ended		Nine Months Ended
	September 30, 2021		September 30, 2021
Net sales	$	105,345	$	283,005
Net income		2,477		12,247

This unaudited pro forma consolidated financial data is included only for the purpose of illustration and does not necessarily indicate what the operating results would have been if the acquisition of ParkUSA had occurred on January 1 of the year prior to the acquisition. Moreover, this information is not indicative of what the Company’s future operating results will be. The information prior to the acquisition is included based on prior accounting records maintained by ParkUSA. The pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of ParkUSA to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property and equipment and intangible assets had been applied on January 1 of the year prior to the acquisition. Adjustments also include an increase of interest expense as if the Company’s debt obtained in connection with the acquisition of ParkUSA had been outstanding since January 1 of the year prior to the acquisition. The provision for income taxes has also been adjusted for all periods, based upon the foregoing adjustments to historical results.