ACQUISITIONS

Acquisition of TBEI

On June 2, 2017, the Company completed the acquisition of all of the outstanding shares of capital stock of TBEI. TBEI is a leading U.S. manufacturer of dump truck bodies and trailers serving maintenance and infrastructure end markets. The Company expects that the acquisition of TBEI will enable it to strengthen its market position as a specialty vehicle manufacturer in maintenance and infrastructure markets, leverage its expertise in building chassis-based vehicles and balance the mix of revenues it generates from municipal and industrial markets. As the acquisition closed on June 2, 2017, the assets and liabilities of TBEI have been consolidated into the Condensed Consolidated Balance Sheet as of September 30, 2017, while the post-acquisition results of operations have been included in the Condensed Consolidated Statements of Operations, within the Environmental Solutions Group.

The initial cash consideration paid by the Company to acquire TBEI was approximately $271.8 million, inclusive of cash acquired and a preliminary working capital adjustment. Any additional working capital adjustment is expected to be finalized before the end of the fourth quarter of 2017.

The acquisition is being accounted for in accordance with ASC 805, Business Combinations. Accordingly, the total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed in connection with the acquisition based on their estimated fair values as of the completion of the acquisition. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results of operations. The Company’s purchase price allocation as of September 30, 2017 reflects various provisional estimates that were based on the information that was available as of the acquisition date and the subsequent filing date of this Form 10-Q. The Company believes that this information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, however the determination of those fair values is not yet finalized. Thus, the preliminary measurements of fair value set forth in the table below are subject to change during the measurement period as valuations are finalized, including those performed by a third-party valuation specialist related to certain of the acquired tangible and intangible assets. The Company expects to finalize the valuations and complete the purchase price allocation as soon as practicable.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date:



(in millions)
Purchase price, inclusive of working capital adjustment ^(a)	$	269.7
Total consideration	269.7

Cash	2.6
Accounts receivable	23.4
Inventories	24.7
Prepaid expenses and other current assets	0.8
Rental equipment	0.8
Properties and equipment	23.4
Customer relationships ^(b)	90.0
Trade names ^(c)	60.0
Other intangible assets	3.0
Accounts payable	(18.7		)
Accrued liabilities	(5.6		)
Deferred tax liabilities	(65.4		)
Net assets acquired	$	139.0

Goodwill ^(d)	$	130.7


(a)	$243.0 million of the purchase price was funded through borrowings under the Company’s revolving credit facility, with the remainder being funded with existing cash on hand. The purchase price is subject to a final working capital adjustment that is expected to be finalized before the end of the fourth quarter of 2017.


(b)	Represents the preliminary fair value assigned to customer relationships, which are considered to be definite-lived intangible assets, with a preliminary estimated useful life of approximately 12 years.


(c)	Represents the preliminary fair value assigned to trade names, which are considered to be indefinite-lived intangible assets.


(d)	Goodwill, which is not deductible for tax purposes, has been allocated to the Environmental Solutions Group on the basis that the synergies identified will primarily benefit this segment.

In the period between the June 2, 2017 closing date and September 30, 2017, TBEI generated $65.3 million of net sales and $3.9 million of operating income. The Company has included the operating results of TBEI within the Environmental Solutions Group in its condensed consolidated financial statements since the closing date.

Under ASC 805-10, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are accounted for as expenses in the periods in which the costs are incurred. Primarily due to the TBEI acquisition, the Company incurred $0.5 million and $1.5 million of acquisition-related costs in the three and nine months ended September 30, 2017, which have been recorded in Acquisition and integration-related expenses on the Condensed Consolidated Statement of Operations. The Company expects to incur additional integration expenses during the remainder of 2017.

In the nine months ended September 30, 2016, the Company incurred $0.9 million of acquisition and integration-related costs in connection with acquisitions completed in the prior-year.

Unaudited pro forma financial information

The following table presents the unaudited pro forma combined results of operations of the Company and TBEI for the three and nine months ended September 30, 2017 and 2016, after giving effect to certain pro forma adjustments including: (i) elimination of the costs recognized related to the step-up in fair value of TBEI’s inventory that will not have a continuing impact, (ii) amortization of acquired intangible assets, (iii) the impact of certain fair value adjustments such as depreciation on the acquired property, plant and equipment, (iv) interest expense for historical long-term debt of TBEI that was repaid and interest expense on additional borrowings by the Company to fund the acquisition and (v) elimination of non-recurring acquisition and integration-related expenses. The unaudited pro forma statement of operations of the Company assuming this transaction occurred at January 1, 2016 is as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions, except per share data)	2017		2016		2017		2016
Net sales	$	248.7	$	239.1	$	740.0	$	695.4
Income from continuing operations	13.1		9.8		38.3		36.2
Diluted earnings from continuing operations (per share)	$	0.22	$	0.16	$	0.63	$	0.59

The unaudited pro forma financial information is presented for informational purposes only and is not intended to represent or be indicative of the consolidated results of operations of the Company that would have been reported had the acquisition been completed as of the beginning of the periods presented, and should not be taken as being representative of the future consolidated results of operations of the Company.