Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Skratch Enterprises Ltd.

On June 21, 2022, the Company acquired the stock of Skratch Enterprises Ltd. (“Skratch”) for $7,402, which is inclusive of deferred payments withheld by the Company of $1,228, to be paid over the next five years or utilized to satisfy post-closing working capital adjustments or indemnity claims under the purchase agreement. Located in Telford, United Kingdom, Skratch offers a single-point supply solution model for clients, and enabling large scale deployments. Skratch’s service offerings include design, prototyping and proof of concept, hardware and software, logistics and warehousing, installation, maintenance, content management, and managed monitoring. Skratch has been included in the Company’s Technology Services and Solutions business unit within the Rail, Technologies, and Services segment.

VanHooseCo Precast LLC

On August 12, 2022, the Company acquired the operating assets of VanHooseCo Precast LLC (“VanHooseCo”), a privately-held business headquartered in Loudon, Tennessee specializing in precast concrete walls, water management products, and traditional precast products for the industrial, commercial, and residential infrastructure markets. The Company acquired VanHooseCo for $52,203, net of cash acquired at closing, subject to the finalization of net working capital adjustments. An amount equal to $2,500 of the purchase price was deposited in an escrow account in order to cover breaches of representations and warranties. The acquisition agreement includes two employment agreements whereby principals have the ability to earn up to an additional $1,000 dependent upon the successful completion of the principals’ employment agreements. VanHooseCo has been included in the Company’s Precast Concrete Products segment.

Acquisition Summary

Each transaction was accounted for under the acquisition method of accounting under U.S. GAAP which requires an acquiring entity to recognize, with limited exceptions, all of the assets acquired and liabilities assumed in a transaction at fair value as of the acquisition date. Goodwill primarily represents the value paid for each acquisition’s enhancement to the Company’s product and service offerings and capabilities, as well as a premium payment related to the ability to control the acquired assets, as well as the assembled workforce provided.

VanHooseCo contributed net sales of $6,353 and operating profit of $397 to the Company’s consolidated results for the period from August 12, 2022 through September 30, 2022.

The table below summarizes the Company’s results as though the VanHooseCo acquisition had been completed on January 1, 2022. Certain of VanHooseCo’s historical amounts were reclassified to conform to the Company’s financial presentation of operations, which included recording inventory and property, plant, and equipment at fair market value, to establish intangible assets, to remove deferred compensation expense, and to include interest expense for the additional borrowings. The following unaudited pro forma information is provided for informational purposes only and does not represent what consolidated results of operations would have been had the VanHooseCo acquisition occurred on January 1, 2022 nor are they necessarily indicative of future consolidated results of operations. The Company has omitted the prior year interim period from the table below due to the acquired company being a privately-held entity with limited interim financial information.


	Nine Months Ended September 30,
		2022
Net sales		$	385,824
Net loss attributable to L.B. Foster Company		(633)
Diluted loss per share
As reported		$	(0.16)
Pro forma		$	(0.06)

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of the VanHooseCo and Skratch acquisitions. Due to the timing of the acquisitions, the Company is in the process of measuring the fair value of assets acquired and liabilities assumed, including intangible assets, and values for the allocations shown in the tables below are preliminary.


Allocation of purchase price	VanHooseCo		Skratch
Current assets, net of cash acquired on the acquisition date	$	10,825	$	1,129
Property, plant, and equipment	30,001		174
Goodwill	9,674		5,549
Other intangibles	4,561		1,750
Liabilities assumed	(2,521)		(1,200)
Total	$	52,540	$	7,402

The following table summarizes the estimates of the fair values of the VanHooseCo and Skratch identifiable intangible assets acquired:


Identifiable intangible assets	VanHooseCo		Skratch
Non-compete agreements	$	—	27
Customer relationships	1,537		1,349
Trademarks and trade names	2,697		374
Favorable lease	327		—
Total	$	4,561	$	1,750

The Company made a preliminary allocation of the purchase price for the VanHooseCo and Skratch acquisitions as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy. See Note 14 for a description of the fair value hierarchy.

Due to the timing of the acquisitions, values shown in the table above are preliminary. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement recognized for assets or liabilities assumed, the Company will retrospectively adjust the amounts recognized as of the acquisition date.

Divestiture Summary

On August 1, 2022, the Company divested the assets of its rail spikes and anchors track components business (“Track Components”) located in St-Jean-sur-Richelieu, Quebec, Canada. Cash proceeds from the transaction were $7,795, subject to indemnification obligations and working capital adjustments. The Track Components business was reported in the Rail Products business unit within the Rail, Technologies, and Services segment. On September 24, 2021, the Company executed the sale of its Piling Products division for $23,902 in total proceeds. The sale included substantially all inventory held by the Company associated with the division. The Piling Products division was included in the Fabricated Steel business unit within the Steel Products and Measurement segment.