Acquisition

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Powerline Plus Ltd

On January 4, 2022, the Company acquired all issued and outstanding shares of capital stock of Powerline Plus Ltd. and its affiliate PLP Redimix Ltd. (collectively, the “Powerline Plus Companies"), a full-service electrical distribution construction company based in Toronto, Ontario. Cash consideration paid, funded through a combination of cash on hand and borrowings under the Facility (as defined below), including $0.1 million of net asset and other adjustments, was $110.7 million, net of cash acquired. The addition of the Powerline Plus Companies expanded our distribution operations in Ontario, Canada.

Additionally, the acquisition includes contingent earn-out consideration that may be payable if the Powerline Plus Companies achieve certain performance targets over a three-year post-acquisition period. As of the acquisition date, the fair value of the contingent earn-out consideration was $0.9 million. The future payout of the contingent earn-out consideration, if any, is unlimited and could be significantly higher than the acquisition date fair value. If the minimum thresholds of the performance targets are achieved the contingent earn-out consideration payment will be approximately $16.6 million. Changes in contingent earn-out consideration, subsequent to the acquisition, of approximately $0.7 million were recorded in other income, for the year ended December 31, 2022. The results of the Powerline Plus Companies are included in the Company’s consolidated financial statements beginning on the transaction date. During the year ended December 31, 2022, the Company recognized approximately $0.5 million, of acquisition-related costs associated with this acquisition.

The purchase agreement also includes contingent consideration provisions for down-side margin guarantee adjustments based upon certain contract performance subsequent to the acquisition. The contracts were valued at fair value at the acquisition date, causing no margin guarantee estimate or adjustments for fair value. Unfavorable changes in contract estimates, such as modified costs to complete or change order recognition, will result in changes to these margin guarantee estimates. No changes in margin guarantee adjustments on contracts, subsequent to the acquisition, have been recorded for the year ended December 31, 2022. Future margin guarantee adjustments, if any, will be recognized in other income in 2023.

The following table summarizes the allocation of the opening balance sheet as of the date of the Powerline Plus Companies acquisition:


(in thousands)	January 4, 2022 acquisition date (initial estimates)		Measurement Period Adjustments		Final Acquisition Allocation
Cash paid	$	114,429	$	—	$	114,429
Contingent consideration - fair value at acquisition date	10,608		(9,743)		865
Net asset and other adjustments	563		(479)		84
Total consideration, net of estimated net asset adjustments	125,600		(10,222)		115,378
Less: Acquired cash	(3,853)		—		(3,853)
Total consideration less cash acquired, net of net asset and other adjustments	$	121,747	$	(10,222)	$	111,525

Cash and cash equivalents	$	3,853	$	—	$	3,853
Accounts receivable	12,131		(52)		12,079
Contract assets	12,443		148		12,591
Refundable income taxes	394		482		876
Prepaid expenses and other current assets	1,233		(121)		1,112
Property and equipment	10,366		1,577		11,943
Operating lease right-of-use assets	6,631		(511)		6,120
Intangible assets	—		50,246		50,246
Accounts payable	(8,095)		(466)		(8,561)
Contract liabilities	(1,597)		(95)		(1,692)

Current portion of operating lease obligations	(1,224)		—		(1,224)
Current portion of finance lease obligations	(1,492)		—		(1,492)
Deferred income tax liabilities	(1,358)		(13,991)		(15,349)
Operating lease obligations, net of current maturities	(4,897)		—		(4,897)
Finance lease obligations, net of current maturities	(3,243)		—		(3,243)
Net identifiable assets and liabilities	25,145		37,217		62,362
Unallocated intangible assets	56,650		(56,650)		—
Total acquired assets and liabilities	81,795		(19,433)		62,362
Goodwill	$	43,805	$	9,211	$	53,016

The following table summarizes the estimated fair values of identifiable intangible assets and the related weighted average amortization periods as of the acquisition date of the Powerline Plus Companies.


	Estimated Fair Value at Acquisition Date		Weighted Average Amortization Period at Acquisition Date
	(in thousands)		(in years)
Amortizable Intangible Assets
Customer relationships	$	39,757	15.0
Backlog	4,007		1.0
Below market lease	511		5.0
Total amortizable intangible assets	$	44,275	14.9
Indefinite-lived Intangible Assets
Trade names	5,971		Indefinite
Total intangible assets	$	50,246

The acquisition date fair values of intangible assets were determined using the income approach, which discounts the projected future cash flows using a discount rate that appropriately reflects the risks associated with the projected cash flows. Under the income approach, the acquisition date fair value of the customer relationships and backlog were estimated using a multi-period excess earnings valuation method and the acquisition date fair value of the trade names was estimated using a relief from royalty valuation method. The fair value of the acquired operating lease obligation and operating right of use asset was estimated by applying the income approach. The fair value of the operating lease obligation was determined by comparing the difference between the annual lease contract rent over the remaining contractual term to a market rate cash flow stream, discounted to the present value. The Company calculated the fair value of the operating right of use asset based on the fair values of the operating lease obligation adjusted for a below market lease positions. The contractual value of the acquired accounts receivable is equal to the fair market value.

The Company has developed estimates of fair value of the assets acquired and liabilities assumed for the purposes of allocating the purchase price. During the year ended December 31, 2022, the Company recorded certain measurement period adjustments related to various working capital, property and equipment, intangible asset and deferred tax accounts determined during our purchase price allocation procedures. The goodwill to be recognized, which represents the excess of the purchase price over the net amount of the fair values assigned to assets acquired and liabilities assumed, is primarily attributable to the value of an assembled workforce and other non-identifiable assets. No synergies were anticipated in the acquisition as the Powerline Plus Companies will function as an individual business within the Company’s operating structure. Per applicable Canadian Revenue Authority regulations, $42.4 million of the goodwill and intangibles for tax purposes related to the acquisition of the Powerline Plus Companies will be tax deductible.