Annual report pursuant to Section 13 and 15(d)

Note 4 - Business Combinations

v3.21.1
Note 4 - Business Combinations
12 Months Ended
Oct. 31, 2020
Notes to Financial Statements  
Business Combination Disclosure [Text Block]

Note 4. Business Combinations

 

May 2019 Acquisition of Capital Pumping

 

On May 15, 2019, the Company acquired Capital Pumping, LP and its affiliates (“Capital”), a concrete pumping provider based in Texas for a purchase price of $129.2 million, which was paid using proceeds from the Company’s public offering of common stock and additional borrowings on its term loan facility. This acquisition qualified as a business combination under ASC 805. Accordingly, the Company recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill recorded from the transaction represents expected synergies from combining operations and the assembled workforce.

 

The following table represents the final allocation of consideration to the assets acquired and liabilities assumed at their estimated acquisition-date fair values with any measurement-period adjustments included:

 

Consideration paid:

  $ 129,218  
         

Net assets acquired:

       

Current assets

  $ 748  

Intangible assets

    45,500  

Property and equipment

    56,467  

Liabilities assumed

    (63 )

Total net assets acquired

    102,652  
         

Goodwill

  $ 26,566  

 

Identifiable intangible assets acquired consist of customer relationships of $40.0 million and a trade name valued at $5.5 million. The customer relationships were valued using the multi-period excess earnings method. The Company determined the useful life of the customer relationships to be 15 years. The trade name was valued using the relief-from-royalty method and the Company determined the trade name associated with Capital to be indefinite.

 

December 2018 Acquisition of CPH

 

On December 6, 2018, the Company consummated the Business Combination. This acquisition qualified as a business combination under ASC 805. Accordingly, the Company recorded all assets acquired and liabilities assumed at their acquisition-date fair values, with any excess recognized as goodwill. Goodwill recorded from the transaction represents the value provided by the Company’s leading market share in a highly-fragmented industry. 

 

The following table represents the final allocation of consideration to the assets acquired and liabilities assumed at their estimated acquisition-date fair values with any measurement-period adjustments included (see paragraph below for any measurement-period adjustments included):

 

Consideration paid:

       

Cash

  $ 445,386  

Fair value of rollover equity

    164,908  

Net working capital adjustment

    4,050  

Total consideration paid

  $ 614,344  
         

Net assets acquired:

       

Current assets

  $ 49,112  

Intangible assets

    208,063  

Property and equipment

    219,467  

Liabilities assumed

    (110,245 )

Total net assets acquired

    366,397  
         

Goodwill

  $ 247,947  

 

Note: Cash in table above is net of $1.0 million in cash acquired

 

Identifiable intangible assets acquired consist of customer relationships of $152.7 million and trade names of $55.4 million. The customer relationships were valued using the multi-period excess earnings method. The Company determined the useful life of the customer relationships to be 15 years. The trade names were valued using the relief-from-royalty method. The Company determined the useful life of the trade name associated with Camfaud to be 10 years. The Company determined the trade names associated with Brundage-Bone and Eco-Pan to be indefinite.

 

During the Successor period from December 6, 2018 through October 31, 2019, the Company recorded an out of period adjustment related to the reduction of sales tax accrual of $3.4 million that resulted in changes to goodwill and liabilities assumed in the transaction. The impact of the adjustment was not considered material to the Company's previously issued financial statements.

 

CPH incurred transaction costs of $14.2 million and debt extinguishment costs of $16.4 million independently prior to the Business Combination.

 

Additional costs consisting of stock option and other compensation related expenses were recorded in connection with the Business Combination. These costs were solely contingent upon the completion of the business combination and did not include any future service requirements. As such, these costs will be presented “on the line” and are not reflected in either Predecessor or Successor financial statements.  “On the line” describes those expenses triggered by the consummation of a business combination that were incurred by the acquiree, i.e. CPH, that are not recognized in the Statement of Operations of either the Predecessor or Successor as they are not directly attributable to either period but instead were contingent on the Business Combination.

 

In conjunction with the Business Combination, there were $15.6 million of transaction bonuses and, as a result of a change in control provision for stock-based awards, certain unvested stock-based awards immediately vested, resulting in the recognition of compensation expense of approximately $0.6 million. These expenses were not reflected in either the Predecessor or Successor consolidated statements of operations and comprehensive loss periods.

 

Unaudited Pro Forma Financial Information

 

The following unaudited pro forma financial information presents the combined results of operations for the Company and gives effect to the CPH and Capital business combinations discussed above as if they had occurred on November 1, 2018. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the CPH and Capital business combinations had been completed on November 1, 2018, nor does it purport to project the results of operations of the combined company in future periods. The unaudited pro forma financial information does not give effect to any anticipated integration costs related to the acquired company.

 

The unaudited pro forma financial information is as follows:

 

(in thousands)

  Year Ended October 31, 2020     Year Ended October 31, 2019  

Revenue

  $ 304,301     $ 24,396  

Pro forma revenue adjustments by Business Combination

               

Capital

    -       26,829  

CPH

    -       258,565  

Total pro forma revenue

  $ 304,301     $ 309,790  

 

      (As Restated)  

(in thousands)

  Year Ended October 31, 2020     Year Ended October 31, 2019  

Net loss

  $ (61,251 )   $ (22,575 )

Pro forma net income (loss) adjustments by Business Combination

               

Capital

    -       2,868  

CPH

    -       (16,403 )

Total pro forma net loss

  $ (61,251 )   $ (36,110 )