Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Business Combinations

v3.20.1
Note 4 - Business Combinations
3 Months Ended
Jan. 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
  $
48,912
 
Intangible assets
   
208,063
 
Property and equipment
   
219,467
 
Liabilities assumed
   
(110,245
)
Total net assets acquired
   
366,197
 
         
Goodwill
  $
248,147
 
 
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 statement 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)
 
Three Months Ended January 31, 2020
   
Three Months Ended January 31, 2019
 
Revenue
  $
73,939
    $
24,396
 
Pro forma revenue adjustments by Business Combination
               
Capital
   
-
     
12,383
 
CPH
   
-
     
33,970
 
Total pro forma revenue
  $
73,939
    $
70,749
 
 
   
Three Months Ended January 31, 2020
   
Three Months Ended January 31, 2019
 
Net loss
  $
(2,746
)   $
(22,575
)
Pro forma net income adjustments by Business Combination
               
Capital
   
-
     
1,310
 
CPH
   
-
     
(3,630
)
Total pro forma net loss
  $
(2,746
)   $
(24,895
)