3 .	BUSINESS COMBINATION :

July

27,

2018,

the Company completed the acquisition of

100%

of Ameron Water Transmission Group, LLC (“Ameron”) for a purchase price of

$38.1

million in cash. The results of Ameron’s operations have been included in the consolidated financial statements since that date. Ameron was a major supplier of engineered welded steel pressure pipe as well as reinforced concrete pipe. In addition to strengthening the Company’s position in the water transmission pipe market, this acquisition expands the Company's bar-wrapped concrete cylinder pipe capabilities and adds reinforced concrete pipe and T-Lock

—a proprietary polyvinyl chloride (PVC) lining for concrete pipe sewer applications—to the Company’s product portfolio. In connection with the acquisition, the Company acquired pipe facilities in Tracy, California and San Luis Río Colorado, Mexico, as well as a protective lining facility in Brea, California.

The following table summarizes the preliminary purchase consideration and preliminary fair value of the assets acquired and liabilities assumed as of

July

27,

2018

(in thousands):

Assets
Cash and cash equivalents	$	912
Trade and other receivables		8,887
Contract assets		12,018
Inventories		7,937
Prepaid expenses and other		3,777
Property and equipment		34,827
Other assets		320
Total assets acquired		68,678

Liabilities
Accounts payable		5,520
Accrued liabilities		1,599
Contract liabilities		123
Deferred income taxes		3,221
Total liabilities assumed		10,463

Bargain purchase gain		(20,080	)

Total purchase consideration	$	38,135

The asset and liability fair value measurements are preliminary, primarily related to income, deferred, and foreign taxes, and are subject to change as additional information is obtained and certain tax returns are finalized. As a result of additional information obtained about facts and circumstances that existed as of the acquisition date, the Company recorded measurement period adjustments during the

fourth

quarter of

2018,

which resulted in a net decrease of the bargain purchase gain of

$1.8

million. The adjustments primarily included reclassifications between balance sheet categories and a

$2.0

million reduction in inventories. The purchase price allocation will be finalized as soon as practicable within the measurement period, but

not

later than

one

year following the acquisition date.

The excess of the aggregate net fair value of assets acquired and liabilities assumed over the fair value of consideration transferred as the purchase price has been recorded as a bargain purchase gain. When it became apparent there was a potential for a bargain purchase gain, management reviewed the Ameron assets acquired and liabilities assumed as well as the assumptions utilized in estimating their fair values. Upon completion of this reassessment, the Company concluded that recording a bargain purchase gain with respect to Ameron was appropriate and required under U.S. GAAP. The Company believes the seller was motivated to complete the transaction as part of an overall repositioning of its business.

The Company incurred acquisition-related costs during the year ended

December

31,

2018

$2.6

million. These costs are included in Selling, general, and administrative expense in the Consolidated Statements Operations.

Ameron operations contributed net sales of

$30.2

million to the Company’s continuing operations for the period from

July

27,

2018

December

31,

2018.

It is impracticable to determine the effect on net income as a substantial portion of Ameron has been integrated into the Company’s ongoing operations.

The following unaudited pro forma summary presents the consolidated results of the Company as if the acquisition of Ameron had occurred on

January

2017

(in thousands):

	Year Ended December 31,
	2018			2017

Net sales	$	200,513		$	186,377
Net loss from continuing operations		(15,102	)		(10,611	)

This unaudited pro forma consolidated financial data is included only for the purpose of illustration and does

not

necessarily indicate what the operating results would have been if the acquisition had occurred on

January

2017.

Moreover, this information is

not

indicative of what the Company’s future operating results will be. The information for

2017

and

2018

prior to the acquisition is included based on prior accounting records maintained by Ameron. The pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Ameron to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property and equipment and intangible assets had been applied on

January

2017,

and the consequential tax effects. Aside from revising the

2018

net income for the effect of the bargain purchase gain, there were

material, non-recurring adjustments to this unaudited pro forma information.