3. Acquisitions

On December 31, 2014, the Company acquired all of the outstanding common stock of Henderson for the purpose of expanding its current market presence in the snow and ice segment. Total consideration was $98,676 including a working capital adjustment of $4,688 which the Company paid the former shareholders of Henderson after the date of these financial statements and an outstanding payable to a former Henderson shareholder. The outstanding payable to the former Henderson shareholder was $3,340 at December 31, 2014 and is included in accrued expenses and other current liabilities. The acquisition was financed through amending the Company’s senior credit facility as discussed below in Note 7 and through the use of on hand cash. The Company incurred $1,815 of transaction expenses related to this acquisition that are included in selling, general and administrative expense in the Consolidated Statements of Income.

The following table summarizes the preliminary allocation of the purchase price paid and the subsequent working capital adjustment to the fair value of the net assets acquired as of the acquisition date:



Cash and cash equivalents	$	3,950
Accounts receivable		14,951
Inventories		16,308
Refundable income taxes paid		1,149
Deferred income taxes - current		514
Other current assets		876
Property and equipment		10,848
Goodwill		47,830
Intangible assets		17,390
Other assets - long term		74
Accounts payable and other current liabilities		(24,083)
Deferred income taxes - long term		(2,866)
Other liabilities - long term		(248)
Total	$	86,693

The fair values of the assets acquired and liabilities assumed included in the table above are preliminary and subject to change as the Company finalizes the third-party valuations and assesses certain reserves.

The goodwill for the acquisition is a result of acquiring and retaining the existing workforces and expected synergies from integrating the operations into the Company. The Company only expects to be able to deduct unamortized intangible assets and goodwill that existed at the time of the acquisition of $4,218 as only the existing goodwill and intangible assets are deductible as a result of not making an election under Section 338(h)(10) of the Internal Revenue Code. The remaining useful lives of intangible assets and goodwill for income tax purposes is 10.3 years. For book purposes, the acquired intangible assets include customer relationships of $8,300 being amortized over 15 years, patents of $3,200 being amortized over 10 years, non-compete agreements of $2,090 being amortized over 4 years, $200 backlog being amortized over six months and trademarks of $3,600 that possess indefinite lives.

The acquisition was accounted for under the purchase method, and accordingly, the results of operations are included in the Company’s financial statements from the date of acquisition. As the transaction occurred on December 31, 2014, there was no income statement activity in the year ended December 31, 2014.

The following unaudited pro forma information combines historical results as if Henderson had been owned by the Company for the twelve month periods presented.



		Year ended December 31,
		2014		2013
Net sales	$	385,138	$	267,300

Net income	$	43,191	$	12,453

Earnings per common share assuming dilution attributable to common shareholders	$	1.90	$	0.54

The unaudited pro forma information above includes the historical financial results of the Company and Henderson, adjusted to record depreciation and intangible asset amortization related to valuation of the acquired tangible and intangible assets at fair value and the addition of incremental costs related to debt to finance the acquisition, and the tax benefits related to the increased costs. This information is presented for information purposes only and is not necessarily indicative of what the Company’s results of operations would have been had the acquisition been in effect for the periods presented or future results.

On May 6, 2013, the Company acquired substantially all of the assets of TrynEx for the purpose of expanding its current market presence in the snow and ice segment. Total consideration paid was $26,734 including an estimated working capital adjustment. The working capital adjustment was further adjusted to reduce the purchase price at December 31, 2013 by $262 which the Company received in 2014. The acquisition was financed with $28,000 of revolver borrowings under the Company's credit facility discussed in Note 7. The Company incurred $1,239 of transaction expenses related to this acquisition that are included in selling, general and administrative expense in the Consolidated Statements of Income.

The TrynEx purchase agreement includes contingent consideration in the form of an earnout capped at $7,000. Under the earnout the former owners of TrynEx are entitled to receive payments contingent upon the revenue growth and financial performance of the acquired business for the years 2014, 2015 and 2016. On August 5, 2013, the purchase agreement was amended to remove the requirement that the former owners of TrynEx remain employed in the 2014 and 2015 performance periods, resulting in recognition of the fair value of the contingent consideration for 2014 and 2015 of $3,587 at that date. The requirement of continued employment remains in place for the 2016 performance period.

The following table summarizes the allocation of the purchase price paid and the subsequent working capital adjustment to the fair value of the net assets acquired as of the acquisition date:



Accounts receivable	$	604
Inventories		4,130
Other current assets		29
Property and equipment		5,272
Goodwill		5,910
Intangible assets		12,499
Accounts payable and other liabilities		(1,972)
Total	$	26,472

The goodwill for the acquisition is a result of acquiring and retaining the existing workforces and expected synergies from integrating the operations into the Company. The Company is amortizing its goodwill for income tax purposes over a fifteen-year period starting at the date of acquisition. The acquired intangible assets include customer relationships of $8,820 being amortized over 19.5 years, patents of $1,320 being amortized over 17 years and trademarks of $2,359 being amortized over 25 years.

The acquisition was accounted for under the purchase method, and accordingly, the results of operations are included in the Company's financial statements from the date of acquisition. From the date of acquisition through December 31, 2013, the TrynEx assets contributed $12,879 of revenues and ($3,334) of pre-tax operating losses, including $4,506 of certain purchase accounting expenses, related to the Company.