3. Acquisitions

On July 15, 2016, the Company acquired Dejana. Total consideration was $191,544 including a preliminary working capital adjustment of $3,989 that reduced the purchase price at the close of the transaction on July 15, 2016 that was subsequently adjusted by $5,417 paid by the Company to the seller. Thus, the net working capital adjustment paid to the former owners of Dejana was $1,428 in addition to contingent consideration with an estimated fair value of $10,200. The acquisition was financed through exercising the accordion feature on the Company’s term loan for $130,000 less an original issue discount of $650 and $20,000 of short term revolver borrowings and through the use of $31,994 of on hand cash. The Company incurred $3,422 of transaction expenses related to the Dejana acquisition that are included in selling, general and administrative expense in the Consolidated Statements of Income in the year ended December 31, 2016.

The Dejana purchase agreement includes contingent consideration in the form of an earn out capped at $26,000. Under the earn out agreement, the former owners of Dejana are entitled to receive payments contingent upon the revenue growth and financial performance of the acquired business for the years 2016, 2017 and 2018. The preliminary estimated fair value of the earn out consideration was $10,200 which was further adjusted at December 31, 2016 to $10,373 as a result of the 2016 performance exceeding the 2016 fair value established at the opening balance sheet by $173. The subsequent adjustment is included in selling, general and administrative expense in the Consolidated Statements of Income in the year ended December 31, 2016. As a result of the year ending December 31, 2016 results, the new possible range of outcomes was reduced from $26,000 to a maximum earnout of $21,487.

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:



Accounts receivable	$	13,509
Inventories		20,017
Truck chassis floor plan inventory		13,479
Prepaids and other current assets		705
Property and equipment		5,821
Goodwill		77,354
Intangible assets		77,800
Other assets - long term		219
Accounts payable and other liabilities		(3,881)
Floor plan obligations		(13,479)
Earn out liability		(10,200)
Total	$	181,344

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. Due to the limited amount of time since the acquisition of substantially all of the assets of Dejana, the initial purchase price allocation is preliminary as of December 31, 2016 as the Company has not completed its analysis of income tax liabilities. The Company expects to be able to deduct amortization of goodwill for income tax purposes over a fifteen-year period.

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, 2016, the Dejana assets contributed $65,044 of revenues and ($1,397) of pre-tax operating losses.

The following unaudited pro forma information presents the combined results of operations of the Company and Dejana for the years ended December 31, 2016 and December 31, 2015 as if the acquisition had occurred on January 1, 2015, with pro forma adjustments to give effect to amortization of intangible assets, depreciation of fixed assets, an increase in interest expense from the acquisition financing and certain other adjustments:



		Years ended December 31,
		2016		2015
Net sales	$	490,243	$	517,716

Net income	$	45,983	$	45,760

Earnings per common share assuming dilution attributable to common shareholders	$	2.00	$	2.01

The unaudited pro forma information above includes the historical financial results of the Company and Dejana, 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 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 $98,511 including a working capital adjustment of $4,688 and a separate payment to one of the former shareholders of $3,340. The Company paid the former shareholders of Henderson $4,688 of the working capital adjustment in the year ended December 31, 2015 and had an outstanding payable to a former Henderson shareholder at December 31, 2014. The outstanding payable to the former Henderson shareholder was $3,340 at December 31, 2014 and was included in accrued expenses and other current liabilities until it was paid to the former shareholder in the year ended December 31, 2015. 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 in the year ended December 31, 2014.

The following table summarizes the final 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		1,206
Deferred income taxes - current		823
Other current assets		876
Property and equipment		10,848
Goodwill		47,800
Intangible assets		17,390
Other assets - long term		74
Accounts payable and other current liabilities		(24,083)
Deferred income taxes - long term		(3,202)
Other liabilities - long term		(248)
Total	$	86,693

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 8.4 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 period presented.



		Year ended December 31,
		2014
Net sales	$	385,138

Net income	$	43,191

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

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.