Acquisitions

12 Months Ended

Dec. 31, 2019

Acquisitions

Acquisition

4. Acquisitions

On May 1, 2017, the Company purchased substantially all of the assets of Arrowhead Equipment, Inc. (“Arrowhead”). Total consideration was $7,385. The acquisition includes Arrowhead’s assets acquired at two upfit locations in Albany and Queensbury, New York that are both being leased by the Company. The assets were acquired with on hand cash and short term borrowings under the Company’s Revolving Credit Agreement. The acquired assets are included in the Work Truck Solutions segment and were acquired to expand the geographical footprint of that segment.  The Company incurred $343 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, 2017.

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 - trade	$	852
Inventories		1,547
Prepaids and other current assets		6
Property and equipment		624
Goodwill		2,720
Intangible assets		2,700
Accounts payable and other liabilities		(957)
Unfavorable lease		(107)
Total	$	7,385

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 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 acquisition method of accounting, 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, 2017, the Arrowhead assets contributed $7,964 of revenues and $607 of pre-tax operating income to the Company.

On July 15, 2016, the Company acquired  Dejana. 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.  Based on the year ended December 31, 2016 results, the new possible range of outcomes was reduced from $26,000 to a maximum earnout of $21,487. The Company made a payment to the former owners of Dejana of $5,487 in the year ended December 31, 2017. The purchase agreement was amended on September 20, 2017 to extend the earnout measurement periods for an additional two years, namely the fiscal years ended December 31, 2019 and December 31, 2020, with the potential for the former owners of Dejana to earn up to 50% of the remaining unearned earnout payments based on the original earnout targets and measurement periods. During the third quarter of 2017, there was a fair value adjustment to reduce the earn out by ($1,186), which was further reduced during the fourth quarter by ($600), for a total fair value adjustment to the earnout for the year of ($1,786), which is included as a reduction to selling, general and administrative expense in the Consolidated Statements of Income for the year ended December 31, 2017. During the fourth quarter of 2018, there was a fair value adjustment to reduce the earn out by ($900), which is included as a reduction to selling, general and administrative expense in the Consolidated Statements of Income for the year ended December 31, 2018. During the fourth quarter of 2019, there was a fair value adjustment to reduce the earn out by ($200), which is included as a reduction to selling, general and administrative expense in the Consolidated Statements of Income for the year ended December 31, 2019.