Business Acquisitions

12 Months Ended

Dec. 31, 2011

Business Acquisitions [Abstract]

Business Acquisitions

Business Acquisitions

In 2010, the Company  purchased (a) the membership interests of T.W. LaQuay Dredging, LLC (“TWLD”), a Texas limited liability company, from LaQuay Holdings, Inc. (the “Seller”), (b) all of the issued and outstanding capital stock of Industrial Channel and Dock Company, a Texas Corporation, and Commercial Channel and Dock Company, a Texas Corporation (collectively, the “Channel and Dock Companies”), from Timothy W. LaQuay and Linda F. LaQuay (the principal shareholders of the Seller, the “Principal Shareholders”), and (c) certain parcels of real property located in Port Lavaca, Texas from the Principal Shareholders (collectively, the “Purchase Transactions”).  TWLD and its predecessor company have operated as a marine construction and dredging company in the Gulf Coast markets since 2000.  The integration of TWLD’s operations and assets have added to the Company’s dredging fleet and enhanced its presence in the Gulf Coast.  At the closing, the Company entered into a consulting agreement with Timothy and Linda LaQuay and with Charles F. Barnett for a term of one year from the Closing Date.

Upon the terms of and subject to the conditions set forth in the Purchase Agreement, the total aggregate consideration paid by the Company to the Seller and the Principal Shareholders consisted of the following:

• Cash consideration of $52.4 million, paid to the Seller for the membership interests of T.W. LaQuay Dredging;

• Cash consideration of $4.5 million, paid to the Principal Shareholders for the Channel and Dock Companies and the above mentioned parcels of land; and

• An additional $4.0 million paid to Seller as a result of an increase in the purchase price of the membership interests by the amount of additional taxes incurred by the Seller arising from the allocation of the membership interests purchase price, as further described in Section 1060 of the U.S. Internal Revenue Code, as amended.

The Purchase Agreement contained customary representations, warranties, covenants and indemnities, including certain post-closing covenants with respect to confidentiality and non-competition.

The following table summarizes the allocation of the purchase price:

Receivables and other short-term assets	$	6,723
Property and equipment	$	44,925
Accounts payable	$	(8,065	)
Other accrued liabilities	$	(2,776	)
Goodwill	$	20,072
Total	$	60,879

The purchase price was allocated to the assets acquired and the liabilities assumed using estimated fair values as of the acquisition date.  Working capital items primarily included trade accounts receivable, net of trade accounts payable, which due to their short term nature, the fair value was equal to carrying value.  No values were assigned to the acquisition of the trade name or the value of the contracts in backlog, as such amounts were short term in duration and immaterial in fair value.

The goodwill of $20.1 million arising from the acquisition consists primarily of the synergies and economies of scale expected from the combining of the operations of the Company and TWLD.  The Company and Seller elected to treat the acquisition as an asset purchase for tax purposes.  Including acquisition related costs of approximately $1.2 million, goodwill for tax purposes was approximately $21.3 million, which is amortizable over a 15 year period.

Acquisition related costs of $1.2 million were included in selling, general and administrative expenses in the Company’s income statement for the year ended December 31, 2010.

The Company’s condensed consolidated financial statements at December 31, 2010 include results of TWLD for the period since the acquisition.  Pro-forma information is presented below as if the purchase had occurred on January 1 of each reporting period:

	2010		2009
Revenue	$	356,936	$	334,271
Income before taxes	34,291		39,206
Net income	$	22,164	$	24,879
Earnings per share:
Basic	$	0.82	$	1.06
Diluted	$	0.82	$	1.04

In February, 2010, the Company expanded its business into the Pacific Northwest through the purchase of marine construction equipment items including derrick barges, cranes, hammers and ancillary equipment from a private company exiting the marine construction business, for a purchase price of approximately $7.0 million in cash.  The acquisition constitutes a business, as the assets acquired met the definition of a “self-sustaining integrated set of activities and assets capable of being conducted and managed to provide a return to investors, owners, members or participants” and include such items as (a) long-lived assets, such as marine construction equipment, (b) the ability to obtain access to necessary materials or rights, and (c) employees, which collectively are used to bid and obtain projects, which generate contract revenue through our field office in Tacoma, Washington.

The Company applied the principles of ASC 820 regarding the determination of fair values for a variety of applications, including business combinations.  The Company believes that the valuation of $9.2 million reflected the appropriate fair market value under the “in-use” valuation premise, based on the expertise of senior management, as well as reliance on outside sources, such as dealer markets, broker markets and principal to principal markets.

The fair value of the assets acquired of $9.2 million exceeded the fair value of the purchase price of $7.0 million.  Accordingly, the acquisition was accounted for as a bargain purchase, and, as a result, the Company recognized a gain of $1.6 million (net of all tax effects) associated with the transaction.  The gain was included in the line item “Gain from bargain purchase of a business” in the 2010 Consolidated Statements of Income.

Acquisition related costs of $0.5 million are included in selling, general and administrative expenses in the Company’s income statement for the year ended December 31, 2010.

Discrete financial information is not available for the business prior to the acquisition.