Acquisitions, Goodwill And Other Intangible Assets

3 Months Ended

Mar. 31, 2020

Acquisitions, Goodwill And Other Intangible Assets [Abstract]

Acquisitions

ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Acquisitions Completed in the First Quarter of 2020

Polyplastic

In January 2020, the Company acquired 100 percent of the equity interests of Polyplastic Group B.V. (with its subsidiaries “Polyplastic”), a premier window supplier to the caravanning industry, headquartered in Rotterdam, Netherlands. The purchase price was $95.8 million, net of cash acquired, plus contingent consideration up to $7.7 million, based on future sales by this operation. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. As the acquisition of Polyplastic is not considered to have a material impact on the Company's financial statements, pro forma results of operations and other disclosures are not presented. The Company is validating account balances and finalizing the valuation for customer relationship and other identifiable intangible assets and net tangible assets. The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):

Cash consideration, net of cash acquired	$	95,766
Contingent consideration	2,796
Total fair value of consideration given	$	98,562
Customer relationship and other identifiable intangible assets	$	53,674
Net tangible assets	7,234
Total fair value of net assets acquired	$	60,908
Goodwill (not tax deductible)	$	37,654

The customer relationship intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

Acquisitions with Measurement Period Adjustments in the First Quarter of 2020

CURT

In December 2019, the Company acquired 100 percent of the equity interests of CURT Acquisition Holdings, Inc. (with its subsidiaries “CURT”), a leading manufacturer and distributor of branded towing products and truck accessories for the aftermarket, headquartered in Eau Claire, Wisconsin. The purchase price was $337.6 million, net of cash acquired, and is subject to potential post-closing adjustments related to net working capital, which are not expected to be material. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the Company’s Aftermarket Segment.

During the three months ended March 31, 2020, the Company adjusted the preliminary purchase price allocation reported at December 31, 2019 to account for updates to assumptions and estimates related to the fair value of intangible assets and inventories. These measurement period adjustments would not have resulted in a material impact on the prior period results if the adjustments had been recognized as of the acquisition date. As of March 31, 2020, the valuation of amounts subject to net working capital adjustments are not complete. These amounts are subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date).

The acquisition of this business was recorded, as updated, on the acquisition date as follows (in thousands):

	Preliminary at December 31, 2019		Measurement Period Adjustments		As Adjusted at March 31, 2020
Cash consideration, net of cash acquired	$	337,640	$	—	$	337,640
Assets Acquired
Accounts receivable	$	28,611	$	—	$	28,611
Inventories	88,765		(6,648)		82,117
Fixed assets	24,036		—		24,036
Customer relationship	112,000		(7,800)		104,200
Tradename and other identifiable intangible assets	37,705		(300)		37,405
Operating lease right-of-use assets	27,925		—		27,925
Other tangible assets	4,060		(497)		3,563
Liabilities Assumed
Accounts payable	(18,577)		—		(18,577)
Current portion of operating lease obligations	(5,360)		—		(5,360)
Accrued expenses and other current liabilities	(10,002)		—		(10,002)
Operating lease obligations	(22,565)		—		(22,565)
Deferred taxes	(31,877)		1,752		(30,125)
Total fair value of net assets acquired	$	234,721	$	(13,493)	$	221,228
Goodwill (not tax deductible)	$	102,919	$	13,493	$	116,412

The fair values of the customer relationship and tradename intangible assets are being amortized over their estimated useful lives of 16 years and 20 years, respectively. The fair values of these assets were determined using a discounted cash flow model, which is a level 3 input in the fair value hierarchy. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

Lewmar Marine Ltd.

In August 2019, the Company acquired 100 percent of the equity interests of Lewmar Marine Ltd. and related entities (collectively, “Lewmar”), a supplier of leisure marine equipment, headquartered in Havant, United Kingdom. The purchase price was $43.2 million, net of cash acquired. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date in the Company’s OEM Segment and Aftermarket Segment. As the acquisition of Lewmar is not considered to have a material impact on the Company’s financial statements, pro forma results of operations and other disclosures are not presented.

During the three months ended March 31, 2020, the Company adjusted the preliminary purchase price allocation reported at December 31, 2019 to account for updates to assumptions and estimates related to the fair value of intangible assets and inventories. These measurement period adjustments would not have resulted in a material impact on the prior period results if the adjustments had been recognized as of the acquisition date. As of March 31, 2020, the valuations of customer relationships, other intangible assets, and fixed assets are not complete. These amounts are subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date).

The acquisition of this business was recorded, as updated, on the acquisition date as follows (in thousands):

	Preliminary at December 31, 2019		Measurement Period Adjustments		As Adjusted at March 31, 2020
Cash consideration, net of cash acquired	$	43,224	$	—	$	43,224
Customer relationship and other identifiable intangible assets	$	19,580	$	2,170	$	21,750
Net tangible assets	3,286		(705)		2,581
Total fair value of net assets acquired	$	22,866	$	1,465	$	24,331
Goodwill (not tax deductible)	$	20,358	$	(1,465)	$	18,893

The customer relationship intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

Goodwill

Goodwill by reportable segment was as follows:

(In thousands)	OEM Segment		Aftermarket Segment		Total
Net balance – December 31, 2019	$	215,620	$	135,494	$	351,114
Acquisitions – 2020	37,654		—		37,654
Measurement period adjustments	(586)		12,613		12,027
Foreign currency translations	(1,152)		(283)		(1,435)
Net balance – March 31, 2020	$	251,536	$	147,824	$	399,360

Goodwill represents the excess of the total consideration given in an acquisition of a business over the fair value of the net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but instead is tested at the reporting unit level for impairment annually in November, or more frequently if certain circumstances indicate a possible impairment may exist.

Other Intangible Assets

Other intangible assets consisted of the following at March 31, 2020:

(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	344,078	$	75,473	$	268,605	6	to	16
Patents	87,989		45,970		42,019		3	to	19
Trade names (finite life)	60,823		8,284		52,539		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	7,598		5,244		2,354		3	to	6
Other	309		181		128		2	to	12
Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	$	513,084	$	135,152	$	377,932

Other intangible assets consisted of the following at December 31, 2019:

(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	319,934	$	69,008	$	250,926	6	to	16
Patents	76,206		44,611		31,595		3	to	19
Trade names (finite life)	50,917		7,086		43,831		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	7,598		4,947		2,651		3	to	6
Other	309		173		136		2	to	12
Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	$	467,251	$	125,825	$	341,426

Goodwill And Other Intangible Assets

ACQUISITIONS, GOODWILL AND OTHER INTANGIBLE ASSETS

Acquisitions Completed in the First Quarter of 2020

Polyplastic

In January 2020, the Company acquired 100 percent of the equity interests of Polyplastic Group B.V. (with its subsidiaries “Polyplastic”), a premier window supplier to the caravanning industry, headquartered in Rotterdam, Netherlands. The purchase price was $95.8 million, net of cash acquired, plus contingent consideration up to $7.7 million, based on future sales by this operation. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the Company’s OEM Segment. As the acquisition of Polyplastic is not considered to have a material impact on the Company's financial statements, pro forma results of operations and other disclosures are not presented. The Company is validating account balances and finalizing the valuation for customer relationship and other identifiable intangible assets and net tangible assets. The acquisition of this business was preliminarily recorded on the acquisition date as follows (in thousands):

Cash consideration, net of cash acquired	$	95,766
Contingent consideration	2,796
Total fair value of consideration given	$	98,562
Customer relationship and other identifiable intangible assets	$	53,674
Net tangible assets	7,234
Total fair value of net assets acquired	$	60,908
Goodwill (not tax deductible)	$	37,654

The customer relationship intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

Acquisitions with Measurement Period Adjustments in the First Quarter of 2020

CURT

In December 2019, the Company acquired 100 percent of the equity interests of CURT Acquisition Holdings, Inc. (with its subsidiaries “CURT”), a leading manufacturer and distributor of branded towing products and truck accessories for the aftermarket, headquartered in Eau Claire, Wisconsin. The purchase price was $337.6 million, net of cash acquired, and is subject to potential post-closing adjustments related to net working capital, which are not expected to be material. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date, primarily in the Company’s Aftermarket Segment.

During the three months ended March 31, 2020, the Company adjusted the preliminary purchase price allocation reported at December 31, 2019 to account for updates to assumptions and estimates related to the fair value of intangible assets and inventories. These measurement period adjustments would not have resulted in a material impact on the prior period results if the adjustments had been recognized as of the acquisition date. As of March 31, 2020, the valuation of amounts subject to net working capital adjustments are not complete. These amounts are subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date).

The acquisition of this business was recorded, as updated, on the acquisition date as follows (in thousands):

	Preliminary at December 31, 2019		Measurement Period Adjustments		As Adjusted at March 31, 2020
Cash consideration, net of cash acquired	$	337,640	$	—	$	337,640
Assets Acquired
Accounts receivable	$	28,611	$	—	$	28,611
Inventories	88,765		(6,648)		82,117
Fixed assets	24,036		—		24,036
Customer relationship	112,000		(7,800)		104,200
Tradename and other identifiable intangible assets	37,705		(300)		37,405
Operating lease right-of-use assets	27,925		—		27,925
Other tangible assets	4,060		(497)		3,563
Liabilities Assumed
Accounts payable	(18,577)		—		(18,577)
Current portion of operating lease obligations	(5,360)		—		(5,360)
Accrued expenses and other current liabilities	(10,002)		—		(10,002)
Operating lease obligations	(22,565)		—		(22,565)
Deferred taxes	(31,877)		1,752		(30,125)
Total fair value of net assets acquired	$	234,721	$	(13,493)	$	221,228
Goodwill (not tax deductible)	$	102,919	$	13,493	$	116,412

The fair values of the customer relationship and tradename intangible assets are being amortized over their estimated useful lives of 16 years and 20 years, respectively. The fair values of these assets were determined using a discounted cash flow model, which is a level 3 input in the fair value hierarchy. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

Lewmar Marine Ltd.

In August 2019, the Company acquired 100 percent of the equity interests of Lewmar Marine Ltd. and related entities (collectively, “Lewmar”), a supplier of leisure marine equipment, headquartered in Havant, United Kingdom. The purchase price was $43.2 million, net of cash acquired. The results of the acquired business have been included in the Condensed Consolidated Statements of Income since the acquisition date in the Company’s OEM Segment and Aftermarket Segment. As the acquisition of Lewmar is not considered to have a material impact on the Company’s financial statements, pro forma results of operations and other disclosures are not presented.

During the three months ended March 31, 2020, the Company adjusted the preliminary purchase price allocation reported at December 31, 2019 to account for updates to assumptions and estimates related to the fair value of intangible assets and inventories. These measurement period adjustments would not have resulted in a material impact on the prior period results if the adjustments had been recognized as of the acquisition date. As of March 31, 2020, the valuations of customer relationships, other intangible assets, and fixed assets are not complete. These amounts are subject to adjustment as additional information is obtained within the measurement period (not to exceed 12 months from the acquisition date).

The acquisition of this business was recorded, as updated, on the acquisition date as follows (in thousands):

	Preliminary at December 31, 2019		Measurement Period Adjustments		As Adjusted at March 31, 2020
Cash consideration, net of cash acquired	$	43,224	$	—	$	43,224
Customer relationship and other identifiable intangible assets	$	19,580	$	2,170	$	21,750
Net tangible assets	3,286		(705)		2,581
Total fair value of net assets acquired	$	22,866	$	1,465	$	24,331
Goodwill (not tax deductible)	$	20,358	$	(1,465)	$	18,893

The customer relationship intangible asset is being amortized over its estimated useful life of 15 years. The consideration given was greater than the fair value of the net assets acquired, resulting in goodwill, because the Company anticipates the attainment of synergies and an increase in the markets for the acquired products.

Goodwill

Goodwill by reportable segment was as follows:

(In thousands)	OEM Segment		Aftermarket Segment		Total
Net balance – December 31, 2019	$	215,620	$	135,494	$	351,114
Acquisitions – 2020	37,654		—		37,654
Measurement period adjustments	(586)		12,613		12,027
Foreign currency translations	(1,152)		(283)		(1,435)
Net balance – March 31, 2020	$	251,536	$	147,824	$	399,360

Goodwill represents the excess of the total consideration given in an acquisition of a business over the fair value of the net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but instead is tested at the reporting unit level for impairment annually in November, or more frequently if certain circumstances indicate a possible impairment may exist.

Other Intangible Assets

Other intangible assets consisted of the following at March 31, 2020:

(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	344,078	$	75,473	$	268,605	6	to	16
Patents	87,989		45,970		42,019		3	to	19
Trade names (finite life)	60,823		8,284		52,539		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	7,598		5,244		2,354		3	to	6
Other	309		181		128		2	to	12
Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	$	513,084	$	135,152	$	377,932

Other intangible assets consisted of the following at December 31, 2019:

(In thousands)	Gross Cost		Accumulated Amortization		Net Balance		Estimated Useful Life in Years
Customer relationships	$	319,934	$	69,008	$	250,926	6	to	16
Patents	76,206		44,611		31,595		3	to	19
Trade names (finite life)	50,917		7,086		43,831		3	to	20
Trade names (indefinite life)	7,600		—		7,600		Indefinite
Non-compete agreements	7,598		4,947		2,651		3	to	6
Other	309		173		136		2	to	12
Purchased research and development	4,687		—		4,687		Indefinite
Other intangible assets	$	467,251	$	125,825	$	341,426