Acquisition

6 Months Ended

Jun. 30, 2023

Business Combination and Asset Acquisition [Abstract]

On May 19, 2023 the Company acquired 100% of the outstanding equity interests of Indoff, a business-to-business direct marketer of material handling products, commercial interiors and business products with operations in North America, for approximately $72.6 million in cash, $5.2 million of which was placed into an escrow account for two years to secure the sellers’ indemnification obligations under the purchase agreement. Under the terms of the escrow agreement the escrow amount will be reduced to $2.5 million on the one year anniversary of the closing date. This acquisition expands the Company's presence in the MRO market in North America. The acquisition was accounted for as a business combination using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed be recognized at their fair values as of the acquisition date. The fair value assigned to the identified intangible assets acquired were based on assumptions and estimates made by management. The total associated transaction costs of the acquisition were $0.7 million and were recorded in selling, distribution and administrative expenses in the Condensed Consolidated Statement of Operations. For book purposes, the Company will be amortizing the customer lists and trademark assets over a ten-year period which will result in approximately $3.0 million in annual amortization expense. The acquisition was an asset acquisition for tax purposes and as such, the customer lists, trademarks and goodwill resulting from this acquisition will be tax deductible over a fifteen-year period. The Indoff accounts are included in the accompanying consolidated financial statements from the date of acquisition.

The Company prepared a preliminary purchase price fair value allocation to the assets acquired and liabilities assumed in the acquisition. These fair value allocations have not yet been finalized, principally related to the measurement of the acquired net working capital and the valuation of the acquired intangible assets. Amounts below could change, potentially materially, as we finalize the valuations of the assets acquired and liabilities assumed. The following table details the preliminary fair values as of the acquisition date (in millions):


Purchase price:	$	72.6
Less:
Cash	0.3
Accounts receivable	16.8
Inventories	10.3
Prepaid expenses and other current assets	2.5
Property, plant and equipment	0.3
Operating lease right-of-use assets	0.8
Customer lists	24.1
Trademarks	6.2
Other assets	0.1
Total identifiable assets acquired	$	61.4
Accounts payable	(12.9)
Accrued expenses and other current liabilities	(4.7)
Deferred revenue	(5.5)
Operating lease liabilities	(0.8)
Total identifiable liabilities acquired	$	(23.9)
Net identifiable assets acquired	37.5
Goodwill	$	35.1
Total net assets acquired	$	72.6

The amount allocated to goodwill reflects the benefits the Company expects to realize from the growth of the acquisition’s operations.

The Indoff accounts are included in the accompanying consolidated financial statements from the date of acquisition. For the three and six months ended June 30, 2023, Indoff generated approximately $23.9 million in revenue and approximately $0.9 million of net income. The Company’s unaudited pro forma revenue and net income for the three and six month

periods ended June 30, 2023 and 2022 below have been prepared as if the Indoff acquisition had occurred on January 1, 2022 (in millions).


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net sales	$	346.1	$	366.3	$	662.1	$	689.4

Net income from continuing operations	$	21.7	$	24.7	$	36.4	$	47.4

The unaudited pro forma financial information above is not necessarily indicative of what the Company’s consolidated results actually would have been if the acquisition had been completed at the beginning of the respective periods. In addition, the unaudited pro forma information above does not attempt to project the Company’s future results.

The following table provides information related to the goodwill and intangible assets (indefinite-lived and definite-lived) updated for the Indoff acquisition (in millions):


	June 30,		December 31,
	2023		2022
Goodwill	$	40.6	$	5.5
Definite-lived intangibles	30.2		0.4
Indefinite-lived intangibles	0.7		0.7
Balance	$	71.5	$	6.6

As of June 30, 2023 goodwill was $40.6 million which increased from December 31, 2022 due to the second quarter acquisition of Indoff. The Company also acquired intangible assets of $30.3 million from Indoff. The following table summarizes information related to the Company's definite-lived intangible assets as of June 30, 2023 (in millions):


	Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted Average Useful Life
Client lists	10 yrs	$	26.1	$	2.0	$	24.1	9.8
Trademarks	10 yrs	6.2		0.1		6.1		9.9
Total		$	32.3	$	2.1	$	30.2	9.8

The following table summarizes information related to the Company's definite-lived intangible assets as of December 31, 2022 (in millions):


	Amortization Period (Years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Weighted Average Useful Life
Client lists	10 yrs	$	2.0	$	1.6	$	0.4	2.1
Total		$	2.0	$	1.6	$	0.4	2.1

The Company recorded an additional $0.4 million of intangible amortization expense in the second quarter of 2023 related to the Indoff acquisition. As of June 30, 2023, estimated amortization expense for intangible assets for future years is as follows (in millions):


2023 remainder	$	1.7
2024	3.2
2025	3.0
2026	3.0
2027	3.0
Thereafter	$	16.3
Total	$	30.2