Subsequent Events (Notes)

12 Months Ended

Dec. 31, 2019

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

Acquisitions and Divestitures

Gaomei

On January 4, 2019, we completed the acquisition of Hefei Gaomei Cleaning Machines Co., Ltd. and Anhui Rongen Environmental Protection Technology Co., Ltd. (collectively "Gaomei"), privately held designers and manufacturers of commercial cleaning solutions based in China. The financial results for Gaomei have been included in the consolidated financial results since the date of closing.

The following table summarizes the fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:



ASSETS
Current Assets	$	8.5
Intangible Assets Subject to Amortization:
Trade Name	1.8
Customer Lists	13.9
Other Assets	1.3
Total Identifiable Assets Acquired	25.5
LIABILITIES
Current Liabilities	(8.0		)
Long-Term Liabilities	(6.0		)
Total Identifiable Liabilities Assumed	(14.0		)
Goodwill	15.6
Total Purchase Price	$	27.1

The fair value measurements were final as of December 31, 2019.

The total purchase price includes the following:

•$11.3 million which was paid during the first quarter of 2019 upon close of the transaction;

•$11.3 million which was paid in the fourth quarter of 2019;

•

$4.7 million which represents the estimated fair value of contingent consideration at the acquisition date. The estimate is based on a probability-weighted scenario analysis of achieving certain levels of gross profit growth over a three year period. Consideration of $0.0 million to $42.4 million will be paid in March 2021 if the gross profit growth targets are met. As of December 31, 2019, the contingent consideration, which is recorded in Other Liabilities on our Consolidated Balance Sheet, had a fair value of $2.1 million; and

•$(0.2) million which represents a working capital purchase price adjustment.

None of the goodwill is expected to be deductible for income tax purposes. The expected lives of the acquired amortizable intangible assets range from 10 years to 15 years and are being amortized on a straight-line basis. The pro forma effects of this acquisition are not significant to the Company.

Waterstar

During 2018, we sold substantially all of the assets of our Waterstar business for $4.0 million in cash. The resulting gain was approximately $1.0 million and is reflected within Selling and Administrative Expense in operating profit in our Consolidated Statements of Operations.

IP Cleaning S.p.A.

On April 6, 2017, we acquired nearly 100 percent of the outstanding capital stock of IPC Group for a purchase price of $353.8 million, net of cash acquired of $8.8 million. The primary seller was Ambienta SGR S.p.A., a European private equity fund. IPC Group, based in Italy, is a designer and manufacturer of innovative professional cleaning equipment, cleaning tools and supplies. The acquisition strengthens our presence and market share in Europe and will allow us to better leverage our EMEA cost structure. We funded the acquisition of IPC Group, along with related fees, including refinancing of existing debt, with funds raised through borrowings under a senior secured credit facility in an aggregate principal amount of $420.0 million. Further details regarding our acquisition financing arrangement are discussed in Note 9.

The following unaudited pro forma financial information presents the combined results of operations of the Company as if the acquisition of IPC Group had occurred as of January 1, 2017:



Years ended December 31	2017
Net Sales
Pro forma	$	1,057.1
As reported	1,003.1

Net Earnings (Loss) Attributable to Tennant Company
Pro forma	$	12.3
As reported	(6.2		)

Net Earnings (Loss) Attributable to Tennant Company per Diluted Share
Pro forma	$	0.68
As reported	(0.35		)

The unaudited pro forma financial information is presented for informational purposes only. It is not necessarily indicative of what our consolidated results of operations actually would have been had the acquisition occurred at the beginning of each year, nor does it attempt to project the future results of operations of the combined company.

The unaudited pro forma financial information above gives effect to the following:

• Incremental depreciation and amortization expense related to the fair value of the property, plant and equipment and identified intangible assets;

• Exclusion of the purchase accounting impact of the inventory step-up related to the sale of acquired inventory;

• Incremental interest expense related to additional debt used to finance the acquisition;

• Exclusion of non-recurring acquisition-related transaction and financing costs; and

• Pro forma adjustments tax affected based on the jurisdiction where the costs were incurred.