DMC Global Inc 8-K/A, filed Mar 11, 2022
DMC Global Inc. (BOOM)
8-K/A
2022-03-11
For: 2021-12-23
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Added on
April 10, 2026
About this 8-K/A
DMC Global Inc filed this 8-K/A on March 11, 2022, reporting on events of December 23, 2021.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A (Amendment No. 1)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): December 23, 2021
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||||||||
(Address of Principal Executive Offices, Including Zip Code)
(303 ) 665-5700
(Registrant’s Telephone Number, Including Area Code)
| Title of each class | Trading Symbol | Name of exchange on which registered | ||||||||||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.01 Completion of Acquisition or Disposition of Assets.
On December 28, 2021, DMC Global Inc., a Delaware corporation (the “Company”) filed a Current Report on Form 8-K (the “Original 8-K”) to report the closing, on December 23, 2021, of the Company’s acquisition (the “Acquisition”) of 60% of Arcadia Products, LLC, a Colorado limited liability company that resulted from the conversion of Arcadia, Inc., a California corporation, following a tax reorganization (“Arcadia”) for consideration of $261 million in cash (excluding $7.6 million in acquired cash) and 551,458 shares of its common stock, par value $0.05 per share.
This Current Report on Form 8-K/A (this “Amended 8-K”) amends and supplements the Original 8-K filed by the Company, and is being filed to provide the historical financial statements and the pro forma financial information required pursuant to Items 9.01(a) and 9.01(b) of Form 8-K, respectively. In accordance with the requirements of Items 9.01(a)(3) and 9.01(b)(2) of Form 8-K, this Amended 8-K is being filed within 71 calendar days of the date that the Original 8-K was required to be filed with respect to the Acquisition.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of business acquired.
The audited financial statements of Arcadia as of and for the years ended December 31, 2019 and 2020 are filed as Exhibit 99.1 and Exhibit 99.2 to this Amended 8-K and are incorporated herein by reference.
The unaudited financial statements of Arcadia as of and for the nine months ended September 30, 2021 are filed as Exhibit 99.3 to this Amended 8-K and are incorporated herein by reference.
(b) Pro forma financial information.
The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020 and for the nine months ended September 30, 2021, which combines the historical results of the Company and Arcadia after giving effect to the Acquisition (the “Pro Forma Financial Information”) is filed as Exhibit 99.4 to this Amended 8-K and incorporated herein by reference. An unaudited pro forma condensed combined balance sheet has not been presented as the Acquisition has already been fully reflected in the consolidated balance sheet included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 1, 2022.
Also included in this Amended 8-K is the consent of Windes Inc. consenting to the inclusion of its reports dated April 27, 2020 and May 7, 2021 and relating to the financial statements of Arcadia included as Exhibit 99.1, Exhibit 99.2, which is included as Exhibit 23.1. Also included in this Amended 8-K is the awareness letter of Windes Inc. regarding the inclusion of its report dated February 18, 2022 within Exhibit 99.3.
The pro forma financial information included in this Amended 8-K has been presented for informational purposes only. It does not purport to represent the actual results of operations that the Company and Arcadia would have achieved had the businesses been combined during the periods presented in the Pro Forma Financial Information and is not intended to project the future results that the combined businesses may achieve.
(d) Exhibits.
| Exhibit Number | Description | |||||||
| 15.1 | ||||||||
| 23.1 | ||||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 99.3 | ||||||||
| 99.4 | ||||||||
| 104 | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DMC Global Inc. | |||||||||||
| Dated: | March 11, 2022 | By: | /s/ Michael Kuta | ||||||||
| Michael Kuta | |||||||||||
| Chief Financial Officer | |||||||||||
Exhibit 15.1
ACKNOWLEDGMENT OF INDEPENDENT ACCOUNTANTS
We are aware that our report dated February 18, 2022 on our review of the financial statements of Arcadia, Inc., which include the balance sheet as of September 30, 2021 and the related statements of income, stockholders’ equity, and cash flows for the period January 1, 2021 to September 30, 2021, and the related notes to the financial statements, is incorporated by reference in DMC Global, Inc.’s Registration Statements as follows:
(1)Registration Statement (Form S-3 No. 333-238211, Form S-3ASR 333-255719),
(2)Registration Statements (Form S-8 No. 333-143355, Form S-8 No. 333-188796 and Form S-8 No. 333-211328) pertaining to the Company’s 2006 Stock Incentive Plan,
(3)Registration Statements (Form S-8 No. 333-182979 and Form S-8 No. 333-218177) pertaining to the Company’s Employee Stock Purchase Plan, and
(4)Registration Statement (Form S-8 No. 333-214460) pertaining to the Company’s 2016 Omnibus Incentive Plan.
| /s/ Windes, Inc. | |||||
| Long Beach, California | |||||
| March 11, 2022 | |||||
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the following Registration Statements:
(1)Registration Statement (Form S-3 No. 333-238211, Form S-3ASR 333-255719),
(2)Registration Statements (Form S-8 No. 333-143355, Form S-8 No. 333-188796 and Form S-8 No. 333-211328) pertaining to the Company’s 2006 Stock Incentive Plan,
(3)Registration Statements (Form S-8 No. 333-182979 and Form S-8 No. 333-218177) pertaining to the Company’s Employee Stock Purchase Plan, and
(4)Registration Statement (Form S-8 No. 333-214460) pertaining to the Company’s 2016 Omnibus Incentive Plan;
of DMC Global, Inc. of our reports dated May 7, 2021 and April 27, 2020, relating to the balance sheets of Arcadia, Inc. as of December 31, 2020 and 2019, and the related statements of income, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.
| /s/ Windes, Inc. | |||||
| Long Beach, California | |||||
| March 11, 2022 | |||||
Financial Statements December 31, 2019
CONTENTS Independent Auditors’ Report ........................................................................... 1 Balance Sheet .............................................................................................. 2 Statement of Income ...................................................................................... 3 Statement of Stockholders’ Equity ..................................................................... 4 Statement of Cash Flows ................................................................................. 5 Notes to the Financial Statements .................................................................. 6-16 Independent Auditors’ Report on Supplementary Financial Data ............................... 17 Supplemental Schedule of Cost of Goods Sold .................................................... 18 Supplemental Schedule of Operating Expenses .................................................... 19
1 INDEPENDENT AUDITORS’ REPORT To the Stockholders of Arcadia, Inc. We have audited the accompanying financial statements of Arcadia, Inc. (a California corporation), which comprise the balance sheet as of December 31, 2019, and the related statements of income, stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Arcadia, Inc. as of December 31, 2019, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 2, beginning January 1, 2019, Arcadia, Inc. adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and its related amendments. Our opinion is not modified with respect to this matter. Long Beach, California April 27, 2020 Long Beach | Irvine | Los Angeles www.windes.com 844.4WINDES
ARCADIA, INC. BALANCE SHEET DECEMBER 31, 2019 CURRENT ASSETS Cash 22,784,054$ Accounts receivable, net of bad debt reserve of $757,022 29,574,214 Inventory 41,080,620 Prepaid expenses and other current assets 224,663 93,663,551 PROPERTY AND EQUIPMENT, net 14,658,371 OTHER ASSETS Employee advances 327,820 Note receiveable 200,000 Deposits 115,536 Deferred taxes 512,029 Goodwill 2,200,210 3,355,595 TOTAL ASSETS 111,677,517$ CURRENT LIABILITIES Accounts payable 4,821,607$ Accrued wages and related employee benefits 1,587,697 Accrued expenses 4,432,601 Customer deposits and advances 10,173,874 21,015,779 COMMITMENTS AND CONTINGENCIES (Note 8) STOCKHOLDERS’ EQUITY Common stock, $100 stated value; authorized 10,000 shares, 6,645 shares issued and outstanding 642,500 Additional paid-in-capital 2,696,876 Retained earnings 87,322,362 90,661,738 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 111,677,517$ LIABILITIES AND STOCKHOLDERS' EQUITY ASSETS The accompanying notes are an integral part of these financial statements. 2
ARCADIA, INC. STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2019 NET SALES 252,734,510$ COST OF GOODS SOLD 165,986,999 GROSS PROFIT 86,747,511 OPERATING EXPENSES Selling 13,395,069 General and administrative 27,289,413 40,684,482 INCOME FROM OPERATIONS 46,063,029 OTHER INCOME (EXPENSES) Other income, net 33,485 Loss on asset disposition (102,790) (69,305) INCOME BEFORE TAXES 45,993,724 PROVISION FOR INCOME TAXES (719,961) NET INCOME 45,273,763$ The accompanying notes are an integral part of these financial statements. 3
ARCADIA, INC. STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2019 Additional Common Paid-In Retained Stock Capital Earnings Total BALANCE AT JANUARY 1, 2019 642,500$ 2,696,876$ 92,697,482$ 96,036,858$ NET INCOME - - 45,273,763 45,273,763 STOCKHOLDER DISTRIBUTIONS - - (50,648,883) (50,648,883) BALANCE AT DECEMBER 31, 2019 642,500$ 2,696,876$ 87,322,362$ 90,661,738$ The accompanying notes are an integral part of these financial statements. 4
ARCADIA, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2019 CASH FLOWS FROM OPERATING ACTIVITIES Net income 45,273,763$ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,431,071 Loss on asset dispositions 102,790 Change in bad-debt reserve 49,194 Change in deferred taxes 44,100 Adjustment to goodwill 59,629 Changes in operating assets and liabilities: Accounts receivable 4,726,452 Inventory (3,188,531) Prepaid expenses and other current assets 66,175 Deposits 117,689 Accounts payable (6,438,031) Accrued wages and related employee benefits (2,255,958) Accrued expenses 3,108,153 Customer deposits and advances 593,832 Net Cash Provided By Operating Activities 43,690,328 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (2,369,372) Proceeds from sale of property and equipment 3,500 Net change in employee advances (30,018) Net Cash Used In Investing Activities (2,395,890) CASH FLOWS FROM FINANCING ACTIVITIES Distributions to stockholders (50,648,883) Net Cash Used In Financing Activities (50,648,883) NET CHANGE IN CASH AND CASH EQUIVALENTS (9,354,445) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 32,138,499 CASH AND CASH EQUIVALENTS, END OF YEAR 22,784,054$ SUPPLEMENTAL DISCOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Income taxes 924,610$ Interest 329$ The accompanying notes are an integral part of these financial statements. 5
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 6 NOTE 1 – Description of Business Arcadia, Inc. (the Company) manufactures finished doors, window frames, and building partitions. The Company's products are sold at wholesale to various contractors and subcontractors primarily throughout the United States to both the commercial and residential markets. NOTE 2 – Summary of Significant Accounting Policies Recently Adopted Accounting Standard Beginning January 1, 2019, the Company adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) and its related amendments, which supersedes the revenue recognition requirements in Revenue Recognition (Topic 605). The standard requires an entity to recognize revenue when goods are transferred or services are provided to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also requires disclosures enabling users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The standard permits the use of either a full-retrospective transition method or a modified-retrospective transition method with the cumulative effect adjusted to the opening balance of retained earnings. The Company has elected the use of the modified-retrospective method, which resulted in no adjustment to the opening balance of retained earnings. Basis of Presentation The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Use of Estimates Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing the financial statements. Principal areas requiring the use of estimates include determination of allowance for doubtful accounts, inventory (work in process), impairment of long-lived assets, deferred income taxes, warranty costs, and useful lives of property and equipment.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 7 NOTE 2 – Summary of Significant Accounting Policies (Continued) Common Control Leasing Arrangements ASC 810 was amended by Update No. 2014-07, Applying Variable Interest Entities Guidance to Common Control Leasing Arrangements (ASU 2014-07). This update permits a private company lessee (the reporting entity) to elect an accounting alternative not to apply variable interest entity (VIE) guidance to commonly controlled lessor entities if (a) the private company lessee and the lessor entities are under common control, (b) the private company lessee has a lease arrangement with the lessor entity, (c) substantially all of the activities between the private company lessee and the lessor entity are related to leasing activities (including supporting leasing activities) between those two entities, and (d) if the private company lessee explicitly guarantees or provides collateral for any obligation of the lessor entity related to the asset leased by the private company, and the principal amount of the obligation at inception of such guarantee or collateral arrangement does not exceed the value of the asset leased by the private company from the lessor entity. The Company has elected not to apply VIE guidance to Alpine Universal, Inc., a commonly controlled lessor (see Note 6), and the Company has determined that the leasing arrangements meet the established criteria in ASC 810. Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash deposits and trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the Company’s large number of customers and their geographic dispersion. The Company requires no collateral from its customers and performs on-going credit evaluations of its customers’ financial condition. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company currently places its cash deposits with high-credit quality financial institutions. At times, balances in the Company’s cash account may exceed the federally insured limit; however, the Company has not experienced any losses with respect to these items.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 8 NOTE 2 – Summary of Significant Accounting Policies (Continued) Accounts Receivable Accounts receivable is stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Inventory The inventory of finished aluminum doors, window frames, materials used in finishing coatings for aluminum, and interior building partitions plus related components are stated at the lower of cost or net realizable value under the first-in, first-out (FIFO) method. Inventory on-hand at December 31, 2019 is comprised of: Work-in-process $ 1,392,611 Finished goods 39,688,009 $ 41,080,620 Property and Equipment Property and equipment is stated at cost. Depreciation is provided using straight-line and accelerated methods over the estimated useful lives of the assets. The estimated useful lives of the assets are as follows: Real estate 40 years Machinery and equipment 5-10 years Office equipment, software, and furnishings 5-10 years Vehicles 5 years Leasehold improvements 10-15 years Leasehold improvements are amortized on the straight-line method over the term of the lease or estimated useful life, whichever is shorter. Expenditures for repairs and maintenance are charged to operations as incurred, while renewals and betterments are capitalized.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 9 NOTE 2 – Summary of Significant Accounting Policies (Continued) Employee Advances From time to time, the Company will advance employee loans to assist with the acquisition of residential property. The interest-free advances are paid back through payroll withholdings or upon the sale of the property. Note Receivable The Company has advanced funds to Alpine Universal, Inc. who share common stockholders as the Company. The advances are interest free and are paid back as funds become available. Goodwill Goodwill represents the excess of acquisition costs over the net fair values of identifiable assets acquired and liabilities assumed in business acquisitions. Goodwill is deemed to have an indefinite life and is not amortized, but rather tested at least annually for impairment. During the year ended December 31, 2019, the Company recognized a decrease in goodwill of $59,629 related to the acquisition that occurred in 2018 due to a change in the measurement of certain consideration exchanged in the acquisition, which was recognized as a measurement period adjustment. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets is measured by comparison of the carrying amount of the asset to the net undiscounted future cash flows expected to be generated from the asset. If the future undiscounted cash flows are not sufficient to recover the carrying value of the asset, the asset’s carrying value is adjusted to fair value. During the year ended December 31, 2019, the Company noted no impairment.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 10 NOTE 2 – Summary of Significant Accounting Policies (Continued) Revenue Recognition Beginning January 1, 2019, revenue is recognized when a contractual promise to a customer has been fulfilled by transferring control over the promised goods or services, principally at the time of shipment to or receipt of the products by the customer. The Company’s contractual promises generally represent one performance obligation. However, if a contract includes more than one performance obligation, the consideration is allocated based on the standalone selling prices of the individual performance obligations. Such determination does not require significant judgment. The amount of revenue recognized is based on the expected consideration in exchange for the goods, taking into account contractually defined terms (e.g. trade discounts, cash discounts, and volume rebates) and excluding taxes or duty. The following table presents disaggregated revenue recognized by service line for the year ended December 31, 2019: Large painted/anodized – commercial projects $ 85,209,815 Painted/anodized – aluminum storefronts 62,471,306 Painted/anodized – residential projects 36,149,162 Painted/anodized – interior partitions products 29,741,241 Painted/anodized – doors and frames 13,745,623 Vinyl products 7,403,939 Painted/anodized – aluminum windows 4,456,540 Finishing services 3,891,142 Painted/anodized – commercial sliding products 3,135,974 Hardware 2,843,116 Scrap sales 2,040,027 Painted/anodized – non aluminum windows/doors 1,916,627 $ 252,734,510 Customer Deposits and Advances Customer deposits and advances represents fees collected in advance from customers prior to the completion of the sale transactions. The fees will be recognized when the sale is completed or refunded to the customer if the sale is canceled prior to completion.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 11 NOTE 2 – Summary of Significant Accounting Policies (Continued) Warranty The Company provides warranty covering defects for aluminum doors and window frames. Based on historical costs of warranty replacements and insurance coverages, management has estimated and recorded approximately $1,000,000 at December 31, 2019 for future warranty costs. The warranty accrual is included in accrued expenses on the balance sheet. Advertising The Company expenses advertising costs as incurred. Advertising expense was $308,118 for the year ended December 31, 2019. Income Taxes The Company, with the consent of its stockholders, has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code and also in those states where it operates. Under those provisions, the Company does not provide for or pay federal and certain state corporate income taxes on its taxable income. Instead, the stockholders are liable for individual federal and state income taxes on their share of the Company's taxable income. The Company, as an S corporation, also pays a 1.5% state tax to California on its taxable income resulting from operations in California. The income produced from non-California operations is not subject to this tax. Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. Deferred taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. Any deferred tax assets and liabilities represent the future tax consequences of those differences and will either be taxable or deductible when the assets and liabilities are recovered or settled. As of December 31, 2019, the Company's potential deferred tax liabilities resulting from timing differences resulted in an immaterial amount. The Company’s income tax filings are subject to audit by various taxing authorities. The Company’s open audit periods are generally three and four years for federal and state filings, respectively. The Company has evaluated its tax positions for all open tax years and management believes all tax positions taken would be upheld under an examination. Therefore, no provision for the effects of uncertain tax positions has been recorded for the years ended December 31, 2019. If assessed, the Company classifies any interest and penalties recognized with a tax position as operating expenses in the statement of income.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 12 NOTE 2 – Summary of Significant Accounting Policies (Continued) Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). The guidance in this ASU supersedes the leasing guidance in Leases (Topic 840). Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of the new standard on the financial statements. In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 provides guidance to simplify the subsequent measurement of goodwill by eliminating the Step 2 procedure from the goodwill impairment test. Under the updates in ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating the impact of the adoption of the new standard on the financial statements. Subsequent Events Management has evaluated subsequent events through April 27, 2020, the date on which the financial statements were available to be issued.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 13 NOTE 3 – Property and Equipment Property and equipment as of December 31, 2019 is composed of the following: Buildings $ 3,033,585 Machinery and equipment 15,206,910 Office equipment, software, and furnishings 720,974 Vehicles 2,462,058 Leasehold improvements 3,610,131 25,033,658 Less accumulated depreciation (11,556,658) 13,477,000 Construction in progress 629,371 Land 552,000 $ 14,658,371 NOTE 4 – Line of Credit The Company has a line of credit with Union Bank of California. The Company may borrow up to $7,000,000, with interest payable monthly. The agreement expires in May 2020. The interest rate on this line of credit per the bank agreement is the LIBOR rate plus 1.4%. Borrowings under the line of credit agreement are secured by substantially all of the Company's assets. In addition, the Company is subject to certain loan covenants and pays a commitment fee. There were no outstanding balances on this line of credit at December 31, 2019. The Company also maintains standby letters of credit with Union Bank, which reduces the amount available on the line of credit. As of December 31, 2019, the amount of standby letter of credit was $23,000.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 14 NOTE 5 – Income Taxes The provision from income taxes consists of the following: Current expense: State tax $ 675,861 Deferred tax expense 44,100 Provision for income taxes $ 719,961 The reconciliation of the franchise tax rate to the effective tax rate is as follows at December 31, 2019: State statutory franchise tax rate $ 759,107 Permanent differences (39,146) Provision for income taxes $ 719,961 The components of net deferred income tax assets consist of the following at December 31, 2019: Deferred tax assets: Inventory $ 22,280 Accrued expenses 82,378 Research and development credits 458,187 Other items 12,486 575,331 Deferred tax liabilities: Property and equipment (63,302) Net deferred tax assets $ 512,029 In assessing the valuation of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 15 NOTE 6 – Related-Party and Other Transactions The Company leases facilities in California, Connecticut, Nevada, and Arizona from Alpine Universal, Inc. The stockholders of Alpine Universal, Inc. are also the same stockholders of the Company. The Company’s lease expense and fees to Alpine Universal, Inc. were approximately $3,320,000 for the year ended December 31, 2019. The multi-year lease terms for all these leases are included in the lease commitments described in Note 8. The Company has also advanced funds to Alpine Universal, Inc. to assist with operations. The advances are interest free, with payment due as funds become available. As of December 31, 2019, Alpine owed the Company $200,000 recorded as note receivable on the balance sheet. NOTE 7 – Company-Sponsored Pension Plan The Company sponsors a retirement plan, which provides for employee contributions through salary reductions and employer matching contributions. The Company made employer matching contributions of $245,288 on qualified salaries for the year ended December 31, 2019. The Company matches 30% of an employee's contribution up to a maximum contribution rate of 5% of salary. NOTE 8 – Commitments and Contingencies The Company leases facilities across its geographic operating locations. These operating lease agreements expire through 2046. Certain leases are adjusted annually for increases in the consumer price index and require the Company to pay all executory costs (such as property taxes, maintenance and insurance).
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2019 16 NOTE 8 – Commitments and Contingencies (Continued) Future minimum rental payments under noncancelable leases as of December 31, 2019 are as follows: Year Ending December 31, Related Party Third Party Total 2020 $ 3,003,720 $ 1,462,873 $ 4,466,593 2021 2,279,570 1,108,277 3,387,847 2022 1,762,320 865,917 2,628,237 2023 1,504,992 875,457 2,380,449 2024 1,504,992 884,998 2,389,990 Thereafter 10,237,408 7,582,626 17,820,034 $ 24,293,002 $ 12,780,148 $ 33,073,150 Rent expense for facilities used in the Company's operations was $5,032,487 for the year ended December 31, 2019.
17 INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTARY FINANCIAL DATA To the Stockholders of Arcadia, Inc. We have audited the financial statements of Arcadia, Inc. as of and for the year ended December 31, 2019, and our report thereon dated April 27, 2020, which expressed an unmodified opinion on those financial statements, appears on page 1. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplemental schedules shown on pages 18-19 are presented for purposes of additional analysis of the financial statements, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The supplemental information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. Long Beach, California April 27, 2020 Long Beach | Irvine | Los Angeles www.windes.com 844.4WINDES
ARCADIA, INC. SUPPLEMENTAL SCHEDULE OF COST OF GOODS SOLD FOR THE YEAR ENDED DECEMBER 31, 2019 COST OF GOODS SOLD Materials Direct materials 100,604,777$ Freight 5,989,582 106,594,359 Labor Direct labor 34,779,742 Payroll taxes 2,305,556 Employee benefits 2,983,033 40,068,331 Manufacturing Overhead Rent 4,942,487 Supplies 4,406,736 Utilities 2,715,308 Packing and crating 2,143,355 Repairs and maintenance 1,286,402 Depreciation 1,144,771 Insurance expense 895,857 Outside services 747,184 Waste and disposal costs 568,808 Truck and auto expense 339,258 Equipment rental 134,143 19,324,309 TOTAL COST OF GOODS SOLD 165,986,999$ See Independent Auditors' Report on Supplementary Financial Data on Page 17. 18
ARCADIA, INC. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2019 SELLING EXPENSES Payroll costs 10,750,482$ Bad-debt expense 483,040 Commissions 639,938 Advertising and promotion 380,118 Auto expense 347,885 Travel and entertainment 793,606 13,395,069 GENERAL AND ADMINISTRATIVE EXPENSES Payroll and payroll related expenses 13,436,774 Professional and outside services 4,513,314 Taxes, fees and licenses 3,646,503 Legal and accounting 2,375,458 Warranty expenses 1,137,368 Office supplies and expense 787,601 Telephone and telex 483,968 Banking charges 294,180 Depreciation 286,300 Miscellaneous 237,947 Rent 90,000 27,289,413 TOTAL OPERATING COSTS 40,684,482$ See Independent Auditors' Report on Supplementary Financial Data on Page 17. 19
Financial Statements December 31, 2020
CONTENTS Independent Auditors’ Report ........................................................................... 1 Balance Sheet .............................................................................................. 2 Statement of Income ...................................................................................... 3 Statement of Stockholders’ Equity ..................................................................... 4 Statement of Cash Flows ................................................................................. 5 Notes to the Financial Statements .................................................................. 6-15 Independent Auditors’ Report on Supplementary Financial Data ............................... 16 Supplemental Schedule of Cost of Goods Sold .................................................... 17 Supplemental Schedule of Operating Expenses .................................................... 18
1 INDEPENDENT AUDITORS’ REPORT To the Stockholders of Arcadia, Inc. We have audited the accompanying financial statements of Arcadia, Inc. (a California corporation), which comprise the balance sheet as of December 31, 2020, and the related statements of income, stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Arcadia, Inc. as of December 31, 2020, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Long Beach, California May 7, 2021 Long Beach | Irvine | Los Angeles www.windes.com 844.4WINDES
ARCADIA, INC. BALANCE SHEET DECEMBER 31, 2020 CURRENT ASSETS Cash 31,591,951$ Accounts receivable, net of bad debt reserve of $393,037 32,287,611 Inventory 42,608,936 Prepaid expenses and other current assets 298,966 106,787,464 PROPERTY AND EQUIPMENT, net 15,696,279 OTHER ASSETS Employee advances 288,514 Note receivable 200,000 Deposits 69,609 Deferred taxes 419,037 Goodwill 2,200,210 3,177,370 TOTAL ASSETS 125,661,113$ CURRENT LIABILITIES Accounts payable 6,625,531$ Accrued wages and related employee benefits 2,329,191 Accrued expenses 4,849,510 Customer deposits and advances 10,064,778 23,869,010 COMMITMENTS AND CONTINGENCIES (Note 8) STOCKHOLDERS’ EQUITY Common stock, $100 stated value; authorized 10,000 shares, 6,645 shares issued and outstanding 642,500 Additional paid-in-capital 2,696,876 Retained earnings 98,452,727 101,792,103 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 125,661,113$ LIABILITIES AND STOCKHOLDERS' EQUITY ASSETS The accompanying notes are an integral part of these financial statements. 2
ARCADIA, INC. STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2020 NET SALES 245,553,760$ COST OF GOODS SOLD 162,699,355 GROSS PROFIT 82,854,405 OPERATING EXPENSES Selling 13,709,355 General and administrative 23,570,375 37,279,730 INCOME FROM OPERATIONS 45,574,675 OTHER EXPENSE (128,122) INCOME BEFORE TAXES 45,446,553 PROVISION FOR INCOME TAXES (841,188) NET INCOME 44,605,365$ The accompanying notes are an integral part of these financial statements. 3
ARCADIA, INC. STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2020 Additional Common Paid-In Retained Stock Capital Earnings Total BALANCE AT JANUARY 1, 2020 642,500$ 2,696,876$ 87,322,362$ 90,661,738$ NET INCOME - - 44,605,365 44,605,365 STOCKHOLDER DISTRIBUTIONS - - (33,475,000) (33,475,000) BALANCE AT DECEMBER 31, 2020 642,500$ 2,696,876$ 98,452,727$ 101,792,103$ The accompanying notes are an integral part of these financial statements. 4
ARCADIA, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net income 44,605,365$ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,640,027 Gain on asset dispositions (13,400) Frogiveness of employee advances 153,712 Change in bad debt reserve (363,985) Change in deferred taxes 92,992 Changes in operating assets and liabilities: Accounts receivable (2,349,412) Inventory (1,528,316) Prepaid expenses and other current assets (74,303) Deposits 45,927 Accounts payable 1,803,924 Accrued wages and related employee benefits 741,494 Accrued expenses 416,909 Customer deposits and advances (109,096) Net Cash Provided By Operating Activities 45,061,838 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (2,677,935) Proceed from sale of property and equipment 13,400 Net change in employee advances (114,406) Net Cash Used In Investing Activities (2,778,941) CASH FLOWS FROM FINANCING ACTIVITIES Distributions to stockholders (33,475,000) Net Cash Used In Financing Activities (33,475,000) NET CHANGE IN CASH AND CASH EQUIVALENTS 8,807,897 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 22,784,054 CASH AND CASH EQUIVALENTS, END OF YEAR 31,591,951$ SUPPLEMENTAL DISCOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Income taxes 652,774$ The accompanying notes are an integral part of these financial statements. 5
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 6 NOTE 1 – Description of Business Arcadia, Inc. (the Company) manufactures finished doors, window frames, and building partitions. The Company's products are sold at wholesale to various contractors and subcontractors primarily throughout the United States to both the commercial and residential markets. NOTE 2 – Summary of Significant Accounting Policies Basis of Presentation The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Use of Estimates Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenue and expenses. Actual results could vary from the estimates that were assumed in preparing the financial statements. Principal areas requiring the use of estimates include determination of allowance for doubtful accounts, inventory (work in process), impairment of long-lived assets, deferred income taxes, warranty costs, and useful lives of property and equipment. Common Control Leasing Arrangements The Company has elected not to apply VIE guidance to Alpine Universal, Inc., a commonly controlled lessor (see Note 6), as the Company determined that the leasing arrangements meet the established criteria in ASC 810. ASC 810 permits a private company lessee (the reporting entity) to elect an accounting alternative not to apply variable interest entity (VIE) guidance to commonly controlled lessor entities if (a) the private company lessee and the lessor entities are under common control, (b) the private company lessee has a lease arrangement with the lessor entity, (c) substantially all of the activities between the private company lessee and the lessor entity are related to leasing activities (including supporting leasing activities) between those two entities, and (d) if the private company lessee explicitly guarantees or provides collateral for any obligation of the lessor entity related to the asset leased by the private company, and the principal amount of the obligation at inception of such guarantee or collateral arrangement does not exceed the value of the asset leased by the private company from the lessor entity.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 7 NOTE 2 – Summary of Significant Accounting Policies (Continued) Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash deposits and trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the Company’s large number of customers and their geographic dispersion. The Company requires no collateral from its customers and performs ongoing credit evaluations of its customers’ financial condition. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company currently places its cash deposits with high-credit quality financial institutions. At times, balances in the Company’s cash account may exceed the federally insured limit; however, the Company has not experienced any losses with respect to these items. Accounts Receivable Accounts receivable is stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Inventory The inventory of finished aluminum doors, window frames, materials used in finishing coatings for aluminum, and interior building partitions plus related components are stated at the lower of cost or net realizable value under the first-in, first-out (FIFO) method. Inventory on-hand at December 31, 2020 is comprised of: Work-in-process $ 2,724,404 Finished goods 39,884,532 $ 42,608,936
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 8 NOTE 2 – Summary of Significant Accounting Policies (Continued) Property and Equipment Property and equipment is stated at cost. Depreciation is provided using straight-line and accelerated methods over the estimated useful lives of the assets. The estimated useful lives of the assets are as follows: Buildings 40 years Machinery and equipment 5-10 years Office equipment, software, and furnishings 5-10 years Vehicles 5 years Leasehold improvements 10-15 years Leasehold improvements are amortized on the straight-line method over the term of the lease or estimated useful life, whichever is shorter. Expenditures for repairs and maintenance are charged to operations as incurred, while renewals and betterments are capitalized. Employee Advances From time to time, the Company will advance employee loans to assist with the acquisition of residential property. The interest-free advances are paid back through payroll withholdings or upon the sale of the property. Note Receivable The Company has advanced funds to Alpine Universal, Inc. who share common stockholders as the Company. The advances are interest free and are paid back as funds become available. Goodwill Goodwill represents the excess of acquisition costs over the net fair values of identifiable assets acquired and liabilities assumed in business acquisitions. Goodwill is deemed to have an indefinite life and is not amortized, but rather tested annually for impairment. The Company has elected the accounting alternative available under ASC 350-20 to perform goodwill impairment triggering event evaluations only as of the end of each reporting period. As of December 31, 2020, the Company noted no impairment.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 9 NOTE 2 – Summary of Significant Accounting Policies (Continued) Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets is measured by comparison of the carrying amount of the asset to the net undiscounted future cash flows expected to be generated from the asset. If the future undiscounted cash flows are not sufficient to recover the carrying value of the asset, the asset’s carrying value is adjusted to fair value. During the year ended December 31, 2020, the Company noted no impairment. Revenue Recognition Revenue is recognized when a contractual promise to a customer has been fulfilled by transferring control over the promised goods or services, principally at the time of shipment to or receipt of the products by the customer. The Company’s contractual promises generally represent one performance obligation. However, if a contract includes more than one performance obligation, the consideration is allocated based on the standalone selling prices of the individual performance obligations. Such determination does not require significant judgment. The amount of revenue recognized is based on the expected consideration in exchange for the goods, taking into account contractually defined terms (e.g. trade discounts, cash discounts, and volume rebates) and excluding taxes or duty. The following table presents disaggregated revenue recognized by service line for the year ended December 31, 2020: Large painted/anodized – commercial projects $ 90,166,623 Painted/anodized – aluminum storefronts 63,990,115 Painted/anodized – residential projects 32,782,149 Painted/anodized – interior partition products 25,570,090 Painted/anodized – doors and frames 10,495,271 Vinyl products 6,785,892 Painted/anodized – commercial sliding products 4,377,904 Painted/anodized – aluminum windows 3,773,362 Hardware 2,843,432 Painted/anodized – non-aluminum windows/doors 1,836,482 Scrap sales 1,616,664 Finishing services 1,315,776 $ 245,553,760
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 10 NOTE 2 – Summary of Significant Accounting Policies (Continued) Customer Deposits and Advances Customer deposits and advances represents fees collected in advance from customers prior to the completion of the sale transactions. The fees will be recognized when the sale is completed or refunded to the customer if the sale is canceled prior to completion. Warranty The Company provides warranty coverage for defects for aluminum doors and window frames. Based on historical costs of warranty replacements and insurance coverages, management has estimated and recorded approximately $1,250,000 at December 31, 2020 for future warranty costs. The warranty accrual is included in accrued expenses on the balance sheet. Advertising The Company expenses advertising costs as incurred. Advertising expense was $370,594 for the year ended December 31, 2020. Income Taxes The Company, with the consent of its stockholders, has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code and also in those states where it operates. Under those provisions, the Company does not provide for or pay federal and certain state corporate income taxes on its taxable income. Instead, the stockholders are liable for individual federal and state income taxes on their share of the Company's taxable income. The Company, as an S corporation, also pays a 1.5% state tax to California on its taxable income resulting from operations in California. The income produced from non-California operations is not subject to this tax. Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. Deferred taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. Any deferred tax assets and liabilities represent the future tax consequences of those differences and will either be taxable or deductible when the assets and liabilities are recovered or settled. As of December 31, 2020, the Company's potential deferred tax liabilities resulting from timing differences resulted in an immaterial amount.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 11 NOTE 2 – Summary of Significant Accounting Policies (Continued) Income Taxes (Continued) The Company’s income tax filings are subject to audit by various taxing authorities. The Company’s open audit periods are generally three and four years for federal and state filings, respectively. The Company has evaluated its tax positions for all open tax years and management believes all tax positions taken would be upheld under an examination. Therefore, no provision for the effects of uncertain tax positions has been recorded for the years ended December 31, 2020. If assessed, the Company classifies any interest and penalties recognized with a tax position as operating expenses in the statement of income. Recently Adopted Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment (ASU 2017-04). ASU 2017-04 provides guidance to simplify the subsequent measurement of goodwill by eliminating the Step 2 procedure from the goodwill impairment test. Under the updates in ASU 2017-04, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company chose to early adopt ASU 2017-04 for the year ended December 31, 2020. There was no significant impact upon the adoption of the new standard on the financial statements. In March 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-03, Intangibles – Goodwill and Other (Topic 350). The guidance in this ASU provides an accounting alternative to evaluate triggering events for goodwill impairment only as of the end of each reporting period, whether they report on an interim or annual basis. The Company chose to elect this accounting alternative as of December 31, 2020. There was no significant impact upon the adoption of the new standard and accounting alternative election on the financial statements.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 12 NOTE 2 – Summary of Significant Accounting Policies (Continued) Future Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). The guidance in this ASU supersedes the leasing guidance in Leases (Topic 840). Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of the new standard on the financial statements. Subsequent Events Management has evaluated subsequent events through May 7, 2021, the date on which the financial statements were available to be issued. NOTE 3 – Property and Equipment Property and equipment as of December 31, 2020 is composed of the following: Buildings $ 3,033,585 Machinery and equipment 16,473,766 Office equipment, software, and furnishings 827,641 Vehicles 2,402,742 Leasehold improvements 3,679,385 26,417,119 Less accumulated depreciation (12,984,347) 13,432,772 Construction in progress 1,711,507 Land 552,000 $ 15,696,279
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 13 NOTE 4 – Line of Credit The Company has a line of credit with Union Bank of California. The Company may borrow up to $6,900,000, with interest payable monthly. The agreement expires in August 2022. The interest rate on this line of credit per the bank agreement is the LIBOR rate plus 1.4%. Borrowings under the line of credit agreement are secured by substantially all of the Company's assets. In addition, the Company is subject to certain loan covenants and pays a commitment fee. There was no outstanding balance on this line of credit at December 31, 2020. The Company also maintains standby letters of credit with Union Bank, which reduces the amount available on the line of credit. As of December 31, 2020, the amount of standby letter of credit was $23,000. NOTE 5 – Income Taxes The provision from income taxes consists of the following: Current expense: State tax $ 748,196 Deferred tax expense 92,992 Provision for income taxes $ 841,188 The reconciliation of the franchise tax rate to the effective tax rate is as follows at December 31, 2020: State statutory franchise tax rate $ 856,248 Temporary and permanent differences (15,060) Provision for income taxes $ 841,188
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 14 NOTE 5 – Income Taxes (Continued) The components of net deferred income tax assets consist of the following at December 31, 2020: Deferred tax assets: Inventory $ 21,029 Accrued expenses 102,029 Research and development credits 368,428 Other items 6,695 498,181 Deferred tax liabilities: Property and equipment (79,144) Net deferred tax assets $ 419,037 In assessing the valuation of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. NOTE 6 – Related-Party and Other Transactions The Company leases facilities in California, Connecticut, Nevada, and Arizona from Alpine Universal, Inc. The stockholders of Alpine Universal, Inc. are also the same stockholders of the Company. The Company’s lease expense and fees to Alpine Universal, Inc. were approximately $3,619,000 for the year ended December 31, 2020. The multi-year lease terms for all these leases are included in the lease commitments described in Note 8. The Company has also advanced funds to Alpine Universal, Inc. to assist with operations. The advances are interest free, with payment due as funds become available. As of December 31, 2020, Alpine owed the Company $200,000 recorded as note receivable on the balance sheet.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2020 15 NOTE 7 – Company-Sponsored Pension Plan The Company sponsors a retirement plan, which provides for employee contributions through salary reductions and employer matching contributions. The Company made employer matching contributions of $255,703 on qualified salaries for the year ended December 31, 2020. The Company matches 30% of an employee's contribution up to a maximum contribution rate of 5% of salary. NOTE 8 – Commitments and Contingencies The Company leases facilities across its geographic operating locations. These operating lease agreements expire through 2046. Future minimum rental payments under noncancelable leases as of December 31, 2020 are as follows: Year Ending December 31, Related Party Third Party Total 2021 $ 3,468,600 $ 2,012,751 $ 5,481,351 2022 3,468,600 1,724,296 5,192,896 2023 3,103,800 1,570,722 4,674,522 2024 3,103,800 1,288,556 4,392,356 2025 3,103,800 1,198,246 4,302,046 Thereafter 20,418,850 10,574,420 30,993,270 $ 36,667,450 $ 18,368,991 $ 55,036,441 Certain leases are adjusted annually for increases in the consumer price index and require the Company to pay all executory costs (such as property taxes, maintenance and insurance). Rent expense for facilities used in the Company's operations was $5,909,341 for the year ended December 31, 2020.
16 INDEPENDENT AUDITORS’ REPORT ON SUPPLEMENTARY FINANCIAL DATA To the Stockholders of Arcadia, Inc. We have audited the financial statements of Arcadia, Inc. as of and for the year ended December 31, 2020, and our report thereon dated May 7, 2021, which expressed an unmodified opinion on those financial statements, appears on page 1. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplemental schedules shown on pages 17-18 are presented for purposes of additional analysis of the financial statements, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The supplemental information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. Long Beach, California May 7, 2021 Long Beach | Irvine | Los Angeles www.windes.com 844.4WINDES
ARCADIA, INC. SUPPLEMENTAL SCHEDULE OF COST OF GOODS SOLD FOR THE YEAR ENDED DECEMBER 31, 2020 COST OF GOODS SOLD Materials Direct materials 93,117,024$ Freight 5,953,569 99,070,593 Labor Direct labor 39,050,707 Payroll taxes 2,233,123 Employee benefits 2,952,927 44,236,757 Manufacturing Overhead Rent 5,909,341 Supplies 3,858,751 Utilities 2,527,272 Packing and crating 2,352,428 Repairs and maintenance 1,275,455 Depreciation 1,370,141 Insurance expense 1,054,367 Outside services 1,630 Waste and disposal costs 440,969 Truck and auto expense 320,825 Equipment rental 280,826 19,392,005 TOTAL COST OF GOODS SOLD 162,699,355$ See Independent Auditors' Report on Supplementary Financial Data on Page 16. 17
ARCADIA, INC. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2020 SELLING EXPENSES Payroll costs 11,689,316$ Commissions 558,292 Bad debt expense 397,009 Advertising and promotion 370,594 Travel and entertainment 349,506 Auto expense 344,638 13,709,355 GENERAL AND ADMINISTRATIVE EXPENSES Payroll and payroll related expenses 14,323,102 Professional and outside services 3,547,418 Legal and accounting 1,694,299 Taxes, fees and licenses 1,250,339 Office supplies and expense 769,551 Warranty expenses 605,960 Telephone and telex 495,682 Banking charges 449,181 Depreciation 269,886 Miscellaneous 164,957 23,570,375 TOTAL OPERATING COSTS 37,279,730$ See Independent Auditors' Report on Supplementary Financial Data on Page 16. 18
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CONTENTS Independent Accountants’ Review Report ............................................................ 1 Balance Sheet .............................................................................................. 2 Statement of Income ...................................................................................... 3 Statement of Stockholders’ Equity ..................................................................... 4 Statement of Cash Flows ................................................................................. 5 Notes to the Financial Statements .................................................................. 6-15 Supplemental Schedule of Cost of Goods Sold .................................................... 16 Supplemental Schedule of Operating Expenses .................................................... 17
1 INDEPENDENT ACCOUNTANTS’ REVIEW REPORT To the Stockholders of Arcadia, Inc. We have reviewed the accompanying financial statements of Arcadia, Inc., which comprise the balance sheet as of September 30, 2021, and the related statements of income, stockholders’ equity, and cash flows for the period January 1, 2021 to September 30, 2021, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Accountants’ Responsibility Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion. We are required to be independent of Arcadia, Inc. and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our review. Accountants’ Conclusion Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in accordance with accounting principles generally accepted in the United States of America. Supplementary Information The supplementary information included in the supplementary financial data is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplementary information is the representation of management, and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The supplementary information has been subjected to the review procedures applied in our review of the basic financial statements. We are not aware of any material modifications that should be made to the information. We have not audited the information and, accordingly, do not express an opinion on such information. Long Beach, California February 18, 2022 Long Beach | Irvine | Los Angeles www.windes.com 844.4WINDES
ARCADIA, INC. BALANCE SHEET SEPTEMBER 30, 2021 CURRENT ASSETS Cash 25,418,398$ Accounts receivable, net of bad debt reserve of $300,395 30,626,120 Inventory 58,665,299 Prepaid expenses and other current assets 284,882 114,994,699 PROPERTY AND EQUIPMENT, net 17,171,332 OTHER ASSETS Employee advances 172,165 Deposits 98,757 Deferred taxes 329,294 Goodwill 2,200,210 2,800,426 TOTAL ASSETS 134,966,457$ CURRENT LIABILITIES Accounts payable 10,567,836$ Accrued wages and related employee benefits 3,653,709 Accrued expenses 4,336,311 Customer deposits and advances 9,781,228 28,339,084 COMMITMENTS AND CONTINGENCIES (Note 8) STOCKHOLDERS’ EQUITY Common stock, $100 stated value; authorized 10,000 shares, 6,645 shares issued and outstanding 642,500 Additional paid-in-capital 2,696,876 Retained earnings 103,287,997 106,627,373 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 134,966,457$ ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY See Independent Accountants' Review Report The accompanying notes are an integral part of these financial statements. 2
ARCADIA, INC. STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 NET SALES 184,042,037$ COST OF GOODS SOLD 115,504,310 GROSS PROFIT 68,537,727 OPERATING EXPENSES Selling 9,067,059 General and administrative 17,642,138 26,709,197 INCOME FROM OPERATIONS 41,828,530 OTHER INCOME 484,192 INCOME BEFORE TAXES 42,312,722 PROVISION FOR INCOME TAXES (477,452) NET INCOME 41,835,270$ See Independent Accountants' Review Report The accompanying notes are an integral part of these financial statements. 3
ARCADIA, INC. STATEMENT OF STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 Additional Common Paid-In Retained Stock Capital Earnings Total BALANCE AT JANUARY 1, 2021 642,500$ 2,696,876$ 98,452,727$ 101,792,103$ NET INCOME - - 41,835,270 41,835,270 STOCKHOLDER DISTRIBUTIONS - - (37,000,000) (37,000,000) BALANCE AT SEPTEMBER 30, 2021 642,500$ 2,696,876$ 103,287,997$ 106,627,373$ See Independent Accountants' Review Report The accompanying notes are an integral part of these financial statements. 4
ARCADIA, INC. STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income 41,835,270$ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,376,245 Loss on asset dispositions 23,075 Change in bad debt reserve 244,242 Change in deferred taxes 89,743 Changes in operating assets and liabilities: Accounts receivable 1,417,249 Inventory (16,056,363) Prepaid expenses and other current assets 14,084 Deposits (29,148) Accounts payable 3,942,305 Accrued wages and related employee benefits 1,324,518 Accrued expenses (513,199) Customer deposits and advances (283,550) Net Cash Provided By Operating Activities 33,384,471 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (2,875,373) Proceed from sale of property and equipment 1,000 Issuance of employee advances (3,700) Repayment of employee advances 120,049 Repayment of note receivable 200,000 Net Cash Used In Investing Activities (2,558,024) CASH FLOWS FROM FINANCING ACTIVITIES Distributions to stockholders (37,000,000) Net Cash Used In Financing Activities (37,000,000) NET CHANGE IN CASH AND CASH EQUIVALENTS (6,173,553) CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 31,591,951 CASH AND CASH EQUIVALENTS, END OF THE PERIOD 25,418,398$ SUPPLEMENTAL DISCOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Income taxes 630,565$ See Independent Accountants' Review Report The accompanying notes are an integral part of these financial statements. 5
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 6 NOTE 1 – Description of Business Arcadia, Inc. (the Company) manufactures finished doors, window frames, and building partitions. The Company's products are sold at wholesale to various contractors and subcontractors primarily throughout the United States to both the commercial and residential markets. NOTE 2 – Summary of Significant Accounting Policies Basis of Presentation The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Use of Estimates Management uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenue and expenses. Actual results could vary from the estimates that were assumed in preparing the financial statements. Principal areas requiring the use of estimates include determination of allowance for doubtful accounts, inventory (work in process), impairment of long-lived assets, deferred income taxes, warranty costs, and useful lives of property and equipment. Common Control Leasing Arrangements The Company has elected not to apply VIE guidance to Alpine Universal, Inc., a commonly controlled lessor (see Note 6), as the Company determined that the leasing arrangements meet the established criteria in ASC 810. ASC 810 permits a private company lessee (the reporting entity) to elect an accounting alternative not to apply variable interest entity (VIE) guidance to commonly controlled lessor entities if (a) the private company lessee and the lessor entities are under common control, (b) the private company lessee has a lease arrangement with the lessor entity, (c) substantially all of the activities between the private company lessee and the lessor entity are related to leasing activities (including supporting leasing activities) between those two entities, and (d) if the private company lessee explicitly guarantees or provides collateral for any obligation of the lessor entity related to the asset leased by the private company, and the principal amount of the obligation at inception of such guarantee or collateral arrangement does not exceed the value of the asset leased by the private company from the lessor entity.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 7 NOTE 2 – Summary of Significant Accounting Policies (Continued) Concentrations of Credit Risk Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash deposits and trade receivables. Concentrations of credit risk with respect to trade receivables are limited due to the Company’s large number of customers and their geographic dispersion. The Company requires no collateral from its customers and performs ongoing credit evaluations of its customers’ financial condition. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company currently places its cash deposits with high-credit quality financial institutions. At times, balances in the Company’s cash account may exceed the federally insured limit; however, the Company has not experienced any losses with respect to these items. Accounts Receivable Accounts receivable is stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Inventory The inventory of finished aluminum doors, window frames, materials used in finishing coatings for aluminum, and interior building partitions plus related components are stated at the lower of cost or net realizable value under the first-in, first-out (FIFO) method. Inventory on-hand at September 30, 2021 is comprised of: Work-in-process $ 3,715,233 Finished goods 54,950,066 $ 58,665,299
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 8 NOTE 2 – Summary of Significant Accounting Policies (Continued) Property and Equipment Property and equipment is stated at cost. Depreciation is provided using straight-line and accelerated methods over the estimated useful lives of the assets. The estimated useful lives of the assets are as follows: Buildings 40 years Machinery and equipment 5-10 years Office equipment, software, and furnishings 5-10 years Vehicles 5 years Leasehold improvements 10-15 years Leasehold improvements are amortized on the straight-line method over the term of the lease or estimated useful life, whichever is shorter. Expenditures for repairs and maintenance are charged to operations as incurred, while renewals and betterments are capitalized. Employee Advances From time to time, the Company will advance employee loans to assist with the acquisition of residential property. The interest-free advances are paid back through payroll withholdings or upon the sale of the property. Goodwill Goodwill represents the excess of acquisition costs over the net fair values of identifiable assets acquired and liabilities assumed in business acquisitions. Goodwill is deemed to have an indefinite life and is not amortized, but rather tested annually for impairment. The Company has elected the accounting alternative available under ASC 350-20 to perform goodwill impairment triggering event evaluations only as of the end of each reporting period. As of September 30, 2021, the Company noted no impairment.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 9 NOTE 2 – Summary of Significant Accounting Policies (Continued) Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets is measured by comparison of the carrying amount of the asset to the net undiscounted future cash flows expected to be generated from the asset. If the future undiscounted cash flows are not sufficient to recover the carrying value of the asset, the asset’s carrying value is adjusted to fair value. For the period January 1, 2021 to September 30, 2021, the Company noted no impairment. Revenue Recognition Revenue is recognized when a contractual promise to a customer has been fulfilled by transferring control over the promised goods or services, principally at the time of shipment to or receipt of the products by the customer. The Company’s contractual promises generally represent one performance obligation. However, if a contract includes more than one performance obligation, the consideration is allocated based on the standalone selling prices of the individual performance obligations. Such determination does not require significant judgment. The amount of revenue recognized is based on the expected consideration in exchange for the goods, taking into account contractually defined terms (e.g. trade discounts, cash discounts, and volume rebates) and excluding taxes or duty. The following table presents disaggregated revenue recognized by service line for the period January 1, 2021 to September 30, 2021: Large painted/anodized – commercial projects $ 64,560,254 Painted/anodized – aluminum storefronts 49,848,078 Painted/anodized – residential projects 28,229,147 Painted/anodized – interior partition products 17,276,765 Painted/anodized – doors and frames 8,902,220 Vinyl products 3,647,886 Painted/anodized – commercial sliding products 2,810,465 Painted/anodized – aluminum windows 2,284,348 Hardware 2,141,997 Scrap sales 1,802,050 Finishing services 1,252,787 Wood 1,215,041 Painted/anodized – non-aluminum windows/doors 70,999 $ 184,042,037
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 10 NOTE 2 – Summary of Significant Accounting Policies (Continued) Customer Deposits and Advances Customer deposits and advances represents fees collected in advance from customers prior to the completion of the sale transactions. The fees will be recognized when the sale is completed or refunded to the customer if the sale is canceled prior to completion. Warranty The Company provides warranty coverage for defects for aluminum doors and window frames. Based on historical costs of warranty replacements and insurance coverages, management has estimated and recorded approximately $1,250,000 at September 30, 2021 for future warranty costs. The warranty accrual is included in accrued expenses on the balance sheet. Advertising The Company expenses advertising costs as incurred. Advertising expense was $211,370 for the period January 1, 2021 to September 30, 2021. Income Taxes The Company, with the consent of its stockholders, has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code and also in those states where it operates. Under those provisions, the Company does not provide for or pay federal and certain state corporate income taxes on its taxable income. Instead, the stockholders are liable for individual federal and state income taxes on their share of the Company's taxable income. The Company, as an S corporation, also pays a 1.5% state tax to California on its taxable income resulting from operations in California. The income produced from non-California operations is not subject to this tax. Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. Deferred taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. Any deferred tax assets and liabilities represent the future tax consequences of those differences and will either be taxable or deductible when the assets and liabilities are recovered or settled.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 11 NOTE 2 – Summary of Significant Accounting Policies (Continued) Income Taxes (Continued) The Company’s income tax filings are subject to audit by various taxing authorities. The Company’s open audit periods are generally three and four years for federal and state filings, respectively. The Company provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by the authoritative guidance on income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. If assessed, the Company classifies any interest and penalties recognized with a tax position as operating expenses in the statement of income. Future Accounting Pronouncement In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02). The guidance in this ASU supersedes the leasing guidance in Leases (Topic 840). Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of the new standard on the financial statements. Subsequent Events Subsequent to the nine month period ended September 30, 2021, the Company completed a reorganization and converted the Company to Arcadia Products LLC, a Colorado limited liability company. On December 16, 2021, an agreement was reached with DMC Global, Inc. (DMC) to acquire 60% of Arcadia Products LLC for cash and stock consideration. On December 23, 2021, the acquisition was completed pursuant to an equity purchase agreement by and among DMC, Arcadia Products LLC, the shareholders of Arcadia, Inc. and certain other parties. As part of the acquisition, a member of Arcadia Products LLC has a put option requiring DMC to acquire the remaining 40% interest of Arcadia Products LLC after three years of the original acquisition for cash or a combination of cash and preferred stock in DMC. In addition, DMC has a call option to acquire the remaining 40% interest of Arcadia Products LLC after three years of the original acquisition in an all cash transaction.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 12 NOTE 2 – Summary of Significant Accounting Policies (Continued) Subsequent Events (Continued) On February 7, 2022, the Company received notice from the IRS that its S-Corporation election was terminated under IRC Section 1362(g) effective November 18, 2020. The termination of the Company’s S-Corporation election would result in the Company being taxed as a C-Corporation, which would generate a tax provision of approximately $12,810,000 and an a change in the Company’s deferred tax position from a tax asset to a tax liability of approximately $460,000. Management believes the termination was an error and preliminary discussion with the IRS yielded no basis or rationale for the termination. The Company strongly believes the termination will be overturned to allow the Company to continue to be taxed as a S-Corporation. Therefore, no accrual for the additional tax liability or change in deferred taxes have been recognized in the financial statements. To the extent the final tax outcome of these matters is different than the estimates recorded, the Company would then adjust its tax reserves or unrecognized tax benefits in the period that this information becomes known. Management has evaluated subsequent events through February 18, 2022, the date on which the financial statements were available to be issued for the nine month period ended September 30, 2021 and except for the items noted above, management determined there was no other subsequent event requiring disclosure in the financial statements. NOTE 3 – Property and Equipment Property and equipment as of September 30, 2021 is composed of the following: Buildings $ 3,033,585 Machinery and equipment 19,276,303 Office equipment, software, and furnishings 849,772 Vehicles 2,421,312 Leasehold improvements 5,325,746 30,906,718 Less accumulated depreciation (14,296,974) 16,609,744 Construction in progress 9,588 Land 552,000 $ 17,171,332
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 13 NOTE 4 – Line of Credit The Company has a line of credit with Union Bank of California. The Company may borrow up to $6,900,000, with interest payable monthly. The agreement expires in August 2022. The interest rate on this line of credit per the bank agreement is the LIBOR rate plus 1.4%. Borrowings under the line of credit agreement are secured by substantially all of the Company's assets. In addition, the Company is subject to certain loan covenants and pays a commitment fee. There was no outstanding balance on this line of credit at September 30, 2021. The Company also maintains standby letters of credit with Union Bank, which reduces the amount available on the line of credit. As of September 30, 2021 the amount of standby letter of credit was $23,000. Subsequent to year-end, the letters of credit were cancelled. NOTE 5 – Income Taxes The provision from income taxes consists of the following: Current expense: State tax $ 387,709 Deferred tax expense 89,743 Provision for income taxes $ 477,452 The reconciliation of the franchise tax rate to the effective tax rate is as follows at September 30, 2021: State statutory franchise tax rate $ 619,297 Temporary and permanent differences (141,845) Provision for income taxes $ 477,452
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 14 NOTE 5 – Income Taxes (Continued) The components of net deferred income tax assets consist of the following at September 30, 2021: Deferred tax assets: Inventory $ 26,230 Accrued expenses 71,348 Research and development credits 296,501 Other items 4,797 398,876 Deferred tax liabilities: Property and equipment (69,582) Net deferred tax assets $ 329,294 In assessing the valuation of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. NOTE 6 – Related-Party and Other Transactions The Company leases facilities in California, Connecticut, Nevada, and Arizona from Alpine Universal, Inc. The stockholders of Alpine Universal, Inc. are also the same stockholders of the Company. The Company’s lease expense and fees to Alpine Universal, Inc. were approximately $2,601,000 for the period January 1, 2021 to September 30, 2021. The multi- year lease terms for all these leases are included in the lease commitments described in Note 8. NOTE 7 – Company-Sponsored Pension Plan The Company sponsors a retirement plan, which provides for employee contributions through salary reductions and employer matching contributions. The Company made employer matching contributions of $183,096 on qualified salaries for the period January 1, 2021 to September 30, 2021. The Company matches 30% of an employee's contribution up to a maximum contribution rate of 5% of salary.
ARCADIA, INC. NOTES TO THE FINANCIAL STATEMENTS SEPTEMBER 30, 2021 15 NOTE 8 – Commitments and Contingencies The Company leases facilities across its geographic operating locations. These operating lease agreements expire through 2046. Future minimum rental payments under noncancelable leases as of September 30, 2021 are as follows: Year Ending December 31, Related Party Third Party Total 2021* $ 513,130 $ 887,988 $ 1,401,118 2022 3,468,600 2,387,487 5,856,087 2023 3,103,800 2,004,112 5,107,912 2024 3,103,800 1,730,263 4,834,063 2025 3,103,800 1,619,674 4,723,474 Thereafter 20,418,850 11,641,833 32,060,683 $ 33,711,980 $ 20,271,357 $ 53,983,337 *Represents lease payments for the remaining three-month period ending December 31, 2021 Certain leases are adjusted annually for increases in the consumer price index and require the Company to pay all executory costs (such as property taxes, maintenance and insurance). Rent expense for facilities used in the Company's operations was $4,331,988 for the period January 1, 2021 to September 30, 2021.
SUPPLEMENTARY FINANCIAL DATA
ARCADIA, INC. SUPPLEMENTAL SCHEDULE OF COST OF GOODS SOLD FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 COST OF GOODS SOLD Materials Direct materials 62,017,370$ Freight 4,650,955 66,668,325 Labor Direct labor 28,615,615 Payroll taxes 1,655,855 Employee benefits 2,230,359 32,501,829 Manufacturing Overhead Rent 4,331,988 Supplies 3,097,132 Utilities 2,170,383 Packing and crating 2,077,013 Insurance expense 1,532,223 Depreciation 1,179,873 Repairs and maintenance 1,008,003 Truck and auto expense 378,974 Waste and disposal costs 275,246 Equipment rental 243,358 Outside services 39,963 16,334,156 TOTAL COST OF GOODS SOLD 115,504,310$ See Independent Accountants' Review Report 16
ARCADIA, INC. SUPPLEMENTAL SCHEDULE OF OPERATING EXPENSES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 SELLING EXPENSES Payroll costs 8,235,890$ Travel and entertainment 388,025 Auto expense 269,770 Advertising and promotion 211,370 Commissions 206,246 Net recovery of bad debt (244,242) 9,067,059 GENERAL AND ADMINISTRATIVE EXPENSES Payroll and payroll related expenses 9,851,176 Professional and outside services 3,858,510 Legal and accounting 1,453,051 Taxes, fees and licenses 723,098 Office supplies and expense 520,351 Telephone and telex 399,940 Banking charges 366,989 Depreciation 196,372 Miscellaneous 193,703 Warranty expenses 78,948 17,642,138 TOTAL OPERATING COSTS 26,709,197$ See Independent Accountants' Review Report 17
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On December 23, 2021, DMC Global Inc. (“DMC”, "we", "us", "our", or the "Company") completed its previously-disclosed acquisition (the “Acquisition”) of 60% of Arcadia Products, LLC, a Colorado limited liability company that resulted from the conversion of Arcadia, Inc., a California corporation, following a tax reorganization (“Arcadia”). The Acquisition was completed pursuant to an equity purchase agreement by and among the Company, Arcadia, the shareholders of Arcadia, Inc. and certain other parties (the “Equity Purchase Agreement”) entered into on December 16, 2021. At the closing of the Acquisition, the Company paid closing consideration of $261 million in cash (excluding $7.6 million in acquired cash) and 551,458 shares of its common stock, par value $0.05 per share. A portion of the cash consideration was placed into escrow and is subject to certain post-closing adjustments.
On December 23, 2021, in connection with the Arcadia acquisition, we entered into an Amended and Restated Credit and Security Agreement with a syndicate of four banks, led by KeyBank National Association (“credit facility”), amending and restating our prior credit agreement dated March 8, 2018. The new credit facility has a 5-year maturity expiring on December 23, 2026 and provides for a maximum commitment amount of $200 million, which includes a $50 million revolving credit facility and a $150 million fully funded term loan facility, which is amortizable at 10% of principal per year with a balloon payment for the outstanding balance upon the credit facility maturity date. The credit facility has an accordion feature to increase the commitments by $100,000 under the revolving loan class and/or by adding a term loan subject to approval by applicable lenders. The credit facility is secured by the assets of DMC including accounts receivable, inventory, and fixed assets, including Arcadia and its subsidiary, as well as guarantees and share pledges by DMC and its subsidiaries.
DMC acquired Arcadia as part of its strategy of building a diversified portfolio of industry-leading businesses with differentiated products and services. Arcadia is a leading U.S. supplier of architectural building products, which include exterior and interior framing systems, curtain walls, windows, doors, interior partitions, and highly engineered windows and doors for the high-end residential real estate market.
Assets acquired and liabilities assumed have been recorded at their fair values. Certain fair values were determined by management using the assistance of third-party valuation specialists. The valuation methods used to determine the fair value of intangible assets included the income approach—excess earnings method for customer relationships and the income approach—relief from royalty method for the trade name acquired. A number of assumptions and estimates were involved in the application of these valuation methods, including revenue forecasts, costs of revenues, operating expenses, tax rates, forecasted capital expenditures, customer attrition rate, discount rates and working capital changes.
The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020 and the nine months ended September 30, 2021 gives effect to the Acquisition as if it had occurred on January 1, 2020, the beginning of the Company's fiscal year. The historical results have been adjusted to give effect to pro forma adjustments, i.e. material charges, credits, and related tax effects, that are: 1) directly attributable to the Acquisition; 2) factually supportable; and 3) with respect to the statements of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined financial information presented herein is based on the assumptions and adjustments described in the accompanying notes. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made.
The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with the Company's historical audited financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and the historical audited financial statements and unaudited interim financial statements of Arcadia included as Exhibit 99.1, Exhibit 99.2, and Exhibit 99.3 in this Form 8-K/A.
The allocation of the purchase price as reflected in the unaudited pro forma condensed combined financial information was based on a preliminary valuation of the assets acquired and liabilities assumed, and the accounting is subject to revision as further analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.
The unaudited pro forma condensed combined financial information is for informational purposes only and should not be considered indicative of actual results that would have been achieved if Arcadia had been acquired and the other transactions had been completed on the date or for the periods presented, and does not purport to indicate the results of operations as of any future date or for any future period.
All figures are in thousands unless otherwise noted.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2020
(In thousands, except share and per share amounts)
| Historical | Pro Forma | ||||||||||||||||||||||
| DMC Global Inc | Arcadia | Transaction Accounting Adjustments | Notes | Pro Forma Combined | |||||||||||||||||||
| Net sales | $ | 229,161 | $ | 245,554 | $ | 410 | (a) | $ | 475,125 | ||||||||||||||
| Cost of products sold | 172,308 | 162,699 | 284 | (b) | 335,291 | ||||||||||||||||||
| Gross profit | 56,853 | 82,855 | 126 | 139,834 | |||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||
| General and administrative expenses | 29,150 | 23,570 | (560) | (c) | 52,160 | ||||||||||||||||||
| Selling and distribution expenses | 23,863 | 13,709 | (609) | (d) | 36,963 | ||||||||||||||||||
| Amortization of purchased intangible assets | 1,449 | — | 37,033 | (e) | 38,482 | ||||||||||||||||||
| Restructuring expenses, net and asset impairments | 3,387 | — | — | 3,387 | |||||||||||||||||||
| Total costs and expenses | 57,849 | 37,279 | 35,864 | 130,992 | |||||||||||||||||||
| Operating (loss) income | (996) | 45,576 | (35,738) | 8,842 | |||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest expense, net | (731) | — | (3,521) | (f) | (4,252) | ||||||||||||||||||
| Other expense, net | (233) | (128) | — | (361) | |||||||||||||||||||
| (Loss) income before income taxes | (1,960) | 45,448 | (39,259) | 4,229 | |||||||||||||||||||
| Income tax (benefit) provision | (548) | 841 | (9,422) | (g) | (9,129) | ||||||||||||||||||
| Net (loss) income | $ | (1,412) | $ | 44,607 | $ | (29,837) | $ | 13,358 | |||||||||||||||
| Net income attributable to redeemable noncontrolling interest | 5,908 | (h) | 5,908 | ||||||||||||||||||||
| Net (loss) income attributable to DMC Global Inc. stockholders | $ | (1,412) | $ | 44,607 | $ | (35,745) | $ | 7,450 | |||||||||||||||
| Net (loss) income per share attributable to DMC Global Inc. stockholders: | |||||||||||||||||||||||
| Basic | $ | (0.10) | $ | 0.49 | |||||||||||||||||||
| Diluted | $ | (0.10) | $ | 0.49 | |||||||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||||||
| Basic | 14,790,296 | 551,458 | (i) | 15,341,754 | |||||||||||||||||||
| Diluted | 14,790,296 | 551,458 | (i) | 15,341,754 | |||||||||||||||||||
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021
(In thousands, except share and per share amounts)
| Historical | Pro Forma | ||||||||||||||||||||||
| DMC Global Inc | Arcadia | Transaction Accounting Adjustments | Notes | Pro Forma Combined | |||||||||||||||||||
| Net sales | $ | 188,271 | $ | 184,042 | $ | (350) | (a) | $ | 371,963 | ||||||||||||||
| Cost of products sold | 141,725 | 115,504 | 3,178 | (b) | 260,407 | ||||||||||||||||||
| Gross profit | 46,546 | 68,538 | (3,528) | 111,556 | |||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||
| General and administrative expenses | 26,121 | 17,642 | (746) | (c) | 43,017 | ||||||||||||||||||
| Selling and distribution expenses | 16,380 | 9,067 | 384 | (d) | 25,831 | ||||||||||||||||||
| Amortization of purchased intangible assets | 823 | — | 11,650 | (e) | 12,473 | ||||||||||||||||||
| Restructuring expenses, net and asset impairments | 127 | — | 127 | ||||||||||||||||||||
| Total costs and expenses | 43,451 | 26,709 | 11,288 | 81,448 | |||||||||||||||||||
| Operating income (loss) | 3,095 | 41,829 | (14,816) | 30,108 | |||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest expense, net | (230) | — | (2,622) | (f) | (2,852) | ||||||||||||||||||
| Other income, net | 304 | 484 | — | 788 | |||||||||||||||||||
| Income (loss) before income taxes | 3,169 | 42,313 | (17,438) | 28,044 | |||||||||||||||||||
| Income tax provision (benefit) | 610 | 477 | (4,185) | (g) | (3,098) | ||||||||||||||||||
| Net income (loss) | $ | 2,559 | $ | 41,836 | $ | (13,253) | $ | 31,142 | |||||||||||||||
| Net income attributable to redeemable noncontrolling interest | 11,433 | (h) | 11,433 | ||||||||||||||||||||
| Net income (loss) attributable to DMC Global Inc. stockholders | $ | 2,559 | $ | 41,836 | $ | (24,686) | $ | 19,709 | |||||||||||||||
| Net income (loss) per share attributable to DMC Global Inc. stockholders: | |||||||||||||||||||||||
| Basic | $ | 0.15 | $ | 1.11 | |||||||||||||||||||
| Diluted | $ | 0.15 | $ | 1.11 | |||||||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||||||
| Basic | 17,239,306 | 551,458 | (i) | 17,790,764 | |||||||||||||||||||
| Diluted | 17,250,525 | 551,458 | (i) | 17,801,983 | |||||||||||||||||||
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. Basis of Presentation
The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020 and for the nine months ended September 30, 2021 (“pro formas”) have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission for the purposes of inclusion in DMC’s Current Report on Form 8-K prepared and furnished in connection with the Acquisition. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures provided herein are adequate to make the information presented not misleading.
The pro formas were derived from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, unaudited condensed consolidated financial statements included in our Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2021, historical audited statement of operations of Arcadia for the year ended December 31, 2020 and the historical unaudited statement of operations of Arcadia for the nine months ended September 30, 2021. The pro formas have been prepared as if the Acquisition had occurred on January 1, 2020, the first day of our fiscal year.
An unaudited pro forma condensed combined balance sheet has not been presented herein as the Acquisition has already been fully reflected in the consolidated balance sheet included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022.
The pro formas are provided for informational purposes only and do not purport to represent what the results of operations would actually have been if the Acquisition had occurred as of the date indicated nor are they necessarily indicative of the future results of the combined company.
2. Purchase Consideration and Preliminary Purchase Price Allocation
We have accounted for the Acquisition under the acquisition method of accounting in accordance with the authoritative guidance on business combinations under the provisions of Accounting Standards Codification 805, Business Combinations ("ASC 805"). The purchase price allocation is considered preliminary, and additional adjustments may be recorded during the measurement period in accordance with ASC 805. The total consideration transferred is still subject to potential working capital adjustment and the preliminary purchase price allocation related to the assets acquired and liabilities assumed may be adjusted as a result of the finalization of our procedures, primarily as it pertains to the valuation of certain long-lived assets. Differences between these preliminary estimates and the final purchase accounting may occur, and these differences could be material.
The following table summarizes the components of the preliminary estimated purchase price and related allocation:
| Cash, including cash acquired | $ | 268,654 | |||
| Equity | 21,716 | ||||
| Total fair value of consideration transferred | 290,370 | ||||
| Assets acquired: | |||||
| Cash and cash equivalents | 7,654 | ||||
| Accounts receivable | 31,456 | ||||
| Inventories | 60,503 | ||||
| Prepaid expenses and other | 2,438 | ||||
| Property, plant and equipment | 17,323 | ||||
| Goodwill | 141,266 | ||||
| Intangible assets | 254,500 | ||||
| Other long-term assets | 122 | ||||
| Total assets acquired | 515,262 | ||||
| Liabilities assumed: | |||||
| Accounts payable | 8,792 | ||||
| Other current liabilities | 22,520 | ||||
| Total liabilities assumed | 31,312 | ||||
| Redeemable noncontrolling interest | 193,580 | ||||
| Total assets acquired and liabilities assumed | $ | 290,370 | |||
Please see further discussion of the preliminary purchase price allocation in Note 3 within Item 8 — Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
3. Pro Forma Adjustments
The following describes the pro forma adjustments related to the Acquisition that have been included in the pro formas. The pro forma adjustments are based on preliminary estimates that could change significantly as additional information is obtained.
(a) Represents the estimated impact of aligning accounting policies of Arcadia to those of the Company as it pertains to revenue recognition.
(b) Represents the estimated impact of aligning accounting policies of Arcadia to those of the Company as it pertains to inventory valuation. Additional labor costs due to anticipated increases in both headcount and wage rates have also been estimated combined with additional depreciation expense on incremental capital expenditures.
(c) Represents the elimination of non-recurring acquisition related transaction costs that were incurred by Arcadia partially offset by the estimated impact of additional general and administrative expenses, primarily additional headcount within finance and information technology.
(d) Represents the estimated impact of aligning accounting policies of Arcadia to those of the Company, including certain changes in accrual estimate assumptions.
(e) Represents the preliminary estimate of amortization expense related to the acquired identifiable intangible assets calculated as if the Acquisition had occurred on January 1, 2020.
The significant intangible assets identified in the purchase price allocation discussed above include customer relationships, trade name, and customer backlog, which are amortized over their estimated useful lives.
The following table presents the estimated fair values and preliminary useful lives established of the identifiable intangible assets acquired:
| Estimated Fair Value | Weighted-Average Useful Life (years) | ||||||||||
| Trade Name | $ | 22,000 | 15 | ||||||||
| Customer Relationships | 211,000 | 15 | |||||||||
| Customer backlog | 21,500 | 0.58 | |||||||||
| $ | 254,500 | ||||||||||
(f) Represents the estimated additional annual interest expense resulting from interest on the Term Loan used to assist in financing the Acquisition, as well as the amortization of the related debt issuance costs. The interest rate assumed for purposes of the unaudited pro formas was 2.665%, which is based upon the Adjusted Daily Simple Secured Overnight Financing Rate (SOFR) plus an applicable margin specified in the credit facility.
The incremental interest expense is partially offset by the reversal of interest expense and amortization of historical debt issuance costs recorded under the Company's previously executed revolving credit facility entered into on March 8, 2018 which terminated as a result of the borrowing to finance the Acquisition.
(g) The pro forma tax adjustment was calculated by applying an estimated blended statutory tax rate of 24% to the pretax loss of the pro forma adjustments for the year ended December 31, 2020 and the nine months ended September 30, 2021, respectively. The unaudited pro forma tax benefit does not purport to represent what our income tax would have been if the acquisition had occurred on January 1, 2020. Additionally, we have not reflected impacts associated with the tax reorganization of Arcadia from a California corporation to a Colorado limited liability company given the complexity of the related analysis.
(h) Represents the 40% redeemable noncontrolling interest share of (1) Arcadia’s historical net income and (2) pro forma adjustments.
(i) The unaudited pro forma basic and diluted earnings per share calculations are based on the basic and diluted weighted-average shares outstanding of DMC, after giving effect to the issuance of shares of common stock issued as Acquisition consideration as if the shares were issued on January 1, 2020. The pro forma basic and diluted earnings per share does not give effect to any equity awards that may be granted after the date of this filing. In addition, the pro forma basic and diluted earnings per share does not give effect to the adjustment of the redeemable noncontrolling interest that was recorded during the fourth quarter of 2021. If the adjustment that was recorded during the fourth quarter of $4,424 were to be incorporated, both basic and diluted earnings per share as disclosed herein would be reduced by $0.29 and $0.25 per share for the year ended December 31, 2020 and the nine months ended September 30, 2021, respectively. The adjustment of the redeemable noncontrolling interest that was recorded during the fourth quarter of 2021 is explained in Note 3 within Item 8 — Financial Statements and Supplementary Data of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
The unaudited pro forma basic and diluted earnings per share was calculated as follows:
| Year ended December 31, 2020 | Nine months ended September 30, 2021 | ||||||||||
| Pro forma weighted-average shares outstanding (Basic) | |||||||||||
| Historical weighted-average shares outstanding | 14,790,296 | 17,239,306 | |||||||||
Shares of common stock issued as part of the Acquisition | 551,458 | 551,458 | |||||||||
| Pro forma basic weighted-average shares outstanding | 15,341,754 | 17,790,764 | |||||||||
| Pro forma weighted-average shares outstanding (Diluted) | |||||||||||
| Historical weighted-average shares outstanding | 14,790,296 | 17,250,525 | |||||||||
Shares of common stock issued as part of the Acquisition | 551,458 | 551,458 | |||||||||
| Pro forma diluted weighted-average shares outstanding | 15,341,754 | 17,801,983 | |||||||||
| Pro forma earnings per share | |||||||||||
| Pro forma net income (in thousands) | $ | 7,450 | $ | 19,709 | |||||||
| Pro forma basic earnings per share | $ | 0.49 | $ | 1.11 | |||||||
| Pro forma diluted earnings per share | $ | 0.49 | $ | 1.11 | |||||||