Columbus Mckinnon Corp 8-K/A, filed Apr 20, 2021
Columbus Mckinnon Corp (CMCO)
About this 8-K/A
Columbus Mckinnon Corp filed this 8-K/A on April 20, 2021, reporting on events of April 7, 2021.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment Number 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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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:
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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. | ☐ |
:
| Item 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
| (a) | Financial Statements for Businesses Acquired. |
The audited financial statements of Precision Acquisition MidCo, Inc. as of and for the years ended September 30, 2020 and September 30, 2019 are furnished as Exhibit 99.1 hereto and incorporated in their entirety herein by reference. The unaudited financial statements of Precision Acquisition MidCo, Inc. for the three months ended December 31, 2020 and December 31, 2019 and as of December 31, 2020 are furnished as Exhibit 99.2 hereto and incorporated in their entirety herein by reference.
| (b) | Pro Forma Financial Information. |
The unaudited pro forma financial information for the twelve months ended March 31, 2020 and as of and for the nine months ended December 31, 2020, is furnished as Exhibit 99.3 hereto and incorporated in its entirety herein by reference.
| (c) | Shell Company Transactions - Not Applicable |
| (d) | Exhibits. |
| EXHIBIT NUMBER |
DESCRIPTION | |
| 23.1 | Consent of Independent Certified Public Accountants | |
| 99.1 | Audited financial statements of Precision Acquisition MidCo, Inc. and Subsidiaries as of and for the years ended September 30, 2020 and September 30, 2019 | |
| 99.2 | Unaudited condensed consolidated financial statements of Precision Acquisition MidCo, Inc. and Subsidiaries for the three months ended December 31, 2020 and December 31, 2019 and as of December 31, 2020 | |
| 99.3 | Unaudited pro forma condensed combined financial statements of the Company giving effect to the acquisition of Dorner as of and for the twelve months ended March 31, 2020 and for the nine months ended December 31, 2020 | |
| 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 thereunto duly authorized.
| COLUMBUS McKINNON CORPORATION | ||
| By: | /s/ Gregory P. Rustowicz | |
| Name: | Gregory P. Rustowicz | |
| Title: | Vice President Finance and Chief Financial Officer | |
| (Principal Financial Officer) | ||
Dated: April 20, 2021
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated November 25, 2020 (except for Notes B, D, H, and L, as to which the date is April 20, 2021), with respect to the consolidated financial statements of Precision Acquisition MidCo, Inc. and subsidiaries, which are included in the Current Report on Form 8-K/A of Columbus McKinnon Corporation filed April 20, 2021. We consent to the incorporation by reference of said report in the Registration Statements of Columbus McKinnon Corporation on Form S-3 (File Nos. 333-217382 and 333-231827) and on Form S-8 (File Nos. 333-168777, 333-207165 and 333-212865).
/s/ Grant Thornton LLP
Milwaukee, Wisconsin
April 20, 2021
Exhibit 99.1
Consolidated Financial Statements and Report of Independent Certified Public Accountants
Precision Acquisition MidCo, Inc. and Subsidiaries
September 30, 2020 and 2019
| Contents | Page | |||||
| Report of Independent Certified Public Accountants | 3 | |||||
| Consolidated Financial Statements | ||||||
| Consolidated balance sheets |
5 | |||||
| Consolidated statements of operations |
7 | |||||
| Consolidated statements of comprehensive income (loss) |
8 | |||||
| Consolidated statements of changes in stockholders’ equity |
9 | |||||
| Consolidated statements of cash flows |
10 | |||||
| Notes to consolidated financial statements |
12 | |||||
|
GRANT THORNTON LLP
100 E Wisconsin Ave., Suite 2100
Milwaukee, WI 53202-4169
D +1 (414) 289-0200 F +1 (414) 289-9910 |
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS | |||
| Board of Directors Precision Acquisition MidCo, Inc. and Subsidiaries
We have audited the accompanying consolidated financial statements of Precision Acquisition MidCo, Inc. (a Delaware corporation) and Subsidiaries, which comprise the consolidated balance sheets as of September 30, 2020 and 2019, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.
Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits 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 consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated 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 consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. | ||||
|
GT.COM |
Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms are separate legal entities and are not a worldwide partnership. | |||
| Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Precision Acquisition MidCo, Inc. and Subsidiaries as of September 30, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. | ||||
| /s/ Grant Thornton LLP | ||||
| Milwaukee, Wisconsin November 25, 2020 (except for Notes B, D, H, and L as to which the date is April 20, 2021) | ||||
Precision Acquisition MidCo, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
September 30,
| 2020 | 2019 | |||||||
| ASSETS |
||||||||
| CURRENT ASSETS |
||||||||
| Cash and cash equivalents |
$ | 11,888,554 | $ | 6,403,691 | ||||
| Accounts receivable, less allowance for doubtful accounts of approximately $85,000 and $111,000, respectively |
14,486,777 | 11,080,901 | ||||||
| Inventories, net |
9,555,189 | 7,649,520 | ||||||
| Other |
2,006,019 | 2,546,561 | ||||||
|
|
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|
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|
| |||
| Total current assets |
37,936,539 | 27,680,673 | ||||||
| LONG-TERM ASSETS |
||||||||
| Property, plant and equipment |
||||||||
| Building |
13,497,622 | 13,086,715 | ||||||
| Machinery and equipment |
6,898,823 | 6,504,671 | ||||||
| Office equipment, including IT software |
4,556,017 | 4,121,855 | ||||||
| Leasehold improvements |
1,295,233 | 1,147,059 | ||||||
| Transportation equipment |
196,375 | 203,298 | ||||||
|
|
|
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| |||
| 26,444,070 | 25,063,598 | |||||||
| Less - accumulated depreciation and amortization |
8,930,134 | 6,054,358 | ||||||
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| |||
| 17,513,936 | 19,009,240 | |||||||
| Land |
299,667 | 299,667 | ||||||
| Construction in progress |
273,247 | 309,440 | ||||||
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| |||
| Total property, plant and equipment |
18,086,850 | 19,618,347 | ||||||
| Goodwill |
87,836,323 | 87,836,323 | ||||||
| Other intangible assets, net |
122,048,610 | 130,081,944 | ||||||
| Deposits |
373,101 | 373,101 | ||||||
|
|
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|
|
| |||
| Total long-term assets |
228,344,884 | 237,909,715 | ||||||
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| |||
| Total assets |
$ | 266,281,423 | $ | 265,590,388 | ||||
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| |||
The accompanying notes are an integral part of these consolidated financial statements.
5
Precision Acquisition MidCo, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS - CONTINUED
September 30,
| 2020 | 2019 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| CURRENT LIABILITIES |
||||||||
| Current portion of capital lease obligation |
$ | 194,049 | $ | 194,049 | ||||
| Line of credit |
897,068 | 948,973 | ||||||
| Accounts payable |
5,245,427 | 3,941,422 | ||||||
| Customer deposits |
2,402,494 | 1,748,513 | ||||||
| Accrued compensation and benefits |
4,535,103 | 2,715,362 | ||||||
| Other accrued liabilities |
2,424,533 | 875,497 | ||||||
|
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|
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| |||
| Total current liabilities |
15,698,674 | 10,423,816 | ||||||
| LONG-TERM LIABILITIES |
||||||||
| Deferred tax liabilities, net |
28,647,905 | 29,970,774 | ||||||
| Term loan, less current portion, net of deferred financing costs |
65,807,311 | 70,382,083 | ||||||
| Capital lease obligation, less current portion |
12,014,739 | 12,208,788 | ||||||
| Derivative instrument |
- | 55,247 | ||||||
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| |||
| Total long-term liabilities |
106,469,955 | 112,616,892 | ||||||
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| |||
| Total liabilities |
122,168,629 | 123,040,708 | ||||||
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| STOCKHOLDERS’ EQUITY |
||||||||
| Common stock, $.01 par value, 100,000 shares authorized 100 shares issued and outstanding |
1 | 1 | ||||||
| Retained earnings |
2,707,031 | 1,707,001 | ||||||
| Additional paid-in capital |
141,664,153 | 141,447,756 | ||||||
| Accumulated other comprehensive loss |
(258,391 | ) | (605,078 | ) | ||||
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| |||
| Total stockholders’ equity |
144,112,794 | 142,549,680 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 266,281,423 | $ | 265,590,388 | ||||
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| |||
The accompanying notes are an integral part of these consolidated financial statements.
6
Precision Acquisition MidCo, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended September 30,
| 2020 | 2019 | |||||||
| Net sales |
$ | 90,196,775 | $ | 83,532,135 | ||||
| Cost of sales |
45,663,036 | 43,288,157 | ||||||
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| |||
| Gross profit |
44,533,739 | 40,243,978 | ||||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles of approximately $8,033,000 and $8,033,000, respectively |
36,875,778 | 37,527,135 | ||||||
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| |||
| Income from operations |
7,657,961 | 2,716,843 | ||||||
| Other expenses |
||||||||
| Acquisition costs |
109,788 | 182,258 | ||||||
| Interest expense, net |
6,218,658 | 6,794,240 | ||||||
| Other expense, net |
150,223 | 1,439 | ||||||
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| |||
| 6,478,669 | 6,977,937 | |||||||
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| Income (loss) before income taxes |
1,179,292 | (4,261,094 | ) | |||||
| Income tax expense (benefit) |
||||||||
| Current |
1,467,517 | 233,034 | ||||||
| Deferred |
(1,288,255 | ) | (984,471 | ) | ||||
|
|
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| |||
| 179,262 | (751,437 | ) | ||||||
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| NET INCOME (LOSS) |
$ | 1,000,030 | $ | (3,509,657 | ) | |||
|
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|
| |||
The accompanying notes are an integral part of these consolidated financial statements.
7
Precision Acquisition MidCo, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended September 30,
| 2020 | 2019 | |||||||
| Net income (loss) |
$ | 1,000,030 | $ | (3,509,657 | ) | |||
| Other comprehensive income (loss) |
||||||||
| Foreign currency translation adjustments |
291,699 | (430,552 | ) | |||||
| Change in value of derivative instrument |
54,988 | (740,418 | ) | |||||
|
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| |||
| Comprehensive income (loss) |
$ | 1,346,717 | $ | (4,680,627 | ) | |||
|
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| |||
The accompanying notes are an integral part of these consolidated financial statements.
8
Precision Acquisition MidCo, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Years Ended September 30, 2020 and 2019
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Other | |||||||||||||||||||||||||||
| Shares | Retained | Additional | Comprehensive | |||||||||||||||||||||||||
| Authorized | Outstanding | Amount | Earnings | Paid-in Capital | Income (Loss) | Total | ||||||||||||||||||||||
| Balance at September 30, 2018 |
1,000 | 100 | $ | 1 | $ | 5,216,658 | $ | 141,313,048 | $ | 565,892 | $ | 147,095,598 | ||||||||||||||||
| Capital contributions |
- | - | - | - | 251,000 | - | 251,000 | |||||||||||||||||||||
| Stock-based compensation |
- | - | - | - | 417,531 | - | 417,531 | |||||||||||||||||||||
| Redemption of common stock |
- | - | - | - | (533,823 | ) | - | (533,823 | ) | |||||||||||||||||||
| Foreign currency translation adjustments |
- | - | - | - | - | (430,552 | ) | (430,552 | ) | |||||||||||||||||||
| Change in value of derivative instrument |
- | - | - | - | - | (740,418 | ) | (740,418 | ) | |||||||||||||||||||
| Net loss |
- | - | - | (3,509,657 | ) | - | - | (3,509,657 | ) | |||||||||||||||||||
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| Balance at September 30, 2019 |
1,000 | 100 | 1 | 1,707,001 | 141,447,756 | (605,078 | ) | 142,549,679 | ||||||||||||||||||||
| Stock-based compensation |
- | - | - | - | 333,416 | - | 333,416 | |||||||||||||||||||||
| Redemption of common stock |
- | - | - | - | (117,019 | ) | - | (117,019 | ) | |||||||||||||||||||
| Foreign currency translation adjustments |
- | - | - | - | - | 291,699 | 291,699 | |||||||||||||||||||||
| Change in value of derivative instrument |
- | - | - | - | - | 54,988 | 54,988 | |||||||||||||||||||||
| Net income |
- | - | - | 1,000,030 | - | - | 1,000,030 | |||||||||||||||||||||
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| Balance at September 30, 2020 |
1,000 | 100 | $ | 1 | $ | 2,707,031 | $ | 141,664,153 | $ | (258,391 | ) | $ | 144,112,793 | |||||||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
9
Precision Acquisition MidCo, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended September 30,
| 2020 | 2019 | |||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 1,000,030 | $ | (3,509,657 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation |
2,588,942 | 2,510,616 | ||||||
| Amortization |
8,033,333 | 8,033,333 | ||||||
| Amortization of deferred financing costs, included in interest expense |
410,000 | 410,000 | ||||||
| Loss (gain) on disposition of property, plant and equipment |
19,054 | (3,122 | ) | |||||
| Stock-based compensation |
333,416 | 417,531 | ||||||
| Deferred income tax expense |
(1,498,999 | ) | (1,043,461 | ) | ||||
| Change in the allowance for doubtful accounts |
(26,112 | ) | (1,862 | ) | ||||
| Change in the inventory valuation reserve |
195,144 | 2,518 | ||||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable |
(3,379,765 | ) | 912,509 | |||||
| Inventories |
(2,100,813 | ) | (163,582 | ) | ||||
| Other assets |
672,137 | (501,711 | ) | |||||
| Accounts payable |
1,304,007 | 565,938 | ||||||
| Customer deposits |
631,262 | 1,290,973 | ||||||
| Accrued compensation and benefits |
2,033,514 | 175,503 | ||||||
| Other accrued liabilities |
1,402,259 | (307,659 | ) | |||||
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| Net cash provided by operating activities |
11,617,409 | 8,787,867 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property, plant and equipment |
(1,055,191 | ) | (2,349,421 | ) | ||||
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| Net cash used in investing activities |
(1,055,191 | ) | (2,349,421 | ) | ||||
The accompanying notes are an integral part of these consolidated financial statements.
10
Precision Acquisition MidCo, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years Ended September 30,
| 2020 | 2019 | |||||||
| Cash flows from financing activities: |
||||||||
| Payments on long-term debt |
$ | (4,984,772 | ) | $ | (3,060,000 | ) | ||
| Payments on capital lease |
(194,049 | ) | (150,259 | ) | ||||
| Proceeds from line of credit, net |
(124,366 | ) | (182,074 | ) | ||||
| Redemption of common stock |
(117,019 | ) | (533,823 | ) | ||||
| Capital contributions |
- | 251,000 | ||||||
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| Net cash used in financing activities |
(5,420,206 | ) | (3,675,156 | ) | ||||
| Effect of exchange rate on cash and cash equivalents |
342,851 | (311,628 | ) | |||||
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| Net increase in cash and cash equivalents |
5,484,863 | 2,451,662 | ||||||
| Cash and cash equivalents at beginning of year |
6,403,691 | 3,952,029 | ||||||
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| Cash and cash equivalents at end of year |
$ | 11,888,554 | $ | 6,403,691 | ||||
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| Supplemental disclosure of cash flow information |
||||||||
| Cash paid during the year for |
||||||||
| Interest |
$ | 5,331,040 | $ | 6,774,909 | ||||
| Income taxes |
649,133 | 1,175,825 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
11
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS
September 30, 2020 and 2019
NOTE A - ORGANIZATION
Precision Acquisition MidCo, Inc., a Delaware corporation, was formed on March 6, 2017 for the purpose of acquiring a 100% equity ownership in Dorner Holding Corp.
Dorner Holding Corp., a Delaware corporation, has a 100% equity ownership in Dorner Mfg. Corp.
Dorner Mfg. Corp. designs and manufactures conveyor products and systems and sells them through domestic and international sales channels.
Dorner Holding Corp. has a 100% equity ownership in Dorner Conveyors Ltd., a Canadian subsidiary, which sells conveyor products and systems that are manufactured by Dorner Mfg. Corp.
Dorner Mfg. Corp. has a 100% equity ownership in Dorner (M) Sdn. Bhd. (Dorner Asia). Dorner Asia is a Malaysia-based company that is engaged in the design and manufacture of flexible conveyor systems and parts.
Dorner Mfg. Corp. formed Dorner Holdings Europe GmbH for the purpose of acquiring 100% equity ownership in GmbH, subsequently changed to Dorner GmbH. Dorner GmbH is a German-based company that designs and manufactures conveyor products and systems.
Dorner Holding Corp. acquired a 100% equity ownership in Sautem, S.A. de C.V. and formed Dorner Latin America S. de C.V.(Dorner Latin America), a wholly owned Mexican subsidiary which is engaged in the design and manufacture of conveyors and automatic labeling systems.
In December 2018, Dorner Holdings Europe GmbH formed Dorner Sarl, a wholly owned French subsidiary that provides marketing and development service to Dorner GmbH in the Republic of France.
Sales to foreign customers were approximately 12% and 17% of net sales for the years ended September 30, 2020 and 2019, respectively. Accounts receivable from foreign customers were approximately $1,850,000 and $1,985,000 as of September 30, 2020 and 2019, respectively.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:
Principles of Consolidation
The accompanying consolidated financial statements include the financial position, results of operations and cash flows of Precision Acquisition MidCo, Inc., Dorner Holding Corp., Dorner Mfg. Corp., Dorner Conveyors Ltd., Dorner Latin America S. de C.V., Dorner (M) Sdn. Bhd., Dorner Holdings Europe GmbH and Dorner GmbH, collectively referred to as the Company. All significant intercompany transactions and balances have been eliminated in the consolidation.
Use of Estimates
The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
12
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
Cash and Cash Equivalents
The Company maintains cash at financial institutions that may exceed federally insured amounts at times. In addition, the Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Accounts Receivable
The Company, in the normal course of business, monitors the financial condition of its customers and reviews the credit history of each new customer. The Company establishes an allowance for doubtful accounts that corresponds to the specific credit risk of its customers, historical trends and other information on the state of the economy. Decisions to write-off receivables are based on management’s judgment after consideration of facts and circumstances surrounding potential uncollectible accounts.
Inventories
Inventories are valued at the lower of cost or net realizable value. Cost is determined using the weighted-average cost method. The Company allocates overhead and direct labor on the basis of estimated direct labor hours in each work center. Net realizable value represents the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company determines its valuation reserve by considering a number of factors, including age of the inventory and various usage tests.
Deferred Financing Costs
Costs associated with negotiating and entering into long-term financing arrangements are deferred and amortized on a straight-line basis, which approximates the effective-interest method over the life of the associated agreement. The debt issuance costs incurred are capitalized and recorded on the balance sheets as a direct deduction from the carrying amount of the long-term liability recorded.
Goodwill
Goodwill represents the excess of purchase price paid over net assets acquired in a business combination. Goodwill is not amortized but is tested for impairment at least annually, or more frequently if indicators of impairment exist, in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 350-20-35-1. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. The Company’s reporting units are determined based upon whether discrete financial information is available and reviewed regularly, whether those units constitute a business, and the extent of economic similarities and interdependencies between those reporting units for purposes of aggregation. The Company has determined that there is one reporting unit.
To perform a quantitative test, the Company uses the discounted cash flow method to estimate the fair value of the reporting unit. The discounted cash flow incorporates various assumptions, the most significant being projected revenue growth rates, operating profit margins and cash flows, the terminal growth rate, and the discount rate. The Company projects revenue growth rates, operating margins and cash flows based on the Company’s current business, expected developments, and operational strategies over a five-year period. In estimating the terminal growth rates, the Company considers its historical and projected results, as well as the economic environment in which its reporting unit operates. The discount rates utilized reflect the Company’s assumptions of marketplace participants’ cost of capital and risk assumptions in the economy. The Company completed its annual evaluation of goodwill and concluded there was no impairment for the years ended September 30, 2020 and 2019.
13
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
Other Intangible Assets
At acquisition, the Company estimates and records the fair value of purchased intangible assets which consist of a trade name, customer relationships, and technology, as discussed in Note D. The fair values are estimated based on management’s assessment as well as independent third-party appraisals. Such valuations may include a discounted cash flow of anticipated revenues resulting from the acquired intangible asset.
Amortization of intangible assets with finite lives is recognized over their estimated useful lives using an amortization method that reflects the pattern in which the economic benefits of the intangible assets are consumed or otherwise realized. The straight-line method is used to amortize the intangible assets. The estimated useful lives for intangible assets range from 15-20 years.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and amortization of property, plant and equipment are calculated using the straight-line method over their estimated useful lives as follows:
| Building and leasehold improvements | 5 to 39 years | |
| Transportation equipment | 4 to 10 years | |
| Office equipment | 3 to 7 years | |
| Machinery and equipment | 3 to 10 years |
Repairs and maintenance that do not extend the lives of the applicable assets are charged to expense as incurred. Gain or loss from the retirement or other disposition of assets is included in other expense.
Impairment of Long-Lived and Intangible Assets
Long-lived assets, such as property, plant and equipment and intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the related asset might not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future undiscounted cash flows expected to be generated by the asset. If the asset is determined to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. The Company determines fair value through discounted cash flows, appraisals or comparable sales transactions. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Management has determined that no impairment exists as of and for the years ended September 30, 2020 and 2019.
Deposits
Deposits represent refundable security deposits paid out for each of the Company’s building leases.
Customer Deposits
Advance payments received from customers are recorded as a liability until the date title transfers and a sale takes place.
14
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
Product Warranties
The Company provides warranties with the sales of its products. Provision for estimated warranty expenses is recognized at the time of sale, determined on the basis of warranty terms and prior claim experience of related companies. The warranty reserve is included in other accrued liabilities in the accompanying consolidated balance sheets. Changes in the Company’s aggregate liability for product warranties, including aggregate reductions for payments made, aggregate changes for accruals related to guarantees issued during the period and aggregate changes to preexisting accruals, are not deemed to be significant.
Derivative Instrument
During fiscal year 2018, the Company entered into an interest rate swap agreement to actively manage its interest costs. The interest rate swap seeks to achieve the lowest interest rate cost consistent with an acceptable level of risk, given the varying interest rate environments. The interest rate swap is linked to the existing outstanding debt and has been designated as a hedge. The interest rate swap is recorded in the consolidated balance sheets, at fair value, with the changes in fair value recorded as a component of comprehensive income/loss. During the current fiscal year, the interest rate swap expired. The balance of the interest rate swap as of September 30, 2020 and 2019 was $0 and $(55,247), respectively.
Revenue Recognition
Sales and related costs of sales are generally recorded when goods are shipped and title, ownership and risk of loss have passed to the customer, all of which occurs upon shipment or delivery of the product based on applicable shipping terms. The shipping terms may vary depending on the nature of the customer, domestic or foreign, and the type of transportation used. The Company provides for the estimated future warranty costs of repair, replacement or customer accommodation in cost of sales when sales are recognized and upon the incurrence of known and anticipated events and circumstances.
Shipping and Handling Costs
The Company records the net difference between freight revenue invoiced to its customers and freight-out costs incurred to third-party carriers in sales allowances and discounts in the accompanying consolidated statements of operations. Freight charged to customers was approximately $2,126,000 and $2,066,000 for the years ended September 30, 2020 and 2019, respectively. Third-party freight-out costs were approximately $1,846,000 and $1,755,000 for the years ended September 30, 2020 and 2019, respectively.
Research and Development
Research and development costs are charged to operations when incurred. Total research and development costs were approximately $1,169,000 and $1,440,000 for the years ended September 30, 2020 and 2019, respectively.
Advertising
Advertising costs are charged to operations when incurred. Total advertising expenses were approximately $938,000 and $1,488,000 for the years ended September 30, 2020 and 2019, respectively.
15
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
Foreign Currency
The Company’s functional currency is the U.S. dollar. The functional currencies of Canada, Germany, France, Malaysia and Mexico are their local currency. Nonmonetary assets, liabilities and equity components are translated at historical rates, and monetary assets and liabilities are translated at exchange rates in effect at the end of the period. Income statement accounts are translated at average rates for the period. The resulting translation gain and loss adjustments are recorded directly to accumulated other comprehensive income (loss). Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as a component of other expenses as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to tax loss and credit carryforwards and differences between the financial reporting and tax bases of existing assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those carryforwards and temporary differences are expected to be utilized, recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company has not identified any uncertain tax position requiring accrual or disclosure in the consolidated financial statements. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense; however, no interest or penalties have been recorded. The Company files income tax returns in the United States and the other countries in which it operates and various state and local jurisdictions and is subject to routine audits by these taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
Recent Accounting Pronouncements
In May 2014, the Federal Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 is the result of a joint project of FASB and the International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for use in the U.S. and internationally. ASU 2014-09 supersedes the revenue recognition requirements in Topic 605 of the FASB Codification and most industry-specific guidance throughout the Industry Topics of the Codification. ASU 2014-09 enhances comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets, reduces the number of requirements an entity must consider for recognizing revenue, and requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. ASU 2014-09 requires either retrospective application by restating each prior period presented in the financial statements, or retrospective application by recording the cumulative effect on prior reporting periods to beginning retained earnings in the year that the standard becomes effective. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Principal Versus Agent Considerations), to clarify the implementation guidance on principal versus agent considerations. In June 2020, the FASB issued ASU 2020-05 which deferred the effective date by one year. The standard will be effective for annual reporting periods beginning after December 15, 2019. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.
16
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
The FASB has issued ASU 2016-02 Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 supersedes the previous leases standard, Leases (Topic 840). In June 2020, the FASB issued ASU 2020-05 which deferred the effective date by one year. The ASU is effective for annual reporting periods beginning after December 15, 2021. Early adoption is permitted. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements.
NOTE C - INVENTORIES, NET
Inventories at September 30, 2020 and 2019 consist of the following:
| 2020 | 2019 | |||||||
| Raw materials |
$ | 4,852,658 | $ | 3,451,222 | ||||
| Work-in-process |
3,421,306 | 2,760,154 | ||||||
| Finished goods |
1,786,891 | 1,748,667 | ||||||
|
|
|
|
|
|
| |||
| 10,060,855 | 7,960,043 | |||||||
| Less - valuation reserve |
(505,666 | ) | (310,523 | ) | ||||
|
|
|
|
|
|
| |||
| $ | 9,555,189 | $ | 7,649,520 | |||||
|
|
|
|
|
|
| |||
NOTE D - OTHER INTANGIBLE ASSETS, NET
The Company has the following amounts related to other intangible assets as of September 30:
| 2020 | ||||||||||||||||
| Weighted - average Useful Lives |
Gross | Accumulated Amortization |
Net Book Value | |||||||||||||
| Trade name |
16.5 | $ | 8,500,000 | $ | (1,505,200 | ) | $ | 6,994,800 | ||||||||
| Technology |
11.5 | 30,500,000 | (7,201,400 | ) | 23,298,600 | |||||||||||
| Customer relationships |
16.5 | 111,500,000 | (19,744,790 | ) | 91,755,210 | |||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
| $ | 150,500,000 | $ | (28,451,390 | ) | $ | 122,048,610 | ||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
17
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
| 2019 | ||||||||||||||||
| Weighted - Average Useful Lives |
Gross | Accumulated Amortization |
Net Book Value | |||||||||||||
| Trade name |
17.5 | $ | 8,500,000 | $ | (1,080,200 | ) | $ | 7,419,800 | ||||||||
| Technology |
12.5 | 30,500,000 | (5,168,100 | ) | 25,331,900 | |||||||||||
| Customer relationships |
17.5 | 111,500,000 | (14,169,756 | ) | 97,330,244 | |||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
| $ | 150,500,000 | $ | (20,418,056 | ) | $ | 130,081,944 | ||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||
The aggregate annual amortization expense for other intangible assets subsequent to September 30, 2020 is as follows:
| 2021 |
$ | 8,033,300 | ||
| 2022 |
8,033,300 | |||
| 2023 |
8,033,300 | |||
| 2024 |
8,033,300 | |||
| 2025 |
8,033,300 | |||
| Thereafter |
81,882,110 | |||
|
|
|
|||
| Total |
$ | 122,048,610 | ||
|
|
|
|||
Amortization expense for other amortizable intangible assets amounted to approximately $8,033,300 for the years ended September 30, 2020 and 2019.
NOTE E - FINANCING ARRANGEMENTS
The Company has available a revolving line of credit with a bank that expires March 15, 2022. Borrowings are limited to $10,000,000. Interest on borrowings is currently at LIBOR plus 5.75% (6.75% at September 30, 2020 and 7.79% at September 30, 2019). Outstanding borrowings under the revolving line of credit were $0 at both September 30, 2020 and 2019.
The Company has an agreement with a financial institution in Germany that is currently in the form of a line of credit in which borrowings are limited to 1,000,000€ to fund building expansion and production capabilities. Outstanding borrowings under the line of credit were approximately 765,000€ or $897,000 USD and 870,000€ or $949,000 USD at September 30, 2020 and 2019, respectively. Upon reaching the limit of the line of credit, this will be converted into a term loan with a bank that expires June 30, 2027. Interest rate on borrowings is currently 1.17%.
During the year, the Company made principal only prepayments on the term loan. As a result, there will be no required principal repayment due until December 31, 2022 and the entire carrying amount of the loan will be considered to be a long-term obligation.
18
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
Long-term obligations at September 30, 2020 and 2019 consist of the following:
| 2020 | 2019 | |||||||
| Term loan to a bank, currently bearing interest at LIBOR plus 5.75% (6.75% and 7.79% at September 30, 2020 and 2019, respectively). Monthly, interest only installment payments are due through December 31, 2022, with the next required quarterly principal payment due December 31, 2022. The final lump-sum installment is due March 15, 2023. Collateral on the loan is all real and personal property of the Company |
$66,815,228 | $71,800,000 | ||||||
| Capital lease obligation - with imputed interest rate of 7.21%, payable through 2035, collateralized by a building |
12,208,788 | 12,402,837 | ||||||
| Less: Unamortized debt issuance costs, net of accumulated amortization of $1,452,000 and $1,042,000 as of September 30, 2020 and 2019, respectively |
(1,007,917 | ) | (1,417,917 | ) | ||||
|
|
|
|
|
|||||
| 78,016,099 | 82,784,920 | |||||||
| Less: Current portion of long-term obligations |
(194,049 | ) | (194,049 | ) | ||||
|
|
|
|
|
|||||
| $ | 77,822,050 | $ | 82,590,871 | |||||
|
|
|
|
|
|||||
The Company leases a building under an agreement that is classified as a capital lease. The cost of the building under the capital lease of $10,517,000 at September 30, 2020 and 2019, is included in the consolidated balance sheets within property, plant and equipment. Accumulated amortization of the leased building at September 30, 2020 and 2019 was approximately $2,000,000 and $1,436,000, respectively. Amortization under capital leases was approximately $564,000 for the years ended September 30, 2020 and 2019.
The aggregate annual principal payments required on notes payable and the future minimum lease payments on the capital lease are as follows:
| Year Ending September 30, | Term Loan | Capital Lease | Total | |||||||||
| 2021 |
$ | — | $ | 1,114,973 | $ | 1,114,973 | ||||||
| 2022 |
— | 1,148,422 | 1,148,422 | |||||||||
| 2023 |
66,815,228 | 1,182,875 | 67,998,103 | |||||||||
| 2024 |
— | 1,218,361 | 1,218,361 | |||||||||
| 2025 |
— | 1,254,914 | 1,254,914 | |||||||||
| Thereafter |
14,961,427 | 14,961,427 | ||||||||||
|
|
|
|
|
|
|
|||||||
| 66,815,228 | 20,880,972 | 87,696,200 | ||||||||||
| Less: Interest |
— | (8,672,184 | ) | (8,672,184 | ) | |||||||
| Less: Unamortized debt issuance costs, net |
(1,007,917 | ) | — | (1,007,917 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| $ | 65,807,311 | $ | 12,208,788 | $ | 78,016,099 | |||||||
|
|
|
|
|
|
|
|||||||
19
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
NOTE F - SELF-INSURED HEALTH PLAN
The Company partially self-insures for employees’ health insurance and is generally responsible for a plan year maximum of $90,000 of stop loss per plan participant. There is an aggregate attachment point of $3,508,000 and a minimum attachment point of $3,157,000. Under the terms of the plan, all active full-time employees of Dorner Mfg. Corp. are eligible to participate. Operations are charged with the cost of claims reported and an estimate of claims incurred but not reported. A liability for unpaid claims and the associated claims expenses, including incurred but not reported claims, is monitored and adjusted on a monthly basis.
NOTE G - SELF EMPLOYMENT BENEFIT PLAN
The Company has a profit-sharing 401(k) plan substantially covering all employees. The Company matches 100% of the first 1% of employee contributions and 50% on the next 5% of employee contributions. The plan also adopted a safe harbor plan with automatic enrollment. Profit-sharing contributions to the plan are made at the discretion of the Board of Directors, limited to the maximum amount allowable under the Internal Revenue Code. The total Company matching contributions were approximately $590,000 and $576,000 for the years ended September 30, 2020 and 2019, respectively.
NOTE H - INCOME TAXES
A reconciliation of the provision for income taxes using the statutory federal income tax rate to the effective income tax rate at September 30, 2020 and 2019 is as follows:
| 2020 | 2019 | |||||||||||||||
| Federal statutory rate |
$ | 247,652 | (21.0 | )% | $ | (893,371 | ) | (21.0 | )% | |||||||
| Other* |
(68,390 | ) | 5.8 | 141,934 | 3.3 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| $ | 179,262 | (15.2 | )% | $ | (751,437 | ) | (17.7 | )% | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
*Other provision for income taxes is primarily made up of foreign tax rate differences, state income taxes, and a valuation allowance for Section 163(j).
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities result primarily from inventory, stock-based compensation, goodwill, intangible assets, property, plant and equipment and accrued liabilities. These items along with the tax effects of net operating loss (“NOL”) and tax credit carryforwards comprise the following components of deferred income taxes at September 30, (approximate):
| 2020 | 2019 | |||||||
| Deferred tax asset |
$ | 1,288,000 | $ | 868,000 | ||||
| Deferred tax liability |
(29,936,000 | ) | (30,839,000 | ) | ||||
|
|
|
|
|
|
| |||
| Net deferred tax liability |
$ | (28,648,000 | ) | $ | (29,971,000 | ) | ||
|
|
|
|
|
|
| |||
20
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
The Company has available state unused NOL carryforwards to be applied against future taxable income of approximately $95,000 and $700,000 at September 30, 2020 and 2019, respectively, which are scheduled to expire beginning in 2036. The Company also has unused foreign tax credits of approximately $236,000 and $129,000 at September 30, 2020 and 2019, respectively. These credits are available to offset future U.S. income taxes in varying amounts, which begin to expire in 2027. The Company recorded a full valuation allowance against the foreign tax credits for FY20 (but not FY19) because it is unlikely the Company will be able to utilize them before they expire.
NOTE I - STOCKHOLDERS’ EQUITY INCENTIVE PLAN
The Company’s Parent Organization established a stock incentive plan on March 15, 2017 under which stock options may be granted to key Company employees who are in a position to make material contributions to the successful operation of the Company’s business. The maximum number of shares of common stock that may be granted under the plan is 6,369 shares, provided that only 1,061 of such shares shall be reserved for issuance solely to members of the Board who are not employees of the Company. The exercise price of shares subject to option is equal to the market price of the Company’s common stock on the date of grant. The maximum term of the options is 10 years with a vesting period of five years.
Following is a summary of the stock option awards:
| Number of Options |
Weighted - Average Exercise Price | |||||||
| Beginning of period October 1, 2018 |
5,307 | $ | 3,000 | |||||
| Forfeited |
(572 | ) | 3,000 | |||||
| Exercised |
(168 | ) | 3,000 | |||||
| Granted |
- | - | ||||||
|
|
|
|
|
|
| |||
| Outstanding, end of year September 30, 2019 |
4,567 | $ | 3,000 | |||||
|
|
|
|
|
|
| |||
| Exercisable, end of year September 30, 2019 |
873 | $ | 3,000 | |||||
|
|
|
|
|
|
| |||
| Outstanding, beginning of year October 1, 2019 |
4,567 | $ | 3,000 | |||||
| Forfeited |
(322 | ) | 3,000 | |||||
| Exercised |
(36 | ) | 3,000 | |||||
| Granted |
542 | 3,247 | ||||||
|
|
|
|
|
|
| |||
| Outstanding, end of year September 30, 2020 |
4,751 | $ | 3,028 | |||||
|
|
|
|
|
|
| |||
| Exercisable, end of year September 30, 2020 |
969 | $ | 3,028 | |||||
|
|
|
|
|
|
| |||
These shares vest in two ways: time-based vesting over five years and performance-based vesting based upon the attainment of certain earnings targets and return-on-investment-based vesting upon an Exit Event or a change in control of the Company that meets a specified financial yield, as defined within the share agreement. The Company recognized approximately $333,000 and $418,000 in stock-based compensation expense related to these awards during 2020 and 2019, respectively, and as of September 30, 2020, there was $695,000 of unrecognized compensation expense to be recognized over the next three years related to the time-based vesting awards. Expense related to the performance-based vesting will not be recorded until such time the criteria to vest in the awards becomes probable of occurring.
21
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
NOTE J - FAIR VALUE MEASUREMENT
The Fair Value Measurement and Disclosures topic of the Codification defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e. exit price) in an orderly transaction between market participants at the measurement date. This topic requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels, depending on the assumptions (i.e. inputs) used in the valuation. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The hierarchy of fair value is defined as follows:
| ● | Level 1 - Valuations are based on unadjusted, quoted prices in active markets for identical assets or liabilities; |
| ● | Level 2 - Valuations are based on quoted prices for similar assets or liabilities in active markets, or on quoted prices in markets that are not active, but for which significant inputs are observable, either directly or indirectly; and |
| ● | Level 3 - Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date. |
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term obligations.
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair values due to their short-term nature.
The carrying value of the long-term obligations approximates fair value since the interest rates are market based. The fair value of these borrowings is based upon inputs that are observable either directly or indirectly, which represents a Level 2 measurement in the hierarchy.
NOTE K - RISKS AND UNCERTAINTIES
In March 2020, an outbreak of COVID-19 occurred globally causing significant fluctuations in financial markets and disruptions in global business operations. The extent of the impact on the Company’s assets and future operations will depend on the duration and continued spread of the outbreak, including any other further developments.
NOTE L - ADDITIONAL FINANCIAL INFORMATION
Other current assets consist of the following at September 30:
| 2020 | 2019 | |||||||
| Prepaid tax deposit |
$ | - | $ | 652,000 | ||||
| Prepaid insurance |
380,196 | 510,858 | ||||||
| Other |
1,625,823 | 1,383,703 | ||||||
|
|
|
|
|
|
| |||
| $ | 2,006,019 | $ | 2,546,561 | |||||
|
|
|
|
|
|
| |||
22
Precision Acquisition MidCo, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FiNANCIAL STATEMENTS - CONTINUED
September 30, 2020 and 2019
Other current liabilities consist of the following at September 30:
| 2020 | 2019 | |||||||
| Accrued commissions |
$ | 253,952 | $ | 154,043 | ||||
| Accrued warranty |
118,700 | 108,700 | ||||||
| Accrued income taxes |
699,270 | 217,942 | ||||||
| Accrued agent termination costs |
496,440 | - | ||||||
| Accrued channel rebates |
377,288 | 47,215 | ||||||
| Other |
478,883 | 347,597 | ||||||
|
|
|
|
|
|
| |||
| $ | 2,424,533 | $ | 875,497 | |||||
|
|
|
|
|
|
| |||
NOTE M - SUBSEQUENT EVENTS
The Company evaluated its September 30, 2020 consolidated financial statements for subsequent events through November 25, 2020, the date the consolidated financial statements were originally issued, and through April 20, 2021 (unaudited), the date these consolidated financial statements were revised. The Company is not aware of any subsequent events which would require recognition or disclosure in the consolidated financial statements.
23
Exhibit 99.2
Condensed Consolidated Interim Financial Statements
Precision Acquisition MidCo, Inc. and Subsidiaries
As of December 31, 2020 and 2019 and for the three months ended December 31, 2020 and 2019
Precision Acquisition MidCo, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
December 31,
| 2020 | 2019 | |||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 11,681,940 | $ | 7,379,599 | ||||
| Accounts receivable, less allowance for doubtful accounts of approximately $154,000 and $179,000, respectively |
13,336,382 | 9,636,205 | ||||||
| Inventories, net |
11,149,482 | 9,064,185 | ||||||
| Prepaid and other |
1,819,099 | 2,052,013 | ||||||
|
|
|
|
|
|
| |||
| Total current assets |
37,986,903 | 28,132,002 | ||||||
| Long-term assets |
||||||||
| Property, plant and equipment |
||||||||
| Building |
14,293,860 | 13,273,456 | ||||||
| Machinery and equipment |
7,185,743 | 6,614,063 | ||||||
| Office equipment, including IT software |
4,671,391 | 4,474,395 | ||||||
| Leasehold improvements |
1,376,335 | 1,181,371 | ||||||
| Transportation equipment |
176,248 | 179,481 | ||||||
|
|
|
|
|
|
| |||
| 27,703,577 | 25,722,766 | |||||||
| Less - accumulated depreciation and amortization |
9,990,059 | 6,838,972 | ||||||
|
|
|
|
|
|
| |||
| 17,713,518 | 18,883,794 | |||||||
| Land |
299,667 | 299,667 | ||||||
| Construction in progress |
423,208 | 323,108 | ||||||
|
|
|
|
|
|
| |||
| Total property, plant and equipment |
18,436,393 | 19,506,569 | ||||||
| Goodwill |
87,836,323 | 87,836,323 | ||||||
| Other intangible assets, net |
120,040,400 | 128,073,734 | ||||||
| Deposits |
373,101 | 373,101 | ||||||
|
|
|
|
|
|
| |||
| Total long-term assets |
226,686,217 | 235,789,727 | ||||||
|
|
|
|
|
|
| |||
| Total assets |
$ | 264,673,120 | $ | 263,921,729 | ||||
|
|
|
|
|
|
| |||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
2
Precision Acquisition MidCo, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS - CONTINUED
December 31,
| 2020 | 2019 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities |
||||||||
| Current portion of capital lease obligation |
$ | 450,479 | $ | 194,049 | ||||
| Line of credit |
901,669 | 947,292 | ||||||
| Accounts payable |
5,451,689 | 4,194,451 | ||||||
| Customer deposits |
3,078,748 | 1,910,938 | ||||||
| Accrued compensation and benefits |
3,230,530 | 2,085,513 | ||||||
| Other accrued liabilities |
3,308,766 | 671,866 | ||||||
|
|
|
|
|
|
| |||
| Total current liabilities |
16,421,881 | 10,004,109 | ||||||
| Long-term liabilities |
||||||||
| Deferred tax liabilities, net |
28,323,514 | 29,684,244 | ||||||
| Term loan, less current portion, net of deferred financing costs |
60,964,700 | 70,492,351 | ||||||
| Capital lease obligation, less current portion |
12,118,990 | 12,163,548 | ||||||
| Derivative instrument |
- | 53,271 | ||||||
|
|
|
|
|
|
| |||
| Total long-term liabilities |
101,407,204 | 112,393,414 | ||||||
|
|
|
|
|
|
| |||
| Total liabilities |
117,829,085 | 122,397,523 | ||||||
| Stockholders’ equity |
||||||||
| Common stock, $.01 par value, 100,000 shares authorized 100 shares issued and outstanding |
1 | 1 | ||||||
| Retained earnings |
5,126,794 | 529,207 | ||||||
| Additional paid-in capital |
141,748,153 | 141,528,849 | ||||||
| Accumulated other comprehensive loss |
(30,913 | ) | (533,851 | ) | ||||
|
|
|
|
|
|
| |||
| Total stockholders’ equity |
146,844,035 | 141,524,206 | ||||||
|
|
|
|
|
|
| |||
| Total liabilities and stockholders’ equity |
$ | 264,673,120 | $ | 263,921,729 | ||||
|
|
|
|
|
|
| |||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
3
Precision Acquisition MidCo, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
Three months ended December 31,
| 2020 | 2019 | |||||||
| Net sales |
$ | 27,671,498 | $ | 19,385,617 | ||||
| Cost of sales |
13,543,515 | 9,885,841 | ||||||
|
|
|
|
|
|
| |||
| Gross profit |
14,127,983 | 9,499,776 | ||||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles of approximately $2,008,000 and $2,008,000, respectively |
9,157,582 | 9,021,540 | ||||||
|
|
|
|
|
|
| |||
| Income from operations |
4,970,401 | 478,236 | ||||||
| Other expenses |
||||||||
| Interest expense, net |
1,370,709 | 1,602,980 | ||||||
| Other expense, net |
245,683 | 79,891 | ||||||
|
|
|
|
|
|
| |||
| 1,616,392 | 1,682,871 | |||||||
|
|
|
|
|
|
| |||
| Income (loss) before income taxes |
3,354,009 | (1,204,635 | ) | |||||
| Income tax expense (benefit) |
||||||||
| Current |
1,668,873 | (73,450 | ) | |||||
| Deferred |
(734,627 | ) | 46,609 | |||||
|
|
|
|
|
|
| |||
| 934,246 | (26,841 | ) | ||||||
|
|
|
|
|
|
| |||
| Net income (loss) |
$ | 2,419,763 | $ | (1,177,794 | ) | |||
|
|
|
|
|
|
| |||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
4
Precision Acquisition MidCo, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three months ended December 31,
| 2020 | 2019 | |||||||
| Net Income (loss) |
$ | 2,419,763 | $ | (1,177,794 | ) | |||
| Other comprehensive income |
||||||||
| Foreign currency translation adjustments |
227,478 | 69,251 | ||||||
| Change in value of derivative instrument |
- | 1,976 | ||||||
|
|
|
|
|
|||||
| Comprehensive income (loss) |
$ | 2,647,241 | $ | (1,106,567 | ) | |||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
5
Precision Acquisition MidCo, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Three months ended December 31, 2019 and 2020
| Accumulated | ||||||||||||||||||||||||||||
| Common Stock | Other | |||||||||||||||||||||||||||
| Shares | Retained | Additional | Comprehensive | |||||||||||||||||||||||||
| Authorized | Outstanding | Amount | Earnings | Paid-in Capital | Income (Loss) | Total | ||||||||||||||||||||||
| Balance at September 30, 2019 |
1,000 | 100 | $ | 1 | $ | 1,707,001 | $ | 141,447,756 | $ | (605,078 | ) | $ | 142,549,680 | |||||||||||||||
| Stock-based compensation |
- | - | - | - | 81,093 | - | 81,093 | |||||||||||||||||||||
| Foreign currency translation adjustments |
- | - | - | - | - | 69,251 | 69,251 | |||||||||||||||||||||
| Change in value of derivative instrument |
- | - | - | - | - | 1,976 | 1,976 | |||||||||||||||||||||
| Net loss |
- | - | - | (1,177,794 | ) | - | - | (1,177,794 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance at December 31, 2019 |
1,000 | 100 | $ | 1 | $ | 529,207 | $ | 141,528,849 | $ | (533,851 | ) | $ | 141,524,206 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
||||||||||||||||||||||||||||
| Balance at September 30, 2020 |
1,000 | 100 | $ | 1 | $ | 2,707,031 | $ | 141,664,153 | $ | (258,391 | ) | $ | 144,112,794 | |||||||||||||||
| Stock-based compensation |
- | - | - | - | 84,000 | - | 84,000 | |||||||||||||||||||||
| Foreign currency translation adjustments |
- | - | - | - | - | 227,478 | 227,478 | |||||||||||||||||||||
| Net income |
- | - | - | 2,419,763 | - | - | 2,419,763 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance at December 31, 2020 |
1,000 | 100 | $ | 1 | $ | 5,126,794 | $ | 141,748,153 | $ | (30,913 | ) | $ | 146,844,035 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
6
Precision Acquisition MidCo, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
Three months ended December 31,
| 2020 | 2019 | |||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | 2,419,763 | $ | (1,177,794 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation |
828,425 | 699,841 | ||||||
| Amortization |
2,008,333 | 2,008,333 | ||||||
| Amortization of deferred financing costs, included in interest expense |
102,500 | 102,500 | ||||||
| (Gain) loss on disposition of property, plant and equipment |
(470 | ) | 1,500 | |||||
| Stock-based compensation |
84,000 | 81,093 | ||||||
| Deferred income tax expense |
(324,391 | ) | (286,530 | ) | ||||
| Change in the allowance for doubtful accounts |
67,864 | 8,451 | ||||||
| Change in the inventory valuation reserve |
10,488 | 7,097 | ||||||
| Changes in operating assets and liabilities |
||||||||
| Accounts receivable |
1,082,531 | 1,436,245 | ||||||
| Inventories |
(1,604,781 | ) | (1,421,762 | ) | ||||
| Other assets |
186,919 | 494,548 | ||||||
| Accounts payable |
206,262 | 253,029 | ||||||
| Customer deposits |
676,254 | 162,425 | ||||||
| Accrued compensation and benefits |
(1,304,573 | ) | (629,849 | ) | ||||
| Other accrued liabilities |
884,233 | (203,631 | ) | |||||
|
|
|
|
|
|
| |||
| Net cash provided by operating activities |
5,323,357 | 1,535,496 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property, plant and equipment |
(330,976 | ) | (462,589 | ) | ||||
|
|
|
|
|
|
| |||
| Net cash used in investing activities |
(330,976 | ) | (462,589 | ) | ||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
7
Precision Acquisition MidCo, Inc. and Subsidiaries
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS - CONTINUED
Three months ended December 31,
| 2020 | 2019 | |||||||
| Cash flows from financing activities: |
||||||||
| Payments on long-term debt |
$ | (4,945,111 | ) | $ | - | |||
| Payments on capital lease |
(243,241 | ) | (45,260 | ) | ||||
|
|
|
|
|
|
| |||
| Net cash used in financing activities |
(5,188,352 | ) | (45,260 | ) | ||||
| Effect of exchange rate on cash and cash equivalents |
(10,643 | ) | (51,739 | ) | ||||
|
|
|
|
|
|
| |||
| Net increase in cash and cash equivalents |
(206,614 | ) | 975,908 | |||||
| Cash and cash equivalents at beginning of period |
11,888,554 | 6,403,691 | ||||||
|
|
|
|
|
|
| |||
| Cash and cash equivalents at end of period |
$ | 11,681,940 | $ | 7,379,599 | ||||
|
|
|
|
|
|
| |||
| Supplemental disclosure of cash flow information |
||||||||
| Cash paid during the period for interest |
$ | 1,137,188 | $ | 1,378,439 | ||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
8
Precision Acquision MidCo, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE A - ORGANIZATION
Precision Acquisition MidCo, Inc., a Delaware corporation, was formed on March 6, 2017 for the purpose of acquiring a 100% equity ownership in Dorner Holding Corp.
Dorner Holding Corp., a Delaware corporation, has a 100% equity ownership in Dorner Mfg. Corp.
Dorner Mfg. Corp. designs and manufactures conveyor products and systems and sells them through domestic and international sales channels.
Dorner Holding Corp. has a 100% equity ownership in Dorner Conveyors Ltd., a Canadian subsidiary, which sells conveyor products and systems that are manufactured by Dorner Mfg. Corp.
Dorner Mfg. Corp. has a 100% equity ownership in Dorner (M) Sdn. Bhd. (Dorner Asia). Dorner Asia is a Malaysia-based company that is engaged in the design and manufacture of flexible conveyor systems and parts.
Dorner Mfg. Corp. formed Dorner Holdings Europe GmbH for the purpose of acquiring 100% equity ownership in GmbH, subsequently changed to Dorner GmbH. Dorner GmbH is a German-based company that designs and manufactures conveyor products and systems.
Dorner Holding Corp. acquired a 100% equity ownership in Sautem, S.A. de C.V. and formed Dorner Latin America S. de C.V.(Dorner Latin America), a wholly owned Mexican subsidiary which is engaged in the design and manufacture of conveyors and automatic labeling systems.
In December 2018, Dorner Holdings Europe GmbH formed Dorner Sarl, a wholly owned French subsidiary that provides marketing and development service to Dorner GmbH in the Republic of France.
Sales to foreign customers were approximately 11% and 14% of net sales for the three months ended December 31, 2020 and 2019, respectively. Accounts receivable from foreign customers were approximately $2,663,000 and $2,021,000 as of December 31, 2020 and 2019, respectively.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:
Basis of Presentation
The accompanying condensed consolidated interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all information and disclosures required to be included in annual financial statements. The information contained in the accompanying condensed consolidated interim financial statements and the notes thereto should be read in conjunction with the consolidated financial statements and the notes thereto for the period ended September 30, 2020 (the “Annual Financial Statements”). These condensed consolidated interim financial statements do not repeat disclosures that would substantially duplicate disclosures in the Annual Financial Statements or details of accounts that have not been changed significantly in amounts or composition. The interim condensed consolidated financial statements have been prepared on the same basis as the Company’s Annual Financial Statements. In the opinion of management, the accompanying condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for the fair presentation of these condensed consolidated interim financial statements. The results for the three months
9
Precision Acquision MidCo, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
December 31, 2020 and 2019
ended December 31, 2020 are not necessarily indicative of the results that could be expected for the year ended September 30, 2021.
Principles of Consolidation
The accompanying financial statements include the financial position and results of operations of Precision Acquisition MidCo, Inc., Dorner Holding Corp., Dorner Mfg. Corp., Dorner Conveyors Ltd., Dorner Latin America S. de C.V., Dorner (M) Sdn. Bhd., Dorner Holdings Europe GmbH and Dorner GmbH, collectively referred to as the Company. All significant intercompany transactions and balances have been eliminated in the consolidation.
Use of Estimates
The preparation of the condensed consolidated interim financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of revenue and expenses during the reporting period in the condensed consolidated interim financial statements and accompanying notes. Actual results could differ from those estimates.
Inventories
Inventories are valued at the lower of cost or net realizable value. Cost is determined using the weighted-average cost method. The Company allocates overhead and direct labor on the basis of estimated direct labor hours in each work center. Net realizable value represents the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company determines its valuation reserve by considering a number of factors, including age of the inventory and various usage tests.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and amortization of property, plant and equipment are calculated using the straight-line method over their estimated useful lives as follows:
| Building and leasehold improvements |
5 to 39 years | |
| Transportation equipment |
4 to 10 years | |
| Office equipment |
3 to 7 years | |
| Machinery and equipment |
3 to 10 years |
Repairs and maintenance that do not extend the lives of the applicable assets are charged to expense as incurred. Gain or loss from the retirement or other disposition of assets is included in other expense.
Revenue Recognition
Sales and related costs of sales are generally recorded when goods are shipped and title, ownership and risk of loss have passed to the customer, all of which occurs upon shipment or delivery of the product based on applicable shipping terms. The shipping terms may vary depending on the nature of the customer, domestic or foreign, and the type of transportation used. The Company provides for the estimated future warranty costs of repair, replacement or customer accommodation in cost of sales when sales are recognized and upon the incurrence of known and anticipated events and circumstances.
10
Precision Acquision MidCo, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE C - INVENTORIES, NET
Inventories at December 31, consist of the following:
| 2020 | 2019 | |||||||
| Raw materials |
$ | 6,096,838 | $ | 4,825,648 | ||||
| Work-in-process |
3,729,373 | 3,124,362 | ||||||
| Finished goods |
1,839,425 | 1,431,795 | ||||||
|
|
|
|
|
|||||
| 11,665,636 | 9,381,805 | |||||||
| Less - valuation reserve |
(516,154 | ) | (317,620 | ) | ||||
|
|
|
|
|
|||||
| $ | 11,149,482 | $ | 9,064,185 | |||||
|
|
|
|
|
|||||
NOTE D - OTHER INTANGIBLE ASSETS, NET
The Company has the following amounts related to other intangible assets as of December 31:
| 2020 |
||||||||||||||
| Weighted- Lives |
Gross | Accumulated Amortization |
Net Book Value | |||||||||||
| Trade name |
16.25 | $ | 8,500,000 | $ | (1,611,500 | ) | $ | 6,888,500 | ||||||
| Technology |
11.25 | 30,500,000 | (7,709,700 | ) | 22,790,300 | |||||||||
| Customer relationships |
16.25 | 111,500,000 | (21,138,400 | ) | 90,361,600 | |||||||||
|
|
|
|
|
|
|
|
|
| ||||||
| $ | 150,500,000 | $ | (30,459,600 | ) | $ | 120,040,400 | ||||||||
|
|
|
|
|
|
|
|
|
| ||||||
| 2019 |
||||||||||||||
| Weighted- Lives |
Gross | Accumulated Amortization |
Net Book Value | |||||||||||
| Trade name |
17.25 | $ | 8,500,000 | $ | (1,186,500 | ) | $ | 7,313,500 | ||||||
| Technology |
12.25 | 30,500,000 | (5,676,400 | ) | 24,823,600 | |||||||||
| Customer relationships |
17.25 | 111,500,000 | (15,563,366 | ) | 95,936,634 | |||||||||
|
|
|
|
|
|
|
|
|
| ||||||
| $ | 150,500,000 | $ | (22,426,266 | ) | $ | 128,073,734 | ||||||||
|
|
|
|
|
|
|
|
|
| ||||||
11
Precision Acquision MidCo, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
December 31, 2020 and 2019
The aggregate annual amortization expense for other intangible assets subsequent to December 31, 2020 is as follows:
| Remaining 2021 |
$ | 6,025,000 | ||
| 2022 |
8,033,300 | |||
| 2023 |
8,033,300 | |||
| 2024 |
8,033,300 | |||
| 2025 |
8,033,300 | |||
| Thereafter |
81,882,200 | |||
|
|
|
| ||
| Total |
$ | 120,040,400 | ||
|
|
|
| ||
Amortization expense for other amortizable intangible assets amounted to approximately $2,008,300 for the three months ended December 31, 2020 and 2019.
NOTE E - FINANCING ARRANGEMENTS
The Company has available a revolving line of credit with a bank that expires March 15, 2022. Borrowings are limited to $10,000,000. Interest on borrowings is currently at LIBOR plus 5.75% (6.75% at December 31, 2020 and 7.45% at December 31, 2019). Outstanding borrowings under the revolving line of credit were $0 at both December 31, 2020 and 2019.
The Company has an agreement with a financial institution in Germany that is currently in the form of a line of credit in which borrowings are limited to 1,000,000€ to fund building expansion and production capabilities. Outstanding borrowings under the line of credit were approximately 737,000€ or $902,000 USD and 844,000€ or $947,000 USD at December 31, 2020 and 2019, respectively. Upon reaching the limit of the line of credit, this will be converted into a term loan with a bank that expires June 30, 2027. Interest rate on borrowings is currently 1.17%.
During the year, the Company made principal only prepayments on the term loan. As a result, there will be no required principal repayment due until December 31, 2022 and the entire carrying amount of the loan will be considered to be a long-term obligation.
12
Precision Acquision MidCo, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
December 31, 2020 and 2019
Long-term obligations at December 31, consist of the following:
| 2020 | 2019 | |||||||
| Term loan to a bank, currently bearing interest at LIBOR plus 5.75% (6.75% and 7.45% at December 31, 2020 and 2019, respectively). Monthly, interest only installment payments are due through December 31, 2022, with the next required principal payment due December 31, 2022. The final lump-sum installment is due March 15, 2023. Collateral on loan is all real and personal property of the Company |
$61,870,116 | $71,800,000 | ||||||
| Capital lease obligation - with imputed interest rate of 7.21%, payable through 2035, collateralized by a building |
12,569,469 | 12,357,597 | ||||||
| Less: Unamortized debt issuance costs, net of accumulated amortization of $1,452,000 and $1,042,000 as of December 31, 2020 and 2019, respectively |
(905,416 | ) | (1,307,649 | ) | ||||
|
|
|
|
|
|
| |||
| 73,534,169 | 82,849,948 | |||||||
| Less: Current portion of capital lease obligation |
(450,479 | ) | (194,049 | ) | ||||
|
|
|
|
|
|
| |||
| $ | 73,083,690 | $ | 82,655,899 | |||||
|
|
|
|
|
|
| |||
The Company leases a building under an agreement that is classified as a capital lease. The cost of the building under the capital lease of $10,517,000 at December 31, 2020 and 2019, is included in the consolidated balance sheets within property, plant and equipment. Accumulated amortization of the leased building at December 31, 2020 and 2019 was approximately $2,141,000 and $1,576,000, respectively. Amortization under capital leases was approximately $141,000 for the three months ended December 31, 2020 and 2019.
The aggregate annual principal payments required on notes payable and the future minimum lease payments on the capital lease are as follows:
| December 31, 2020, |
Term Loan | Capital Lease | Total | |||||||||
| Remaining 2021 |
$ | - | $ | 838,305 | $ | 838,305 | ||||||
| 2022 |
- | 1,148,422 | 1,148,422 | |||||||||
| 2023 |
61,870,116 | 1,182,875 | 63,052,991 | |||||||||
| 2024 |
- | 1,218,361 | 1,218,361 | |||||||||
| 2025 |
- | 1,254,914 | 1,254,914 | |||||||||
| Thereafter |
- | 15,378,974 | 15,378,974 | |||||||||
|
|
|
|
|
|
|
|
|
| ||||
| 61,870,116 | 21,021,851 | 82,891,967 | ||||||||||
| Less: Interest |
- | (8,452,382 | ) | (8,452,382 | ) | |||||||
| Less: Unamortized debt issuance costs, net |
(905,416 | ) | - | (905,416 | ) | |||||||
|
|
|
|
|
|
|
|
|
| ||||
| $ | 60,964,700 | $ | 12,569,469 | $ | 73,534,169 | |||||||
|
|
|
|
|
|
|
|
|
| ||||
13
Precision Acquision MidCo, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE F - INCOME TAXES
A reconciliation of the provision for income taxes using the statutory federal income tax rate to the effective income tax rate at December 31, is as follows:
| 2020 | 2019 | |||||||||||||||
| Federal statutory rate |
$ | 704,342 | 21.0 | % | $ | (252,973 | ) | (21.0 | )% | |||||||
| Other* |
229,904 | 6.9 | 226,132 | 19.0 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| $ | 934,246 | 27.9 | % | $ | (26,841 | ) | (2.0 | )% | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
* Other provision for income taxes is primarily made up of foreign tax rate differences, state income taxes, and a valuation allowance for Section 163(j).
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities result primarily from inventory, stock-based compensation, goodwill, intangible assets, property, plant and equipment and accrued liabilities. These items along with the tax effects of net operating loss (NOL) and tax credit carryforwards comprise the following components of deferred income taxes at December 31, (approximate):
| 2020 | 2019 | |||||||
| Deferred tax asset |
$ | 2,733,000 | $ | 1,905,000 | ||||
| Deferred tax liability |
(31,056,000 | ) | (31,589,000 | ) | ||||
|
|
|
|
|
|
| |||
| Net deferred tax liability |
$ | (28,323,000 | ) | $ | (29,684,000 | ) | ||
|
|
|
|
|
|
| |||
NOTE G - RISKS AND UNCERTAINTIES
In March 2020, an outbreak of COVID-19 occurred globally causing significant fluctuations in financial markets and disruptions in global business operations. The extent of the impact on the Company’s assets and future operations will depend on the duration and continued spread of the outbreak, including any other further developments.
NOTE H - ADDITIONAL FINANCIAL INFORMATION
Other current liabilities consist of the following at December 31:
| 2020 | 2019 | |||||||
| Accrued commissions and rebates |
$ | 640,103 | $ | 65,712 | ||||
| Accrued warranty |
118,700 | 138,700 | ||||||
| Accrued income taxes |
1,409,927 | - | ||||||
| Accrued agent termination costs |
496,440 | - | ||||||
| Other |
643,596 | 467,454 | ||||||
|
|
|
|
|
|
| |||
| $ | 3,308,766 | $ | 671,866 | |||||
|
|
|
|
|
|
| |||
14
Precision Acquision MidCo, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
December 31, 2020 and 2019
NOTE I - SUBSEQUENT EVENTS
The Company evaluated subsequent events through April 20, 2021, the date which the condensed consolidated interim financial statements were available to be issued. There were no material subsequent events that required recognition or additional disclosure in these condensed consolidated interim financial statements, other than those noted below.
On March 1, 2021, the Company entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Columbus McKinnon Corporation (“Columbus”). The Company is now a wholly owned subsidiary of Columbus. The Merger was effective April 7, 2021.
On March 31, 2021, the Company paid off their line of credit in Germany. The total amount paid off was €707,400 and there is no remaining balance on the line of credit.
15
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On April 7, 2021, pursuant to the terms set forth in the previously announced Agreement and Plan of Merger, dated March 1, 2021, Columbus McKinnon Corporation (‘the Company” or “CMCO”), completed its acquisition (“Acquisition”) of Precision Blocker, Inc, and its subsidiaries, including its indirect wholly-owned operating subsidiary Dorner Mfg. Corp. (collectively “Dorner”). The unaudited pro forma condensed combined balance sheet as of December 31, 2020 and the condensed combined statements of operations for the nine months ended December 31, 2020 and for the twelve months ended March 31, 2020, illustrate the effects of the Acquisition (the “Transaction” or the “Transaction Accounting Adjustments”), as well as contemporaneous financing activities and certain other related adjustments described below (the “Other Transaction Accounting Adjustments” and, together with the Transaction, the “Transactions”).
The Other Transaction Accounting Adjustments include but are not limited to the Company’s borrowing of $650 million under a new first lien term loan facility (the “New Term Loan”) to fund the Acquisition, the replacement of the prior revolving credit facility with an aggregate principal amount of $100 million (the “Existing Revolver”) with a new revolving credit facility with an aggregate principal amount of $100 million (the “New Revolver”), and the repayment of the remaining outstanding balance of the Company’s existing term loan (the “Existing Term Loan”). In addition, the Company plans to raise $150 million through the issuance of shares of the Company’s common stock, par value $0.01 per share (the “Equity Issuance”), with the proceeds of such Equity Issuance expected to be used to repay a portion of the New Term Loan. The completion of the Equity Issuance is subject to market and other conditions, and there can be no assurance as to whether or when the Equity Issuance may be completed, or as to the actual size or terms of the Equity Issuance. For more information about the Equity Issuance, refer to Note 6(e).
The Company’s fiscal year ends on March 31st, while Dorner’s fiscal year ends on September 30th. As the Company’s fiscal year end differs by more than one quarter from Dorner’s fiscal year end, the unaudited pro forma condensed combined statement of operations presented herein have been presented using the different fiscal periods as discussed below. The unaudited pro forma condensed combined statement of operations for the twelve months ended March 31, 2020 presented herein reflects a combination of the Company’s results of operations for its fiscal year ended March 31, 2020 and Dorner’s results of operations from April 1, 2019 through March 31, 2020, which were calculated using its fiscal year ended September 30, 2019, less the six months ended March 31, 2019, plus the six months ended March 31, 2020. The unaudited pro forma condensed combined statement of operations for the nine months ended December 31, 2020 presented herein reflects a combination of the Company’s results of operations for the nine months ended December 31, 2020 and Dorner’s results of operations from April 1, 2020 through December 31, 2020, calculated using its fiscal year ended September 30, 2020, less the six months ended March 31, 2020, plus the three months ended December 31, 2020. The unaudited pro forma condensed combined balance sheet as of December 31, 2020 presented herein reflects a combination of the Company’s financial position as of December 31, 2020 and Dorner’s financial position as of December 31, 2020.
The unaudited pro forma condensed combined balance sheet data as of December 31, 2020 gives effect to the Transactions as if they occurred on December 31, 2020. The unaudited pro forma condensed consolidated statements of operations data for the nine months ended December 31, 2020 and for the twelve months ended March 31, 2020, have been prepared as if the Transactions had occurred on April 1, 2019.
The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes, the Company’s audited annual consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the Securities and Exchange Commission (“the SEC”) on May 27, 2020, and the Company’s unaudited quarterly consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, filed with the SEC on January 28, 2021.
The adjustments to the unaudited pro forma condensed combined financial information described herein are based on available information and assumptions management believes are reasonable. These adjustments are estimates, subject to risks and uncertainties that could cause the unaudited pro forma condensed combined financial statements to differ materially from actual results.
1
The unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Acquisition, nor the costs that may be incurred to achieve such benefits.
As such, the unaudited pro forma condensed combined financial information is shown purely for illustrative purposes and is not indicative of the combined financial position or results of operations that would have been realized had the Transactions occurred as of the dates indicated above. The unaudited pro forma condensed combined financial information should not be considered representative of future financial conditions or results of operations.
2
Unaudited pro forma condensed combined balance sheet as of
December 31, 2020
(in thousands)
| Historical | ||||||||||||||||||||||||||||
| CMCO
|
Dorner (as adjusted) Note 2
|
Transaction
|
Reference
|
Other Transaction Accounting Adjustments
|
Reference
|
Pro Forma
| ||||||||||||||||||||||
| ASSETS: |
||||||||||||||||||||||||||||
| Current assets: |
||||||||||||||||||||||||||||
| Cash and cash equivalents |
$ | 187,626 | $ | 11,682 | $ | (497,085) | 5(a) | $ | 366,629 | 6(a) | $ | 68,852 | ||||||||||||||||
| Trade accounts receivables, less allowance for doubtful accounts |
94,177 | 13,336 | (179) | 5(b) | - | 107,334 | ||||||||||||||||||||||
| Inventories |
113,446 | 11,149 | 2,558 | 5(c) | - | 127,153 | ||||||||||||||||||||||
| Prepaid expenses and other |
18,850 | 1,819 | - | - | 20,669 | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Total current assets |
414,099 | 37,986 | (494,706) | 366,629 | 324,008 | |||||||||||||||||||||||
| Property, plant, and equipment, net |
72,304 | 18,436 | 10,258 | 5(d) | - | 100,998 | ||||||||||||||||||||||
| Goodwill |
338,995 | 87,836 | 213,919 | 5(e) | - | 640,750 | ||||||||||||||||||||||
| Other intangibles, net |
221,741 | 120,041 | 72,959 | 5(f) | - | 414,741 | ||||||||||||||||||||||
| Marketable securities |
7,925 | - | - | - | 7,925 | |||||||||||||||||||||||
| Deferred taxes on income |
27,777 | - | (27,080) | 5(m) | - | 697 | ||||||||||||||||||||||
| Other assets |
64,545 | 373 | 514 | 5(g) | 2,188 | 6(b) | 67,620 | |||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Total assets |
$ | 1,147,386 | $ | 264,672 | $ | (224,136) | $ | 368,817 | $ | 1,556,739 | ||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY: |
||||||||||||||||||||||||||||
| Current liabilities: |
||||||||||||||||||||||||||||
| Trade accounts payable |
$ | 49,576 | $ | 5,451 | $ | - | $ | - | $ | 55,027 | ||||||||||||||||||
| Accrued liabilities |
90,086 | 9,618 | 434 | 5(h) | - | 100,138 | ||||||||||||||||||||||
| Current portion of long-term debt |
4,450 | 902 | (902) | 5(i) | (4,450) | 6(c) | - | |||||||||||||||||||||
| Current portion financing lease liability |
- | 450 | (75) | 5(j) | 375 | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Total current liabilities |
144,112 | 16,421 | (543) | (4,450) | 155,540 | |||||||||||||||||||||||
| Term loan and revolving credit facility |
245,092 | 60,965 | (60,965) | 5(k) | 244,913 | 6(d) | 490,005 | |||||||||||||||||||||
| Financing lease liability |
- | 12,118 | 2,891 | 5(l) | 15,009 | |||||||||||||||||||||||
| Other non-current liabilities |
260,858 | 28,324 | (7,862) | 5(m) | - | 281,320 | ||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Total liabilities |
650,062 | 117,828 | (66,479) | 240,463 | 941,874 | |||||||||||||||||||||||
| Shareholders’ equity: |
||||||||||||||||||||||||||||
| Voting common stock |
240 | - | - | 33 | 6(e) | 273 | ||||||||||||||||||||||
| Additional paid-in capital |
293,869 | 141,748 | (141,748) | 5(n) | 143,967 | 6(e) | 437,836 | |||||||||||||||||||||
| Retained earnings |
287,095 | 5,127 | (15,940) | 5(n) | (15,646) | 6(e) | 260,636 | |||||||||||||||||||||
| Accumulated other comprehensive loss |
(83,880) | (31) | 31 | 5(n) | - | (83,880) | ||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Total shareholders’ equity |
497,324 | 146,844 | (157,657) | 128,354 | 614,865 | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity |
$ | 1,147,386 | $ | 264,672 | $ | (224,136) | $ | 368,817 | $ | 1,556,739 | ||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
3
Unaudited pro forma condensed combined statement of operations for the twelve months
ended March 31, 2020
(dollars and shares in thousands, except per share amounts)
| Historical | ||||||||||||||||||||||||||||
| CMCO
|
Dorner (as adjusted) Note 2
|
Transaction
|
Reference
|
Other Transaction
|
Reference
|
Pro forma
| ||||||||||||||||||||||
| Net sales |
$ | 809,162 | $ | 82,094 | $ | - | $ | - | $ | 891,256 | ||||||||||||||||||
| Cost of products sold |
525,976 | 43,289 | 3,742 | 5(o) | - | 573,007 | ||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Gross Profit |
283,186 | 38,805 | (3,742) | - | 318,249 | |||||||||||||||||||||||
| Selling |
91,054 | 14,738 | - | - | 105,792 | |||||||||||||||||||||||
| General and administrative |
77,880 | 11,879 | 19,716 | 5(p) | 1,675 | 6(f) | 111,150 | |||||||||||||||||||||
| Research and development expenses |
11,310 | 1,536 | - | - | 12,846 | |||||||||||||||||||||||
| Net loss on sales of businesses, including impairment |
176 | - | - | - | 176 | |||||||||||||||||||||||
| Amortization of intangibles |
12,942 | 8,033 | 4,598 | 5(q) | - | 25,573 | ||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Income (loss) from operations |
89,824 | 2,619 | (28,056) | (1,675) | 62,712 | |||||||||||||||||||||||
| Interest and debt expense |
14,234 | 6,675 | - | (1,155) | 6(g) | 19,754 | ||||||||||||||||||||||
| Cost of debt refinancing |
- | - | - | 14,645 | 6(h) | 14,645 | ||||||||||||||||||||||
| Investment (income) loss, net |
(891) | - | - | - | (891) | |||||||||||||||||||||||
| Foreign currency exchange loss (gain), net |
(1,514) | (38) | - | - | (1,552) | |||||||||||||||||||||||
| Other (income) expense, net |
839 | (88) | - | - | 751 | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Income from continuing operations before income tax expense (benefit) |
77,156 | (3,930) | (28,056) | (15,165) | 30,005 | |||||||||||||||||||||||
| Income tax expense |
17,484 | (379) | (7,080) | 5(r) | (3,791) | 6(i) | 6,234 | |||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Net income (loss) |
$ | 59,672 | $ | (3,551) | $ | (20,976) | $ | (11,374) | $ | 23,771 | ||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Weighted average basic shares outstanding |
23,619 | - | 3,301 | 6(j) | 26,920 | |||||||||||||||||||||||
| Weighted average diluted shares outstanding |
23,855 | - | 3,308 | 6(j) | 27,163 | |||||||||||||||||||||||
|
|
|
|
|
|
| |||||||||||||||||||||||
| Basic income per share |
$ | 2.53 | $ | 0.88 | ||||||||||||||||||||||||
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
| |||||||||||||||||||||||
| Diluted income per share |
$ | 2.50 | $ | 0.88 | ||||||||||||||||||||||||
|
|
|
|
|
|
| |||||||||||||||||||||||
4
Unaudited pro forma condensed combined statement of operations for the nine
months ended December 31, 2020
(dollars and shares in thousands, except per share amounts)
| Historical | ||||||||||||||||||||||||||||
| CMCO
|
Dorner (as adjusted) Note 2
|
Transaction
|
Reference
|
Other Transaction Accounting Adjustments
|
Reference
|
Pro forma
| ||||||||||||||||||||||
| Net sales |
$ | 463,407 | $ | 78,091 | $ | - | $ | - | $ | 541,498 | ||||||||||||||||||
| Cost of products sold |
307,270 | 38,371 | 471 | 5(o) | - | 346,112 | ||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Gross Profit |
156,137 | 39,720 | (471) | - | 195,386 | |||||||||||||||||||||||
| Selling |
56,087 | 12,728 | - | - | 68,815 | |||||||||||||||||||||||
| General and administrative |
53,842 | 8,708 | - | 506 | 6(f) | 63,056 | ||||||||||||||||||||||
| Research and development expenses |
8,703 | 923 | - | - | 9,626 | |||||||||||||||||||||||
| Net loss on sales of businesses, including impairment |
- | - | - | - | - | |||||||||||||||||||||||
| Amortization of intangibles |
9,449 | 6,025 | 3,448 | 5(q) | - | 18,922 | ||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Income (loss) from operations |
28,056 | 11,336 | (3,919) | (506) | 34,967 | |||||||||||||||||||||||
| Interest and debt expense |
9,192 | 4,387 | - | 1,236 | 6(g) | 14,815 | ||||||||||||||||||||||
| Cost of debt refinancing |
- | - | - | - | - | |||||||||||||||||||||||
| Investment (income) loss, net |
(1,429) | - | - | - | (1,429) | |||||||||||||||||||||||
| Foreign currency exchange loss (gain), net |
1,083 | 425 | - | - | 1,508 | |||||||||||||||||||||||
| Other (income) expense, net |
20,081 | (51) | - | - | 20,030 | |||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Income from continuing operations before income tax expense (benefit) |
(871) | 6,575 | (3,919) | (1,742) | 43 | |||||||||||||||||||||||
| Income tax expense |
(392) | 1,358 | (1,002) | 5(s) | (436) | 6(i) | (472) | |||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Net income (loss) |
$ | (479) | $ | 5,217 | $ | (2,917) | $ | (1,306) | $ | 515 | ||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||
| Weighted average basic shares outstanding |
23,871 | - | 3,301 | 6(j) | 27,172 | |||||||||||||||||||||||
| Weighted average diluted shares outstanding |
23,871 | - | 3,319 | 6(j) | 27,190 | |||||||||||||||||||||||
|
|
|
|
|
|
| |||||||||||||||||||||||
| Basic income per share |
$ | (0.02) | $ | 0.02 | ||||||||||||||||||||||||
|
|
|
|
|
|
| |||||||||||||||||||||||
|
|
|
|
|
|
| |||||||||||||||||||||||
| Diluted income per share |
$ | (0.02) | $ | 0.02 | ||||||||||||||||||||||||
|
|
|
|
|
|
| |||||||||||||||||||||||
5
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
Note 1 - Basis of Presentation
The historical financial information has been adjusted to give pro forma effect to the Acquisition, as well as the related debt issuances by the Company, which were used to fund the Acquisition and repay previously existing debt of both the Company and Dorner, and the expected Equity Issuance by the Company, the proceeds of which are expected to be used to repay a portion of the New Term Loan. The unaudited pro forma condensed combined financial information has been prepared in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures about Acquired and Disposed Businesses, as adopted by the SEC on May 20, 2020 (“Article 11”).
The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). The purchase price for the Acquisition will be allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the acquisition date, and any excess value of the consideration transferred over the net assets will be recognized as goodwill. The Company has made a preliminary allocation of the purchase price for the Acquisition to the assets acquired and liabilities assumed as of the acquisition date based on the Company’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed using information currently available. Differences between these preliminary estimates and the final acquisition accounting could occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial information and the Company’s future results of operations and financial position.
Note 2 - Presentation of Dorner – Reclassification Adjustments
Historical Dorner financial information included within the unaudited pro forma condensed combined financial information has been reclassified to conform the presentation to that of the Company as indicated in the table below:
Balance sheet as of December 31, 2020
| Presentation in Dorner’s Financial Statements
|
|
Presentation in Pro Forma Condensed Combined
|
Amount (in | |||||
| Accounts receivable, less allowance for doubtful accounts |
Trade accounts receivable, less allowance for doubtful accounts | $ | 13,336 | |||||
| Prepaid and other |
Prepaid Expenses and Other | 1,819 | ||||||
| Building |
Property, plant, and equipment, net | 14,294 | ||||||
| Machinery and equipment |
Property, plant, and equipment, net | 7,186 | ||||||
| Office Equipment, including IT software |
Property, plant, and equipment, net | 4,671 | ||||||
| Leasehold improvements |
Property, plant, and equipment, net | 1,376 | ||||||
| Transportation equipment |
Property, plant, and equipment, net | 176 | ||||||
| Less - accumulated depreciation and amortization |
Property, plant, and equipment, net | (9,990) | ||||||
| Land |
Property, plant, and equipment, net | 300 | ||||||
| Construction in progress |
Property, plant, and equipment, net | 423 | ||||||
| Other intangible assets, net |
Other intangibles, net | 120,041 | ||||||
| Deposits |
Other assets | 373 | ||||||
| Current portion of capital lease obligation |
Current portion financing lease liability | 450 | ||||||
| Line of credit |
Current portion of long-term debt | 902 | ||||||
| Accounts payable |
Trade accounts payable | 5,451 | ||||||
| Customer deposits |
Accrued liabilities | 3,079 | ||||||
| Accrued compensation and benefits |
Accrued liabilities | 3,231 | ||||||
| Other accrued liabilities |
Accrued liabilities | 3,308 | ||||||
| Deferred tax liabilities, net |
Other non-current liabilities | 28,324 | ||||||
| Term loan, less current portion, net of deferred financing costs |
Term loan and revolving credit facility | 60,965 | ||||||
| Capital lease obligation, less current portion |
Financing lease liability | 12,118 |
6
| Retained earnings |
|
Retained earnings | 5,127 | |||||
| Additional paid-in capital |
Additional paid-in-capital | 141,748 | ||||||
| Accumulated other comprehensive loss |
Accumulated other comprehensive loss | (31) |
Statement of Operations for the Twelve Months Ended March 31, 2020
| Presentation in Dorner’s Financial Statements | Presentation in Pro Forma Condensed Combined Financial Information |
Amount (in thousands) | ||||||
| Net Sales |
Net sales | $ | 82,094 | |||||
| Cost of sales |
|
Cost of products sold | 43,289 | |||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
General and administrative | 11,597 | ||||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Research and development expenses | 1,536 | ||||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Selling | 14,738 | ||||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Amortization of intangibles | 8,033 | ||||||
| Interest expense, net |
Interest and debt expense | 6,675 | ||||||
| Acquisition Costs |
General and administrative | 282 | ||||||
| Other expense, net |
Other (income) expense, net | (88) | ||||||
| Other expense, net |
Foreign currency exchange loss (gain), net | (38) | ||||||
| Current |
Income tax expense | (112) | ||||||
| Deferred |
Income tax expense | (267) |
Statement of Operations for the Nine Months Ended December 31, 2020
| Presentation in Dorner’s Financial Statements | Presentation in Pro Forma Condensed Combined Financial Information |
Amount (in thousands) | ||||||
| Net Sales |
|
Net sales | $ | 78,091 | ||||
| Cost of sales |
Cost of products sold | 38,371 | ||||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
General and administrative | 8,708 | ||||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Research and development expenses | 923 | ||||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Selling | 12,728 | ||||||
| Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Amortization of intangibles | 6,025 | ||||||
| Interest expense, net |
Interest and debt expense | 4,387 | ||||||
| Other expense, net |
Other (income) expense, net | (51) | ||||||
| Other expense, net |
Foreign currency exchange loss (gain), net | 425 | ||||||
| Current |
Income tax expense | 3,057 | ||||||
| Deferred |
Income tax expense | (1,699) |
Note 3 – Conforming Accounting Policies
The accounting policies used in the preparation of the unaudited pro forma condensed combined financial information are those set out in CMCO’s consolidated financial statements. Based on the procedures performed to date, the accounting policies of Dorner are similar in all material respects to CMCO’s accounting policies, with the exception of Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“Topic 842”) and ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“Topic 606”), which Dorner had not yet been
7
required to adopt as a private company, as well as accounting for reserves on accounts receivable and warranties, accounting for slow-moving inventory, and accounting for inventory capitalization. The impacts have been described in Note 5 to the unaudited pro forma condensed combined financial information. There were no material differences to historical Dorner revenue recognition upon adoption of Topic 606.
CMCO is not aware of any other material differences between the accounting policies of the two companies that would continue to exist subsequent to the application of acquisition accounting. Following the consummation of the Acquisition, CMCO has begun to conduct, but has not yet completed, a more detailed review of Dorner’s accounting policies in an effort to determine if differences in accounting policies require further reclassification of Dorner’s results of operations or reclassification of assets or liabilities to conform to CMCO’s accounting policies and classifications. As a result, CMCO may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the unaudited pro forma condensed combined financial information.
Note 4 - Estimated Purchase Consideration and Preliminary Purchase Price Allocation
The estimated consideration transferred in the Acquisition is $486 million of cash, which includes the extinguishment of existing Dorner debt of $61.8 million and the payment of $8.9 million of Dorner transaction expenses at transaction close.
The table below represents an estimated preliminary purchase price allocation based on estimates, assumptions, valuations, and other analyses based on Dorner’s balance sheet as of December 31, 2020. The total preliminary estimated purchase consideration is allocated to the tangible and intangible assets and liabilities of Dorner based on their estimated fair values as if the Acquisition had occurred on December 31, 2020, which is the assumed Acquisition date for purposes of the unaudited pro forma condensed combined balance sheet. Other than the items specifically noted below, Dorner’s assets and liabilities are presented at their respective carrying amounts (as adjusted for accounting policy alignment) and should be treated as preliminary values. Based on the information available as of the time of the preparation of this unaudited pro forma condensed combined financial information, CMCO believes that these carrying values approximate fair values. CMCO has not completed the final allocation of the purchase price for the Acquisition to Dorner’s assets and liabilities; such final allocation will be completed within one year. Therefore, the acquired assets and liabilities are reflected at their preliminarily estimated fair values with the excess consideration recorded as goodwill. The final valuation could result in a material difference from the amounts shown.
The following table summarizes the preliminary purchase price as if the Acquisition occurred on December 31, 2020
| (dollars in thousands) | ||||||
| Amounts | ||||||
|
|
| |||||
| Total Consideration Paid |
$ | 486,272 | ||||
| Book value of net assets acquired at December 31, 2020 |
208,711 | |||||
| Adjusted for: |
||||||
| Accounting policy alignment (1) |
2,980 | |||||
| Elimination of existing goodwill & intangible assets |
(207,877) | |||||
|
|
| |||||
| Adjusted book value of net assets acquired |
3,814 | |||||
| Adjustments to: |
||||||
| Inventories |
3,231 | |||||
| Property, plant and equipment, net |
3,649 | |||||
| Other intangibles, net |
193,000 | |||||
| Goodwill |
301,667 | |||||
| Other non-current liabilities |
(19,089) | |||||
|
|
|
|||||
8
|
| ||||||
| Reconciliation to consideration transferred |
$ | 486,272 | ||||
|
| ||||||
| (1) | Accounting policy alignment includes impact of adopting Topic 842, as well as accounting for reserves on accounts receivable and warranties, accounting for slow-moving inventory, and accounting for inventory capitalization. Refer to Note 5 for further disclosure. |
Note 5 - Transaction Accounting Adjustments
Pro Forma Transaction Accounting Adjustments to the unaudited pro forma condensed combined balance sheet
5(a) – Reflects adjustments to cash and cash equivalents to record the acquisition of Dorner and the payment of transaction costs in connection with the Acquisition.
| (dollars in thousands) | ||||
| Acquisition of Dorner |
$ | (486,272) | ||
| CMCO transaction costs |
(10,813) | |||
|
|
|
| ||
| Net Cash outflow |
$ | (497,085) | ||
|
|
|
| ||
5(b) – Trade accounts receivables, less allowance for doubtful accounts was reduced by $0.18 million in order to align Dorner’s historical accounting policy with that of CMCO.
5(c) – Reflects the adjustments to inventories to record the accounting policy alignments for slow-moving inventory and inventory capitalization. Also reflects the step-up of acquired Dorner inventory (as adjusted for the accounting policy changes) to fair value.
| (dollars in thousands) | ||||
| Adjustment to reflect accounting policy alignment of Inventory Reserves |
$ | (625) | ||
| Adjustment to reflect accounting policy alignment of Inventory Capitalization |
69 | |||
| Fair value step-up of acquired inventory |
3,114 | |||
|
|
|
| ||
| Pro forma adjustment to Inventories |
$ | 2,558 | ||
|
|
|
| ||
5(d) – Reflects the adjustments to property, plant, and equipment, net to record the acquisition of finance leases and the fair value step-up of acquired Dorner fixed assets.
| (dollars in thousands) | ||||
| Adjustment to reflect acquisition of finance leases |
$ | 6,609 | ||
| Fair value step-up of acquired property, plant, and equipment, net |
3,649 | |||
|
|
|
|||
| Pro forma adjustment to Property, Plant, and Equipment, net |
$ | 10,258 | ||
|
|
|
|||
The following table displays the expected useful lives of material property, plant, and equipment acquired.
| Estimated Useful Life (years) | ||
| Building |
20 | |
| Leasehold Improvements |
12 | |
| Machinery & Equipment |
5 | |
| Tooling |
3 | |
| Furniture, Fixtures, and Equipment |
4 | |
| Computer & Networking |
3 |
9
| Computer Software |
3 | |
| Transportation Equipment |
5 |
5(e) - Reflects adjustments to remove Dorner’s historical goodwill, and record estimated goodwill resulting from the Acquisition.
| (dollars in thousands) | ||||
| Goodwill resulting from the Acquisition |
$ | 301,755 | ||
| Dorner’s historical goodwill |
(87,836) | |||
|
|
|
| ||
| Pro forma adjustment to Goodwill |
$ | 213,919 | ||
|
|
|
| ||
5(f) - Reflects adjustments to record the preliminary estimated fair value of the identifiable intangible assets acquired, net of historical book value of Dorner’s intangibles prior to the Acquisition.
| (dollars in thousands) | Amount | Estimated Useful Life (in years) |
||||||
| Elimination of Dorner’s historical intangibles |
$ | (120,041) | ||||||
| Fair value of acquired customer relationships |
140,000 | 16 | ||||||
| Fair value of acquired technology portfolio |
45,000 | 14 | ||||||
| Fair value of acquired trade name portfolio |
8,000 | 12 | ||||||
|
|
|
|
||||||
| Pro forma adjustment to Other intangibles, net |
$ | 72,959 | ||||||
|
|
|
|
||||||
5(g) - Other assets increased by $0.51 million to record Dorner’s right of use assets for operating leases upon adoption of Topic 842.
5(h) – Reflects adjustments to Accrued liabilities to record the acquisition of Dorner’s operating leases and the alignment of Dorner’s historical accounting policy for accounting for warranty reserves with that of CMCO.
| (dollars in thousands) | ||||
| Adjustment to reflect acquisition of operating leases |
$ | 356 | ||
| Adjustment to reflect accounting policy alignment of Warranty Reserves |
78 | |||
|
|
|
| ||
| Pro forma adjustment to Accrued liabilities |
$ | 434 | ||
|
|
|
| ||
5(i) – Current portion of long-term debt decreased by $0.9 million to record the extinguishment of Dorner’s historical current portion of debt.
5(j) – Current portion financing lease liability decreased by $0.075 million from the acquisition of finance leases.
5(k) - Term loan and revolving credit facility decreased by $61 million as a result of CMCO’s extinguishment of Dorner’s existing debt on the Acquisition close date.
5(l) - Financing lease liability increased by $2.9 million from the acquisition of acquired finance leases.
5(m) – Reflects adjustments to record the effect of Dorner’s adoption of Topic 842, the recognition of deferred tax liabilities in connection of the Acquisition, jurisdictional netting of deferred tax assets with deferred tax liabilities, and the write-off of deferred taxes associated with Dorner’s historical goodwill.
| (dollars in thousands) | ||||
| Adjustment to reflect acquisition of operating leases |
$ | 158 | ||
10
|
Adjustment to reflect increase in deferred tax liabilities from the Acquisition |
20,231 | |||
| Adjustment to reclassify for jurisdictional netting of deferred taxes |
(27,080) | |||
| Adjustment to write-off deferred tax liabilities related to Dorner’s historical goodwill |
(1,171) | |||
|
|
|
| ||
| Pro forma adjustment to Other non-current liabilities |
$ | (7,862) | ||
|
|
|
|
5(n) - The following table presents the pro forma adjustments to shareholders’ equity:
| (dollars in thousands) | ||||||||
| Elimination of Dorner’s Additional paid-in-capital |
(141,748) | |||||||
| Elimination of Dorner Accumulated other comprehensive income |
31 | |||||||
| Elimination of Dorner’s Retained Earnings |
(5,127) | |||||||
| CMCO transaction costs |
(10,813) | |||||||
|
|
|
|||||||
| Pro forma adjustment to Retained earnings |
(15,940) | |||||||
|
|
|
| ||||||
| Pro forma adjustment to Shareholders’ Equity |
$ | (157,657) | ||||||
|
|
|
| ||||||
Pro Forma Transaction Adjustments to the unaudited pro forma condensed combined statements of operations
5(o) - The following table presents the pro forma adjustments to cost of products sold:
| Twelve Months Ended |
Nine Months Ended |
|||||||
| (dollars in thousands) | March 31, 2020 | December 31, 2020 | ||||||
| Fair value step-up of acquired inventory |
$ | 3,114 | $ | - | ||||
| Incremental depreciation on acquired property, plant, and equipment, net |
628 | 471 | ||||||
|
|
|
|||||||
| Pro forma adjustment to Cost of products sold |
$ | 3,742 | $ | 471 | ||||
|
|
|
|||||||
5(p) - The following table presents the pro forma adjustments to general and administrative expenses:
| Twelve Months Ended | ||||
| (dollars in thousands) | March 31, 2020 | |||
| CMCO transaction costs |
$ | 10,813 | ||
| Dorner transaction costs |
8,903 | |||
|
|
|
|||
| Pro forma adjustment to General and administrative |
$ | 19,716 | ||
|
|
|
|||
5(q) - The following table presents the pro forma adjustments to amortization of intangibles:
| Twelve Months Ended | Nine Months Ended | |||||||
| (dollars in thousands) | March 31, 2020 | December 31, 2020 | ||||||
| Pro forma amortization expense on acquired customer relationships |
$ | 8,750 | $ | 6,563 | ||||
| Pro forma amortization expense on acquired technology portfolio |
3,214 | 2,411 | ||||||
| Pro forma amortization expense on acquired trade name portfolio |
667 | 500 | ||||||
| Historical amortization of intangibles |
(8,033) | (6,025) | ||||||
|
|
|
| ||||||
| Pro forma adjustment to Amortization of intangibles |
$ | 4,598 | $ | 3,448 | ||||
|
|
|
| ||||||
11
5(r) - Reflects the income tax effect of the Transaction Accounting Adjustments calculated using a weighted average statutory rate of (25%).
Note 6 - Other Transaction Accounting Adjustments
Pro Forma Other Transaction Accounting Adjustments to the unaudited pro forma condensed combined balance sheet
6(a) – The following table presents the pro forma Other Transaction Accounting Adjustments related to cash, which include (1) $650 million of cash received from the New Term Loan, $5 million of final original issuance discount, and $150 million received from the Equity Issuance (2) the repayment of the Existing Term Loan, (3) repayment of a portion of the New Term Loan, (4) the payment of issuance costs related to the New Term Loan and the New Revolver, (5) the payment of transaction bonuses, and (6) payment of the Equity Issuance costs.
| (dollars in thousands) | ||||
| Sources: |
||||
| Cash received from New Term Loan |
$ | 650,000 | ||
| Final original issuance discount |
(5,000) | |||
| Cash received from Equity Issuance |
150,000 | |||
|
|
|
| ||
| Total Sources |
795,000 | |||
| Uses: |
||||
| Repayment of Existing Term Loan |
(256,013) | |||
| Cash to repay a portion of New Term Loan |
(150,000) | |||
| Cash to pay New Term Loan issuance costs |
(12,308) | |||
| Cash to pay New Revolver issuance costs |
(3,050) | |||
| Payment of transaction bonuses |
(1,000) | |||
| Cash to pay Equity Issuance costs |
(6,000) | |||
|
|
|
| ||
| Total Uses |
(428,371) | |||
|
|
|
| ||
| Net Cash Inflow |
$ | 366,629 | ||
|
|
|
| ||
6(b) – The following table reflects the change in Other assets as a result of incremental deferred financing fees for the New Revolver and the write-off of fees related to the Existing Revolver.
| (dollars in thousands) | ||||
| Deferred financing fees - New Revolver |
$ | 3,050 | ||
| Write-Off financing fees - Existing Revolver |
(862) | |||
|
|
|
| ||
| Pro forma adjustment to Other Assets |
$ | 2,188 | ||
|
|
|
| ||
6(c) – Reflects the payoff of the $4.5 million current portion of the Existing Term Loan.
6(d) - Reflects adjustments to fund the Acquisition and repay the Existing Term Loan. The interest rate on the New Term Loan is determined by the Eurodollar rate plus an applicable margin. The change in the Company’s borrowings are as follows:
| (dollars in thousands) | ||||
| Issuance of New Term Loan |
$ | 650,000 | ||
| Final original issuance discount |
(5,000) | |||
12
| Less New Term Loan issuance costs not written off |
(4,995) | |||||||
|
|
|
|||||||
| Issuance of New Term Loan, net |
640,005 | |||||||
| Repayment of Existing Term Loan (net of issuance costs) |
(245,092) | |||||||
| Partial repayment of New Term Loan |
(150,000) | |||||||
|
|
|
|||||||
| Pro forma adjustment to Term loan and revolving facility |
$ | 244,913 | ||||||
|
|
|
6(e) – The following table presents the pro forma adjustments to shareholders’ equity, which include (1) the expected Equity Issuance of 3,301,147 shares of the Company’s common stock, with an assumed share price of $45.44, net of $6 million of issuance costs, (2) payment of employee bonuses in connection with the Transaction, and (3) the write-off of deferred financing costs associated with the repayment of the Existing Term Loan, Existing Revolver, and the partial repayment of the New Term Loan.
| (dollars in thousands) | ||||||||
| Adjustment to Voting Common Stock |
$ | 33 | ||||||
| Common stock issuance - APIC |
149,967 | |||||||
| Fees related to Equity Issuance |
(6,000) | |||||||
|
|
|
|
||||||
| Total adjustment to APIC from Equity Issuance |
143,967 | |||||||
| Deferred financing costs on Existing Term Loan |
$ | (6,471) | ||||||
| Deferred financing costs on Existing Revolver |
(862) | |||||||
| Deferred financing fees on partial repayment of New Term Loan |
(7,313) | |||||||
| Transaction bonuses |
(1,000) | |||||||
|
|
|
|
||||||
| Total adjustment to Retained Earnings |
$ | (15,646) | ||||||
|
|
|
| ||||||
| Pro forma adjustment to Shareholders’ equity |
$ | 128,354 | ||||||
|
|
|
| ||||||
A sensitivity analysis has been performed on the number of shares of the Company’s common stock expected to be issued in the Equity Issuance. The analysis gives effect to a hypothetical $1.00 change in the share price of the Company’s common stock in the Equity Issuance. A $1.00 change in the share price of the Company’s common stock in the Equity Issuance would cause a corresponding increase or decrease to the number of shares issued of approximately 0.07 million.
Pro Forma Other Transaction Adjustments to the unaudited pro forma condensed combined statements of operations
6(f) – Reflects the issuance of restricted stock units to key Dorner employees and payment of employee transaction bonuses in connection with the Acquisition.
| Twelve Months Ended | Nine Months Ended | |||||||
| (dollars in thousands) | March 31, 2020 | December 31, 2020 | ||||||
| Compensation expense from issuance of restricted stock unit awards |
$ | 675 | $ | 506 | ||||
| Transaction bonuses |
1,000 | |||||||
|
|
|
|||||||
| Pro forma adjustment to General and administrative |
$ | 1,675 | $ | 506 | ||||
|
|
|
|||||||
6(g) - Reflects the elimination of the Company’s interest expense and amortization of deferred financing costs related to the repaid Existing Term Loan and records the interest expense and amortization of debt issuance costs on the New Term Loan in connection with the Acquisition. Interest rates are determined based on either a eurocurrency rate or base rate plus an applicable margin. An interest rate of 3.70% was assumed below.
13
| Twelve Months Ended | Nine Months Ended | |||||||
| (dollars in thousands) | March 31, 2020 | December 31, 2020 | ||||||
| Pro forma interest on New Term Loan |
$ | 18,315 | $ | 13,736 | ||||
| Pro forma amortization of New Term Loan and New Revolver financing costs |
1,438 | 1,079 | ||||||
|
|
|
|||||||
| Pro forma interest and debt expense |
19,753 | 14,815 | ||||||
| Historical CMCO interest and debt expense |
$ | (14,234) | $ | (9,192) | ||||
| Historical Dorner interest and debt expense |
(6,675) | (4,387) | ||||||
|
|
|
|||||||
| Historical interest and debt expense |
(20,909) | (13,579) | ||||||
|
|
|
|||||||
| Pro forma adjustment to interest and debt expense |
$ | (1,155) | $ | 1,236 | ||||
|
|
|
|||||||
A sensitivity analysis has been performed on interest expense to assess the effect a hypothetical 0.125% change in the interest rate related to the New Term Loan, which reflects a gross issuance of $650 million, debt issuance costs of $4.9 million, $5 million of final original issuance discount, repayment of the Existing Term Loan of $256 million, as well as immediate repayment of $150 million on the New Term Loan. A 0.125% change in interest rates would cause a corresponding increase or decrease to interest expense of approximately $0.62 million for the twelve months ended March 31, 2020 and $0.47 million for the nine months ended December 31, 2020.
6(h) – Reflects a loss from the extinguishment of the Existing Term Loan and New Term Loan, as well as a write-off of Existing Revolver deferred financing fees.
| Twelve Months Ended | ||||
| (dollars in thousands) | March 31, 2020 | |||
| Write-Off financing fees - Existing Term Loan |
$ | 6,471 | ||
| Write-Off financing fees - Existing Revolver |
862 | |||
| Write-Off financing fees – repay portion of New Term Loan |
7,313 | |||
|
|
|
|||
| Pro forma adjustment to Cost of debt refinancing |
$ | 14,645 | ||
|
|
|
|||
6(i) – Reflects the income tax effect of the Other Transaction Adjustments calculated using a weighted average statutory rate of (25%).
6(j) – Reflects the 3,301,147 shares of common stock of the Company expected to be issued in connection with the Equity Issuance and the vesting of the restricted stock units treated as post-Acquisition compensation expense.
| Twelve Months Ended
|
Nine Months Ended |
|||||||
| (dollars in thousands except for earnings per share figure) | March 31, 2020 | December 31, 2020 | ||||||
| Pro Forma Net Income |
$ | 23,771 | $ | 515 | ||||
| Pro Forma Basic EPS |
||||||||
| Historical average basic shares outstanding |
23,619 | 23,871 | ||||||
| Shares from Equity Issuance |
3,301 | 3,301 | ||||||
|
|
|
|||||||
| Total average basic shares outstanding |
26,920 | 27,172 | ||||||
|
|
|
|||||||
| Pro Forma Basic EPS |
0.88 | 0.02 | ||||||
|
|
|
|||||||
14
| Pro Forma Diluted EPS |
||||||||
| Historical average basic shares outstanding |
23,855 | 23,871 | ||||||
| Shares from Equity Issuance |
3,301 | 3,301 | ||||||
| Dilutive impact of restricted stock units |
7 | 18 | ||||||
|
|
|
|
|
|
| |||
| Total average dilutive shares outstanding |
27,163 | 27,190 | ||||||
|
|
|
|
|
|
| |||
| Pro Forma Diluted EPS |
$ | 0.88 | $ | 0.02 | ||||
|
|
|
|
|
|
|
A sensitivity analysis has been performed on EPS to assess the effect a hypothetical $1.00 change in the share price of the Company’s common stock in the Equity Issuance. A $1.00 increase or decrease in the share price of the Company’s common stock in the Equity Issuance would cause an insignificant change to pro forma Basic EPS and Diluted EPS for the twelve months ended March 31, 2020 and for the nine months ended December 31, 2020.
Note 7 – Nonrecurring adjustments
The following table reflects the adjustments related to non-recurring items within the pro forma condensed combined financial information. These non-recurring items were assumed to have occurred on April 1, 2019, the beginning of the twelve-month period ended March 31, 2020.
| Nonrecurring Adjustments | ||||
| Twelve Months Ended | ||||
| (dollars in thousands) | March 31, 2020 | |||
| CMCO Transaction Costs |
$ | (10,813) | ||
| Dorner Transaction Costs |
(8,903) | |||
| Transaction Bonuses |
(1,000) | |||
| Fair value step-up of acquired inventory |
(3,114) | |||
| Write-Off financing fees - Existing Term Loan |
(6,471) | |||
| Write-Off financing fees - Existing Revolver |
(862) | |||
| Write-Off financing fees - partial repayment of New Term Loan |
(7,313) | |||
|
|
|
| ||
| Total Non-Recurring Adjustments |
(38,475) | |||
| Income tax expense / (benefit) - assumed 25% statutory tax rate |
(9,655) | |||
|
|
|
| ||
| Total Non-Recurring Adjustments, net of tax effects |
$ | (28,820) | ||
|
|
|
| ||
15