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ACQUISITIONS
12 Months Ended
Dec. 31, 2022
Business Combination and Asset Acquisition [Abstract]  
ACQUISITIONS ACQUISITIONS
The Company completed the acquisitions discussed below during the years ended December 31, 2022, 2021 and 2020. The acquisitions were funded through cash on hand, issuance of shares, or borrowings under the Company’s credit facility in existence at the time of acquisition. For each of the acquisitions discussed, we either acquired the assets and assumed the liabilities of the business, or acquired 100% of the equity interests. Assets acquired and liabilities assumed in the individual acquisitions were recorded on the Company’s consolidated balance sheet at their estimated fair values as of the respective dates of acquisition. For each acquisition, the Company completes its allocation of the purchase price to the fair value of acquired assets and liabilities within a one-year measurement period. For those acquisitions where the purchase price allocation is provisional, which includes certain acquisitions completed in 2022, the Company is still in the process of finalizing the fair values of acquired intangible assets and fixed assets. In general, the acquisitions described below provided the opportunity for the Company to either establish a new presence in a particular market and/or expand its product offerings in an existing market and increase its market share and per unit content.
For each acquisition, the excess of the purchase consideration over the fair value of the net assets acquired is recorded as goodwill, which generally represents the combined value of the Company’s existing purchasing, manufacturing, sales, and systems resources with the organizational talent and expertise of the acquired companies’ respective management teams to maximize efficiencies, revenue impact, market share growth and net income.
For the years ended December 31, 2022, 2021 and 2020, revenue of approximately $121.8 million, $259.9 million and $81.9 million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses acquired in each such respective year.
For the years ended December 31, 2022, 2021 and 2020, operating income of approximately $19.4 million, $25.0 million and $10.7 million, respectively, was included in the Company’s consolidated statements of income pertaining to the businesses acquired in each such respective year. Acquisition-related costs associated with the businesses acquired in 2022, 2021 and 2020 were immaterial in each respective year.
Contingent Consideration
In connection with certain acquisitions, if certain financial results for the acquired businesses are achieved, the Company is required to pay additional cash consideration. The Company records a liability for the fair value of the contingent consideration related to each of these acquisitions as part of the initial purchase price based on the present value of the expected future cash flows and the probability of future payments at the date of acquisition.
The following table provides a reconciliation of the beginning and ending aggregate fair values of the contingent consideration as of December 31, 2022 and 2021:
(thousands) 2022 2021
Beginning fair value - contingent consideration $ 12,275  $ 6,885 
Additions 1,940  4,540 
Fair value adjustments 2,228  3,350 
Settlements (7,230) (2,500)
Ending fair value - contingent consideration 9,213  12,275 
The following table shows the balance sheet location of the fair value of contingent consideration and the maximum amount of contingent consideration payments the Company may be subject to at December 31, 2022 and 2021:
(thousands) 2022 2021
Accrued liabilities $ 5,250  $ 7,040 
Other long-term liabilities 3,963  5,235 
Total fair value of contingent consideration 9,213  12,275 
Maximum amount of contingent consideration 10,747  19,600 
2022 Acquisitions
The Company completed five acquisitions in the year ended December 31, 2022, including the following three previously announced acquisitions (collectively, the "2022 Acquisitions"):
Company Segment Description
Rockford Corporation Manufacturing Designer and manufacturer of audio systems and components through its brand Rockford Fosgate®, primarily serving the powersports and automotive aftermarkets, based in Tempe, Arizona, acquired in March 2022.
Diamondback Towers, LLC Manufacturing Manufacturer of wakeboard/ski towers and accessories for marine original equipment manufacturers ("OEMs"), based in Cocoa, Florida, acquired in May 2022.
Transhield Manufacturing Designer and manufacturer of customized and proprietary protection solutions for the marine, military and industrial markets, including covers and shrinkable packaging, to protect equipment during transport and storage, based in Elkhart, Indiana, acquired in November 2022.
Inclusive of two acquisitions not discussed above, total cash consideration for the 2022 Acquisitions was approximately $248.5 million, plus contingent consideration over a one to two-year period based on future performance in connection with certain acquisitions. The preliminary purchase price allocations are subject to valuation activities being finalized, and thus certain purchase accounting adjustments are subject to change within the measurement period as the Company finalizes its estimates. Changes to preliminary purchase accounting estimates recorded in 2022 related to the 2022 Acquisitions were immaterial.
2021 Acquisitions
The Company completed thirteen acquisitions in the year ended December 31, 2021, including the following seven previously announced acquisitions (collectively, the "2021 Acquisitions"):
Company Segment Description
Sea-Dog Corporation & Sea-Lect Plastics (collectively, "Sea-Dog") Distribution & Manufacturing Distributor of a variety of marine and powersports hardware and accessories to distributors, wholesalers, retailers, and manufacturers and provider of plastic injection molding, design, product development and expert tooling to companies and government entities, based in Everett, Washington, acquired in March 2021.
Hyperform, Inc. Manufacturing Manufacturer of high-quality, non-slip foam flooring, operating under the SeaDek brand name, for the marine OEM market and aftermarket as well as serving the pool and spa, powersports and utility markets under the SwimDek and EndeavorDek brand names, with manufacturing facilities in Rockledge, Florida and Cocoa, Florida, acquired in April 2021.
Alpha Systems, LLC Manufacturing & Distribution
Manufacturer and distributor of component products and accessories for the RV, marine, manufactured housing and industrial end markets that includes adhesives, sealants, rubber roofing, roto/blow molding and injection molding products, flooring, insulation, shutters, skylights, and various other products and accessories, operating out of nine facilities in Elkhart, Indiana, acquired in May 2021.
Coyote Manufacturing Company Manufacturing Designer, fabricator, and manufacturer of a variety of steel and aluminum products, including boat trailers, towers, T-tops, leaning posts, and other custom components primarily for the marine OEM market, based in Nashville, Georgia, acquired in August 2021.
Tumacs Covers Manufacturing Manufacturer of custom designed boat covers, canvas frames, and bimini tops, primarily serving large marine OEMs and dealers, headquartered in Pittsburgh, Pennsylvania, with manufacturing facilities in Indiana and Pennsylvania, and a distribution/service center in Michigan, acquired in August 2021.
Wet Sounds, Inc. & Katalyst Industries LLC (collectively "Wet Sounds") Manufacturing Designer, engineer, and fabricator of innovative audio systems and accessories, including amplifiers, tower speakers, soundbars, and subwoofers sold directly to OEMs and consumers, and to dealers and retailers, primarily within the marine market as well as to the home audio and powersports markets and aftermarkets, based in Rosenburg, Texas, acquired in November 2021.
Williamsburg Marine LLC & Williamsburg Furniture, Inc. (collectively "Williamsburg") Manufacturing Manufacturer of seating for the RV and marine end markets sold primarily to OEMs, based in Milford and Nappanee, Indiana, acquired in November 2021.
Inclusive of six acquisitions not discussed above, total cash consideration for the 2021 Acquisitions was approximately $509.1 million, plus contingent consideration over a one to three-year period based on future performance in connection with certain acquisitions. Purchase price allocations and all valuation activities in connection with the 2021 Acquisitions have been finalized, and adjustments made during the year related to changes in the preliminary purchase price allocation recorded in 2022 related to the 2021 Acquisitions were immaterial and relate primarily to the valuation of intangible and fixed assets.
2020 Acquisitions
The Company completed eleven acquisitions in the year ended December 31, 2020, including the following seven previously announced acquisitions (collectively, the "2020 Acquisitions"):
Company Segment Description
Maple City Woodworking Corporation Manufacturing Manufacturer of hardwood cabinet doors and fascia for the RV market based in Goshen, Indiana, acquired in March 2020.
SEI Manufacturing, Inc. Manufacturing Manufacturer of towers, T-Tops, hardtops, rails, gates and other aluminum exterior products for the marine market located in Cromwell, Indiana, acquired in March 2020.
Inland Plywood Company Manufacturing Supplier, laminator, and wholesale distributor of treated, untreated, and laminated plywood, medium density overlay panels, and other specialty products, primarily serving the marine market as well as the RV and industrial markets headquartered in Pontiac, Michigan with an additional facility in Cocoa, Florida, acquired in August 2020.
Synergy RV Transport Distribution Transportation and logistics service provider primarily for original equipment manufacturers and dealers in the RV market located in Goshen, Indiana, acquired in August 2020.
Front Range Stone Manufacturing Fabricator and installer of natural stone, quartz, solid surface, and laminate countertops, primarily serving big box home improvement retailers, home builders and commercial contractors in the industrial market based in Englewood, Colorado, acquired in September 2020.
Geremarie Corporation Manufacturing Designer, manufacturer, and fabricator of a full suite of high-precision aluminum components serving the marine industry, in addition to the medical, aerospace, defense, commercial and industrial markets located in Lake Zurich, Illinois, acquired in November 2020.
Taco Metals, LLC Manufacturing Manufacturer of boating products including rub rail systems, canvas and tower components, sport fishing and outrigger systems, helm chairs and pedestals, and specialty hardware for leading OEMs in the recreational boating industry and the related aftermarket headquartered in Miami, Florida, with manufacturing facilities in Tennessee and Florida, and distribution centers in Tennessee, Florida, South Carolina, and Massachusetts, acquired in November 2020.
Inclusive of four acquisitions not discussed above, total cash consideration for the 2020 Acquisitions was approximately $306.5 million, plus contingent consideration over a one to three-year period based on future performance in connection with certain acquisitions. One acquisition in 2020 accounted for $129.7 million in cash consideration, contingent consideration with an initial fair value of $3.4 million (subject to a $10.0 million maximum), $1.6 million in accounts receivable, $2.9 million in inventory, $49.0 million in fixed assets, $49.1 million in intangible assets (composed of $42.6 million in customer relationships, $0.6 million in non-competition agreements, and $5.9 million in trademarks), $2.6 million in accounts payable and accrued liabilities, $4.9 million in operating lease right-of-use assets and liabilities, and $32.9 million in goodwill. Purchase price allocations and all valuation activities in connection with the 2020 Acquisitions have been finalized.
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of the acquisition for 2022 Acquisitions:
2022
Acquisitions
(thousands) Acquisition A Acquisition B All Others Total
Consideration
Cash, net of cash acquired $ 132,557  $ 95,582  $ 20,355  $ 248,494 
Working capital holdback and other, net(1)
—  (749) 414  (335)
Contingent consideration(2)
—  —  1,750  1,750 
Total consideration 132,557  94,833  22,519  249,909 
Assets Acquired
Trade receivables $ 20,640  $ 4,882  $ 904  $ 26,426 
Inventories 32,744  8,732  2,309  43,785 
Prepaid expenses & other 2,502  161  93  2,756 
Property, plant & equipment 5,270  6,026  1,638  12,934 
Operating lease right-of-use assets 2,917  1,435  599  4,951 
Identifiable intangible assets:
Customer relationships 56,000  38,630  6,940  101,570 
Non-compete agreements 400  230  250  880 
Patents 7,500  9,400  —  16,900 
Trademarks 16,000  7,910  1,410  25,320 
Liabilities Assumed
Current portion of operating lease obligations (512) (289) (273) (1,074)
Accounts payable & accrued liabilities (25,681) (3,238) (1,253) (30,172)
Operating lease obligations (2,405) (1,146) (326) (3,877)
Deferred tax liabilities (19,540) (14,076) —  (33,616)
Total fair value of net assets acquired 95,835  58,657  12,291  166,783 
Goodwill(3)
36,722  36,176  10,228  83,126 
$ 132,557  $ 94,833  $ 22,519  $ 249,909 
(1) Certain acquisitions contain working capital holdbacks which are typically settled in a 90-day period following the close of the acquisition. This value represents the remaining amounts due to (from) sellers as of December 31, 2022.
(2) These amounts reflect the acquisition date fair value of contingent consideration based on future results relating to certain acquisitions.
(3) Goodwill is tax-deductible for the 2022 Acquisitions, except Acquisition A and Acquisition B (totaling approximately $72.9 million).
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of the acquisition for 2021 and 2020 Acquisitions:
2021
Acquisitions
2020 Acquisitions
(thousands) Acquisition A Acquisition B All Others Total
Consideration
Cash, net of cash acquired $ 149,304  $ 165,387  $ 194,373  $ 509,064  $ 306,482 
Common stock issuance(1)
10,211  —  —  10,211  — 
Contingent consideration(2)
3,500  —  1,230  4,730  4,763 
Total consideration 163,015  165,387  195,603  524,005  311,245 
Assets Acquired
Trade receivables $ 8,370  $ 4,483  $ 13,265  $ 26,118  $ 15,324 
Inventories 25,760  16,647  24,898  67,305  25,583 
Prepaid expenses & other 46  12,210  1,491  13,747  733 
Property, plant & equipment 27,573  867  26,454  54,894  64,790 
Operating lease right-of-use assets 11,507  5,267  8,756  25,530  20,029 
Identifiable intangible assets:
Customer relationships 47,700  50,660  65,712  164,072  99,897 
Non-compete agreements 1,200  680  1,763  3,643  1,150 
Patents 8,600  15,050  5,200  28,850  6,470 
Trademarks 27,450  12,360  16,709  56,519  23,464 
Liabilities Assumed
Current portion of operating lease obligations (2,385) (1,072) (2,061) (5,518) (2,721)
Accounts payable & accrued liabilities (18,100) (1,687) (12,522) (32,309) (12,405)
Operating lease obligations (9,122) (4,195) (6,695) (20,012) (17,308)
Deferred tax liabilities —  —  (1,486) (1,486) (4,584)
Total fair value of net assets acquired 128,599  111,270  141,484  381,353  220,422 
Goodwill(3)
34,416  54,117  54,119  142,652  90,823 
$ 163,015  $ 165,387  $ 195,603  $ 524,005  $ 311,245 
(1) In connection with Company A, the Company issued 113,961 shares of common stock at a closing price of $89.60 as of the acquisition date.
(2) These amounts reflect the acquisition date fair value of contingent consideration based on future results relating to certain acquisitions. Contingent consideration associated with Company A is valued at $3.5 million, but subject to a $6.0 million maximum.
(3) Goodwill is tax-deductible for the 2021 Acquisitions, except Tumacs Covers (approximately $6.2 million), and for the 2020 Acquisitions, except Front Range Stone (approximately $11.0 million).
We estimate the value of acquired property, plant, and equipment using a combination of the income, cost, and market approaches, such as estimates of future income growth, capitalization rates, discount rates, and capital expenditure needs of the acquired businesses.
We estimate the value of customer relationships using the multi-period excess earnings method, which is a variation of the income approach, calculating the present value of incremental after-tax cash flows attributable to the asset. Non-compete agreements are valued using a discounted cash flow approach, which is a variation of the income approach, with and without the individual counterparties to the non-compete agreements. Trademarks and patents are valued using the relief-from-royalty method, which applies an estimated royalty rate to forecasted future cash flows, discounted to present value.
The estimated useful life for customer relationships is 10 years. The estimated useful life for non-compete agreements is 5 years. The weighted average estimated useful life for patents is 13 years, ranging from 10 to 18 years. Trademarks have an indefinite useful life.
Pro Forma Information (Unaudited)
The following pro forma information assumes the 2022 Acquisitions and 2021 Acquisitions occurred as of the beginning of the year immediately preceding each such acquisition. The pro forma information contains the actual operating results of each of the 2022 Acquisitions and 2021 Acquisitions, combined with the results prior to their respective acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of the beginning of the year immediately preceding each such acquisition.
The pro forma information includes financing and interest expense charges based on the actual incremental borrowings incurred in connection with each transaction as if it occurred as of the beginning of the year immediately preceding each such acquisition.
In addition, the pro forma information includes incremental amortization expense related to intangible assets acquired of $4.6 million and $21.8 million for the years ended December 31, 2022 and 2021, respectively, in connection with the acquisitions as if they occurred as of the beginning of the year immediately preceding each such acquisition.
(thousands except per share data) 2022 2021
Net sales $ 4,958,134  $ 4,497,253 
Net income 330,206  258,413 
Basic earnings per common share 14.91  11.34 
Diluted earnings per common share 13.57  11.06 
The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisitions been consummated as of that time, nor is it intended to be a projection of future results.