|9 Months Ended|
Jun. 30, 2022
|Business Combinations [Abstract]|
Note 3: Acquisitions
Acquisition of Kinetic
On June 28, 2022, Precision Marshall (“Precision”) acquired 100% of the issued and outstanding shares of common stock of The Kinetic Co., Inc. (“Kinetic”), a Wisconsin corporation, which was accomplished through a Purchase Agreement (the “Purchase Agreement”). In connection with the Purchase Agreement, Precision also entered into a Real Estate Purchase Agreement with Plan B-6, LLC, an affiliate of Kinetic, pursuant to which Precision received all of Kinetic's right, title, and interest in and to the land and improvements (collectively, the “Real Estate”) that Kinetic uses in its operations. The combined purchase price, which is subject to certain post-closing adjustments, for the Kinetic shares and Real Estate was approximately $24.6 million, which was funded with borrowings under the company’s credit facility, proceeds from sale-leaseback of the Real Estate, a subordinated promissory note to in the amount of $3.0 million to the Seller of Kinetic, contingent earn-out liability, valued at $997,000, and cash on-hand.
As of the date of acquisition, Precision entered into a sale and leaseback agreement with a third-party, independent of the Kinetic sellers, for the Real Estate. The sale price of the Real Estate was approximately $8.9 million, subject to closing fees of approximately $547,000.
The provisions of the lease agreement include a 20-year lease term with two five-year renewal options. The base rent under the lease agreement is $50,000 per month for the first year of the term and a 2% per annum escalator. The Lease Agreement is a “net lease,” such that the lessees are also obligated to pay all taxes, insurance, assessments, and other costs, expenses, and obligations of ownership of the Real Property incurred by Moss. Due to the highly specialized nature of the leased assets, the Company currently believes that it is more likely than not that each of the two five-year options will be exercised. The proceeds, net of closing fees, from the sale-leaseback were used to assist in funding the acquisition of Kinetic.
Under the preliminary purchase price allocation, the Company recognized goodwill of approximately $2.2 million, which is calculated as the excess of both the consideration exchanged and liabilities assumed as compared to the fair value of the identifiable assets acquired. The values assigned to the assets acquired and liabilities assumed are based on their estimates of fair value available as of June 28, 2022, as calculated by an independent third-party firm. Goodwill arising from the acquisition is expected to be fully deductible for tax purposes. The table below outlines the purchase price allocation of the purchase for Kinetic to the acquired identifiable assets, liabilities assumed and goodwill (in $000’s):
The table below presents selected proforma information for the Company for the three- and nine-month periods ended June 30, 2022, assuming that the acquisition had occurred on October 1, 2020 (the beginning of the Company’s 2021 fiscal year), pursuant to ASC 805-10-50 (in thousands). This proforma information does not purport to represent what the actual results of operations of the Company would have been had the acquisition occurred on that date, nor does it purport to predict the results of operations for future periods.
(1) Adjustments are related to adjustments made for the following:
Amortization expense of definite-lived intangible assets has been adjusted based on the preliminary fair value at the acquisition date.
Interest expense has been adjusted to include proforma interest expense that would have been incurred as a result of the acquisition financing obtained by the Company.
Certain other expenses have been adjusted to reflect the post-acquisition operating environment.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef