Quarterly report pursuant to Section 13 or 15(d)

Business Combination

v3.8.0.1
Business Combination
9 Months Ended
Sep. 30, 2017
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
Note 4 – Business Combination
 
On July 20, 2016, pursuant to the Merger Agreement, a wholly owned subsidiary of the Company merged with and into LHLLC in a transaction accounted for as a business combination. Following this transaction, 1347 Capital changed its name to Limbach Holdings, Inc.
 
LHLLC’s equity holders and option holders received consideration comprised of (a) $32.4 million in cash, (b) 2,200,005 shares of Company common stock with a fair value of $17.5 million, (c) 666,670 merger warrants, each exercisable for one share of Company common stock at an exercise price of $12.50 per share with a fair value of $0.5 million, and (d) 1,000,006 additional warrants, each exercisable for one share of Company common stock at an exercise price of $11.50 per share, with a fair value of $0.6 million. Certain of the shares and warrants are subject to lockup agreements and securities law restrictions. Total cash paid, including the additional share-based compensation, was $33.0 million.
 
As part of the consideration in the Business Combination, the Company issued shares of common stock to LHLLC’s equity holders pursuant to an effective registration statement and Merger Warrants (as defined below) and Additional Merger Warrants (as defined below) pursuant to a private placement under Section 4(a)(2) of the Securities Act of 1933, as amended (“Securities Act”). Securities Act restrictions on the resale of such securities constitute a security-specific restriction under fair value guidance; therefore, a price adjustment to the fair value is appropriate for affiliates of the Company who own in excess of 10% of the outstanding securities. Fair value determinations for the securities used as consideration are valued at market prices, unless they have a security-specific restriction. Fair value determination for securities with security-specific restrictions under federal securities laws incorporate a price adjustment to the market price.
 
The final valuations of assets acquired and liabilities assumed were: 
 
 
 
As of
 
(in thousands)
 
July 20, 2016
 
Cash and cash equivalents
 
$
238
 
Restricted cash
 
 
63
 
Accounts receivable
 
 
80,930
 
Property and equipment
 
 
20,990
 
Intangible assets
 
 
20,910
 
Costs and estimated earnings in excess of billings on uncompleted contracts
 
 
38,215
 
Other current assets
 
 
2,272
 
Other assets
 
 
130
 
Advances to and equity in joint ventures, net
 
 
6
 
Deferred tax assets
 
 
380
 
Total assets acquired
 
 
164,134
 
Accounts payable, including retainage
 
 
35,596
 
Accrued expenses and other current liabilities
 
 
26,507
 
Billings in excess of costs on and estimated earnings on uncompleted contracts
 
 
30,068
 
Long-term debt
 
 
30,858
 
Other long term liabilities
 
 
645
 
Total liabilities assumed
 
 
123,674
 
Net assets acquired
 
$
40,460
 
 
Direct transaction-related costs consisted of costs incurred in connection with the Merger Agreement and the Business Combination. These costs, totaling $0.1 million for the period from July 20, 2016 through September 30, 2016 (Successor), are reflected in selling, general and administrative expenses in the respective Condensed Consolidated Statement of Operations. 1347 Capital also incurred transaction costs of $5.9 million independently prior to the Business Combination, and since 1347 Capital is not consolidated with the Predecessor (see Note 2 – Basis of Presentation), those costs are not reflected in the Predecessor financial statements, but are disclosed herein.
 
Additional costs consisting of stock option and other compensation-related expenses were recorded in connection with the Business Combination. These costs, totaling $0.6 million for the period from July 20, 2016 through September 30, 2016 (Successor), and $1.5 million for the period July 1, 2016 through July 19, 2016 (Predecessor), are reflected in selling, general and administrative expenses in the respective Condensed Consolidated Statements of Operations. This Predecessor amount reflects compensation expense associated with stock options which became fully vested and exercisable in connection with the Business Combination.
 
The following unaudited pro forma financial information summarizes the combined results of operations for the Company as though the Business Combination had occurred on January 1, 2015:
 
 
 
For the nine months ended
 
(in thousands)
 
September 30, 2016
 
Pro forma revenues
 
$
313,280
 
Pro forma net loss attributable to common shareholders
 
$
(848)
 
 
The pro forma financial information does not include any costs related to the Business Combination. In addition, the pro forma financial information does not assume any impacts from revenue, cost or other operating synergies that could be generated as a result of the Business Combination. The unaudited pro forma financial information is not necessarily indicative of what the Company’s results would have been had the Business Combination been consummated on such dates or project results of operations for any future period.
 
The following pro forma adjustments were incorporated into the presentation:
 
 
1.
Successor and Predecessor periods have been combined in the pro forma for the nine months ended September 30, 2016.
 
2.
Transaction costs related to the Business Combination were eliminated.
 
3.
Intangible amortization is based on the economic values derived from definite-lived intangible assets.
 
4.
Depreciation is incorporated based on the new fair values and estimated useful lives of fixed assets.
 
5.
Interest expense is recognized on new debt financing.
 
6.
Preferred dividends are recognized on the new issue of cumulative redeemable convertible preferred stock.
 
7.
Statutory provision for income taxes was used.
 
8.
The activities of 1347 Capital have been excluded for the period from January 1, 2016 through July 19, 2016 because it was not consolidated and its operations were considered to be de minimus.