Tangible assets and liabilities:

Land and buildings⁽¹⁾

$

475

Machinery and equipment⁽²⁾

2,557

Right-of-use asset⁽³⁾

2,000

Accrued expenses and other liabilities

(672

)

Net tangible assets and liabilities

4,360

Intangible assets - customer relationships⁽⁴⁾

996

Goodwill

2,217

Purchase Price⁽⁵⁾

$

7,573

(1)

Land and buildings – Represents an acquired operating facility located in Ingleside, Texas (“Ingleside Facility”). The fair value of the facility was estimated based on a third-party appraisal.  

(2)

Machinery and equipment – Represents acquired machinery, equipment and vehicles. The fair values of the assets were estimated based on third-party appraisals.

(3)

Right-of-use asset – Represents a fabrication and operating facility located in Harvey, Louisiana (“Harvey Facility”) that was subject to both a lease arrangement with Dynamic and a separate purchase option that enabled us to buy the facility from Dynamic prior to December 2, 2022 for a nominal amount (“Harvey Option”). We believed it was probable we would exercise the Harvey Option, and accordingly, concluded that the arrangement represented a finance lease under the guidance of ASC 842,“Leases”, due to the Harvey Option representing a bargain purchase option. Therefore, we reflected the estimated fair value of the Harvey Facility plus future lease payment obligations as a right-of-use asset in our preliminary purchase price allocation, with the estimated fair value based on a combination of a third-party appraisal, third-party indications of interest for the facility, and indications of value communicated by and between us and Dynamic during the due diligence process. We subsequently determined that the Harvey Facility was no longer necessary for our future operations, and during the third quarter 2022, we sold the Harvey Option to a third party for $2.1 million ($1.9 million, net of transaction and other costs). No material gain or loss was recognized on the sale of the Harvey Option as the net proceeds approximated the carrying value of the underlying right-of-use asset. The net proceeds from the sale are reflected on our Statement of Cash Flows within proceeds from the sale of property and equipment.

(4)

Customer relationships – Represents the estimated fair value of existing underlying customer relationships with estimated lives of 7 years. The fair value was estimated based on a multi-period excess earnings method which incorporated Level 3 inputs. The significant assumptions used in estimating fair value included revenue and income projections for the DSS Business and the estimated discount rate that reflects the level of risk associated with receiving future cash flows. For the three and nine months ended September 30, 2022, amortization expense for our intangible assets was less than $0.1 million and $0.1 million, respectively, and our amortization expense is estimated to be $0.1 million to $0.2 million for each of 2022, 2023, 2024, 2025 and 2026, and $0.3 million thereafter.

(5)

Purchase Price – Represents a base cash purchase price of $8.0 million, less $0.4 million attributable to assumed employee vacation obligations.