Calcbench often talks about the importance of tracking what companies say about their goodwill and intangible assets, and particularly how those assets fit into purchase price allocation data that companies report about the acquisitions they make.
We have yet another example of that point from Thor Industries ($THO) and its latest quarterly report, filed on Wednesday morning.
In the Acquisitions section of the footnotes, Thor shares the details of its AirX Intermediate Inc. acquisition. “Airxcel,” as the business is called, manufactures components for recreational vehicles, and Thor acquired the company back in September to strengthen Thor’s own business of selling RVs and related machinery.
At the time the deal was announced, Thor valued the acquisition at $750 million. In this week’s filings, we finally see the purchase price allocation details. See Figure 1, below; numbers are in thousands.
First, we see that goodwill is valued at $368.6 million, 48 percent of the $768.5 million in total assets acquired. Other intangible assets are another $402.2 million — which means that altogether, goodwill and intangible assets are more than the total purchase price. (They add up to $770.1 million.) Only when you net out liabilities and other related assets does one get back to that original $750 million number, which actually is $745.1 million.
Second, notice that these intangible assets will be amortized over time. That’s typically the case with intangible assets, but what matters here is that Thor discloses the amortization period:
On the acquisition date, amortizable intangible assets had a weighted-average useful life of 18.3 years. The customer relationships were valued based on the Discounted Cash Flow Method and will be amortized on an accelerated basis over 20 years. The trademarks were valued on the Relief from Royalty Method and will be amortized on a straight-line basis over 20 years. The design technology assets were valued on the Relief from Royalty Method and will be amortized on a straight-line basis over 10 years. Backlog was valued based on the Discounted Cash Flow Method and will be amortized on a straight-line basis over 2 months. The vast majority of the goodwill recognized as a result of this transaction is not deductible for tax purposes.
Those details help an analyst model out the decline in asset value into the future, so you can get a better sense of the true value of the merger. Even if this specific merger doesn’t strike you as a significant deal for Thor (which makes roughly $12.3 billion in annual revenue and has $6.6 billion in total assets), the disclosures remind us yet again to always read the footnotes. You can find a trove of data tucked away there that will help with in-depth analysis.
Calcbench subscribers can find purchase price allocation data in several ways. First, as we demonstrated above, you can always search the Interactive Disclosures database to see what companies say in their Business Combinations or Acquisitions disclosures.
Second, we recently launched a dedicated Business Combinations page, where you can look up deals and purchase price allocation data by individual companies. For example, here is what you see when you search for Thor Industries:
The Airxcel is right there in the second line, and you can scroll across to see how much was allocated to each specific category (cash, inventory, goodwill, intangibles, and so forth).
You can also use our Segments, Rollforwards, and Breakouts database to search in a more targeted way. We posted a detailed explanation of how to look up “PPA” data a while back, and it’s worth reading if you want a quick tutorial.
And if you specifically want more information about the rising importance of goodwill in purchase price allocation, we have that in spades. Our most recent analysis of goodwill assets was published in September, plus a webinar we hosted on goodwill, and other research reports we’ve published in the past. Whatever you’re looking for, we’ve got the data.
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