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Acquisitions | 9 Months Ended
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Sep. 30, 2014
Acquisitions |
Acquisitions | 3. Acquisitions 2014 Acquisitions On August 1, 2014, we acquired Aluminium Services UK Limited, the parent holding company of All Metal Services (“AMS”). AMS provides comprehensive materials management solutions to aerospace and defense OEMs and their subcontractors on a global basis, supporting customers in more than 40 countries worldwide. AMS offers a broad range of aerospace metals including aluminum, steel, titanium, nickel alloys and aluminum bronze, offering full or cut to size materials. AMS also offers in-house machining and water-jet cutting for more complex requirements. AMS has eight locations in four countries including China, France, Malaysia, and the United Kingdom. During the three-months ended September 30, 2014 we incurred approximately $0.8 million in transaction related costs, which are included in warehouse, delivery, selling, general and administrative expenses. Net sales of AMS during the period from August 1, 2014 through September 30, 2014 were $45.1 million. On August 1, 2014, we acquired Northern Illinois Steel Supply Co. (“NIS”), a value-added distributor and fabricator of a variety of steel and non-ferrous metal products, primarily structural steel components and parts, located in Channahon, Illinois. Net sales of NIS during the period from August 1, 2014 through September 30, 2014 were $3.5 million. The combined transaction value of our 2014 acquisitions was $145.7 million, which included the assumption of $41.7 million of debt. We funded these acquisitions with borrowings on our revolving credit facility and cash on hand. 2013 Acquisitions On November 1, 2013, through our wholly-owned subsidiary American Metals Corporation, we acquired Haskins Steel Co., Inc. (“Haskins Steel”), located in Spokane, Washington. Founded in 1955, Haskins Steel processes and distributes primarily carbon steel and aluminum products of various shapes and sizes to a diverse customer base in the Pacific Northwest. Their in-house processing capabilities include shearing, sawing, burning and forming. Net sales of Haskins Steel for the nine months ended September 30, 2014 were $23.0 million. On April 30, 2013, we acquired Travel Main Holdings, LLC (“Travel Main”), a real estate holding company with a portfolio of 18 real estate properties, all of which are leased by certain of our subsidiaries. The transaction value of $78.9 million included the assumption of $43.8 million of indebtedness. On April 12, 2013, we acquired Metals USA Holdings Corp. (“Metals USA”). Metals USA is one of the largest metals service center businesses in the United States and a leading provider of value-added processed aluminum, brass, copper, carbon steel, stainless steel, manufactured metal components and inventory management services. Metals USA sells its products and services to a diverse customer base and broad range of end markets, including the aerospace, auto, defense, heavy equipment, marine transportation, commercial construction, office furniture manufacturing, energy and oilfield service industries, among several others. This acquisition added a total of 44 service centers strategically located throughout the United States to our existing operations and complements our existing customer base, product mix and geographic footprint. Net sales of Metals USA for the nine months ended September 30, 2014 and during the period from April 13, 2013 through September 30, 2013 were $1.36 billion and $828.8 million, respectively. On May 16, 2014, we sold Metals USA’s non-core roofing business for net proceeds of approximately $26.2 million and recorded a pre-tax loss of approximately $1.1 million, which is included in other expense, net. Net sales of Metals USA’s non-core roofing business during the nine months ended September 30, 2014 and during the period from April 13, 2013 through September 30, 2013 were $9.6 million and $17.1 million, respectively. The purchase price for Metals USA of $766.8 million along with assumed debt of $486.1 million represented a total transaction value of approximately $1.25 billion. We funded the transaction and refinanced all but $12.3 million of Metals USA’s debt with proceeds from a $500.0 million term loan and $500.0 million senior notes offering, with the balance drawn on our revolving credit facility (see Note 7). During the nine months ended September 30, 2013, we incurred approximately $11.4 million in transaction related costs, which are included in warehouse, delivery, selling, general and administrative expenses. The allocation of the total purchase price of Metals USA to the fair values of assets acquired and liabilities assumed was as follows:
|  | (in millions) |
Cash |  | $ | 3.2 |
Accounts receivable |  | 206.0 |
Inventories |  | 379.5 |
Property, plant and equipment |  | 242.6 |
Goodwill |  | 382.7 |
Intangible assets subject to amortization |  | 137.6 |
Intangible assets not subject to amortization |  | 203.0 |
Other current and long-term assets |  | 9.1 |
Total assets acquired |  | 1,563.7 |
Current and long-term debt |  | 486.1 |
Deferred taxes |  | 184.4 |
Other current and long-term liabilities |  | 126.4 |
Total liabilities assumed |  | 796.9 |
Net assets acquired |  | $ | 766.8 |
Purchase price allocations The acquisitions discussed in this note have been accounted for under the acquisition method of accounting and, accordingly, the respective purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of each acquisition. The accompanying consolidated statements of income include the revenues and expenses of each acquisition since its respective acquisition date. The consolidated balance sheets reflect the allocation of each acquisition’s purchase price as of September 30, 2014, as applicable. The purchase price allocations for the 2014 acquisitions are preliminary and are pending the completion of certain purchase price adjustments based on tangible and intangible asset valuations and various pre-acquisition period income tax returns. The measurement periods for purchase price allocations do not exceed 12 months from the acquisition date. Pro forma financial information The following pro forma summary financial results present the consolidated results of operations as if the acquisition of Metals USA had occurred as of January 1, 2013, after the effect of certain adjustments, including interest expense on the acquisition debt, non-recurring acquisition related costs, and amortization of certain identifiable intangible assets. The pro forma summary financial results reflect Metals USA’s historical method for inventory valuation, which was the first-in, first-out (FIFO) method for the majority of its inventories. Metals USA adopted our last-in, first-out (LIFO) method of inventory valuation upon acquisition. The pro forma summary financial results for the nine months ended September 30, 2013 exclude approximately $48.7 million of acquisition and related costs. The pro forma results have been presented for comparative purposes only and are not indicative of what would have occurred had the Metals USA acquisition been made as of January 1, 2013, or of any potential results, which may occur in the future.
|  | Nine Months Ended |
|  | September 30, 2013 |
|  | (in millions, except |
|  | per share amounts) |
Pro forma: |  |  |
Net sales |  | $ | 7,447.1 |
Net income attributable to Reliance |  | $ | 267.1 |
Diluted earnings per common share attributable to Reliance shareholders |  | $ | 3.45 |
Basic earnings per common share attributable to Reliance shareholders |  | $ | 3.48 |

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