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ACQUISITION | 12 Months Ended
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Aug. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
ACQUISITION | NOTE 2. ACQUISITION On April 25, 2022 (the "Acquisition Date"), the Company completed the acquisition of TAC Acquisition Corp. ("Tensar"). The total cash purchase price, net of $19.6 million cash acquired, was approximately $550 million, subject to customary purchase price adjustments, and was funded through domestic cash on-hand. Tensar is a leading global provider of innovative ground stabilization and soil reinforcement solutions through two major product lines: Tensar® geogrids and Geopier® foundation systems, which are complementary to the Company's existing concrete reinforcement product lines within North America and Europe. Geogrids are polymer-based products used for ground stabilization, soil reinforcement and asphalt optimization in construction applications, including roadways, public infrastructure and industrial facilities. Geopier foundation systems are ground improvement solutions that increase the load-bearing characteristics of ground structures and working surfaces and can be applied in soil types and construction situations in which traditional support methods are impractical or would make a project infeasible. Tensar’s end customers include commercial, industrial and residential site developers, mining and oil and gas companies, transportation authorities, coastal and waterway authorities and waste management companies. Tensar serves customers in more than 80 national markets through its manufacturing facilities, the largest of which are located in Morrow, Georgia and Blackburn, England. The acquired operations in North America are presented within the North America reportable segment, and the remaining acquired operations are presented within the Europe reportable segment. The Company accounts for business combinations by recognizing the assets acquired and liabilities assumed at the Acquisition Date fair value. In valuing acquired assets and liabilities, fair value estimates were determined using Level 3 inputs, including expected future cash flows and discount rates. While the Company uses its best estimates and assumptions as a part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the Acquisition Date, the Company’s estimates are inherently uncertain and subject to refinement. The results of operations of Tensar are reflected in the Company’s consolidated financial statements from the Acquisition Date. The financial statements are not retrospectively adjusted for any adjustments that occur during the allowable one-year measurement period (the "Measurement Period"). Rather, any adjustments to provisional amounts identified during the Measurement Period will be recorded in the reporting period in which the adjustment is determined. The table below presents the preliminary fair values and measurement period adjustments that were allocated to Tensar's assets and liabilities as of the Acquisition Date:
(in thousands) |  | Estimated Fair Value as of Acquisition Date |  | Measurement Period Adjustments |  | Estimated Fair Value
Cash and cash equivalents |  | $ | 19,551 |  |  | $ | — |  |  | $ | 19,551 |
Accounts receivable |  | 38,188 |  |  | (447) |  |  | 37,741 |
Inventories |  | 38,810 |  |  | 652 |  |  | 39,462 |
Prepaid and other current assets |  | 14,143 |  |  | (1,615) |  |  | 12,528 |
Defined benefit pension plan |  | 14,620 |  |  | — |  |  | 14,620 |
Property, plant and equipment |  | 88,541 |  |  | (2,558) |  |  | 85,983 |
Intangible assets |  | 260,500 |  |  | — |  |  | 260,500 |
Goodwill |  | 187,861 |  |  | (1,056) |  |  | 186,805 |
Other noncurrent assets |  | 19,430 |  |  | 230 |  |  | 19,660 |
Accounts payable |  | (12,468) |  |  | 334 |  |  | (12,134) |
Accrued expenses and other payables |  | (23,307) |  |  | (418) |  |  | (23,725) |
Current maturities of long-term debt |  | (3,277) |  |  | — |  |  | (3,277) |
Deferred income taxes |  | (48,683) |  |  | 3,628 |  |  | (45,055) |
Other noncurrent liabilities |  | (17,597) |  |  | 1,250 |  |  | (16,347) |
Long-term debt |  | (4,312) |  |  | — |  |  | (4,312) |
Total assets acquired and liabilities assumed |  | $ | 572,000 |  |  | $ | — |  |  | $ | 572,000 |
Inventories The acquired inventory is comprised of finished goods, work in process and raw materials. The fair value of finished goods was calculated as the estimated selling price, adjusted for the selling costs, economic rents for use of intangible assets involved with the disposal process and a reasonable profit margin. The fair value of work in process was calculated as the estimated selling price, adjusted for estimated costs to complete manufacturing, estimated selling costs and a reasonable profit margin. The fair value of raw materials approximates the historical carrying value or was calculated based on the estimated replacement cost. The total purchase accounting inventory adjustment of $8.7 million was recognized during the year ended August 31, 2022 and was reflected as cost of goods sold as the related inventory was sold. Defined Benefit Pension Plan The Company recognized a net asset of $14.6 million at the Acquisition Date, representing the overfunded status of the acquired defined benefit pension plan. See Note 15, Employees' Retirement Plans, for more information on the acquired plan. Property, Plant and Equipment The fair value of real property was calculated using the cost approach for buildings and improvements and the sales comparison approach for land. The fair value of personal property was calculated using the cost approach. The cost approach measures the value by estimating the cost to acquire or construct comparable assets and adjusts for age and condition. The Company assigned real property a useful life ranging from 5 to 25 years and personal property a useful life ranging from 1 to 15 years. Goodwill Goodwill from acquisitions represents the excess of the purchase price over the fair value of net assets acquired. The factors contributing to the amount of goodwill are based on strategic and synergistic benefits that are expected to be realized from the acquisition, due in part to the complementing markets for engineered construction ground reinforcement and concrete reinforcement. As of the Acquisition Date, the Company added $186.8 million of goodwill related to the Tensar acquisition. The recognized goodwill is not deductible for tax purposes. Intangible Assets The acquired intangible assets consist of:
(in thousands, except life in years) |  | Life in Years |  | Estimated Fair Value
Developed technologies |  | 1 to 11 |  | $ | 147,900 |
Trade names |  | 8 to 9 or indefinite |  | 57,000 |
Customer relationships |  | 12 to 17 |  | 53,200 |
In-process research and development |  | Indefinite |  | 2,400 |
The fair value of developed technologies was calculated using the income approach under the excess earnings method and considers selling, marketing and research and development costs, which were allocated based on patent lifecycles. The fair value of trade names was calculated using the income approach, under the relief from royalty method. The relief from royalty method considers revenue derived from the corporate and product-specific trade names, the strength and relevance of the trade names in the marketplace and management’s plans to utilize the trade names going forward. The fair value of customer relationships was calculated using the income approach, under the with-and-without method. The with-and-without method considers opportunity costs associated with lost profits in the absence of the existing customer base. The fair value of in-process research and development was calculated using the cost approach and considers development costs, profit mark-up and opportunity cost. Deferred Income Taxes Deferred tax liabilities include the expected future U.S. federal, state and foreign tax consequences associated with temporary differences between the preliminary fair values of the assets acquired and liabilities assumed and the respective tax bases. Tax rates utilized in calculating the deferred tax liabilities represent the appropriate tax rate for each respective jurisdiction. Deferred tax liabilities may be adjusted during the Measurement Period as the Company finalizes tax returns for periods prior to the Acquisition Date. Other Assets Acquired and Liabilities Assumed The Company used historical carrying values for trade accounts receivable and payables, as well as certain other current and noncurrent assets and liabilities, as their carrying values represented the fair value of those items as of the Acquisition Date. Financial Results The following table summarizes the financial results of Tensar from the Acquisition Date through the end of fiscal 2022 that are included in the Company’s consolidated statement of earnings and consolidated statement of comprehensive income:
(in thousands) |  | From the Acquisition Date to August 31, 2022
Net sales |  | $ | 102,107 |
Earnings before income taxes |  | 3,183 |
Pro Forma Supplemental Information Supplemental information on an unaudited pro forma basis is presented below as if the acquisition of Tensar occurred on September 1, 2020. The pro forma financial information is presented for comparative purposes only, based on certain factually supported estimates and assumptions, which the Company believes to be reasonable, but not necessarily indicative of future results of operations or the results that would have been reported if the acquisition had been completed on September 1, 2020. These results were not used as part of management's analysis of the financial results and performance of the Company. The pro forma adjustments do not reflect anticipated synergies, but rather include the nonrecurring impact of additional cost of sales from revalued inventory and the recurring income statement effects of fair value adjustments, such as depreciation and amortization. Further adjustments were made to remove the impact of Tensar's prior management fees, acquisition and integration expenses and interest on debt not assumed in the acquisition. The resulting tax effects of the business combination are also reflected below.
|  | Year Ended August 31,
(in thousands) |  | 2022 |  | 2021
Pro forma net sales |  | $ | 9,064,322 |  |  | $ | 6,957,903 |
Pro forma net earnings |  | 1,238,174 |  |  | 416,904 |
The pro forma results presented above include, but are not limited to, adjustments to remove the impact of $8.7 million of acquisition and integration expenses from 2022 and reapportion $1.0 million of those costs incurred following the Acquisition Date to 2021, as well as reallocate $8.7 million of increased cost of goods sold in 2022 to 2021 as a result of the revaluation of inventory. The pro forma results also reflect increased amortization expense from acquired intangible assets of $8.1 million in 2022 and $12.4 million in 2021.

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- Definition 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). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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