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Acquisitions | 12 Months Ended
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Dec. 31, 2022
Business Combinations [Abstract] |
ACQUISITIONS | ACQUISITIONS AND DISPOSITIONS On August 1, 2022, the Company acquired all of the shares of the FASA Group, the largest independent rendering company in Brazil, pursuant to a stock purchase agreement dated May 5, 2022 (the “FASA Acquisition”). The FASA Group, with its 14 rendering plants and an additional two plants under construction, will supplement the Company's global supply of waste fats, enhancing it as a leader in the supply of low-carbon waste fats and oils. The Company initially paid approximately R$2.9 billion Brazilian Real in cash (approximately $562.6 million USD at the exchange rate in effect on the closing date of the acquisition) for all the shares of the FASA Group, subject to certain post closing adjustments and a contingent payment based on future earnings growth in accordance with the terms set forth in the stock purchase agreement. Under the stock purchase agreement, such contingent payment could range from R$0 to a maximum of R$1.0 billion if future earnings growth reaches certain levels over a three year period. The Company has completed an analysis for this contingency and has recorded a liability of approximately R$867.5 million (approximately $168.1 million USD at the exchange rate in effect on the closing date of the acquisition) representing the present value of the maximum contingency under the income approach. The Company will analyze the contingency each quarter and any change will be booked through operating income including the accretion of the change in the long-term liability. At December 31, 2022, the current forecast is showing no change to the initial contingency that was recorded. The Company initially financed the FASA Acquisition by borrowing approximately $515.0 million of revolver borrowings under the Company's Amended Credit Agreement, with the remainder coming from cash on hand. During the fourth quarter of fiscal 2022, the Company made immaterial working capital adjustments and made a cash payment for a working capital purchase price adjustment per the stock purchase agreement of approximately $7.1 million with an offset to goodwill. The following table summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed in the FASA Acquisition as of August 1, 2022 at the exchange rate of R$5.16:USD$1.00 (in thousands):
Accounts receivable | $ | 76,640 |
Inventories | 43,058 |
Other current assets | 33,327 |
Property, plant and equipment | 142,931 |
Identifiable intangible assets | 161,182 |
Goodwill | 408,589 |
Operating lease right-of-use assets | 583 |
Other assets | 55,191 |
Deferred tax asset | 8,144 |
Accounts payable | (15,920) |
Current portion of long-term debt | (18,680) |
Accrued expenses | (38,708) |
Long-term debt, net of current portion | (41,926) |
Long-term operating lease liabilities | (583) |
Deferred tax liability | (79,691) |
Other noncurrent liabilities | (503) |
Non-controlling interests | (18,058) |
Purchase price, net of cash acquired | $ | 715,576 |
Less hold-back | 21,705 |
Less contingent consideration | 168,128 |
Cash paid for acquisition, net of cash acquired | $ | 525,743 |
The $408.6 million of goodwill from the FASA Acquisition, which is expected to strengthen the Company's base business and expand its ability to provide additional low carbon intensity feedstocks to fuel the growing demand for renewable diesel, was assigned to the Feed Ingredients segment and is nondeductible for tax purposes. The identifiable intangible assets include $150.2 million in collection routes with a life of 12 years and $11.0 million in trade name with a life of 5 years for a total weighted average life of approximately 11.5 years. The Company is still assessing the provisional amounts recorded for assets acquired and liabilities assumed including possible future adjustments related to amounts recorded for income taxes. Due to the complexity of acquiring multiple entities in Brazil, the Company is continuing its procedures to identify information pertaining to income tax matters during the measurement period. If new information is obtained about facts and circumstances that existed at the closing date, the Company will adjust its measurement of provisional income tax amounts, thus the final determination of the values presented in the above table of assets acquired and liabilities assumed may result in retrospective adjustments to the values presented with a corresponding adjustment to goodwill. The Company does not expect the impact of any adjustments to these amounts during the measurement period to be material. The amount of net sales and net loss from the FASA Acquisition included in the Company's consolidated statement of operations for the twelve months ended December 31, 2022 were $146.7 million and $(3.6) million, respectively. In addition, the Company incurred acquisition costs related to the FASA Acquisition for the twelve months ended December 31, 2022 of approximately $3.2 million. On May 2, 2022, the Company acquired all of the shares of Valley Proteins, pursuant to a stock purchase agreement dated December 28, 2021 (the “Valley Acquisition”). The Valley Acquisition includes a network of 18 major rendering plants and used cooking oil facilities throughout the southern, southeast and mid-Atlantic regions of the U.S. The Company initially paid approximately $1.177 billion in cash for the Valley Acquisition, which is subject to various post-closing adjustments in accordance with the stock purchase agreement. During the third and fourth quarters of fiscal 2022, the Company made immaterial working capital adjustments and made a cash payment for a working capital purchase price adjustment per the stock purchase agreement of approximately $6.0 million with an offset to goodwill. The Company initially financed the Valley Acquisition by borrowing all of the Company's delayed draw term A-1 facility of $400.0 million and delayed draw term A-2 facility of $500.0 million, with the remainder coming through revolver borrowings under the Company's Amended Credit Agreement. The following table summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed in the Valley Acquisition as of May 2, 2022 (in thousands):
Accounts receivable | $ | 68,558 |
Inventories | 58,246 |
Other current assets | 13,825 |
Property, plant and equipment | 409,405 |
Identifiable intangible assets | 389,200 |
Goodwill | 358,298 |
Operating lease right-of-use assets | 16,380 |
Other assets | 14,164 |
Deferred tax asset | 1,075 |
Accounts payable | (47,615) |
Current portion of long-term debt | (2,043) |
Current operating lease liabilities | (4,779) |
Accrued expenses | (66,034) |
Long-term debt, net of current portion | (5,995) |
Long-term operating lease liabilities | (11,601) |
Other noncurrent liabilities | (19,436) |
Purchase price, net of cash acquired | $ | 1,171,648 |
The $358.3 million of goodwill from the Valley Acquisition, which is expected to strengthen the Company's base business and expand its ability to provide additional low carbon intensity feedstocks to fuel the growing demand for renewable diesel, was assigned to the Feed Ingredients segment. For U.S. income tax purposes, the Valley Acquisition is treated as a purchase of substantially all the assets of Valley Proteins; therefore, almost all of the goodwill is expected to be deductible for tax purposes. The identifiable intangible assets include $292.1 million in collection routes with a life of 15 years and $97.1 million in permits with a life of 15 years for a total weighted average life of approximately 15 years. The Company is still assessing the provisional amounts recorded for assets acquired and liabilities assumed including possible purchase price adjustment in accordance with the stock purchase agreement, thus the final determination of the values presented in the above table of assets acquired and liabilities assumed may result in retrospective adjustments to the values presented in the above table with a corresponding adjustment to goodwill. The Company does not expect the impact of any adjustments to these amounts during the measurement period to be material. The amount of net sales and net loss from the Valley Acquisition included in the Company's consolidated statement of operations for the twelve months ended December 31, 2022 were $624.9 million and $(38.3) million, respectively. In addition, the Company incurred acquisition costs related to the Valley Acquisition for the twelve months ended December 31, 2022 of approximately $5.6 million. As a result of the Valley Acquisition and the FASA Acquisition, effective May 2, 2022 and August 1, 2022, respectively, the Company began including the operations of the Valley Acquisition and the FASA Acquisition in the Company's consolidated financial statements. The following table presents selected pro forma information, for comparative purposes, assuming the Valley Acquisition and FASA Acquisition had occurred on January 3, 2021 for the periods presented (unaudited) (in thousands):
| Twelve Months Ended
| December 31, 2022 |  | January 1, 2022
Net sales | $ | 7,059,871 |  |  | $ | 5,826,297 |
Net income | 724,064 |  |  | 625,834 |
The Company notes that pro forma results of operations for the acquisitions discussed below have not been presented because the effect of each acquisition individually or in the aggregate is not deemed material to revenues, total assets and net income of the Company for any period presented. On February 25, 2022, a wholly-owned international subsidiary of the Company acquired all of the shares of Group Op de Beeck, a Belgium digester, organic and industrial waste processing company, that is now included in our Fuel Ingredients segment, for an initially estimated purchase price of approximately $91.7 million, plus or minus various closing adjustments in accordance with the stock purchase agreement. Initially, the Company paid approximately $71.3 million in cash consideration. In the second quarter of fiscal 2022, the Company paid an additional $4.2 million for purchase price adjustments related to working capital and estimated future construction costs for a total purchase price of approximately $75.5 million. The Company recorded assets and liabilities consisting of property, plant and equipment of approximately $28.1 million, intangible assets of approximately $27.2 million, goodwill of approximately $29.6 million and other net liabilities of approximately $(9.4) million including working capital and net debt. The identifiable intangibles have a weighted average life of 15 years. On October 18, 2022, the Company announced that we entered into a stock purchase agreement to acquire all the shares of Gelnex, a leading global producer of collagen products (including gelatin and collagen peptides), for approximately $1.2 billion in cash, plus or minus various closing adjustments in accordance with the stock purchase agreement. The transaction is subject to customary approvals, including the receipt of regulatory approval and is anticipated to close in the first half of 2023. On November 2, 2022, the Company announced that we entered into a definitive agreement to purchase Polish rendering company, Miropasz Group for approximately €110.0 million, subject to post-closing adjustments. The transaction is subject to customary approvals, including the receipt of regulatory approval and is anticipated to close in the third quarter of 2023. The Company incurred acquisition costs of approximately $16.4 million for the twelve months ended December 31, 2022, respectively related to the above disclosed acquisitions, including the Valley Acquisition, the FASA Acquisition, Group Op de Beeck, the previously announced Gelnex and Miropasz acquisitions as well as other immaterial acquisitions. In December 2020, the Company acquired substantially all the assets of Marengo Fabricated Steel Ltd (the “Marengo Acquisition”) a grease collection equipment manufacturer. The Company purchased the Marengo Acquisition for $10.8 million consisting of cash paid of approximately $10.5 million and a hold back amount of approximately $0.3 million, which was paid in fiscal 2021. The Company recorded assets and liabilities consisting of property, plant and equipment of approximately $3.6 million, goodwill of approximately $5.7 million and other net assets of approximately $1.5 million. In October 2020, a wholly-owned international subsidiary acquired all the shares of a Belgium privately owned group of companies (the “Belgium Group Acquisition”). The Company purchased the Belgium Group Acquisition for approximately $24.6 million after purchase price adjustments consisting of cash paid of approximately $19.3 million and a hold back amount of approximately $5.3 million, which approximately $1.7 million was paid in fiscal 2021. The Company recorded assets and liabilities consisting of property, plant and equipment of approximately $14.8 million, intangible assets of approximately $6.4 million, goodwill of approximately $9.1 million and net working capital liabilities of approximately $5.7 million. The identifiable intangibles have a weighted average life of 12 years. Additionally, the Company made other immaterial acquisitions and dispositions in fiscal 2022 and 2020.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI https://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 + Details
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