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Acquisitions | 3 Months Ended
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Mar. 30, 2024
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions Miropasz Group On January 31, 2024, a wholly-owned international subsidiary of the Company acquired all of the shares of the Miropasz Group (the “Miropasz Acquisition”), a rendering company in Poland that is now in our Feed Ingredients segment, for a cash purchase price of approximately €105.6 million (approximately $114.3 million USD at the exchange rate of €1.0:USD$1.082198 on the closing date). In addition, the Company incurred a liability of approximately €7.0 million (approximately $7.6 million USD at the exchange rate on the closing date) for acquisition consideration hold-back amount that is part of the purchase price set aside in escrow in the Company's name for possible indemnification claims by the Company, which amounts will be paid to the sellers in the future if no claims arise. The hold-back amount represents a noncash investing activity during the period of acquisition. The Company recorded assets and liabilities on a preliminary basis consisting of property, plant and equipment of approximately $21.2 million, identifiable intangibles which includes routes and immaterial land use rights of approximately $34.9 million with a weighted average life of 17 years, other net assets of approximately $2.4 million which includes cash, working capital and net debt, and goodwill of approximately $63.4 million. Due to the complexity of acquiring foreign entities, the Company is still assessing the provisional amounts recorded for assets acquired and liabilities assumed including possible future purchase price adjustments to property, plant and equipment, intangible assets and taxes, and thus the final determination of the value of assets acquired and liabilities assumed may result in retrospective adjustment to the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. Goodwill is expected to strengthen the Company's base Feed Ingredients business and is nondeductible for tax purposes. Gelnex On March 31, 2023, the Company acquired all of the shares of Gelnex, a leading global producer of collagen products (the “Gelnex Acquisition”). The Gelnex Acquisition includes a network of five processing facilities in South America and one in the United States. The initial purchase price of approximately $1.2 billion was comprised of an initial cash payment of approximately $1.1 billion, which consisted of a payment of approximately R$4.3 billion Brazilian real (approximately $853.3 million USD at the exchange rate of R$5.08:USD$1.00 on the closing date) and a payment of approximately $243.5 million in USD, and is subject to various post-closing adjustments in accordance with the stock purchase agreement. In addition, the Company incurred a liability of approximately $104.1 million for acquisition consideration hold-back amounts that are part of the purchase price set aside in escrow in the Company's name for possible indemnification claims by the Company, which amounts will be paid to the sellers in the future if no claims arise. The hold-back amount represents a noncash investing activity during the period of acquisition. The Gelnex Acquisition gives us immediate capacity to serve the growing needs of our collagen customers and the growing gelatin market. The initial purchase price was financed by borrowing all of the Company's term A-3 facility of $300.0 million and term A-4 facility of $500.0 million, with the remainder coming through revolver borrowings under the Company's Amended Credit Agreement. During the third quarter of fiscal 2023, the Company made a cash payment for working capital purchase price adjustment per the stock purchase agreement of approximately $14.1 million with an offset to goodwill. The Company obtained new information about facts and circumstances that existed at the acquisition date during the first quarter of fiscal 2024 that resulted in measurement period adjustments to increase property, plant and equipment by approximately $13.7 million, decrease intangible assets by approximately $9.5 million, decrease goodwill by approximately $9.1 million, increase deferred tax liabilities by approximately $5.1 million, increase deferred tax assets by approximately $8.1 million and a decrease in other assets and liabilities of approximately $0.1 million. The following table summarizes the final fair value of the assets acquired and the liabilities assumed in the Gelnex Acquisition as of March 31, 2023 (in thousands):
Accounts receivable | $ | 81,025 |
Inventories | 140,865 |
Other current assets | 3,143 |
Property, plant and equipment | 169,205 |
Identifiable intangible assets | 339,500 |
Goodwill | 542,572 |
Operating lease right-of-use assets | 134 |
Other assets | 2,703 |
Deferred tax asset | 9,067 |
Accounts payable | (15,059) |
Current operating lease liabilities | (26) |
Current portion of long-term debt | (44,692) |
Accrued expenses | (18,826) |
Long-term debt, net of current portion | (1,407) |
Long-term operating lease liabilities | (123) |
Deferred tax liability | (12,870) |
Other noncurrent liabilities | (19) |
Purchase price, net of cash acquired | $ | 1,195,192 |
Less hold-back | 104,145 |
Cash paid for acquisition, net of cash acquired | $ | 1,091,047 |
The $542.6 million of goodwill from the Gelnex Acquisition, which is expected to strengthen the Company's gelatin business and expand its ability to service increased demand of its collagen customer base, is assigned to the Food Ingredients segment. Of the goodwill booked in the Gelnex Acquisition approximately $425.0 million is expected to be deductible for tax purposes. The identifiable intangible assets include $331.0 million in customer relationships with a weighted average life of 11.4 years and $8.5 million in trade name with a life of 5 years for a total weighted average life of approximately 11.3 years. The amount of net sales and net income (loss) from the Gelnex Acquisition included in the Company's consolidated statement of operations for the three months ended March 30, 2024 was $65.9 million and $(36.1) million, respectively. As a result of the Gelnex Acquisition, effective March 31, 2023, the Company began including the operations of the Gelnex Acquisition in the Company's consolidated financial statements. The following table presents selected pro forma information, for comparative purposes, assuming the Gelnex Acquisition had occurred on January 1, 2023, for the periods presented (in thousands):
| Three Months Ended |  |
| April 1, 2023 |  |  |  |
Net sales | $ | 1,889,439 |  |  |  |  |
Net income | 192,634 |  |  |  |  |
FASA Group 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 at the time of acquisition, will supplement the Company's global supply of waste fats, making it 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 of R$5.16:USD$1.00 on the closing date) 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 completed an analysis as of the acquisition date for this contingency and recorded a liability of approximately R$428.2 million (approximately $83.0 million USD at the exchange rate in effect on the closing date of the acquisition) representing the present value of the contingency utilizing assistance from external valuation experts and the use of a Monte Carlo model representing the probability weighted present value of the expected payment to be made under the agreement using the income approach. The Company analyzes the contingent consideration liability using a Monte Carlo model each quarter and any change in fair value is recorded through operating income as changes in fair value of contingent consideration. The hold-back and contingent consideration amounts represent noncash investing activities during the period of acquisition. 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 a cash payment for 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 final fair value of the assets acquired and the liabilities assumed in the FASA Acquisition as of August 1, 2022 (in thousands):
Accounts receivable | $ | 76,640 |
Inventories | 43,058 |
Other current assets | 33,327 |
Property, plant and equipment | 224,384 |
Identifiable intangible assets | 119,477 |
Goodwill | 301,937 |
Operating lease right-of-use assets | 583 |
Other assets | 62,388 |
Deferred tax asset | 2,315 |
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 | (95,653) |
Other noncurrent liabilities | (503) |
Non-controlling interests | (21,704) |
Purchase price, net of cash acquired | $ | 630,432 |
Less hold-back | 21,705 |
Less contingent consideration | 82,984 |
Cash paid for acquisition, net of cash acquired | $ | 525,743 |
The $301.9 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 $108.6 million in routes with a weighted average life of 12 years and $10.9 million in trade name with a life of 5 years for a total weighted average life of approximately 11.4 years. The Company notes that pro forma results of operations discussed above does not include the Miropasz Acquisition or other acquisitions individually or in the aggregate as those acquisitions are not deemed material to net sales, total assets and net income of the Company for any period presented. Additionally, the Company completed other immaterial acquisitions in the first three months of fiscal 2023. The Company incurred acquisition costs and integration costs of approximately $4.1 million and $7.0 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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