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ACQUISITION OF PERFORMANCE CHEMICALS & INGREDIENTS COMPANY | 6 Months Ended
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Jun. 30, 2014
ACQUISITION OF PERFORMANCE CHEMICALS & INGREDIENTS COMPANY [Abstract] |
ACQUISITION OF PERFORMANCE CHEMICALS & INGREDIENTS COMPANY | NOTE 2—ACQUISITION OF PERFORMANCE CHEMICALS & INGREDIENTS COMPANY On May 7, 2014, the Company acquired 100 percent (the “Acquisition”) of the outstanding common shares of Performance Chemicals & Ingredients Company (d/b/a SensoryEffects), a privately held supplier of customized food and ingredient systems, headquartered in St. Louis, Missouri, for a purchase price of approximately $569 million including working capital acquired. The purchase price included a $5.5 million deposit made on March 31, 2014 with an escrow agent pursuant to the terms of a Letter of Intent. SensoryEffects is a leader in powder, solid and liquid flavor systems, creamer and specialty emulsified powders, cereal-based products and other functional ingredient food and beverage delivery systems. The Acquisition of SensoryEffects accelerates the Company’s growth into the health and wellness markets. SensoryEffects was merged with the Company’s Food, Pharma & Nutrition segment, strengthening its market leadership position, and the segment was renamed SensoryEffects. The estimated goodwill of $357,131 arising from the Acquisition consists largely of expected synergies, including the combined entities experience and technical problem solving capabilities, and acquired workforce. The goodwill is assigned to the SensoryEffects segment and approximately $20,466 is expected to be tax deductible for income tax purposes. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed.
Cash and cash equivalents |  | $ | 2,635 |
Accounts receivable, net |  |  | 25,674 |
Inventories |  |  | 32,000 |
Property, plant and equipment, net |  |  | 75,850 |
Customer relationships |  |  | 130,300 |
Trade names |  |  | 31,100 |
Developed technology |  |  | 3,200 |
Other assets |  |  | 3,955 |
Indemnification asset |  |  | 1,650 |
Trade accounts payable |  |  | (10,427 | )
Accrued expenses |  |  | (6,326 | )
Deferred income taxes |  |  | (77,500 | )
Goodwill |  |  | 357,131 |
Total purchase price |  | $ | 569,242 |
The estimated valuation of the fair value of tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions that are subject to change. In preparing our preliminary fair value estimates of the intangible assets and certain tangible assets acquired, management, among other things, consulted an independent advisor. The purchase price and related allocation to assets acquired and liabilities assumed is preliminary pending finalizing actual working capital acquired as of the Acquisition date. Additionally, certain intangible assets are not tax deductible and the related deferred tax liabilities are preliminary pending management’s final review. Customer relationships are amortized over a 10-year period utilizing an accelerated method based on the estimated average customer attrition rate. Trade names and developed technology are amortized over 10 years and 5 years, respectively, utilizing the straight-line method as the consumption pattern of the related economic benefits cannot be reliably determined. The Company is indemnified for tax liabilities prior to the Acquisition date. There were no changes in the indemnification asset balance from May 7, 2014 to June 30, 2014. Transaction and integration related costs included in selling, general, and administrative expenses for the six months ended June 30, 2014 are $2,616. The following unaudited pro forma information has been prepared as if the Acquisition had occurred on January 1, 2013.
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | Net Sales |  |  | Net Earnings |  |  | Net Sales |  |  | Net Earnings |
SensoryEffects actual results included in the Company’s consolidated income statement from May 7, 2014 through June 30, 2014 |  | $ | 36,395 |  |  | $ | (457 | ) |  | $ | 36,395 |  |  | $ | (457 | )
2014 Supplemental pro forma combined financial information |  | $ | 157,635 |  |  | $ | 14,726 |  |  | $ | 302,242 |  |  | $ | 26,483 |
Basic earnings per share |  |  |  |  |  | $ | .49 |  |  |  |  |  |  | $ | .88 |
Diluted earnings per share |  |  |  |  |  | $ | .47 |  |  |  |  |  |  | $ | .85 |
2013 Supplemental pro forma combined financial information |  | $ | 130,248 |  |  | $ | 11,115 |  |  | $ | 264,164 |  |  | $ | 21,227 |
Basic earnings per share |  |  |  |  |  | $ | .38 |  |  |  |  |  |  | $ | .72 |
Diluted earnings per share |  |  |  |  |  | $ | .36 |  |  |  |  |  |  | $ | .69 |
2014 supplemental pro forma earnings for the three months ended June 30, 2014, exclude $14,944 of acquisition-related costs incurred and $4,735 of nonrecurring expenses related to the fair value adjustment to acquisition-date inventory. 2014 supplemental pro forma earnings for the six months ended June 30, 2014, exclude $16,212 of acquisition-related costs incurred and $4,735 of nonrecurring expenses related to the fair value adjustment to acquisition-date inventory. The pro forma information presented does not purport to be indicative of the results that actually would have been attained if the SensoryEffects acquisition had occurred at the beginning of the periods presented and is not intended to be a projection of future results.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4922-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4934-128472 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4926-128472 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4845-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463 + Details
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