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Acquisitions and Investments
 12 Months Ended
Dec. 31, 2014
Business Combinations [Abstract]  
Acquisitions and Investments
ACQUISITIONS AND INVESTMENTS

Specialized

On May 13, 2014 the "Closing Date", the Company acquired all of the operating units of Specialized Industries LP, a portfolio company of ELB Capital Management, LLC.  The purchase included the businesses of Super Products LLC, Wausau-Everest LP and Howard P. Fairfield LLC as well as several related entities ("Specialized"), including all brand names and related product names and trademarks (the "Acquisition") pursuant to the terms of the Membership Interests and Partnership Interests Purchase Agreement dated February 24, 2014 (the “Agreement”). The purchase price consideration was $193 million, on a debt-free basis which included certain post-closing adjustments that were made within 90 days from the Acquisition date per the agreement.

In connection with the Acquisition on May 13, 2014, Alamo Group amended its revolving credit facility and increased its line of credit from $100 million to $250 million. Alamo Group financed the Acquisition through $190 million of new borrowings under the amended credit facility.

The Acquisition was accounted for in accordance with ASC Topic 805 Business Combinations (“ASC Topic 805”).  Accordingly, the total purchase price has been allocated to assets acquired and liabilities assumed in connection with the Acquisition, based on their fair values as of May 12, 2014. 

The primary reason for the Specialized acquisition was to broaden the Company's existing equipment lines. This acquisition broadens our product offering and enhances our market position both in vacuum trucks and snow removal equipment.

The Company completed its evaluation of the purchase price allocation during the fourth quarter of 2014, which included the fair value of accounts receivable, inventory, rental equipment, property, plant and equipment, intangibles, accrued liabilities and deferred taxes. This required the Company to adjust the recorded goodwill.

The following table summarizes the fair value of the assets acquired and liabilities assumed as of the Acquisition date (in thousands):
 
 
Cash
$
2,025

Accounts receivable
16,290

Inventory
47,500

Prepaid expenses
3,223

Deferred income tax assets
1,554

Rental equipment
28,446

Property, plant & equipment
13,214

Intangible assets
53,900

Other assets
675

Deferred income tax liabilities
(4,293
)
Other liabilities assumed
(10,962
)
 
 
Net assets assumed
151,572

 
 
Goodwill
41,327

Acquisition Price
$
192,899









Intangible assets determined to be definite-lived assets and are broken down as follows:

(in thousands)
Estimated Useful Lives
Value at Acquisition
Definite:
 
 
   Trade names and trademarks
25
$
22,200

   Customer and dealer relationships
14
29,700

   Patents and drawings
12
2,000

Total
 
$
53,900



The valuation did not identify indefinite-lived assets during the analysis.

Other liabilities consisted of Accounts payable of $4.1 million and the remaining amount consisted of various assumed accrued liabilities.

This allocation resulted in goodwill of $41.3 million, all of which has been assigned to the Company's Industrial reporting segment. $6.5 million of goodwill is tax deductible the remaining balance is not. The recognized goodwill is primarily attributable to expected synergies in both the vacuum truck and snow removal product lines.

Under ASC Topic 805-10, acquisition related costs (i.e., advisory, legal, valuation and other professional fees) are not included as a component of consideration transferred, but are accounted for as expenses in the periods in which the costs are incurred. The Company incurred $1.8 million of acquisition related costs, which have been recorded in Selling, general and administrative expenses on the consolidated statement of income. The Company will incur integration expenses during 2015 and 2016 relating to manufacturing process changes and computer conversion. They are expected to be immaterial.

In the period between the Acquisition Date and December 31, 2014, the Specialized business units generated approximately $107.4 million of net sales and $5.1 million of net income. The Company has included the operating results of Specialized in its consolidated financial statements since the Acquisition Date.

The following table presents the unaudited pro forma combined results of operations of the Company and the acquired business units of Specialized as if the acquisition had occurred on January 1, 2013 for the years ended December 31, 2014 and December 31, 2013. This includes certain pro forma adjustments including: (i) recognition of the costs related to the step-up in fair value of the Specialized inventory, (ii) amortization of acquired intangible assets, (iii) the impact of certain fair value adjustments such as depreciation on the acquired rental equipment and property, plant and equipment, and (iv) interest expense for historical long-term debt of Specialized that was repaid and interest expense on additional borrowings by the Company to fund the acquisition. The unaudited pro forma statement of income of the Company is as follows:
 
 
(Unaudited) Year Ended 
 December 31,
(In thousands, except per share amounts)
 
2014
 
2013
Net sales
 
$
882,568

 
$
828,809

Net income
 
$
42,575

 
$
37,306

Diluted earnings per share
 
$
3.54

 
$
3.05



The unaudited pro forma financial information is presented for informational purposes only and is not intended to represent or be indicative of the consolidated results of operations of the Company that would have been reported had the acquisition been completed as of the beginning of the periods presented, and should not be taken as being representative of the future consolidated results of operations of the Company.





Other Acquisitions

The Company also completed two smaller acquisitions during the second quarter of 2014. Kellands Agricultural Ltd. was acquired on April 2, 2014 and Fieldquip Australia PTY LTD was acquired on April 7, 2014. Both acquisitions were on a debt free basis and subject to certain post-closing adjustments with total consideration of $5,594,000.

These acquisitions are being accounted for in accordance with ASC Topic 805.  Accordingly, the total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed based on their estimated fair values as of the completion of the acquisitions.  These allocations reflect various provisional estimates that were available at the time and are subject to change during the purchase price allocation period as valuations are finalized.

The primary reason for the Kellands acquisition was to increase the Company's presence in the manufacturing and distribution of agricultural machinery in the UK. This acquisition broadens our product offering and allows the Company to enter the self-propelled sprayer market.

The primary reason for the Fieldquip acquisition was to broaden the Company's presence in the manufacturing and distribution of agricultural machinery in Australia.