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Business Combination | 6 Months Ended
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Jul. 01, 2018
Business Combination [Abstract] |
Business Combination |
Note 3. | Business Combination
On April 30, 2018, the Company completed the acquisition of Sivomatic Holding B.V. (“Sivomatic”), a leading European supplier of premium pet litter products. Sivomatic is a vertically integrated manufacturer, with production facilities in the Netherlands, Austria and Turkey. With a leading position in premier clumping products, Sivomatic’s product portfolio spans the range of pet litter derived from bentonite, sourced predominantly from wholly-owned mines in Turkey. The results of Sivomatic are included in our Performance Materials segment. Sivomatic has approximately 115 employees and generated revenue of €73 million in 2017. The acquisition was financed through a combination of cash on hand and borrowings under the Company’s credit facilities. The fair value of the total consideration transferred, net of cash acquired, was $124.1 million. The acquisition has been accounted for using the acquisition method of accounting, which requires, among other things, that we recognize the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. As of July 1, 2018, the purchase price allocation remains preliminary as the Company completes its assessment of property, mineral rights, certain reserves including environmental, legal and tax matters, obligations, intangible assets and deferred taxes, as well as complete our review of Sivomatic’s existing accounting policies. The following table summarizes the Company’s preliminary purchase price allocation for the Sivomatic acquisition:
|  | Preliminary Allocation |
|  | (millions of dollars) |
Accounts receivable |  | $ | 24.4 |
Inventories |  |  | 15.6 |
Other current assets |  |  | 0.6 |
Mineral rights |  |  | 35.0 |
Plant, property and equipment |  |  | 38.0 |
Goodwill |  |  | 32.4 |
Intangible assets |  |  | 20.0 |
Total assets acquired |  | $ | 166.0 |
Current maturity of long term debt |  |  | 5.7 |
Accounts payable |  |  | 9.0 |
Accrued expenses |  |  | 5.8 |
Long term debt |  |  | 5.1 |
Non-current deferred tax liability |  |  | 16.2 |
Other non-current liabilities |  |  | 0.1 |
Total liabilities assumed |  | $ | 41.9 |
Net assets acquired |  | $ | 124.1 |
The Company used the income, market, or cost approach (or a combination thereof) for the preliminary valuation, and used valuation inputs and analyses that were based on market participant assumptions. Market participants are considered to be buyers and sellers unrelated to the Company in the principal or most advantageous market for the asset or liability. For certain items, the carrying value was determined to be a reasonable approximation of fair value based on the information available. Goodwill was calculated as the excess of the consideration transferred over the assets acquired and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill is primarily attributable to fair value of expected synergies from combining the MTI and Sivomatic businesses and will be allocated to the Performance Materials segment. The allocation is expected to be completed during the first quarter of 2019. Goodwill recognized as a result of this acquisition is not deductible for tax purposes. In connection with the acquisition, the Company recorded an additional deferred tax liability of $15.0 million with a corresponding increase to goodwill. The increase in deferred tax liability represents the tax effect of the difference between the estimated assigned fair value of the tangible and intangible assets and the tax basis of such assets. Mineral rights were valued using discounted cash flow method, a Level 3 fair value input. Plant, property and equipment were valued using the cost method adjusted for age and deterioration, also a Level 3 fair value input. Intangible assets acquired mainly include tradenames and customer relationships. Tradenames are a Level 3 fair value input, with an estimated useful life of 25-30 years. Customer relationships are a Level 3 fair value input, with an estimated useful life of 25-30 years. The Company incurred $1.0 million and $1.4 million of acquisition-related costs during the three month and six month periods ended July 1, 2018, which are reflected within the Acquisition related transaction and integration costs line of the Condensed Consolidated Statements of Income. We did not present pro forma and other financial information for the Sivomatic acquisition, as this is not considered to be a material business combination.

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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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