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Acquisitions | 12 Months Ended
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Dec. 31, 2015
Business Combinations [Abstract] |
Acquisitions |
16. | Acquisitions
PMFG On September 3, 2015, the Company completed its acquisition of all of PMFG’s outstanding common stock for a purchase price of $136.7 million. PMFG’s shareholders had the option to elect to exchange each share of PMFG common stock for either (i) $6.85 in cash, without interest, or (ii) shares of the Company’s common stock valued at $6.85, based on the volume weighted average trading price of the Company’s common stock for the 15-trading day period ending on September 2, 2015, the last trading day before the closing of the acquisition, subject to a collar so that there was a maximum exchange ratio of 0.6456 shares of the Company’s common stock for each share of PMFG common stock and a minimum exchange ratio of 0.5282 shares of the Company’s common stock for each share of PMFG common stock, subject to certain exceptions and with overall elections subject to proration. Approximately 44.5% of the shares of PMFG common stock converted into the right to receive the $6.85 cash consideration, for an approximate total of $64.6 million. The Company’s common stock trading price for the 15 day period was $9.6655. As a result, each of the remaining shares of PMFG common stock converted into the right to receive 0.6456 shares of Company common stock, or an approximate total of 7,602,166 shares of Company common stock in aggregate. In accordance with the proration and reallocation provisions of the merger agreement, because the $6.85 per share cash consideration was oversubscribed by PMFG shareholders prior to the election deadline, (a) each PMFG share for which a valid stock election was made or for which no valid cash or stock election was made was automatically cancelled and converted into the right to receive the stock consideration and (b) each PMFG shareholder of record that made a valid cash election by the deadline received (i) the cash consideration for approximately 58.05% of such holder’s PMFG shares for which a valid cash election was made and (ii) the stock consideration for approximately 41.95% of such holder’s PMFG Shares for which a valid cash election was made. The value of stock recorded for purchase accounting was $72.1 million, which reflects the estimated fair value of shares based on the closing price of the Company’s common stock on the acquisition date, and equates to approximately $9.49 per share. PMFG is a global provider of engineered equipment serving the markets for natural gas infrastructure, power generation and refining and petrochemical processing, which complements our Energy segment businesses. The following table summarizes the approximate fair values of the assets acquired and liabilities assumed at the date of closing.
(Table only in thousands) |  |  |  |
Current assets (including cash of $27,100) |  | $ | 93,884 |
Property and equipment |  |  | 30,252 |
Other assets |  |  | 953 |
Assets held for sale (a) |  |  | 950 |
Deferred income tax asset |  |  | — |
Goodwill |  |  | 55,655 |
Intangible – finite life |  |  | 29,940 |
Intangible – indefinite life |  |  | 10,280 |
Total assets acquired |  |  | 221,914 |
Current liabilities assumed |  |  | (73,328 | )
Deferred income tax liability |  |  | (1,899 | )
Long term liabilities assumed |  |  | (3,961 | )
Noncontrolling interest |  |  | (6,000 | )
Net assets acquired |  | $ | 136,726 |
(a) | The assets held for sale consists primarily of real property, and are valued at the estimated proceeds less cost to sell. The Company has not recorded a gain or loss on the classification of the subject assets to Held for Sale. The Company expects to complete the sale of the subject assets within the next twelve months.
During 2015, PMFG accounted for $40.8 million of revenue and $2.2 million of pre-tax income included in the Company’s results. For the PMFG acquisition, the approximate fair values of the assets acquired and liabilities assumed, and the related tax balances, are based on preliminary estimates and assumptions. The fair value measurement method used to measure the assets acquired and liabilities assumed utilizes a number of significant unobservable inputs or Level 3 assumptions. These assumptions include, among others, projections of the acquired businesses future operating results, the implied fair value of assets using an income approach by preparing a discounted cash flow analysis and other subjective assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of the assets acquired and liabilities assumed, and the related tax balances. Such changes could result in material variances between the Company’s future financial results and the amounts presented in the unaudited pro forma information, including variances in the estimated purchase price, fair values recorded and expenses associated with these items. Zhongli On December 15, 2014, the Company acquired 100% of the equity interests of Zhongli for $7.0 million in cash. As additional consideration, the former owners are entitled to earn-out payments based upon a multiple of specified financial results through December 31, 2017. There is no maximum amount of earn-out, under the terms of the Framework Agreement. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be $17.1 million. During 2015, the Company increased the earn-out to $27.0 million at December 31, 2015, based on the estimated fair value of that date. Of this change, $11.2 million is recorded as expense in “Amortization and earn-out expenses” on the Condensed Consolidated Statements of Operations. The balance of the change is due to changes in foreign currency exchange rates. As of December 31, 2015 and 2014, the current portion of the estimated earn-out payable of $11.7 million and $6.1 million, respectively, is recorded in “Accounts payable and accrued expenses” and the balance of $15.3 million and $11.0 million, respectively, is recorded in “Other liabilities” on the Consolidated Balance Sheets. Additionally, the Company has yet to settle initial working capital requirements, as defined in the purchase agreement. Upon settlement, if there are any working capital shortfalls, including any uncollected accounts receivable acquired, which approximated $4.4 million at December 31, 2015, the Company would be indemnified for such amounts, which would be offset against any future earn-out payments. Zhongli is a leader in the design and manufacture of power industry damper, diverter and ball mill systems in China, which complements our Energy segment businesses. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing after the Company finalized purchase accounting during 2015.
(Table only in thousands) |  |  |  |
Current assets (including cash of $1,025) |  | $ | 16,223 |
Property and equipment |  |  | 1,477 |
Goodwill |  |  | 4,752 |
Intangible – finite life, net |  |  | 4,262 |
Intangible – indefinite life |  |  | 960 |
Total assets acquired |  |  | 27,674 |
Current liabilities assumed |  |  | (1,840 | )
Deferred tax liabilities |  |  | (1,739 | )
Net assets acquired |  | $ | 24,095 |
During 2015 and 2014, Zhongli accounted for $28.2 million and $0.1 million of revenue, respectively, and $(6.0) million and zero of pre-tax income (loss) (inclusive of the earnout adjustment noted above), respectively, included in the Company’s results. Emtrol On November 3, 2014, the Company acquired 100% of the membership interests of Emtrol. The Company paid cash at closing of $31.9 million, which was financed with additional debt. The Company also issued 453,858 shares of the Company’s common stock with an agreed upon value of $6.0 million computed based on the average closing price of the Company’s common stock for the 30 trading days immediately preceding the acquisition date. The shares of common stock issued to the former members contain restrictions on sale or transfer for periods ranging from one to two years from the acquisition date. Accordingly, the fair value of the common stock issued has been determined to be $5.8 million, which reflects the estimated fair value of the shares based on the closing price of the Company’s common stock on the acquisition date and a discount related to the sale and transfer restrictions. Emtrol is engaged in the business of designing and manufacturing of fluid catalytic cracking and industrial cyclone technology for a variety of industries including the refinery, petrochemical, and chemical sectors, which complements our Environmental segment businesses. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing after the Company finalized purchase accounting during 2015.
(Table only in thousands) |  |  |  |
Current assets |  | $ | 9,922 |
Property and equipment |  |  | 125 |
Goodwill |  |  | 24,998 |
Intangible – finite life, net |  |  | 12,890 |
Total assets acquired |  |  | 47,935 |
Current liabilities assumed |  |  | (10,173 | )
Net assets acquired |  | $ | 37,762 |
During 2015 and 2014, Emtrol accounted for $33.7 million and $9.8 million of revenue, respectively, and $3.3 million and $1.3 million of pre-tax income, respectively, included in the Company’s results. SAT On September 26, 2014, the Company acquired 100% of the stock of SAT for $1.4 million in cash. The Company is holding back $0.2 million of this cash until certain working capital requirements are determined to be met, as defined in the agreement. As additional consideration, the former owners are entitled to earn-out payments upon the achievement of specified financial results through September 30, 2017. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be $1.0 million, which is the maximum amount of the earnout. There were no adjustments to fair value of the earn-out at December 31, 2015. As of both December 31, 2015 and 2014, the current portion of the estimated earn-out payable of $0.3 million is recorded in “Accounts payable and accrued expenses” and the balance of $0.7 million is recorded in “Other liabilities” on the Consolidated Balance Sheets. SAT is a leading provider of volatile organic compounds abatement solutions for the Chinese air pollution control market, which complements our Environmental segment businesses. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing after the Company finalized purchase accounting during 2015.
(Table only in thousands) |  |  |  |
Current assets |  | $ | 1,679 |
Property and equipment |  |  | 10 |
Goodwill |  |  | 1,733 |
Intangible – finite life, net |  |  | 840 |
Intangible – indefinite life |  |  | 260 |
Total assets acquired |  |  | 4,522 |
Current liabilities assumed |  |  | (1,847 | )
Deferred tax liabilities |  |  | (275 | )
Net assets acquired |  | $ | 2,400 |
During 2015 and 2014, SAT accounted for $2.3 million and $1.0 million of revenue, respectively, and $(0.8) million and zero pre-tax income (loss), respectively, included in the Company’s results. HEE On August 13, 2014, the Company acquired certain assets and liabilities of HEE for $7.0 million in cash. The Company also issued 34,626 shares of the Company’s common stock with an agreed upon value of $0.5 million computed based on the average closing price of the Company’s common stock for the thirty trading days immediately preceding the acquisition date. The shares of common stock issued to the former owners contain restrictions on sale or transfer for a period of six months from the acquisition date. Accordingly, the fair value of the common stock issued has been determined to be $0.5 million, which reflects the estimated fair value of the shares based on the closing price of the Company’s common stock on the acquisition date and a discount related to the sale and transfer restrictions. As additional consideration, the former owners are entitled to earn-out payments upon the achievement of specified financial results through July 31, 2017. Based on projections at the acquisition date, the Company estimated the fair value of the earn-out to be $2.0 million which is the maximum amount of the earnout. During 2015, the Company paid $0.7 million based on the achievement of certain financial results. There were no adjustments to fair value of the remaining earn-out at December 31, 2015. As of December 31, 2015 and 2014, the current portion of the estimated earn-out payable of $0.7 million is recorded in “Accounts payable and accrued expenses” and the balance of $0.6 million and $1.3 million, respectively, is recorded in “Other liabilities” on the Consolidated Balance Sheets. HEE is a leading North American designer and manufacturer of scrubbers and fans for the air pollution control market, which complements our Environmental segment businesses. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing after the Company finalized purchase accounting during 2015.
(Table only in thousands) |  |  |  |
Current assets |  | $ | 913 |
Property and equipment |  |  | 158 |
Goodwill |  |  | 5,644 |
Intangible – finite life, net |  |  | 2,690 |
Intangible – indefinite life |  |  | 510 |
Total assets acquired |  |  | 9,915 |
Current liabilities assumed |  |  | (415 | )
Net assets acquired |  | $ | 9,500 |
During 2015 and 2014, HEE accounted for $11.3 million and $2.3 million of revenue, respectively, and $0.9 million and $0.1 million pre-tax income, respectively, included in the Company’s results. Met-Pro On August 27, 2013, the Company completed its acquisition of Met-Pro. Met-Pro’s shareholders had the option to elect to exchange each share of Met-Pro common stock for either (i) $13.75 in cash, without interest, or (ii) shares of the Company’s common stock valued at $13.75, based on the volume weighted average trading price of the Company’s common stock for the 15-trading day period ending on August 26, 2013, the last trading day before the closing of the merger, subject to a collar so that there was a maximum exchange ratio of 1.3520 shares of the Company’s common stock for each share of Met-Pro common stock and a minimum of 1.0000 share of the Company’s common stock for each share of Met-Pro common stock, subject to certain exceptions and with overall elections subject to proration. Approximately 51.6% of the shares of Met-Pro common stock converted into the right to receive the $13.75 cash consideration, for an approximate total of $104.4 million. The Company’s common stock trading price for the 15 day period was $12.6814. As a result, each of the remaining shares of Met-Pro common stock converted into the right to receive 1.0843 shares of Company common stock, or an approximate total of 7,726,235 shares of Company common stock in aggregate. In accordance with the proration and reallocation provisions of the merger agreement, because the $13.75 per share cash consideration was oversubscribed by Met-Pro shareholders prior to the election deadline, (a) each Met-Pro share for which a valid stock election was made or for which no valid cash or stock election was made was automatically cancelled and converted into the right to receive the stock consideration and (b) each Met-Pro shareholder of record that made a valid cash election received (i) the cash consideration for approximately 77.56% of such holder’s Met-Pro shares for which a valid cash election was made and (ii) the stock consideration for approximately 22.44% of such holder’s Met-Pro Shares for which a valid cash election was made. The value of stock recorded was $98.0 million. In addition, holders of outstanding Met-Pro options and restricted stock units received an aggregate amount of cash equal to approximately $4.9 million as consideration for the cancellation of the options and restricted stock units held by them as of immediately prior to the merger. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing after the Company finalized purchase accounting during 2014.
(Table only in thousands) |  |  |  |
Current assets |  | $ | 68,766 |
Property and equipment |  |  | 15,773 |
Other assets |  |  | 1,375 |
Assets held for sale (a) |  |  | 10,886 |
Goodwill |  |  | 102,552 |
Intangible – finite life, net |  |  | 35,810 |
Intangible – indefinite life |  |  | 11,910 |
Total assets acquired |  |  | 247,072 |
Current liabilities assumed |  |  | (13,638 | )
Deferred income tax liability |  |  | (24,784 | )
Long term liabilities assumed |  |  | (6,078 | )
Net assets acquired |  | $ | 202,572 |
(a) | The assets held for sale consists of primarily real property, and are valued at the estimated proceeds less cost to sell. The Company has not recorded a gain or loss on the classification of the subject assets to Held for Sale. The Company expects to complete the sale of the subject assets within the next twelve months. Three properties were sold during 2015 for total proceeds of $3.2 million. Three properties were sold during 2014 for total proceeds of $6.7 million. The remaining assets held for sale related to the Met-Pro acquisition was $0.7 million at December 31, 2015.
During 2015, 2014, and 2013, Met-Pro accounted for $80.9 million, $83.1 million, and $30.5 million of revenue, respectively, and $14.3 million, $14.6 million and $0.9 million pre-tax income, respectively, included in the Company’s results. Aarding On February 28, 2013, the Company acquired Aarding. Aarding is a global provider of natural gas turbine exhaust systems and silencer applications and is now part of our Engineered Equipment Technology and Parts Group. The purchase price included cash of $24.4 million and 763,673 shares of restricted common stock. The preliminary fair value of the common stock issued was determined to be $6.8 million which reflects the closing price of the Company’s common stock on the closing date and a discount related to the sale and transfer restrictions on the shares. The cash paid was funded by the Company’s cash reserves. Of the total consideration paid, €4.0 million ($4.4 million as of December 31, 2015) is contingent upon the future employment by the sellers and, therefore, has been classified as prepaid compensation by the Company. As of December 31, 2015 and 2014, the current portion of the prepaid compensation of $0.9 million and $1.0 million, respectively, is in “Prepaid expenses and other current assets,” while the non-current portion of $1.0 million and $2.1 million, respectively, is in “Deferred charges and other assets” on the Consolidated Balance Sheets. For the twelve months ended December 31, 2015 and 2014, $0.9 million and $1.1 million, respectively, of compensation expense has been recorded in “Amortization and earn out expenses” on the Consolidated Statements of Operations. Additionally, the former owners of Aarding are entitled to earn-out payments of up to €5.5 million ($6.0 million as of December 31, 2015) upon the attainment of specified financial targets through December 31, 2017. Such earn out payments are contingent upon the continued employment of the sellers. Accordingly, no value for the potential earnout consideration has been allocated to the purchase price of Aarding as any such payments is reported as compensation expense by the Company. For the twelve months ended December 31, 2015 and 2014, $1.2 million and $1.5 million, respectively, of earn-out expense has been recorded in “Amortization and earn out expenses” on the Consolidated Statements of Operations. As of December 31, 2015 and 2014, an accrual of $1.0 million and $1.1 million, respectively, relating to the earn-out is included within “Accounts payable and accrued expenses” on the Consolidated Balance Sheets. The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of closing after the Company finalized purchase accounting during 2014.
(Table only in thousands) |  |  |  |
Current assets |  | $ | 15,062 |
Property and equipment |  |  | 959 |
Goodwill |  |  | 7,595 |
Intangible – finite life, net |  |  | 13,477 |
Intangible – indefinite life |  |  | 2,865 |
Total assets acquired |  |  | 39,958 |
Current liabilities assumed |  |  | (8,277 | )
Deferred income tax liability |  |  | (4,086 | )
Net assets acquired |  | $ | 27,595 |
During 2015, 2014, and 2013, Aarding accounted for $45.3 million, $31.2 million, and $27.4 million of revenue, respectively, and $(1.1) million, $(3.2) million and $0.3 million pre-tax income (loss), respectively, included in the Company’s results. Goodwill related to the Aarding, Met-Pro, PMFG, HEE, and Emtrol acquisitions is not deductible for tax purposes. Goodwill related to the Zhongli and SAT acquisitions is deductible for tax purposes. The following unaudited pro forma information represents the Company’s results of operations as if PMFG acquisition had occurred as of January 1, 2014, the HEE, SAT, Emtrol, and Zhongli acquisitions had occurred as of January 1, 2013, and the Met-Pro and Aarding acquisitions had occurred as of January 1, 2012:
|  | Year Ended December 31, |
(Table only in thousands) |  | 2015 |  |  | 2014 |  |  | 2013 |
Net sales |  | $ | 460,726 |  |  | $ | 493,246 |  |  | $ | 337,767 |
Net (loss) income |  | $ | (29,568 | ) |  | $ | (22,990 | ) |  | $ | 2,050 |
Earnings per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.87 | ) |  | $ | (0.68 | ) |  | $ | 0.09 |
Diluted |  | $ | (0.87 | ) |  | $ | (0.68 | ) |  | $ | 0.08 |
The pro forma results have been prepared for informational purposes only and include adjustments to amortize acquired intangible assets with finite life, eliminate intercompany transactions between the Company and Aarding, reflect foregone interest income on cash paid for the acquisitions, reflect additional interest expense on debt used to fund the acquisitions, and to record the income tax consequences of the pro forma adjustments. Included in the pro forma results are acquisition related expenses of $17.7 million, $1.3 million, and $13.9 million, and certain nonrecurring expenses, such as goodwill impairment, of $3.7 million, $26.6 million, and $3.5 million, for the years ended 2015, 2014, and 2013, respectively. Shares used to calculate the basic and diluted earnings per share were adjusted to reflect the additional shares of common stock issued to fund a portion of the acquisition price. These pro forma results do not purport to be indicative of the results of operations that would have occurred had the purchases been made as of the beginning of the periods presented or of the results of operations that may occur in the future. Goodwill recognized on all of the above acquisitions represents value the Company expects to be created by combining the various operations of the acquired businesses with the Company’s operations, including the expansion into markets within existing business segments, access to new customers and potential cost savings and synergies. Acquisition and integration expenses on the Consolidated Statements of Operations are related to acquisition activities, which include retention, legal, accounting, banking, and other expenses.

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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 5 -URI http://asc.fasb.org/extlink&oid=56956515&loc=d3e1497-128463 Reference 2: 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=56956515&loc=d3e1490-128463 Reference 3: 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=56956515&loc=d3e1392-128463 Reference 4: 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 5: 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=56956515&loc=d3e1486-128463 Reference 6: 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 7: 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=56956791&loc=d3e4845-128472 Reference 8: 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=56956515&loc=d3e1500-128463 Reference 9: 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=56956515&loc=d3e1524-128463 Reference 10: 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 11: 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=56956791&loc=d3e4922-128472 Reference 12: 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=56956791&loc=d3e4934-128472 Reference 13: 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=56956791&loc=d3e4926-128472 Reference 14: 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=56956515&loc=d3e1383-128463 Reference 15: 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 + Details
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