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Note 2 - Acquisition and Divestiture

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

(2)

Acquisition and Divestiture

Molded Fiber

On July 26, 2022, pursuant to a share purchase agreement and related agreements, the Company sold its former wholly owned subsidiary Moulded Fibre Technology, Inc. (“MFT”) and related real estate in Iowa to CKF USA INCORPORATED (“CKF”) (a Delaware Corporation) for approximately $31.5 million. The net book value of the assets sold was approximately $15.4 million and the Company recorded a net gain on sale of approximately $15.7 million, which was recorded in the year ended December 31, 2022. $2.6 million of the purchase price is being held in escrow to indemnify CKF against certain claims, losses, and liabilities, which is scheduled to be released in January 2024. The Securities Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. Proceeds from the sale were used to pay down debt on the Company’s revolving credit facility, as well as income tax obligations on the related gain.

Advant Medical

On March 16, 2022, the Company purchased 100% of the outstanding shares of common stock of Advant Medical, Ltd., Advant Medical Inc., and Advant Medical Costa Rica, Limitada, (together Advant), pursuant to a Stock Purchase Agreement and related agreements, for an aggregate purchase price of €19.0 million in cash along with a working capital adjustment at closing. Total consideration in U.S. Dollars amounted to approximately $21.2 million. The Stock Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.

Founded in 1993, Advant is headquartered in Galway, Ireland, with operations in Costa Rica and partner manufacturing in Mexico. Advant is a developer and contract manufacturer of medical devices and packaging, primarily for catheters and guide wires.

The following table summarizes the allocation of consideration paid to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s estimates of fair value (in thousands):

Fair value of considerations transferred
Cash paid at closing		$	23,608
Other liability			395
Cash from Advant			(2,840	)
Total consideration		$	21,163

Purchase price allocation
Accounts receivable		$	2,299
Inventory			2,410
Other current assets			213
Property, plant, and equipment			5,704
Customer contracts & relationships			2,925
Intellectual property			2,127
Non-compete agreement			259
Lease right of use assets			289
Other assets			41
Goodwill			7,140
Total identifiable assets		$	23,407
Accounts payable			(772	)
Accrued expenses			(668	)
Income taxes			(66	)
Deferred taxes			(449	)
Lease liabilities			(289	)
Net assets acquired		$	21,163

Acquisition costs associated with the transaction through the third quarter of 2022 were approximately $789 thousand, of which $759 thousand was charged to expense in the nine-months ended September 30, 2022 and $30 thousand was charged to expense in the year ended December 31, 2021. These costs were primarily for legal, investment banking and valuation services, as well as stamp duty filings and are reflected on the face of the income statement.

The amount of revenue and earnings of Advant recognized since the acquisition date through the third quarter of 2022 was approximately $13.6 million and $1.8 million, respectively, and is included in the condensed consolidated statement of comprehensive income for the period ended September 30, 2022.

Pro-forma statements

The following table contains an unaudited pro forma condensed consolidated statement of operations for the nine-month period ended September 30, 2022, as if the Advant acquisition had occurred at the beginning of 2022 (in thousands):

		Nine-month Period Ended
		September 30, 2022
		(Unaudited)
Sales		$	266,782
Operating income		$	45,268
Net income		$	33,881
Earnings per share:
Basic		$	4.48
Diluted		$	4.44

The above unaudited pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have occurred had the acquisition occurred as presented. In addition, future results may vary significantly from the results reflected in such pro forma information.