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Note 2 - Acquisitions and Divestiture | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Mergers, Acquisitions and Dispositions Disclosures [Text Block] |
(2) | Acquisitions and Divestiture
Marble Medical On June 24, 2024, the Company purchased 100% of the outstanding shares of common stock of Marble Medical, Inc., (“Marble”) pursuant to a stock purchase agreement and related agreements, for an aggregate purchase price of $4.5 million in cash, plus up to an additional $0.5 million based upon the achievement of sales targets of Marble for each of the 12-month periods ended December 31, 2024, and 2025. As of the opening balance sheet the contingent consideration had a fair value of approximately $400 thousand. The purchase price was subject to an adjustment based upon Marble’s estimated working capital at closing, which resulted in an increase of approximately $100 thousand and is subject to further adjustment when the final working capital is determined. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. Founded in 1988 and headquartered in Tallahassee, FL, Marble develops and manufactures adhesive based medical components and single-use devices. The purchase price includes certain real estate, which encompasses Marble’s manufacturing, warehouse and office facilities. Marble brings to the Company adhesives expertise as well as precision die cutting capabilities. The following table summarizes the allocation of the total purchase price of approximately $5.0 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s preliminary estimates of fair value (in thousands):
|  | Purchase Price Allocation |
Cash |  | $ | 815 |
Accounts receivable |  |  | 872 |
Inventory |  |  | 494 |
Other current assets |  |  | 24 |
Property, plant, and equipment |  |  | 1,018 |
Customer lists |  |  | 250 |
Intellectual property |  |  | 300 |
Non-compete agreement |  |  | 50 |
Goodwill |  |  | 2,564 |
Total assets acquired |  |  | 6,387 |
Accounts payable |  |  | (41 | )
Accrued expenses |  |  | (519 | )
Total liabilities assumed |  |  | (560 | )
Total assets acquired, net of liabilities assumed |  |  | 5,827 |
Less: cash acquired |  |  | (815 | )
Purchase price, net of cash acquired |  | $ | 5,012 |
Acquisition costs associated with the transaction of approximately $146 thousand were charged to expense during the twelve months ended December 31, 2024. These costs were primarily for legal services and are reflected on the face of the condensed consolidated statement of comprehensive income. The amount of revenue and pre-tax income of Marble recognized since the acquisition date, which is included in the consolidated statement of comprehensive income for the twelve months ended December 31, 2024, was approximately $3.6 million and $0.6 million, respectively. 100% of the goodwill related to the Marble acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of Marble and the significant synergies expected to arise after the acquisition. AJR Enterprises On July 1, 2024, the Company purchased 100% of the issued and outstanding membership interests of AJR Enterprises, LLC, (“AJR”) pursuant to a securities purchase agreement and related agreements, for an aggregate purchase price of $110 million in cash. The purchase price was subject to an adjustment based upon AJR’s estimated working capital at closing, a final working capital adjustment, and a reduction for certain AJR liabilities funded by the sellers, which together resulted in an increase to the purchase price of approximately $700 thousand. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. Founded in 1997 and headquartered in St. Charles, IL, with an additional manufacturing plant in Santiago, Dominican Republic, AJR develops and manufactures single-use patient handling systems. Patient surfaces and transfer devices are a growing market due in part to government guidelines and legislation around safe patient handling. AJR’s ‘cut and sew’ manufacturing capabilities and specialty fabrics expertise supplement the Company’s thermoplastic joining expertise, allowing the Company to offer a comprehensive suite of development, commercialization, and manufacturing services for this market. The following table summarizes the allocation of the total purchase price of approximately $110.7 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s preliminary estimates of fair value (in thousands):
|  | Purchase Price Allocation |
Cash |  | $ | 3,000 |
Accounts receivable |  |  | 17,138 |
Inventory |  |  | 9,229 |
Other current assets |  |  | 210 |
Property, plant, and equipment |  |  | 1,149 |
Customer lists |  |  | 46,667 |
Intellectual property |  |  | 8,245 |
Non-compete agreement |  |  | 661 |
Lease right of use assets |  |  | 2,129 |
Goodwill |  |  | 35,628 |
Total assets acquired |  |  | 124,056 |
Accounts payable |  |  | (1,103 | )
Accrued expenses |  |  | (7,092 | )
Lease liabilities |  |  | (2,129 | )
Total liabilities assumed |  |  | (10,324 | )
Total assets acquired, net of liabilities assumed |  |  | 113,732 |
Less: cash acquired |  |  | (3,000 | )
Purchase price, net of cash acquired |  | $ | 110,732 |
Acquisition costs associated with the transaction were approximately $600 thousand charged to expense during the twelve months ended December 31, 2024. These costs were primarily for legal, due diligence, and valuation services, and are reflected on the face of the consolidated statement of comprehensive income. The amount of revenue and pre-tax income of AJR recognized since the acquisition date, which is included in the consolidated statement of comprehensive income for the twelve months ended December 31, 2024, was approximately $53.8 million and $12.0 million, respectively. 100% of the goodwill related to the AJR acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of AJR and the significant synergies expected to arise after the acquisition. Welch Fluorocarbon On July 15, 2024, the Company purchased 100% of the outstanding shares of common stock of Welch Fluorocarbon, Inc., (“Welch”) pursuant to a stock purchase agreement and related agreements, for an aggregate purchase price of $34.6 million in cash, plus up to an additional $6.0 million based upon the achievement of certain EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) targets of Welch for each of the 12-month periods ended December 31, 2024, 2025, and 2026. The contingent consideration has a fair value of approximately $800 thousand as of the opening balance sheet. The purchase price was subject to an adjustment based upon Welch’s working capital at closing, the assumption by the sellers of certain liabilities and a final working capital adjustment which together resulted in a decrease in the purchase price of approximately $200 thousand. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. Founded in 1985 and headquartered in Dover, NH, Welch develops and manufactures thermoformed, and heat sealed implantable medical device components utilizing thin, high-performance films. Welch brings thin film thermoforming capabilities and expertise in developing and manufacturing components for implantable medical devices. Also on July 15, 2024, pursuant to separate purchase and sale agreements (with separate legal parties), the Company purchased certain real estate in Dover, NH, which encompasses a majority of Welch’s manufacturing, warehousing and office facilities for an aggregate purchase of approximately $3.2 million. The following table summarizes the allocation of the total purchase price of approximately $35.2 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s preliminary estimates of fair value (in thousands):
|  | Purchase Price Allocation |
Cash |  | $ | 3,817 |
Accounts receivable |  |  | 1,506 |
Inventory |  |  | 1,969 |
Other current assets |  |  | 115 |
Property, plant, and equipment |  |  | 824 |
Customer lists |  |  | 4,209 |
Intellectual property |  |  | 9,707 |
Non-compete agreement |  |  | 186 |
Lease right of use assets |  |  | 166 |
Goodwill |  |  | 17,135 |
Total assets acquired |  |  | 39,634 |
Accounts payable |  |  | (215 | )
Accrued expenses |  |  | (215 | )
Lease liabilities |  |  | (166 | )
Total liabilities assumed |  |  | (596 | )
Total assets acquired, net of liabilities assumed |  |  | 39,038 |
Less: cash acquired |  |  | (3,817 | )
Net assets acquired, net of cash acquired |  | $ | 35,221 |
Acquisition costs associated with the transaction were approximately $281 thousand charged to expense during the twelve months ended December 31, 2024. These costs were primarily for legal and valuation services and are reflected on the face of the consolidated statement of comprehensive income. The amount of revenue and pre-tax income of Welch recognized since the acquisition date, which is included in the consolidated statement of comprehensive income for the twelve months ended December 31, 2024, was approximately $6.9 million and $0.4 million, respectively. 100% of the goodwill related to the Welch acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of Welch and the significant synergies expected to arise after the acquisition. AQF On August 23, 2024, the Company purchased 100% of the issued and outstanding membership interests of the parent holding companies of AQF Limited, operating as AQF Medical, (“AQF”) pursuant to a share purchase agreement and related agreements, for an aggregate purchase price of €43 million in cash (total purchase price in U.S. Dollars amounted to approximately $48.0 million). The purchase price was subject to an adjustment based upon AQF’s working capital at closing, the assumption by the sellers of certain liabilities and a final working capital adjustment, which resulted in a net decrease of approximately $300 thousand. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. Founded in 2005 and headquartered in Navan, Ireland with additional joint venture operations in Singapore, AQF develops and manufactures custom-engineered foam and thermoplastic components used in a wide range of medical devices and packaging. AQF brings to the Company additional expertise in converting specialty foams and films, an expanded European manufacturing presence, and an Asian market presence in Singapore. The following table summarizes the allocation of the total purchase price of approximately $47.7 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s preliminary estimates of fair value (in thousands):
|  | Purchase Price Allocation |
Cash |  | $ | 3,381 |
Accounts receivable |  |  | 2,237 |
Inventory |  |  | 1,150 |
Other current assets |  |  | 204 |
Property, plant, and equipment |  |  | 976 |
Customer lists |  |  | 14,206 |
Intellectual property |  |  | 2,760 |
Non-compete agreement |  |  | 333 |
Tradename |  |  | 690 |
Lease right of use assets |  |  | 1,723 |
Equity Method Investment |  |  | 6,969 |
Goodwill |  |  | 22,925 |
Total assets acquired |  |  | 57,554 |
Accounts payable |  |  | (1,890 | )
Accrued expenses |  |  | (535 | )
Deferred taxes |  |  | (2,322 | )
Lease liabilities |  |  | (1,723 | )
Total liabilities assumed |  |  | (6,470 | )
Total assets acquired, net of liabilities assumed |  |  | 51,084 |
Less: cash acquired |  |  | (3,381 | )
Purchase price, net of cash acquired |  | $ | 47,703 |
Acquisition costs associated with the transaction were approximately $1.5 million charged to expense during the twelve months ended December 31, 2024. These costs were primarily for legal, due diligence, and valuation services and are reflected on the face of the consolidated statement of comprehensive income. The amount of revenue and pre-tax income of AQF recognized since the acquisition date, which is included in the consolidated statement of comprehensive income for the twelve months ended December 31, 2024, was approximately $6.0 million and $1.0 million, respectively. None of the goodwill related to the AQF acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of AQF and the significant synergies expected to arise after the acquisition. Pro-forma statements The following table contains an unaudited pro forma consolidated statement of comprehensive income for the years ended December 31, 2024 and 2023, as if the collective acquisitions of Marble Medical, AJR Enterprises, Welch Fluorocarbon and AQF, had occurred at the beginning of the prior year (in thousands):
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |
|  | (Unaudited) |  |  | (Unaudited) |
Sales |  | $ | 579,564 |  |  | $ | 505,840 |
Operating Income |  | $ | 92,539 |  |  | $ | 67,966 |
Net Income |  | $ | 64,011 |  |  | $ | 45,151 |
Earnings per share: |  |  |  |  |  |  |  |
Basic |  | $ | 8.35 |  |  | $ | 5.92 |
Diluted |  | $ | 8.22 |  |  | $ | 5.86 |
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 all 2024 acquisitions occurred as presented. In addition, future results may vary significantly from the results reflected in such pro forma information. Pro-forma adjustments include depreciation adjustments on fixed asset step up/down; inventory step-up; amortization of intangibles; and estimated interest expense. 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 the sale of approximately $15.7 million, which was recorded in the year ended December 31, 2022. $2.6 million of the purchase price was held in escrow to indemnify CKF against certain claims, losses, and liabilities. The full escrow balance was 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):
|  | Purchase Price Allocation |
Cash |  | $ | 2,840 |
Accounts receivable |  |  | 2,299 |
Inventory |  |  | 2,410 |
Other current assets |  |  | 213 |
Property, plant, and equipment |  |  | 5,704 |
Customer lists |  |  | 2,925 |
Intellectual property |  |  | 2,127 |
Non-compete agreement |  |  | 259 |
Lease right of use assets |  |  | 289 |
Other assets |  |  | 41 |
Goodwill |  |  | 7,140 |
Total assets acquired |  | $ | 26,247 |
Accounts payable |  |  | (772 | )
Accrued expenses |  |  | (668 | )
Income taxes |  |  | (66 | )
Deferred taxes |  |  | (449 | )
Lease liabilities |  |  | (289 | )
Total liabilities assumed |  |  | (2,244 | )
Total assets acquired, net of liabilities assumed |  |  | 24,003 |
Less: cash acquired |  |  | (2,840 | )
Purchase price, net of cash acquired |  | $ | 21,163 |
Acquisition costs associated with the transaction were approximately $789 thousand, of which $759 thousand was charged to expense in the year ended December 31, 2022. 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 consolidated statement of comprehensive income. The amount of revenue and net income of Advant recognized since the acquisition date, which is included in the consolidated statement of comprehensive income for the year ended December 31, 2022, was approximately $20.0 million and $2.4 million, respectively. None of the goodwill related to the Advant acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of Advant and the significant synergies expected to arise after the acquisition. Pro-forma statements The following table contains an unaudited pro forma consolidated statement of comprehensive income for the year ended December 31, 2022, as if the Advant acquisition had occurred at the beginning of 2022 (in thousands):
|  | Year Ended |
|  | December 31, 2022 |
|  | (Unaudited) |
Sales |  | $ | 358,196 |
Operating Income |  | $ | 56,321 |
Net income |  | $ | 42,311 |
Earnings per share: |  |  |  |
Basic |  | $ | 5.59 |
Diluted |  | $ | 5.52 |
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. Pro-forma adjustments include depreciation adjustments on fixed asset step up/down; inventory step-up; amortization of intangibles; and estimated interest expense.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent + Details
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