XML 18 R8.htm IDEA: XBRL DOCUMENT v3.25.2
Note 2 - Acquisitions
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Business Combination [Text Block]

(2)

 Acquisitions

 

AJR Specialty Products and AJR Custom Foam Products

 

On April 25, 2025, the Company purchased 100% of the outstanding membership interests of AJR Specialty Products, LLC, (“AJR Specialty”) and AJR Custom Foam Products, LLC, (“AJR Custom Foam”) pursuant to a Securities Purchase Agreement, for an aggregate purchase price of $2.8 million in cash. The purchase price was subject to adjustment based upon AJR’s estimated working capital at closing. A portion of the purchase price is being held in escrow 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. As part of the Securities Purchase Agreement, the Sellers as well as certain restricted parties have agreed not to compete with the Company for a period of seven years.

 

AJR Specialty and AJR Custom Foam, are both headquartered in St. Charles, IL. AJR Specialty and AJR Custom Foam provide additional capacity in the growing single-use safe patient handling space, as well as additional expertise in specialty fabrics and foam fabrication.

 

Acquisition costs associated with the transaction charged to expense during the three and six months ended June 30, 2025 were approximately $31 thousand and $59 thousand, respectively. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

 

  

As the revenues, earnings, balance sheet, and pro forma effects of the AJR Specialty and AJR Custom Foam acquisitions are not, and would not have been, material to the results of operations or financial position of the Company, the Company has elected to not disclose substantially all required disclosures of Accounting Standards Codification 805, Business Combinations, for this acquisition.

 

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. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Stock 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 enhances the Company’s 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 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

     2,559  

Total assets acquired

     6,382  

Accounts payable

     (41 )

Accrued expenses

     (519 )

Total liabilities assumed

     (560 )

Total assets acquired, net of liabilities assumed

     5,822  

Less: cash acquired

     (815 )

Purchase price, net of cash acquired

   $ 5,007  

 

Acquisition costs associated with the transaction of approximately $146 thousand were charged to expense during the six months ended June 30, 2024. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

 

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 synergies that have been and are expected to further be realized post-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 Securities 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

     1,127  

Customer lists

     46,667  

Intellectual property

     8,245  

Non-compete agreement

     661  

Lease right of use assets

     2,129  

Goodwill

     35,650  

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 of which $422 thousand were charged to expense during the six months ended June 30, 2024, with the balance being charged to expense during the third quarter of 2024. These costs were primarily for legal, due diligence, and valuation services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

 

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 that have been and are expected to further be realized post-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 Stock 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 provides 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, of which $229 thousand was charged to expense during the six months ended June 30, 2024, with the balance being charged to expense during the third quarter of 2024. These costs were primarily for legal and valuation services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

 

  

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 synergies that have been and are expected to further be realized post-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 Share 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 enhances the Company’s expertise in converting specialty foams and films, and provides 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, of which $116 thousand was charged to expense during the six months ended June 30, 2024, with the balance being charged to expense during the second half of 2024. These costs were primarily for legal, due diligence, and valuation services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

 

None of the goodwill related to the AQF acquisition is expected to be deductible for tax purposes. Goodwill is attributable to the workforce of AQF and the synergies that have been and are expected to further be realized post-acquisition.

 

Pro-forma Statements

 

The following table contains an unaudited pro forma consolidated statement of comprehensive income for the three and six months ended June 30, 2024, as if the collective acquisitions of Marble Medical, AJR Enterprises, Welch Fluorocarbon and AQF had occurred at the beginning of the respective periods (in thousands):

 

   

Three months ended

    

Six months ended

  
   

June 30, 2024

    

June 30, 2024

  
   

(Unaudited)

    

(Unaudited)

  

Sales

   $ 144,188     $ 279,349  

Operating Income

   $ 22,625     $ 43,016  

Net Income

   $ 15,434     $ 29,515  

Earnings per share:

                

Basic

   $ 2.01     $ 3.85  

Diluted

   $ 1.99     $ 3.81  

 

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.