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ACQUISITIONS
 3 Months Ended
Mar. 31, 2013
Acquisition [Abstract]  
ACQUISITION
2. ACQUISITIONS

 

Beall Corporation

 

On February 4, 2013, the Company completed the acquisition of certain assets of the tank and trailer business of Beall Corporation, a Portland, Oregon-based manufacturer of aluminum tank trailers and related equipment. Beall Corporation began Chapter 11 reorganization proceedings in September of 2012, followed by a bankruptcy-court approved auction of its assets in December. The Company was the winning bidder for certain assets of Beall’s tank and trailer business, including its Portland, Oregon manufacturing facility, as well as equipment, inventory, certain product designs, intellectual property and other related assets. The aggregate consideration paid by the Company for the acquired assets and the assumed liabilities was $13.9 million, subject to post-closing purchase price adjustments related to the acquired working capital, and was preliminarily allocated to the opening balance sheet as follows (in thousands):

 

Current assets   $ 1,023  
Property, plant and equipment     2,714  
Intangibles     8,860  
Goodwill     1,725  
Total assets   $ 14,322  
         
Current liabilities   $ (462 )
Total liabilities   $ (462 )
         
Acquisition   $ 13,860  

 

Intangible assets of $8.9 million were recorded as a result of the purchase of the Beall assets. The intangible assets preliminarily consist of the following (in thousands):

 

    Amount     Useful Life
Tradenames and Trademarks   $ 1,622     20 years
Technology     1,217     8 years
Customer relationships     6,021     8 years
    $ 8,860      

 

Goodwill of $1.7 million was preliminarily recorded as a result of the Beall purchase. Goodwill is comprised of operational synergies that are expected to be realized in both the short and long-term and the opportunity to complement our existing Diversified Products business through product line expansion and geographic growth. The Company expects the amount recorded as goodwill to be fully deductible for tax purposes.

 

In connection with the purchase of certain assets of Beall, the Company entered into a separate ten year capital lease agreement for Beall’s manufacturing facility in Portland, Oregon, with payments totaling approximately $4.7 million for such ten year period.

 

Walker Group Holdings LLC

 

On May 8, 2012, the Company completed the acquisition (the “Walker Acquisition”) of all the equity interests of Walker Group Holdings LLC (“Walker”) from Walker Group Resources LLC, the parent of Walker (“Seller”), pursuant to the Purchase and Sale Agreement, dated March 26, 2012, by and among the Company, Walker and Seller (the “Purchase and Sale Agreement”). The aggregate consideration paid by the Company for the Walker Acquisition was $375.0 million in cash, subject to post-closing purchase price adjustments related to the acquired working capital. The Company financed the Walker Acquisition and related fees and expenses using the proceeds of the Company’s offering of 3.375% Convertible Senior Notes due 2018 and the Company’s borrowings under the Term Loan Credit Agreement (as described in further detail in Note 4).

 

Walker is a manufacturer of liquid-transportation systems and engineered products based in New Lisbon, Wisconsin. Walker manufacturing operations are integrated into the Company’s Diversified Products segment while Walker retail operations are integrated into the Retail segment in a manner that is consistent with its focus to leverage operational and market synergies. Walker has manufacturing facilities for its liquid-transportation products in New Lisbon, Wisconsin; Fond du Lac, Wisconsin; Kansas City, Missouri; Kansas City, Kansas; and Queretaro, Mexico with parts and service centers in Houston, Texas; Baton Rouge, Louisiana; Findlay, Ohio; Chicago, Illinois; Mauston, Wisconsin; West Memphis, Arkansas; and Ashland, Kentucky. Manufacturing facilities for Walker’s engineered products are located in New Lisbon, Wisconsin; Elroy, Wisconsin; and Huddersfield, United Kingdom with parts and service centers in Tavares, Florida; Dallas, Texas; and Philadelphia, Pennsylvania.

 

The aggregate purchase price of $375.0 million was allocated to the opening balance sheet of Walker at May 8, 2012, the date of acquisition, which is still preliminary and subject to adjustment, as follows (in thousands):

 

Cash   $ 10,982  
Current assets     93,409  
Property, plant and equipment     32,541  
Intangibles     162,800  
Deferred income taxes     4,640  
Goodwill     146,444  
Total assets   $ 450,816  
         
Current liabilities   $ (74,722 )
Deferred income taxes     (1,100 )
Total liabilities   $ (75,822 )
         
    $ 374,994  
         
Acquisition, net of cash acquired   $ 364,012  

 

Intangible assets of $162.8 million were recorded as a result of the acquisition. The intangible assets preliminarily consist of the following (in thousands):

 

    Amount     Useful Life
Backlog   $ 900     Less than 1 year
Tradenames and Trademarks     27,600     20 years
Technology     15,300     12 years
Customer relationships     119,000     10 years
    $ 162,800      

 

Intangible asset amortization expense was $5.4 million and $0.7 million for the three month period ending March 31, 2013 and 2012, respectively. Annual intangible asset amortization expense for the next five fiscal years is estimated to be $21.7 million in 2013, $21.9 million in 2014, $21.3 million in 2015, $20.1 million in 2016 and $16.9 million in 2017.

 

Goodwill of $146.4 million was preliminarily recorded as a result of the Walker Acquisition in the Diversified Products and Retail segments. Goodwill is comprised of operational synergies that are expected to be realized in both the short and long-term and the opportunity to enter new market sectors with higher margin potential, which will enable us to deliver greater value to our customers and shareholders. The Company expects the amount recorded as goodwill for the Walker Acquisition to be fully deductible for tax purposes.

 

The results of Walker are included in the Condensed Consolidated Statements of Operations, including $95.2 million and $11.5 million of revenue and net income, respectively, for the three months ended March 31, 2013. The following unaudited pro forma information is shown below as if the acquisition of Walker had been completed as of the beginning of the earliest period presented (in thousands, except per share amounts):

 

    Three Months Ended
March 31, 2012		  
Sales   $ 375,013  
Operating income   $ 20,686  
Net income   $ 12,515  
Basic and Diluted net income per share   $ 0.18  

 

The information presented above is for informational purposes only and is not necessarily indicative of the actual results that would have occurred had the acquisition been consummated at January 1, 2012, nor is it necessarily indicative of future operating results of the combined companies under the ownership and management of the Company.

 

The Company incurred various costs related to both the Walker Acquisition and the purchase of certain assets of Beall including fees paid to an investment banker for acquisition services and the related bridge financing commitment, as well as professional fees for diligence, legal and accounting services. These costs totaled $0.6 million and $1.7 million for the three month periods ending March 31, 2013 and 2012, respectively, and have been recorded as Acquisition Expenses in the Condensed Consolidated Statements of Operations.