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Acquisition of Chicago Tube and Iron Company
 12 Months Ended
Dec. 31, 2011
Acquisition of Chicago Tube and Iron Company [Abstract]  
Acquisition of Chicago Tube and Iron Company
2. Acquisition of Chicago Tube and Iron Company:

On July 1, 2011, the Company acquired all of the outstanding common shares of CTI pursuant to the terms of an Agreement and Plan of Merger dated May 18, 2011. CTI stocks, processes and fabricates metal tubing, pipe, bar, valves and fittings and pressure parts at nine operating facilities located primarily throughout the Midwestern United States. The Company paid goodwill in conjunction with the acquisition, as CTI enhances the Company’s commercial opportunities by adding new product offerings to an expanded customer base and by increasing our distribution footprint.

The Company paid total cash consideration of $159,856, consisting of a base purchase price of $150,000, plus the closing cash, working capital and McNeeley purchase agreement payments (as disclosed in the Current Report on Form 8-K filed on May 18, 2011) totaling approximately $9,856. In addition, the Company assumed approximately $5,880 of indebtedness and acquired $11,097 of cash from CTI. Olympic funded its acquisition of CTI primarily with borrowings under its asset-based credit facility. During 2011, the Company incurred $919 of direct acquisition-related costs, which are included in “Administrative and general” in the Consolidated Statement of Operations for the year ended December 31, 2011.

Purchase Price Allocation

The acquisition of CTI was accounted for under the acquisition method of accounting and, accordingly, the purchase price of $159,856 has been allocated to the assets acquired and liabilities assumed based on estimated fair values at July 1, 2011, the date of acquisition. The Consolidated Balance Sheet as of December 31, 2011 reflects the preliminary allocation of CTI’s purchase price and is subject to change after the completion of certain tax adjustments and pre-acquisition tax returns.

 

The preliminary allocation of the total purchase price of CTI to the fair values of the assets acquired and liabilities assumed is as follows:

 

         
    Total  
   

Cash

   $ 11,097  

Accounts receivable, net

     22,378  

Inventories

     52,248  

Assets held for sale

     1,939  

Property and equipment

     49,920  

Goodwill

     40,171  

Intangible assets subject to amortization

     13,332  

Intangible assets not subject to amortization

     23,425  

Other current and long-term assets

     2,505  
   

 

 

  

Total assets acquired

     217,015  
   

 

 

  

Accounts payable

     (10,075 ) 

Current and long-term debt

     (5,880 ) 

Deferred income taxes, net

     (28,921 ) 

Other current and long-term liabilities

     (12,283 ) 
   

 

 

  

Total liabilities assumed

     (57,159 ) 
   

 

 

  

Net assets acquired

   $ 159,856  
   

 

 

  

The accompanying Consolidated Statements of Operations include the revenues and expenses of CTI since the acquisition date. CTI’s net sales and earnings during the period July 1, 2011 through December 31, 2011 were $118,164 and $2,920, respectively.

In connection with the acquisition of CTI, the Company identified and valued certain intangible assets, including the CTI trade name and its existing customer relationships. The trade name was recorded at $23,425, and is not subject to amortization. The Company determined that the trade name acquired has an indefinite life since its economic life is expected to approximate the life of CTI. Additionally, the Company recorded $13,332 related to customer relationships, determined to be amortizable over a fifteen year useful life. The goodwill of $40,171 is not deductible for tax purposes.

Pro Forma Financial Information

The following unaudited pro forma summary of financial results presents the consolidated results of operations as if the CTI acquisition had occurred on January 1, 2010, after the effect of certain adjustments, including increased depreciation expense resulting from recording fixed assets at fair value, interest expense on the acquisition debt and amortization of customer relationships, with the related tax effects. The pro forma results for the year ended December 31, 2010 include $1,338 of transactions costs and other non-recurring acquisition related expenses. The pro forma results for the year ended December 31, 2011 exclude $3,620 of transaction costs and other non-recurring acquisition related expenses. The pro forma results have been presented for comparative purposes only and are not indicative of what would have occurred had the acquisition been made on January 1, 2010, or of any potential results that may occur in the future.

 

                 
    Year Ended  
    December 31, 2011     December 31, 2010  
(in thousands, except per share amounts)            

Pro forma (unaudited):

                

Net sales

   $ 1,381,760     $ 991,773  

Net income

   $ 28,328     $ 3,077  
     

Basic earnings per common share

   $ 2.59     $ 0.28  

Diluted earnings per common share

   $ 2.59     $ 0.28