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Note 2 - Acquisitions | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Business Combination Disclosure [Text Block] |
2. | Acquisitions
On January, 3 2023, the Company acquired all the outstanding shares of capital stock of Metal-Fab for a cash purchase price of $131.2 million. Metal-Fab, headquartered in Wichita, Kansas, is a manufacturer of venting, micro air and clean air products for residential and industrial applications. The Company paid total cash consideration of $131.2 million, consisting of a base purchase price of $131.0 million and a cash adjustment of $0.2 million. During 2023, the Company incurred $2.6 million of direct acquisition-related costs, which are included in "Administrative and general" in the Consolidated Statements of Comprehensive Income, and $2.1 million of non-recurring amortization of inventory fair market value adjustments, which are included in "Cost of materials sold" in the Consolidated Statements of Comprehensive Income. On October 2, 2023, the Company acquired all membership interest of CTB for a cash purchase price of $40.3 million. CTB, headquartered in Conway, Arkansas, is a fabricator of tube and bar products which services the transportation, agricultural, commercial furniture and data center construction industries. The Company paid total cash consideration of $40.3 million, consisting of a base purchase price of $37.8 million and a working capital adjustment of $2.5 million. During 2023, the Company incurred $0.9 million of direct acquisition-related costs, which are included in "Administrative and general" in the Consolidated Statements of Comprehensive Income. On October 1, 2021 the Company acquired substantially all of the net assets of Shaw Stainless & Alloy, Inc. (Shaw), based in Powder Springs, Georgia, for $12.1 million. Shaw is a full-line distributor of stainless steel sheet, pipe, tube, bar and angles. Shaw also manufactures and distributes stainless steel bollards and water treatment systems. The acquisition includes Shaw's stainless-steel distribution and fabrication businesses as well as its architectural and barrier defense businesses. Each acquisition was funded with borrowings under the Company's asset-based credit facility (ABL Credit Facility). Purchase Price Allocation The acquisitions were accounted for as business combinations and the assets and liabilities were valued at fair market value on the date of acquisition. The final purchase price allocations presented below are based upon management’s estimate of the fair value of the acquired assets and assumed liabilities using Level 3 valuation techniques including income, cost and market approaches. The fair value estimates involve the use of estimates and assumptions, including, but not limited to, the timing and amounts of future cash flows, revenue growth rates, discount rates, and royalty rates. The table below summarizes the final purchase price allocations of the fair market values of the assets acquired and the liabilities assumed.
Details of Acquisition (in thousands) |  | Metal-Fab As of January 3, 2023 |  | CTB As of October 2, 2023
Assets acquired |  |  |  |
Cash and cash equivalents |  | $ 1,728 |  | $ -
Accounts receivable, net |  | 10,597 |  | 5,339
Prepaid expenses and other |  | 740 |  | -
Inventories, net |  | 17,236 |  | 3,906
Property and equipment |  | 20,408 |  | 16,193
Goodwill |  | 33,194 |  | 8,401
Intangible assets |  | 54,740 |  | 9,590
Right-of-use and other long-term assets |  | 6,930 |  | 917
Total assets acquired |  | 145,573 |  | 44,346
Total liabilities assumed |  | (14,369) |  | (4,054)
Cash paid |  | $ 131,204 |  | $ 40,292
The accompanying Consolidated Statements of Comprehensive Income include the revenues and expenses of Metal-Fab, CTB and Shaw since January 3, 2023, October 2, 2023 and October 1, 2021, respectively. Metal-Fab's operations are included within the carbon flat-rolled segment, CTB operations are included within the tubular and pipe segment and Shaw's operations are included within the specialty metals flat-rolled segment. The combined net sales for the 2023 acquisitions totaled $110.3 million. In connection with the acquisition of Metal-Fab, the Company identified and valued certain intangible assets, including the Metal-Fab trade name, internally developed technology and know-how, restrictive covenants and customer relationships. The intangible assets were valued on the premise of highest and best use to a market participant, primarily utilizing the income approach valuation methodology. The trade name intangible asset was valued at $11.5 million, and the useful life was determined to be indefinite primarily due to their history and reputation in the marketplace, the Company's expectation that the trade name will continue to be used, and the conclusion that there are currently no other factors identified that would limit their useful life. The internally developed technology and know-how intangible asset was valued at $5.3 million, and the useful life was determined to be 15 years. The non-compete agreements intangible asset was valued at $1.4 million, and the useful life was determined to be the length of the non-compete agreements, which range from two to five years. The customer relationships intangible asset was valued at $36.5 million, and the useful life was determined to be 26 years, based primarily on the consistent and predictable revenue source associated with the existing customer base, the present value of which extends through the 26 year amortization period. In connection with the acquisition of CTB, the Company identified and valued certain intangible assets, including the CTB trade name, internally developed technology and know-how, restrictive covenants and customer relationships. The intangible assets were valued on the premise of highest and best use to a market participant, primarily utilizing the income approach valuation methodology. The trade name intangible asset was valued at $4.0 million, and the useful life was determined to be indefinite primarily due to their history, reputation in the marketplace, the Company's expectation that the trade name will continue to be used, and the conclusion that there are currently no other factors identified that would limit their useful life. The internally developed technology and know-how intangible asset was valued at $1.7 million, and the useful life was determined to be 10 years. The non-compete agreements intangible asset was valued at $0.4 million, and the useful life was determined to be the length of the non-compete agreements, or five years. The customer relationships intangible asset was valued at $3.5 million, and the useful life was determined to be 10 years, based primarily on the consistent and predictable revenue source associated with the existing customer base, the present value of which extends through the 10 year amortization period. Pro Forma Financial Information The following pro forma summary of financial results presents the consolidated results of operations as if the Metal-Fab acquisition has occurred on January 1, 2022, after the effect of certain adjustments. The historical consolidated financial information has been adjusted to give effect of the impact of the consideration issued by the Company to Metal-Fab's stockholders in connection with the acquisition and the effect of debt refinancing necessary to complete the transaction. The pro forma summary also includes certain purchase price accounting adjustments, including the items expected to have a continuing impact on combined results, such as depreciation and amortization expense on acquired assets. The pro forma combined financial information does not reflect the cost of any integration activities or benefits that may result from synergies that may be derived from integration activities. The pro forma results have been presented for comparative purposed only and are not indicative of what would have occurred had the acquisition been made on January 1, 2022, or of any potential results that may occur in the future. The CTB acquisition was not considered to be material for a pro forma historical analysis.
| For the twelve months ended December 31, 2022
| Historical OSI | Historical Metal-Fab | Pro Forma Adjustments | Pro Forma Combined
(in thousands, except per share amounts) |  |  |  |
Pro forma: |  |  |  |
Net sales | $ 2,559,990 | $ 95,528 | $ 736 | $ 2,656,254
Net income (loss) | 90,931 | 16,538 | (12,850) | 94,619
Basic earnings per share | 7.87 | 1.43 | (1.11) | 8.19
Diluted earnings per share | 7.87 | 1.43 | (1.11) | 8.19

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