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Acquisitions | 12 Months Ended
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Dec. 31, 2019
Business Combinations [Abstract] |
Acquisitions | On February 15, 2017, Bonnell Aluminum acquired 100% of the stock of Futura Industries Corporation on a net debt-free basis for approximately $92 million (the “Initial Purchase Price”). The amount actually funded in cash at the transaction date was approximately $87.0 million (the “Initial Cash Funding”), which was the Initial Purchase Price net of preliminary closing adjustments for working capital and seller transaction-related obligations assumed and subsequently paid by Bonnell Aluminum. In addition, the Company was refunded $5 million in the first quarter of 2018 since Futura did not meet certain performance requirements for the 2017 fiscal year (“Earnout Provision”). The acquisition, which was funded using Tredegar’s revolving credit facility, was treated as an asset purchase for U.S. federal income tax purposes. Under the terms of the transaction, $5 million of the Initial Cash Funding was placed in escrow (the “Earnout Escrow”) and was returned to Bonnell Aluminum because Futura did not achieve a targeted EBITDA level (as defined in the Stock Purchase Agreement) for the last eleven months of the fiscal year ended December 2017. At the acquisition date, the Company performed a probability weighted assessment in order to determine the fair value of this contingent asset. The assessment estimated a fair value of $4.3 million and a receivable (“Initial Earnout Receivable”) was recorded by Bonnell Aluminum. At December 31, 2017, the Company updated its valuation of this contingent asset, which resulted in a fair value of $5.0 million. The receivable was increased to $5.0 million, and an additional $0.7 million was recognized as income in 2017 in Other income (expense), net in the Consolidated Statements of Income. The net purchase price for financial reporting purposes was set at approximately $82.9 million (the “Adjusted Net Purchase Price”), which was the Initial Cash Funding less the Initial Earnout Receivable and the net settlement of certain post-closing adjustments of $0.1 million paid to the seller in 2017. Adjustments to the purchase price were made retrospectively as if the accounting had been completed on the acquisition date. Based upon management’s valuation of the fair value of tangible and identifiable intangible assets acquired (net of cash acquired) and liabilities assumed, the allocation of the Adjusted Net Purchase Price is as follows:
(In thousands) |
Accounts receivable | $ | 6,680 |
Inventories | 10,342 |
Prepaid expenses and other current assets | 240 |
Property, plant & equipment | 32,662 |
Identifiable intangible assets: |
Customer relationships | 24,000 |
Trade names | 6,700 |
Trade payables & accrued expenses | (8,135 | )
Total identifiable net assets | 72,489 |
Adjusted Net Purchase Price | 82,860 |
Goodwill | $ | 10,371 |
The goodwill and identifiable intangible asset balances associated with this acquisition are deductible for tax purposes on a straight-line basis over a period of approximately 15 years. For financial reporting purposes, customer relationships are being amortized over 12 years; trade names were being amortized over 13 years but were fully amortized in 2019 as a result of a rebranding initiative by Bonnell Aluminum (see Note 8 for more details on the rebranding initiative). Goodwill is not subject to amortization for financial reporting purposes. For the year ended December 31, 2017, Tredegar’s consolidated results of operations and its Aluminum Extrusions business segment included the following Futura results for the 10.5 months owned: sales of $71.0 million, EBITDA from ongoing operations of $13.2 million, depreciation and amortization of $5.0 million, and capital expenditures of $2.5 million. The following unaudited supplemental pro forma data presents Tredegar’s consolidated sales, net income and related earnings per share as if the acquisition of Futura had been consummated at the beginning of 2017, and is not necessarily indicative of the Company’s financial performance if the acquisition had actually been consummated as of that date, or of future performance. The supplemental unaudited pro forma measures for the year ended December 31, 2017 is presented below:
Tredegar Pro Forma Results with Futura Acquisition |
(In thousands, except per-share data) | 2017
Sales | $ | 968,340 |
Net income | $ | 37,974 |
Earnings per share: |
Basic | $ | 1.15 |
Diluted | $ | 1.15 |
Futura’s pre-acquisition results for the period from January 1 to February 14, 2017, and therefore the pro forma information for 2017 presented above, were adversely impacted by significant disruptions to manufacturing operations and sales caused by the renovation of its anodizing line. The actual accretion to Tredegar’s diluted earnings per share from Futura since the acquisition date was 12 cents per share for 2017. The Company’s pro forma net income was computed for the periods shown as: (i) the Company’s reported net income, plus (ii) Futura’s historical pre-acquisition period earnings before interest, taxes, depreciation and amortization and excluding one-time purchase accounting and transaction-related expenses, minus (iii) the pro forma pre-acquisition period depreciation and amortization for Futura under purchase accounting for the Company, minus (iv) the pro forma pre-acquisition period interest expense for the Company applied at an annual rate of 3.0% to the $87.0 million Initial Cash Funding, minus (v) the pro forma pre-acquisition period income taxes applied at a rate of 39.1% to the pro forma pre-acquisition earnings before income taxes computed from items (ii) through (iv).

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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