Business Combinations

12 Months Ended

Aug. 31, 2013

Business Combinations [Abstract]

Business Combinations

5. BUSINESS COMBINATIONS

On April 22, 2013, the Company acquired substantially all of the assets and assumed certain liabilities of the North American distribution business ("BDNA") of Barnes Group Inc. ("Barnes"), pursuant to the terms of the Asset Purchase Agreement, dated February 22, 2013, between the Company and Barnes. In connection with the acquisition, the total cash consideration the Company paid to Barnes was $547,335 which is net of a post-closing working capital adjustment in the amount of $1,434 that was received by the Company in September 2013. The acquisition was funded by borrowings under the Company's new unsecured credit facility (described in Note 10 below), which was closed simultaneously with the acquisition, and the remaining portion of the purchase price was funded from available cash reserves.

BDNA is a leading distributor of fasteners and other high margin, low cost consumables with a broad distribution footprint throughout the U.S. and Canada. BDNA has a strong presence with customers across manufacturing, government, transportation and natural resources end-markets. BDNA specializes in lowering the total cost of their customers' inventory management through storeroom organization and vendor managed inventory. With this acquisition, the Company adds a highly complementary provider of fasteners and other high margin consumable products and services (often referred to as "Class C" items) with an experienced field sales force and Vendor Managed Inventory solution ("VMI"). With the integration of the two businesses, the Company will have the opportunity to bring its maintenance, repair and operations ("MRO") offering to BDNA's customers, and BDNA's Class C offering and VMI system to the Company's customers. In addition, the acquisition extends the Company's presence into Canada and in new end markets such as mining, transportation and oil and gas.

The acquisition of BDNA was accounted for as a business purchase pursuant to ASC Topic 805, "Business Combinations" ("ASC 805"). Non-recurring transaction and integration costs totaling $11,590 are included in operating expenses of the Company's consolidated statement of income for the fiscal year ended August 31, 2013. As required by ASC 805-20, the Company allocated the purchase price to assets and liabilities based on their estimated fair value at the acquisition date.

The following table summarizes the amounts of identified assets acquired and liabilities assumed based on the estimated fair value at the acquisition date:

Inventory	$	49,378
Accounts receivable		36,407
Prepaid expenses and other current assets		3,161
Intangible assets		117,400
Goodwill		342,000
Property, plant and equipment		19,165
Other assets		98
Total Assets Acquired	$	567,609
Accounts payable and accrued expense		19,611
Other long-term liabilities		663
Total Liabilities Assumed		20,274
Net Assets Acquired	$	547,335

Acquired intangible assets with a fair value of $117,400 consisted of customer relationships of $107,000 with a useful life of 18 years, an indefinite lived tradename of $7,500, and a tradename of $2,900 with a useful life of 5 years. The goodwill amount of $342,000 represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The primary items that generated the goodwill were the premiums paid by the Company for the right to control the business acquired and the expected synergies from the result of adding a highly complementary provider of fasteners and other high margin consumable products and services with an experienced field sales force and VMI solution. In addition, the acquisition extends the Company's presence into Canada and other new end markets. This goodwill will not be amortized and will be tested for impairment at least annually. All of the goodwill recognized as a result of the BDNA acquisition is expected to be deductible for tax purposes and will be amortized for tax purposes over 15 years.

The amount of revenue and earnings from BDNA, exclusive of non-recurring costs, included in the condensed consolidated statements of income for the fiscal year ended August 31, 2013 is $108,376 and $4,474, respectively.

The following unaudited pro forma financial information for the fiscal year ended August 31, 2013, and September 1, 2012 represent the combined results of the Company's operations as if the acquisition of BDNA had occurred on August 28, 2011. The unaudited pro forma financial information does not necessarily reflect the results of operations that would have occurred had the Company constituted a single entity during such periods presented.

	For the Fiscal Year Ended
	August 31, 2013		September 1, 2012
Net Sales	$	2,642,720	$	2,664,086
Net Income		242,966		260,895
Net income per share Two-class method:
Basic	$	3.85	$	4.14
Diluted	$	3.83	$	4.12

Included in the unaudited pro forma net income are adjustments for acquisition-related expenses directly attributable to the acquisition, which are not expected to have a continuing impact on the combined results of the Company's operations, amortization of identifiable intangible assets recognized from the BDNA acquisition, interest expense incurred as a result of the New Credit Facility, increased cost of sales related to the step-up of inventory and changes to income tax expense as a result of the combined results. None of the pro forma adjustments are considered material in relation to the overall unaudited pro forma financial information presented.

On January 31, 2012, the Company acquired certain assets and assumed certain liabilities of ATS Industrial Supply, Inc. ("ATS Industrial"), which is a leading metalworking and MRO industrial distributor in the Rocky Mountain region. The cash purchase price for the acquisition was $32,204. On July 18, 2011, the Company also acquired 100% of the shares of American Tool Supply, Inc. ("ATS") and its affiliate, American Specialty Grinding Co., Inc. ("ASG"), which specializes in custom made tools and re-sharpening services. The total purchase consideration, net of approximately $942 of cash acquired, aggregating $28,948, related to the Company's business combinations completed during fiscal 2011. The Company recorded a post-closing working capital adjustment in the amount of $1,247, which was recorded to goodwill as of August 27, 2011 and was paid by the Company in October 2011. These acquisitions were accounted for as a business purchase pursuant to ASC 805.

The results of operations for ATS Industrial, ATS, and ASG have been included in our consolidated financial statements from the date of acquisitions. The financial results of these acquisitions are considered immaterial for purposes of pro forma financial disclosures and are not included in the table above.