Asset Purchase (TTPP Acquisition)

9 Months Ended

Jan. 31, 2015

TTPP Acquisition

Asset Purchase

(3) Asset Purchase:

On May 5, 2014, we acquired substantially all of the net assets of TTPP for $22.8 million, plus a $1.0 million working capital adjustment, for a total purchase price of $23.8 million, utilizing cash on hand. We recorded this transaction in accordance with ASC 805-20, Business Combinations. TTPP was a provider of custom injection molding services, rapid prototyping and tooling, and was a long-standing supplier of polymer frames and related components for a large number of our firearms, including nearly all of our M&P models. Our acquisition of TTPP’s custom polymer injection molding capabilities was designed to vertically integrate a key component of our manufacturing operations providing us with increased flexibility within our supply chain.

The initial estimated fair value asset and liability allocations made at the acquisition date were adjusted during the nine months ended January 31, 2015 for inventory valuation and payroll accruals. We also recorded identifiable intangible assets relating to customer relationships and order backlog during the nine months ended January 31, 2015.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date, as well as measurement period adjustments as described above (in thousands):

	May 5, 2014		Measurement
	(As Initially		Period			May 5, 2014
	Reported)		Adjustments			(As Adjusted)
Accounts receivable	$	2,614	$	5		$	2,619
Inventories		2,430		460			2,890
Total current assets		5,044		465			5,509
Property, plant, and equipment		4,243	—				4,243
Goodwill		15,183		(1,258	)		13,925
Intangibles assets:
Customer relationships	—			840			840
Order backlog	—			150			150
Other assets		8	—				8
Total assets acquired		24,478		197			24,675
Accounts payable		358		12			370
Accrued expenses		25		114			139
Accrued payroll	—			361			361
Total liabilities assumed		383		487			870
	$	24,095	$	(290	)	$	23,805

Included in general and administrative costs is $458,000 of acquisition-related costs incurred during the nine months ended January 31, 2015 related to the TTPP asset purchase.

The goodwill that was recorded as a result of the TTPP asset purchase will be deductible for tax purposes and amortized over 15 years and is included in our firearm segment.

We amortize customer relationships in proportion to expected yearly revenue generated from the customer lists acquired or products to be sold. We amortize order backlog over the contract lives as they are executed. The following are the identifiable intangible assets acquired and their respective estimated lives (in thousands):

			Estimated Life
	Amount		(In years)
Customer relationships	$	840		7.0
Order backlog		150		1.0
	$	990

Pro forma results of operations assuming that this acquisition had occurred on May 1, 2013 are not required because of the immaterial impact on our consolidated financial statements for all periods presented.