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Acquisition
6 Months Ended
Jun. 30, 2016
Business Combinations [Abstract]  
Acquisition

17.

Acquisition

PMFG

On September 3, 2015, the Company completed its acquisition of 100% of PMFG’s outstanding common stock for a purchase price of $136.7 million. PMFG’s shareholders had the option to elect to exchange each share of PMFG common stock for either (i) $6.85 in cash, without interest, or (ii) shares of the Company’s common stock valued at $6.85, based on the volume weighted average trading price of the Company’s common stock for the 15-trading day period ending on September 2, 2015, the last trading day before the closing of the acquisition, subject to a collar so that there was a maximum exchange ratio of 0.6456 shares of the Company’s common stock for each share of PMFG common stock and a minimum exchange ratio of 0.5282 shares of the Company’s common stock for each share of PMFG common stock, subject to certain exceptions and with overall elections subject to proration.

Approximately 44.5% of the shares of PMFG common stock converted into the right to receive the $6.85 cash consideration, for an approximate total of $64.6 million. The Company’s common stock trading price for the 15-trading day period was $9.6655. As a result, each of the remaining shares of PMFG common stock converted into the right to receive 0.6456 shares of Company common stock, or an approximate total of 7,602,166 shares of Company common stock in aggregate.

In accordance with the proration and reallocation provisions of the merger agreement, because the $6.85 per share cash consideration was oversubscribed by PMFG shareholders prior to the election deadline, (a) each PMFG share for which a valid stock election was made or for which no valid cash or stock election was made was automatically cancelled and converted into the right to receive the stock consideration and (b) each PMFG shareholder of record that made a valid cash election by the deadline received (i) the cash consideration for approximately 58.05% of such holder’s PMFG shares for which a valid cash election was made and (ii) the stock consideration for approximately 41.95% of such holder’s PMFG shares for which a valid cash election was made. The value of stock recorded for purchase accounting was $72.1 million, which equates to approximately $9.49 per share.

PMFG is a global provider of engineered equipment for the abatement of air pollution, the separation and filtration of contaminants from gases and liquids, and industrial noise control equipment, which complements our Energy Segment businesses. The following table summarizes the approximate fair values of the assets acquired and liabilities assumed at the date of closing.

 

(Table only in thousands)

 

 

 

 

Current assets (including cash of $27,100)

 

$

92,690

 

Property and equipment

 

 

29,982

 

Other assets

 

 

953

 

Assets held for sale (a)

 

 

950

 

Deferred income tax asset

 

 

 

Goodwill

 

 

56,020

 

Intangible – finite life

 

 

29,940

 

Intangible – indefinite life

 

 

10,280

 

Total assets acquired

 

 

220,815

 

Current liabilities assumed

 

 

(73,328

)

Deferred income tax liability

 

 

(800

)

Long term liabilities assumed

 

 

(3,961

)

Noncontrolling interest

 

 

(6,000

)

Net assets acquired

 

$

136,726

 

 

(a)

The assets held for sale consist primarily of real property, and are valued at the estimated proceeds less cost to sell. The Company has not recorded a gain or loss on the classification of the subject assets to held for sale. The Company expects to complete the sale of the subject assets within the next twelve months.

For the three months ended June 30, 2016, PMFG accounted for $25.0 million of revenue and $1.7 million of pre-tax income included in the Company’s results.  For the six months ended June 30, 2016, PMFG accounted for $49.9 million of revenue and $4.9 million of pre-tax income included in the Company’s results.

The approximate fair values of the assets acquired and liabilities assumed, and the related tax balances, are based on preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period as we finalize the valuations of the assets acquired and liabilities assumed, and the related tax balances. Such changes could result in material variances between the Company’s future financial results and the amounts presented in the unaudited pro forma information, including variances in the estimated purchase price, fair values recorded and expenses associated with these items.

 

The following unaudited pro forma information represents the Company’s results of operations as if the PMFG acquisition had occurred as of January 1, 2014:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(Table only in thousands, except per share data)

 

2015

 

 

2015

 

Net sales

 

$

124,659

 

 

$

240,410

 

Net loss

 

 

(5,434

)

 

 

(8,195

)

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.16

)

 

$

(0.24

)

Diluted

 

$

(0.16

)

 

$

(0.24

)

 

The pro forma results have been prepared for informational purposes only and include adjustments to amortize acquired intangible assets with finite life, reflect foregone interest income on cash paid for the acquisitions, reflect additional interest expense on debt used to fund the acquisitions, and to record the income tax consequences of the pro forma adjustments. Included in the pro forma results are acquisition related expenses of $1.0 million and $1.3 million for the three-month and six-month periods ended June 30, 2015, respectively. Shares used to calculate the basic and diluted earnings per share were adjusted to reflect the additional shares of common stock issued to fund a portion of the acquisition price. These pro forma results do not purport to be indicative of the results of operations that would have occurred had the purchases been made as of the beginning of the periods presented or of the results of operations that may occur in the future.

Acquisition and integration expenses on the Condensed Consolidated Statements of Income are related to acquisition activities, which include retention, legal, accounting, banking, and other expenses.