Note B - Business Combinations

6 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

NOTE B — BUSINESS COMBINATIONS

On April 30, 2022, (the “Acquisition Date”), the Company acquired certain assets and liabilities of Plateplus, Inc. (“Plateplus”), a wholly owned subsidiary of Metal One, Inc. (“Metal One” or “Seller”), whereby the Company acquired the real estate, buildings, equipment, inventory, and other assets of Plateplus’ East Chicago, IN and Granite City, IL facilities and certain steel inventory at Plateplus’ Loudon, TN and Houston, TX facilities (the “Transaction”). The East Chicago and Granite City facilities are steel coil processing facilities that produce the same type of products as the Company's facilities in Hickman, AR; Decatur, AL and  Sinton, TX. As a result of the Transaction, the Company expanded its footprint and distribution capabilities in the mid-western United States.

The Transaction resulted in the Company acquiring the assets noted above, for a total consideration of $76.5 million, of which $71.7 million was cash consideration and $4.8 million related to 516,041 shares of the Company's common stock issued to the Seller. The fair value of the 516,041 shares issued was determined based on the closing market price of the Company’s common stock on April 29, 2022, the last trading day prior to the Acquisition Date. At the Acquisition Date, the Transaction was funded with net borrowings of $64.0 million made under the Company's asset-based lending facility ("ABL Facility") provided by JPMorgan Chase Bank. An additional $7.9 million was funded by the ABL Facility during the quarter ended September 30, 2022 to pay the final net working capital adjustment.

The Transaction was accounted for using the acquisition method of accounting, in accordance with Topic 805, Business Combinations, whereby the consideration transferred and the acquired identifiable assets and liabilities assumed are recorded at their respective fair values. The excess of the consideration transferred over the fair values of these identifiable net assets is recorded as goodwill. The Transaction resulted in no residual goodwill. The estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the Acquisition Date to estimate the fair value of assets acquired and liabilities assumed. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant. The Company expects to finalize its fair value estimates as soon as practicable but no later than one year from the Acquisition Date.

Fair value of assets acquired and liabilities assumed
Inventory	$	77,546,000
Property, plant and equipment		18,022,000
Operating lease right-of-use asset		1,237,097
Accounts payable		(19,065,000	)
Operating lease liability		(1,237,097	)
Total	$	76,503,000

The following unaudited pro forma consolidated operating results give effect to the Transaction as if it had been completed as of April 1, 2021. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if the Transaction had occurred on such date. The pro forma adjustments are based on certain assumptions that we believe are reasonable.

	Three Months Ended September 30,					Six Months Ended September 30,
	2022			2021		2022		2021
Net sales	$	149,692,409		$	156,012,863	$	330,895,932	$	269,156,632
Earnings from operations	$	(298,575	)	$	20,599,821	$	11,309,807	$	34,987,712

Our consolidated statements of operations for the three month and six month periods ended September 30, 2022, include net sales of approximately $69.4 million and $123 million, respectively, and earnings from operations of approximately $1.5 million and $5.7 million, respectively, attributable to the East Chicago and Granite City facilities acquired from Plateplus. At the Acquisition Date, the Company acquired the inventory on hand at Plateplus' Houston and Loudon facilities and also assumed inventory on order related to these locations. Plateplus provided toll processing services for this material for a period of time following the Acquisition Date with these services having concluded by August 31, 2022. In addition to the East Chicago and Granite City sales and earnings from operations, our consolidated statements of operations for the three month and six month periods ended September 30, 2022, include net sales of approximately $14.7 million and $43.4 million, respectively, and a loss from operations of approximately $1.7 million for the three months ended September 30, 2022 and earnings from operations of approximately $300,000 for the six months ended September 30, 2022 attributable to sales of inventory from Houston and Loudon where the fixed assets were not acquired. The Company recorded transaction specific costs of approximately $460,000 and $1,212,000 in the three month and six month periods ended September 30, 2022 as a component of "Selling, general and administrative" expenses on the Condensed Consolidated Statements of Operations. Information about the debt issuance costs associated with the acquisition financing is provided in Note D.