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Note 3 - Business Combination

9 Months Ended

Jul. 03, 2021

Business Combination Disclosure [Text Block]

(3) Business Combination

On March 16, 2020, we purchased substantially all of the assets of STM for an adjusted purchase price of $19.4 million, reflecting certain post-closing adjustments (the “STM Acquisition”), which included a $1.0 million holdback that was payable one year from the acquisition date.

STM was a leading manufacturer of prestressed concrete strand (“PC strand”) for concrete construction applications. We acquired, among other assets, STM’s accounts receivable, inventories, production equipment and facility located in Summerville, South Carolina, and assumed certain of its accounts payable and accrued liabilities. The STM Acquisition serves to strengthen our competitive position within the PC strand market.

Following is a summary of our final allocation of the adjusted purchase price to the fair values of the assets acquired and liabilities assumed as of the acquisition date:

(In thousands)
Assets acquired:
Accounts receivable	$	3,829
Inventories		3,172
Other current assets		178
Property, plant and equipment		10,919
Intangibles		970
Total assets acquired	$	19,068

Liabilities assumed:
Accounts payable	$	852
Accrued expenses		312
Total liabilities assumed		1,164
Net assets acquired		17,904
Adjusted purchase price		19,356
Goodwill	$	1,452

In connection with the STM Acquisition, we acquired certain intangible assets including customer relationships, a trade name and non-competition agreement. Goodwill associated with the STM Acquisition, which is deductible for tax purposes, consists largely of the synergies we expect to realize through the integration of the acquired assets with our operations.

The STM Acquisition was accounted for as a business purchase pursuant to ASC Topic 805, Business Combinations (“ASC 805”). Under the provisions of ASC 805, acquisition and integration costs are recorded as expenses in the period in which such costs are incurred rather than included as components of consideration transferred.

The following unaudited supplemental pro forma financial information reflects our combined results of operations had the STM Acquisition occurred at the beginning of fiscal 2019. The pro forma information reflects certain adjustments related to the STM Acquisition, including adjusted amortization and depreciation expense based on the fair values of the assets acquired. The pro forma information does not reflect any potential operating efficiencies or cost savings that may result from the STM Acquisition. Accordingly, this pro forma information is for illustrative purposes and is not intended to represent the actual results of operations of the combined company that would have been achieved had the STM Acquisition occurred at the beginning of fiscal 2019, nor is it intended to indicate future results of operations. The pro forma combined results of operations for the three- and nine-month periods ended June 27, 2020 are as follows:

	June 27, 2020
(In thousands)	Three Months Ended		Nine Months Ended
Net sales	$	121,959	$	346,890
Earnings before income taxes		8,531		12,730
Net earnings		6,664		6,447

Restructuring charges. In connection with the STM Acquisition, we elected to consolidate our PC strand operations through the closure of the Summerville facility and the redeployment of its equipment to our other three PC strand production facilities located in Gallatin, Tennessee; Houston, Texas; and Sanderson, Florida. Operations at the Summerville facility ceased during the third quarter of fiscal 2020. Following is a summary of the restructuring activity during the three- and nine-month periods ended July 3, 2021 and June 27, 2020:

(In thousands)	Employee Separation Costs			Equipment Relocation Costs			Facility Closure Costs			Asset Impairments			Total
*2021*
Liability as of October 3, 2020	$	-		$	20		$	151		$	-		$	171
Restructuring charges		13			88			552			4			657
Cash payments		(13	)		(95	)		(669	)		-			(777	)
Non-cash charges		-			-			-			(4	)		(4	)
Liability as of January 2, 2021		-			13			34			-			47
Restructuring charges		-			286			259			-			545
Cash payments		-			(299	)		(266	)		-			(565	)
Non-cash charges		-			-			-			-			-
Liability as of April 3, 2021		-			-			27			-			27
Restructuring charges		-			35			176			1,387			1,598
Cash payments		-			(35	)		(183	)		-			(218	)
Non-cash charges		-			-			-			(1,387	)		(1,387	)
Liability as of July 3, 2021	$	-		$	-		$	20		$	-		$	20

*2020*
Restructuring charges	$	129		$	-		$	20		$	-		$	149
Cash payments		(4	)		-			-			-			(4	)
Liability as of March 28, 2020		125			-			20			-			145
Restructuring charges		76			16			373			343			808
Cash payments		(124	)		(16	)		(350	)		-			(490	)
Non-cash charges		-			-			-			(343	)		(343	)
Liability as of June 27, 2020	$	77		$	-		$	43		$	-		$	120

During the three months ended July 3, 2021, we committed to a plan to sell the Summerville facility acquired in the STM Acquisition for net consideration of $6.3 million. As a result, we determined as of July 3, 2021, the carrying value of the Summerville facility recorded in assets held for sale exceeded its fair value, less estimated costs to sell, and recorded an impairment of assets held for sale of $1.4 million within restructuring charges on our consolidated statements of operations and comprehensive income for the three- and nine-month periods ended July 3, 2021. As of July 3, 2021 and October 3, 2020, we recorded a liability of $20,000 and $171,000, respectively, for restructuring liabilities in accrued expenses on our consolidated balance sheets. We currently expect to incur approximately $300,000 of additional restructuring charges for facility closure costs.