Acquisitions

6 Months Ended

Jun. 30, 2011

Acquisitions

Acquisitions

4.  ACQUISITIONS

On April 1, 2011, the Company acquired all of the outstanding stock of The D.S. Brown Company (D.S. Brown).  D.S. Brown is located in North Baltimore, Ohio and is the largest U.S. manufacturer of components for the bridge and highway transportation infrastructure industry including expansion joint systems, bearing assemblies, pavement sealing systems, and other specialty components.  The acquisition of D.S. Brown provides the Company with a diversified product offering to the infrastructure market.  The results of D.S. Brown have been included in the Company's consolidated financial results since the date of acquisition.  The aggregate purchase consideration for the acquisition of D.S. Brown was $97,643,000, net of a working capital adjustment.  The working capital adjustment portion of the aggregate purchase consideration is payable during the third quarter of 2011.  The Company recorded a payable of $1,643,000 to reflect this obligation at its estimated fair value. 

On June 3, 2011, the Company acquired all of the outstanding stock of Pacific Award Metals, Inc. (Award Metals).  Award Metals operates six facilities in Arizona, California, Colorado, and Washington and is a leading regional manufacturer of roof ventilation, roof trims, flashing and rain ware, drywall trims, and specialized clips and connectors for concrete forms used in the new construction and repair and remodel markets.  The acquisition of Award Metals expands the breadth of the Company's product offerings and allows the Company access to new customers.  The results of Award Metals have been included in the Company's consolidated financial results since the date of acquisition.  The fair value of the aggregate purchase consideration for the acquisition of Award Metals was $13,369,000, net of a working capital adjustment.  A portion of the purchase consideration is payable 540 days after the acquisition date.  The Company recorded a payable of $1,744,000 to reflect this obligation.  The acquisitions of D. S. Brown and Award Metals are not considered significant to the Company's results of operations.

The purchase price for each acquisition was allocated to the assets acquired and liabilities assumed based upon their respective fair values.  The excess consideration was recorded as goodwill and approximated $50,598,000, of which $5,241,000 is deductible for tax purposes.  Goodwill represents future economic benefits arising from other assets acquired that could not be individually identified including workforce additions, growth opportunities, and increased presence in the building products markets.  The allocation of purchase consideration to the assets acquired and liabilities assumed is as follows (in thousands):

		D. S. Brown		Award Metals
Working capital	$	16,803	$	4,177
Property, plant, and equipment		14,481		2,794
Intangible assets		33,300		2,101
Other assets		230		75
Other liabilities		(13,441)		(106)
Goodwill		46,270		4,328
Fair value of purchase consideration	$	97,643	$	13,369

  

The acquired intangible assets consisted of unpatented technology and patents with a fair value of $16,560,000 (15 year estimated useful life), trademarks with a fair value of $11,470,000 (indefinite useful life), customer relationships with a fair value of $5,970,000 (16 year useful life), backlog with a fair value of $1,200,000 (1.5 year useful life), and non-compete agreements with a fair value of $201,000 (4 year useful life).

The acquisitions of D.S. Brown and Award Metals were financed through cash on hand and debt available under the Company's revolving credit facility.  The Company incurred certain acquisition-related costs, primarily composed of legal and consulting fees of $224,000 and $614,000 for the three and six months ended June 30, 2011, respectively.  All acquisition-related costs were recognized as a component of selling, general, and administrative expenses on the consolidated statement of operations.  The Company also recognized additional cost of sales of $2,467,000 for the three and six months ended June 30, 2011 related to the recognition of inventory at fair value when allocating the purchase price of the acquisitions.