Note N — Acquisitions

Fiscal 2012

PSI Energy Solutions

On March 22, 2012, we acquired a 75% ownership interest in PSI Energy Solutions, LLC (“PSI”) for cash consideration of $7,000,000. PSI is a professional services firm that develops cost-effective energy solutions for public and private entities throughout North America. The acquired net assets became part of our Global Group operating segment upon closing and will be reported in the “Other” category for segment reporting purposes.

The assets acquired and liabilities assumed were recognized at their acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of PSI, we identified and valued the following identifiable intangible assets:


(in thousands)	Amount		Useful Life (Years)
Category	Amount		Useful Life (Years)
Customer relationships	$	1,540		15-20
Non-compete agreement		180		3
Other		1,670		10

Total acquired identifiable intangible assets	$	3,390

The purchase price includes the fair values of other assets that were not identifiable, not separately recognizable under accounting rules (e.g., assembled workforce) or of immaterial value. The purchase price also includes a going-concern element that represents our ability to earn a higher rate of return on the group of assets than would be expected on the separate assets as determined during the valuation process. This additional investment value resulted in goodwill, which is expected to be deductible for income tax purposes.

The following table summarizes the consideration transferred for PSI and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date:


(in thousands)
Accounts receivable	$	784
Inventories		407
Intangible assets		3,390
Property, plant and equipment		66

Total identifiable assets		4,647
Accounts payable		(528	)
Accrued liabilities		(437	)

Net identifiable assets		3,682
Goodwill		5,651

Net assets		9,333
Noncontrolling interest		(2,333	)

Total consideration paid	$	7,000

Operating results of PSI have been included in our consolidated statements of earnings from the acquisition date, forward. Pro forma results, including the acquired business since the beginning of fiscal 2012 or fiscal 2011, would not be materially different than reported results.

Angus

On December 29, 2011, we acquired 100% of the outstanding economic interests of Angus for cash consideration of approximately $132,940,000 and the assumption of approximately $47,324,000 of debt, of which $44,341,000 was repaid prior to quarter-end. Additionally, we issued 382,749 restricted common shares to certain former employees of Angus who became employees of Worthington upon closing. These restricted common shares, which vest over a period of one or three years, had a grant-date fair value of approximately $6,300,000. Of this amount, approximately $1,100,000 was attributed to the purchase price. The remaining $5,200,000 will be recognized as stock-based compensation expense on a straight-line basis over the applicable service period. Angus designs and manufactures high-quality, custom-engineered open and closed cabs and operator stations for a wide range of heavy mobile equipment. The acquired net assets and related operations of Angus are included in our recently-formed operating segment, Engineered Cabs. In connection with the acquisition of Angus, we incurred approximately $780,000 of acquisition-related costs, which have been expensed as incurred and recognized within SG&A expense in our consolidated statements of earnings.

The assets acquired and liabilities assumed were recognized at their acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of Angus, we identified and valued the following identifiable intangible assets:


(in thousands)	Amount		Useful Life (Years)
Category	Amount		Useful Life (Years)
Trade name	$	19,100		Indefinite
Customer relationships		32,200		10-15
Non-compete agreement		640		3
Other		963		9

Total acquired identifiable intangible assets	$	52,903

The following table summarizes the consideration transferred for Angus and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date:


(in thousands)
Cash and cash equivalents	$	2,540
Accounts receivable		16,515
Inventories		22,865
Prepaid expenses and other current assets		1,281
Deferred income taxes		398
Intangible assets		52,903
Other noncurrent assets		74
Property, plant and equipment		57,570

Total identifiable assets		154,146
Accounts payable		(9,581	)
Accrued liabilities		(7,483	)
Other current liabilities		(948	)
Long-term debt and other short-term borrowings		(47,324	)

Net identifiable assets		88,810
Goodwill		45,230

Total consideration transferred	$	134,040

Operating results of Angus have been included in our consolidated statements of earnings from the acquisition date, forward, and are disclosed in “Note M – Segment Operations.”

Pro forma net sales and net earnings of the combined entity had the acquisition occurred on June 1, 2010, are summarized as follows:


(unaudited, in thousands)	Net sales		Net earnings
Supplemental pro forma from June 1, 2011—May 31, 2012	$	2,667,478	$	138,250
Supplemental pro forma from June 1, 2010—May 31, 2011		2,573,251		128,191

Supplemental pro forma earnings for fiscal 2012 were adjusted to exclude $508,000 of acquisition-related costs and $2,347,000 of non-recurring expense related to the fair value adjustment to acquisition-date inventory. Supplemental pro forma earnings for fiscal 2011 were adjusted to include these charges.

Coleman Cylinders

On December 1, 2011, we acquired the propane fuel cylinders business of The Coleman Company, Inc. (“Coleman Cylinders”) for cash consideration of approximately $22,653,000. The acquired net assets became part of our Pressure Cylinders operating segment upon closing of the transaction. Subsequent to closing, we received a request from the Federal Trade Commission, asking us to provide, on a voluntary basis, certain information related to the acquisition and the industry as it conducts a preliminary investigation into the transaction. The acquisition fell below the threshold for pre-merger notification under the Hart-Scott-Rodino Act.

The assets acquired and liabilities assumed were recognized at their acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of Coleman Cylinders, we identified and valued the following identifiable intangible assets:


(in thousands)	Amount		Useful Life (Years)
Category	Amount		Useful Life (Years)
Customer relationships	$	4,400		15
Non-compete agreement		160		5

Total acquired identifiable intangible assets	$	4,560

Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to us, which resulted in a purchase price in excess of the fair value of identifiable net assets. The purchase price also includes a going-concern element that represents our ability to earn a higher rate of return on the group of assets than would be expected on the separate assets as determined during the valuation process. This additional investment value resulted in goodwill, which is expected to be deductible for income tax purposes.

The following table summarizes the consideration transferred for Coleman Cylinders and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date:


(in thousands)
Inventories	$	6,456
Intangible assets		4,560
Property, plant and equipment		9,726

Total identifiable assets		20,742
Accounts payable		(3,719	)
Accrued liabilities		(258	)

Net identifiable assets		16,765
Goodwill		5,888

Total consideration paid	$	22,653

Operating results of Coleman Cylinders have been included in our consolidated statements of earnings from the acquisition date, forward. Pro forma results, including the acquired business since the beginning of fiscal 2012 or fiscal 2011, would not be materially different than reported results.

STAKO

On September 30, 2011, we completed the acquisition of Poland-based STAKO sp.Z o.o. (“STAKO”) for cash consideration of approximately $41,500,000. STAKO manufactures liquefied natural gas, propane and butane fuel tanks for use in passenger cars, buses and trucks. The acquired business became part of our Pressure Cylinders operating segment upon closing of this transaction.

The assets acquired and liabilities assumed were recognized at their acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of STAKO, we identified and valued the following identifiable intangible assets:


(in thousands)	Amount		Useful Life (Years)
Category	Amount		Useful Life (Years)
Trade name	$	1,500		10
Customer relationships		2,500		10-15
Non-compete agreement		400		3

Total acquired identifiable intangible assets	$	4,400

The following table summarizes the consideration transferred for STAKO and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date:


(in thousands)
Cash and cash equivalents	$	2,715
Accounts receivable		4,175
Inventories		6,208
Other current assets		75
Intangible assets		4,400
Other noncurrent assets		60
Property, plant and equipment		23,770

Total identifiable assets		41,403
Accounts payable		(2,813	)
Accrued liabilities		(750	)
Other liabilities		(2,182	)
Deferred income taxes		(2,384	)

Net identifiable assets		33,274
Goodwill		8,226

Total consideration paid	$	41,500

Operating results of STAKO have been included in our consolidated statements of earnings from the acquisition date, forward. Pro forma results, including the acquired business since the beginning of fiscal 2012 or fiscal 2011, would not be materially different than reported results.

Bernz

On July 1, 2011, we purchased substantially all of the net assets of Bernz (excluding accounts receivable) from Irwin Industrial Tool Company, a subsidiary of Newell Rubbermaid, Inc., for cash consideration of approximately $41,000,000. Bernz is a leading manufacturer of hand held torches and accessories. The acquired net assets became part of our Pressure Cylinders operating segment upon closing of the transaction.

As more fully described in “NOTE D – Contingent Liabilities,” in connection with this purchase transaction, both parties agreed to settle their litigation. In accordance with the applicable accounting guidance for the settlement of a pre-existing relationship between parties to a business combination, we recognized a settlement gain equal to the amount by which our previously recorded reserve exceeded the estimated fair value of the settlement. The components of the settlement gain are summarized in the following table:


(in thousands)
Reserve	$	14,402
Less: Fair value of settlement		(10,000	)

Settlement gain	$	4,402

The settlement gain was recognized within SG&A expense in our fiscal 2012 consolidated statement of earnings to correspond with the classification of the reserves previously recognized in connection with this matter. An income approach that incorporated market participant assumptions regarding the estimate of future cash flows and the possible variations among those cash flows was used to measure fair value. In accordance with the accounting guidance for a business combination, the fair value of the settlement feature was excluded from the fair value of the consideration transferred for purposes of the purchase price allocation.

The assets acquired and liabilities assumed were recognized at their acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of Bernz, we identified and valued the following identifiable intangible assets:


(in thousands)	Amount		Useful Life (Years)
Category	Amount		Useful Life (Years)
Trade name	$	8,481		Indefinite
Customer relationships		10,473		9-13
Non-compete agreements		2,268		5

Total acquired identifiable intangible assets	$	21,222

Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to us, which resulted in a purchase price in excess of the fair value of identifiable net assets. The purchase price also includes the fair values of other assets that were not identifiable, not separately recognizable under accounting rules (e.g., assembled workforce) or of immaterial value in addition to a going-concern element that represents our ability to earn a higher rate of return on the group of assets than would be expected on the separate assets as determined during the valuation process. This additional investment value resulted in goodwill, which is expected to be deductible for income tax purposes.

The following table summarizes the consideration transferred for Bernz and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date:


(in thousands)
Inventories	$	15,313
Intangible assets		21,222
Property, plant and equipment		7,884

Total identifiable assets		44,419
Accounts payable		(6,167	)
Accrued liabilities		(868	)

Net identifiable assets		37,384
Goodwill		3,616

Total consideration paid	$	41,000

Operating results of Bernz have been included in our consolidated statements of earnings from the acquisition date, forward. Pro forma results, including the acquired business since the beginning of fiscal 2012 or fiscal 2011, would not be materially different than reported results.

Fiscal 2011

MISA Metals, Inc.

On March 1, 2011, we acquired, as partial consideration for the contribution of our metal framing business to ClarkDietrich, the net assets of certain MMI steel processing locations (the “MMI acquisition”). The acquired net assets became part of our Steel Processing operating segment upon closing of the transaction. During the fourth quarter of fiscal 2012, we sold the steel processing assets of two of the three acquired facilities.

As discussed in “Note A – Summary of Significant Accounting Policies,” in accordance with the accounting guidance for the deconsolidation of a subsidiary, the consideration received, including the steel processing assets of MMI, was recognized at fair value. Accordingly, the enterprise fair value of the acquired business, or $72,600,000, represents the purchase price for purposes of applying the purchase price allocation prescribed by the applicable accounting guidance. The assets acquired and liabilities assumed were recognized at their acquisition-date fair values. Intangible assets, consisting of customer relationships, are being amortized over their estimated useful life of 15 years.

The following table summarizes the consideration paid and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date:


(in thousands)
Accounts receivable	$	24,470
Inventories		40,262
Other current assets		7,426
Intangible assets		300
Property, plant and equipment, net		16,319

Total assets		88,777
Accounts payable		(15,062	)
Accrued liabilities		(1,115	)

Identifiable net assets		72,600
Goodwill		-

Total purchase price	$	72,600

Nitin Cylinders Limited

On December 28, 2010, we acquired a 60% ownership interest in India-based Nitin Cylinders Limited for approximately $21,236,000 in cash to expand our presence in the alternative fuels cylinder market. Upon execution of the purchase agreement, the name of the company was changed to Worthington Nitin Cylinders Limited (“WNCL”), which operates as a consolidated joint venture due to our controlling financial interest. WNCL is a manufacturer of high-pressure, seamless steel cylinders for compressed industrial gases and compressed natural gas storage in motor vehicles. The acquired net assets became part of our Pressure Cylinders operating segment upon closing of this transaction.

The assets acquired and liabilities assumed were recognized at their acquisition-date fair values, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. In connection with the acquisition of WNCL, we identified and valued the following intangible assets:


(in thousands)	Amount		Average Life (Years)
Category	Amount		Average Life (Years)
Trade name	$	850		Indefinite
Customer relationships		160		15-20
Other		230		1-10

Total acquired intangible assets	$	1,240

Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to us, which resulted in a purchase price in excess of the fair value of identifiable net assets. Since the fair values assigned to the acquired assets could only assume strategies and synergies of market participants, that additional investment value specific to us was included in goodwill. The purchase price included fair values of other assets that were not identifiable, not separately recognizable under accounting rules (e.g., assembled workforce) or of immaterial value. Goodwill recorded in connection with this acquisition is not expected to be deductible for income tax purposes.

The following table summarizes the consideration paid and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date, as well as the acquisition-date fair value of the noncontrolling interest:


(in thousands)
Cash and cash equivalents	$	1,721
Accounts receivable		2,499
Inventories		9,916
Other current assets		652
Intangible assets		1,240
Property, plant and equipment		14,450

Total identifiable assets		30,478
Accounts payable		(1,227	)
Accrued liabilities		(41	)
Deferred income taxes		(992	)

Net identifiable assets		28,218
Goodwill		7,174

Net assets		35,392
Noncontrolling interest		(14,156	)

Total consideration paid	$	21,236

Hy-Mark Cylinders, Inc.

On June 21, 2010, we acquired the assets of Hy-Mark Cylinders, Inc. (“Hy-Mark”) for cash of $12,175,000. Hy-Mark manufactured extruded aluminum cylinders for medical oxygen, scuba, beverage service, industrial, specialty, and professional racing applications. The acquired net assets became part of our Pressure Cylinders operating segment upon closing of this transaction. The assets of Hy-Mark were relocated to our pressure cylinders facility located in Mississippi subsequent to the acquisition date.

The assets acquired and liabilities assumed were measured and recognized based on their estimated fair values at the date of acquisition, with goodwill representing the excess of the purchase price over the fair value of the net identifiable assets acquired. Intangible assets, consisting mostly of customer lists, will be amortized on a straight-line basis over their estimated useful life of nine years.

Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to us, which resulted in a purchase price in excess of the fair value of identifiable net assets. Since the fair values assigned to the acquired assets could only assume strategies and synergies of market participants, that additional investment value specific to us was included in goodwill. The purchase price included fair values of other assets that were not identifiable, not separately recognizable under accounting rules (e.g., assembled workforce) or of immaterial value. Goodwill recorded in connection with this acquisition is expected to be deductible for income tax purposes.

The following table summarizes the consideration paid and the fair value assigned to the assets acquired and liabilities assumed at the acquisition date:


(in thousands)
Inventories	$	3,053
Intangible assets		2,660
Property, plant and equipment		2,100

Identifiable net assets		7,813
Goodwill		4,362

Total purchase price	$	12,175