Acquisitions

On December 31, 2012, the Company acquired substantially all of the assets of Alumco, Inc. and its subsidiaries (Alumco), including its aluminum screen business, for $22.4 million in cash. The purchase agreement contains (1) an earn-out clause that provides for the payment of an additional $0.5 million to Alumco contingent upon the achievement of certain financial targets and (2) a working capital clause that provides for an adjustment to the purchase price based on the working capital balance as of the acquisition date. We estimated the fair value of the contingent consideration to be $0.3 million and accrued it as part of the purchase price. In addition, we reduced the purchase price by approximately $0.4 million to account for the proceeds we expect to receive from Alumco under the terms of the working capital clause.

The purchase price has been allocated to the fair value of the assets acquired and liabilities assumed, as indicated in the table below. The allocation is preliminary and based on estimates and assumptions that are subject to change within the purchase price allocation period (generally one year from the acquisition date). The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of property, plant and equipment and intangible assets.



	As of Date of Opening Balance Sheet
	(In thousands)
Current assets:
Accounts receivable	$	3,638
Inventories	5,062
Prepaid and other current assets	140
Total current assets	8,840
Property, plant and equipment	4,702
Goodwill	2,477
Intangible assets	8,939
Total assets	$	24,958
Current liabilities:
Accounts payable	$	1,816
Accrued liabilities	705
Current maturities of long-term debt	14
Total current liabilities	2,535
Long-term debt	77
Total liabilities	2,612
Investment	22,346
Total liabilities and equity	$	24,958

The Company used recognized valuation techniques to determine the fair value of the assets and liabilities, including the income approach for customer relationships, with a discount rate that reflects the risk of the expected future cash flows. The goodwill balance, which is deductible for tax purposes, resulted primarily from management's expectation that the acquisition will allow Quanex to become a leader in the screen market by expanding its product portfolio and geographic distribution capabilities. The goodwill has been recorded within the Engineered Products segment.

Pro forma results of operations have not been presented because the effect of the Alumco acquisition was not material to our results of operations.