Note B - Business Combinations

3 Months Ended

Jun. 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 and Decatur, AL and the Sinton, TX location where construction is concluding. 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 all the ownership interests in the assets noted above, for a total consideration of $76.5 million, of which $71.7 million was cash consideration (inclusive of a final net working capital adjustment of $7.9 million accrued and reported as a component of "Accounts payable and accrued expenses" on the Condensed Consolidated Balance Sheet at June 30, 2022) and $4.8 million related to 516,041 shares of common stock issued by the Company. 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 subsequent to June 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
Accounts payable	(19,065,000)
Total	$        76,503,000

In addition to the above, the Company recognized an initial right-of-use ("ROU") asset and lease liability of $1,237,097 during the June 30, 2022 quarter related to the Granite City location. Additional information about this lease is provided in Note E.

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 June 30
		2022		2021
Net sales	$	181,203,523	$	113,143,769
Earnings from operations	$	11,608,382	$	14,387,891

Our consolidated statement of operations for the period ended June 30, 2022, includes net sales and earnings from operations of approximately $53.6 million and $4.3 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. In addition to the East Chicago and Granite City sales and earnings from operations, our consolidated statement of operations for the period ended June 30, 2022, includes net sales and earnings from operations of approximately $28.6 million and $2.1 million, respectively, attributable to sales of inventory from Houston and Loudon where the fixed assets were not acquired. The Company recorded transaction specific costs of approximately $750,000 million in the period ended June 30, 2022 as a component of "Selling, general and administrative" expenses on the Condensed Consolidated Statement of Operation. Additional information about the debt issuance costs is provided in Note D.