Business Acquisition

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Business Acquisition

2. Business Acquisition

On April 8, 2016, the Company acquired the outstanding shares of Harris Corporation’s composite aerostructures business for cash of $187 million, plus the assumption of certain liabilities. The Company funded the cash payable at closing by utilizing proceeds from a $550 million, unsecured credit facility agreement that was completed April 8, 2016 (see Note 14). The acquired entity is part of the Albany Engineered Composites (“AEC”) segment.

The following table summarizes the provisional allocation of the purchase price to the fair value of the assets and liabilities acquired:

(in thousands)	April 8, 2016
Assets acquired
Accounts receivable	$15,443
Inventories	16,670
Prepaid expenses and other current assets	402
Property, plant and equipment	62,784
Intangibles	71,630
Goodwill	95,730
Total assets acquired	$262,659
Liabilities assumed
Accounts payable	$10,323
Accrued liabilities	2,862
Capital lease obligation	17,560
Deferred income taxes	33,143
Other noncurrent liabilities	11,771
Total liabilities assumed	$75,659
Net assets acquired	$187,000

In the fourth quarter of 2016, the Company identified certain adjustments to the provisional value of acquired assets and liabilities. The adjustments increased goodwill by $28.7 million, amortizable intangible assets by $12.3 million, noncurrent liabilities by $10.4 million, deferred tax liabilities by $7.8 million and other liabilities by $2.6 million. Property plant and equipment was reduced by $18.9 million and other assets were reduced by $1.3 million. The effect of these adjustments on fourth-quarter 2016 income before income taxes was approximately $0.1 million and the effect on earnings per share was negligible. Deferred income taxes and goodwill in the table above were still provisional as of December 31, 2016, because the Company is waiting for information needed to finalize the amounts. Goodwill of $95.7 million reflects that the acquisition broadens and deepens AEC’s products, experience and manufacturing capabilities, and significantly increases opportunities for future growth. The goodwill is non-deductible for tax purposes.

The seller provided representations, warranties and indemnities customary for acquisition transactions, including indemnities for certain customer claims identified before closing.

The following table presents operational results of the acquired entity that are included in the Consolidated Statements of Income:

(in thousands, except per share amounts)	April, 8 to December 31, 2016
Net sales	$67,011
Operating loss	(1,246	)
Loss before income taxes	(2,342	)
Net loss attributable to the Company	(1,495	)
Loss per share:
Basic	($0.05	)
Diluted:	($0.05	)

The Consolidated Statements of Income reflect operational activity of the acquired business for only the period subsequent to the closing, which affects comparability of results. The following table shows total Company pro forma statements of what results would have been if the 2016 acquisition had occurred as of January 1, 2015.

	Unaudited - Pro forma
(in thousands, except per share amounts)	2016		2015
Combined Net sales	$802,023		$786,623
Combined Income before income taxes	$80,639		$52,542
Pro forma increase/(decrease) to income before income taxes:
Acquisition expenses	5,367		-
Interest expense related to purchase price	(1,382	)	(5,133	)
Acquisition accounting adjustments:
Depreciation and amortization on property, plant and equipment, and intangible assets	(1,575	)	(7,875	)
Valuation of contract inventories	1,997		6,908
Interest expense on capital lease obligation	300		1,096
Interest expense on other obligations	(133	)	(533	)
Pro forma Income before income taxes	$85,213		$47,005
Pro forma Net Income attributable to the Company	$57,229		$54,245