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Business Acquisition
12 Months Ended
Dec. 31, 2017
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 seller provided representations, warranties and indemnities customary for acquisition transactions, including indemnities for certain customer claims identified before closing. The acquired entity is part of the Albany Engineered Composites (AEC) segment.

 

There were no changes during 2017 to the provisional allocation recorded in 2016. The following table summarizes the 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

 

Goodwill of $95.7 million reflects that the acquisition broadened and deepened AEC’s products, experience and manufacturing capabilities, and significantly increases opportunities for future growth. The goodwill is non-deductible for tax purposes.

 

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

 

(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