Business Acquisition

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Business Acquisition

Business Acquisitions

The Company's acquisitions are accounted for as purchases in accordance with ASC Topic 805, Business Combinations. Tangible assets and liabilities and identifiable intangible assets were adjusted to fair values at the acquisition date with the remainder of the purchase price, if any, recorded as goodwill. Operating results of these acquisitions are included in the Company's Consolidated Financial Statements from the date of acquisition and are not significant to the Company's consolidated operating results such that pro-forma disclosures are required.

2015 Business Acquisitions

On May 18, 2015, the Company purchased Kay Flo Industries, Inc. and certain subsidiaries. The Company acquired 100% of the outstanding shares of Kay Flo Industries, Inc. In connection with the acquisition, the Company agreed to pay contingent consideration based on the achievement of specified objectives, including reaching targeted gross profit thresholds. The range of undiscounted amounts the Company could be required to pay under the contingent consideration arrangement is between $0 and $24 million.

The total fair value of consideration for the acquisitions is $129.4 million, including working capital and $0.4 million in estimated fair value of the contingent consideration arrangement. The Company has funded this transaction with long-term debt, short-term debt, and cash on hand. The debt has been drawn from the Company's existing line of credit.


The purchase price has been adjusted for additional payments to the sellers of $4.0 million, which includes the final determination of working capital and other payments pursuant to the purchase agreement. The purchase price allocation has been finalized and is summarized below:

(in thousands)
Cash	$	880
Accounts receivable	14,699
Inventory	25,094
Other assets	6,155
Intangibles	53,091
Goodwill	47,735
Property, plant, and equipment	27,478
Accounts payable	(12,131		)
Other current liabilities	(4,866		)
Other non-current liabilities	(28,706		)
Total purchase price	$	129,429

The goodwill recognized as a result of the Kay Flo Industries, Inc. acquisition is $47.7 million and is allocated to the Plant Nutrient segment. The goodwill is not deductible for tax purposes. The goodwill recognized is primarily attributable to expansion of the segment's geographic range and the ability to realize synergies from the combination of product lines and marketing efforts.

Details of the intangible assets acquired are as follows:

(in thousands)	Fair Value		Useful Life
Unpatented technology	$	13,400	10 years
Customer relationships	22,800		10 years
Trade names	15,500		7 to 10 years
Noncompete agreement	1,342		5 years
Favorable leasehold interest	49		5 years
Total identifiable intangible assets	$	53,091	10 years *

*weighted average number of years

Prior Years Business Acquisitions

The cash spending in 2014 on the acquisitions of businesses, net of cash acquired was $20.0 million.

On October 7, 2014, the Company purchased Auburn Bean and Grain, which included six grain and four agronomy assets. The Company acquired 100% of the outstanding shares of Auburn Bean and Grain, in related transactions valued at an aggregate purchase price of $60.9 million. The purchase occurred in two transactions. For the shares of Auburn Bean and Grain, the Company paid $5.0 million in cash and approximately 637 thousand unregistered shares of the Company's common stock, valued at $35.5 million. Included in these amounts are approximately 80 thousand shares, valued at $4.5 million for an adjustment to working capital to be paid in 2015. The Company also paid $20.4 million in cash for certain facilities previously leased by Auburn Bean and Grain. The purchase provides combined grain storage capacity of approximately: 18.1 million bushels, 16.0 thousand tons of dry and 3.7 million gallons of liquid nutrient capacity. The purchase price allocation was finalized in 2015 with no significant changes to the previously disclosed allocation.

The summarized purchase price allocation is as follows:

(in thousands)
Cash	$	12,491
Accounts receivable	9,012
Inventory	5,798
Other assets	2,665
Intangibles	9,250
Goodwill	11,236
Property, plant, and equipment	41,692
Accounts payable	(3,419		)
Commodity derivative liabilities	(2,733		)
Other current liabilities	(1,281		)
Long-term debt	(12,577		)
Other non-current liabilities	(11,239		)
Total purchase price	$	60,895

The goodwill recognized as a result of the Auburn Bean and Grain acquisition was $11.2 million, with $5.7 million included in the Grain reportable segment and $5.5 million included in the Plant Nutrient reportable segment. This goodwill was written off in Q4 2015 as part of the impairment recognized in the Grain and Plant Nutrient groups. Approximately $3.9 million of this goodwill was deductible for tax purposes. See Note 4 for additional information on the impairment. In addition to the increased capacity noted above, the acquisition enhances the Company's presence in Michigan, which is a core geographic state, and includes rail interchange agreements already in place with all of the eastern U.S. Class I railroads.

Details of the intangible assets acquired are as follows:

(in thousands)	Fair Value		Useful Life
Supplier relationships	$	4,620	10 years
Customer relationships	$	3,450	10 years
Trade name	$	860	10 years
Noncompete agreement	$	320	1 to 5 years
Total identifiable intangible assets	$	9,250	10 years *

*weighted average number of years

The Company also completed various individually insignificant acquisitions in 2014 for a combined purchase price of $7.2 million.