Business Combinations

12 Months Ended

Aug. 31, 2012

Business Combinations [Abstract]

Business Combinations

Business Combinations

During fiscal 2012, the Company made the following acquisitions:

• In June 2012, the Company acquired substantially all of the assets of Rocky Mountain Salvage, Ltd., a metals recycler in Hinton, Alberta, which expanded MRB’s presence in Western Canada.

The acquisition completed in fiscal 2012 was not material to the Company’s financial position or results of operations. Pro forma operating results for the fiscal 2012 acquisition is not presented, since the aggregate results would not be significantly different than reported results.

During fiscal 2011, the Company made the following acquisitions:

• In September 2010, the Company acquired substantially all of the assets of SOS Metals Island Recycling, LLC, a metals recycler in Maui, Hawaii, to provide an additional source of scrap metal for the MRB Hawaii facility.

• In November 2010, the Company acquired substantially all of the assets utilized by Specialized Parts Planet, Inc. at its Stockton, California used auto parts facility, which expanded APB’s presence in the Western U.S.

• In December 2010, the Company acquired substantially all of the assets of Waco U-Pull It, Inc., a used auto parts store in Waco, Texas, which expanded APB’s presence in the Southwestern U.S.

• In December 2010, the Company acquired substantially all of the assets of Macon Iron & Paper Stock Co., a metals recycler with two yards in Macon, Georgia, which expanded MRB’s presence in the Southeastern U.S.

• In December 2010, the Company acquired substantially all of the assets of Steel Pacific Recycling Inc., a metals recycler with six yards on Vancouver Island, British Columbia, Canada, that previously supplied ferrous scrap to MRB’s Tacoma, Washington facility. This acquisition marked MRB’s initial expansion into Canada.

• In January 2011, the Company acquired substantially all of the assets of State Line Scrap Co., Inc., a metals recycler with one yard in Attleboro, Massachusetts, which expanded MRB’s presence in the Northeastern U.S.

• In January 2011, the Company acquired substantially all of the mobile car crushing assets of Northwest Recycling, Inc., based in Portland, Oregon, which provides scrap metal for MRB’s Portland, Oregon facility.

• In February 2011, the Company acquired substantially all of the assets of Ferrill’s Auto Parts, Inc., a used auto parts business with three stores in Seattle, Washington, which expanded APB’s presence in the Northwestern U.S.

• In March 2011, the Company acquired substantially all of the metals recycling business assets of Amix Salvage & Sales Ltd., which operated four metals recycling yards in British Columbia, Canada and two metals recycling yards in Alberta, Canada that previously supplied ferrous scrap to MRB’s Tacoma, Washington facility. This acquisition expanded MRB’s presence in Western Canada. As part of the consideration paid, the Company issued the seller common shares equal to 20% of the issued and outstanding capital stock of the Company’s acquisition subsidiary.

• In April 2011, the Company acquired substantially all of the assets of American Metal Group, Inc. and certain of its affiliates, a metals recycler with yards in San Jose and Santa Clara, California that previously supplied ferrous scrap to MRB’s Oakland, California facility. This acquisition expanded MRB’s presence in the Western U.S.

The total purchase price of $316 million, comprising $294 million in cash and $22 million in non-cash consideration ($20 million in shares of a subsidiary and $2 million in contingent consideration which was subsequently paid in cash in the third quarter of fiscal 2012) for the acquisitions in fiscal 2011, was allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the date of acquisition. The excess of the aggregate purchase price over the fair value of the identifiable net assets acquired of $253 million was recorded as goodwill, of which $245 million is expected to be deductible for tax purposes.

The following unaudited pro forma summary presents the effect on the consolidated financial results of the Company of the businesses acquired during the year ended August 31, 2011 as though the businesses had been acquired as of the beginning of fiscal 2010 (in thousands):

	2011		2010
Revenues	$	3,539,677	$	2,466,547
Operating income(1)	$	204,613	$	149,328
Net income(1)	$	134,921	$	82,481
Net income attributable to SSI(1)	$	127,954	$	78,106

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(1) Excludes nonrecurring executive compensation paid to the management of acquired companies that will not be incurred in the future.

These pro forma results are not necessarily indicative of what actual results would have been had these acquisitions occurred for the periods presented. In addition, the pro forma results are not intended to be a projection of future results and do not reflect any synergies that may be achieved from combining operations.

During fiscal 2010, the Company made the following acquisitions:

• In October 2009, the Company acquired substantially all of the assets of four of LKQ Corporation’s self-service used auto parts stores located near MRB’s export facility in Portland, Oregon. This acquisition represented the Company’s first used auto parts operations in the Pacific Northwest.

• In January 2010, the Company acquired substantially all of the assets of two of LKQ Corporation’s self-service used auto parts stores, which increased to four the number of used auto parts stores that the Company operates in the Dallas-Fort Worth area.

• In April 2010, the Company acquired substantially all of the assets of Golden Recycling and Salvage, Inc., a metals recycler in Montana, to provide an additional source of scrap metal for MRB’s Tacoma, Washington export facility.

The total purchase price of $41 million in cash for the acquisitions in fiscal 2010 was allocated to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the date of acquisition. The excess of the aggregate purchase price over the fair value of the identifiable net assets acquired of $27 million was recorded as goodwill, which is expected to be deductible for tax purposes.

The acquisitions completed in fiscal 2010 were not material, individually or in the aggregate, to the Company’s financial position or results of operations. Pro forma operating results for the fiscal 2010 acquisitions are not presented, since the aggregate results would not be significantly different than reported results.

The following is a summary of the aggregate fair values of assets acquired and liabilities assumed for acquisitions completed during the year ended August 31, 2011 (in thousands):

Assets:	2011
Cash and cash equivalents	$	285
Accounts receivable	5,490
Inventories	21,794
Prepaid expenses and other current assets	777
Deferred tax assets	2,499
Property, plant and equipment	58,811
Intangible assets	7,182
Other assets	16
Goodwill	253,336
Liabilities:
Short-term liabilities	(22,223		)
Environmental liabilities	(9,083		)
Long-term debt and capital lease obligations	(1,222		)
Deferred tax liability - long-term	(1,646		)
Net assets acquired(1)	$	316,016

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(1) The acquisitions completed in fiscal 2012 and 2010 were not material, individually or in the aggregate, to the Company’s financial position or results of operations.

The following table presents the fair value of intangible assets acquired with the acquisitions completed during the year ended August 31, 2011 (dollars in thousands):

	Weighted Average Life In Years	Gross Carrying Amount
Covenants not to compete	4.8	$	6,062
Other intangible assets subject to amortization(1)	1.5	863
Indefinite-lived intangible assets(2)	Indefinite	257
Total	4.4	$	7,182

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(1) Other intangible assets subject to amortization include supply contracts, permits and licenses and leasehold interests.

(2) Indefinite-lived intangible assets include tradenames and real property options.

The Company paid a premium (i.e., goodwill) over the fair value of the net tangible and identified intangible assets acquired in the transactions described above for a number of reasons, including but not limited to the following:

• The Company will benefit from the assets and capabilities of these acquisitions, including additional resources, skills and industry expertise;

• The acquired businesses increase the Company’s market presence in new and existing regions; and

• The Company anticipates cost savings, efficiencies and synergies.