Note 2 - Acquisition of Chicago Tube and Iron Company

12 Months Ended

Dec. 31, 2012

Business Combination Disclosure [Text Block]

2.     Acquisition of Chicago Tube and Iron Company:

On July 1, 2011, the Company acquired all of the outstanding common shares of CTI pursuant to the terms of an Agreement and Plan of Merger (the “Merger Agreement”) dated May 18, 2011.  CTI stocks, processes and fabricates metal tubing, pipe, bar, valves and fittings and pressure parts at nine operating facilities located primarily throughout the Midwestern United States.  The Company paid goodwill in conjunction with the acquisition, as CTI enhances the Company’s commercial opportunities by adding new product offerings to an expanded customer base and by increasing our distribution footprint.

Concurrent to entering into the Merger Agreement, the Company also entered into the McNeeley Purchase Agreement, dated as of May 18, 2011 (the “McNeeley Purchase Agreement”), with Dr. McNeeley.  Pursuant to the terms of the McNeeley Purchase Agreement, the Company agreed to pay $5,000 to Dr. McNeeley (the “McNeeley Payment”) as a condition precedent to the Company’s acquisition of CTI.

The McNeeley Payment was made at the date of closing of the acquisition and there were no additional employment or performance contingencies tied to the McNeeley Payment.  Although Dr. McNeeley entered into a post-acquisition employment agreement with CTI (as a subsidiary of the Company), Dr. McNeeley could have terminated such employment at any time after the closing (or never have remained a CTI employee) and still have retained the McNeeley Payment.  Pursuant to the accounting guidance in ASC 805-10-55-25, the McNeeley Payment has been accounted for as additional consideration and part of the purchase price as there are no requirements for continuing employment, and Dr. McNeeley’s post-acquisition compensation is at a reasonable level to that of other key employees and specifically identified in his employment agreement.

The Company paid total cash consideration of $159,856, consisting of a base purchase price of $150,000, plus the closing cash, working capital and McNeeley purchase agreement payments (as disclosed in the Current Report on Form 8-K filed on May 18, 2011)  totaling approximately $9,856.  In addition, the Company assumed approximately $5,880 of indebtedness and acquired $11,097 of cash from CTI.  Olympic funded its acquisition of CTI primarily with borrowings under its asset-based credit facility.  During 2011, the Company incurred $919 of direct acquisition-related costs, which are included in “Administrative and general” in the Consolidated Statement of Operations for the year ended December 31, 2011.

Pro Forma Financial Information

The following unaudited pro forma summary of financial results presents the consolidated results of operations as if the CTI acquisition had occurred on January 1, 2010, after the effect of certain adjustments, including increased depreciation expense resulting from recording fixed assets at fair value, interest expense on the acquisition debt and amortization of customer relationships, with the related tax effects.  The pro forma results for the year ended December 31, 2010 include $1,338 of transactions costs and other non-recurring acquisition related expenses.  The pro forma results for the year ended December 31, 2011 exclude $3,620 of transaction costs and other non-recurring acquisition related expenses.  The pro forma results have been presented for comparative purposes only and are not indicative of what would have occurred had the acquisition been made on January 1, 2010, or of any potential results that may occur in the future.

	Year Ended
	December 31, 2011		December 31, 2010
(in thousands, except per share amounts)
Pro forma (unaudited):
Net sales	$	1,381,760	$	991,773
Net income	$	28,328	$	3,077
Basic earnings per common share	$	2.59	$	0.28
Diluted earnings per common share	$	2.59	$	0.28