Quarterly report pursuant to Section 13 or 15(d)

Acquisition

v3.21.2
Acquisition
 9 Months Ended
Sep. 30, 2021
Business Combinations [Abstract]  
Chem32 Acquisition
7. Acquisition:
On March 1, 2021 (the “Closing Date”), the Company completed the acquisition of Chem32, LLC (“Chem32”) as part of a stock transaction (the “Acquisition”) for $44,000 in cash. The net cash paid on the Closing Date by the Company was $41,994, after certain customary adjustments for indebtedness, working capital, cash and a holdback amount pursuant to the agreement. Based in Orange, Texas, Chem32 is a leader in ex situ pre-sulfiding and pre-activation for hydro-processing catalysts.
The Acquisition was accounted for using the acquisition method of accounting. Under the acquisition method, the purchase price was allocated to the identifiable net assets acquired based on the fair values of the identifiable assets acquired and liabilities assumed as of the Closing Date. The excess of the purchase price over fair values of the identifiable net assets acquired was recorded to goodwill.
The following table sets forth the calculation of the purchase price to the identifiable net assets acquired with respect to the Acquisition, which was substantially complete as of September 30, 2021:
Provisional Purchase
Price Allocation		 Adjustments Purchase
Price Allocation
Cash paid, net of cash acquired $ 41,994  $ 788  $ 42,782 
Holdback 2,000  (1,000) 1,000 
Total consideration, net of cash acquired $ 43,994  $ (212) $ 43,782 
Recognized amounts of identifiable assets acquired and liabilities assumed:
Receivables $ 1,368  $ —  $ 1,368 
Inventories 204  —  204 
Prepaid and other current assets 351  —  351 
Property, plant and equipment 5,046  —  5,046 
Other intangible assets —  22,100  22,100 
Other long-term assets 38  153  191 
Fair value of assets acquired 7,007  22,253  29,260 
Accounts payable 207  —  207 
Accrued liabilities 452  (264) 188 
Fair value of net identifiable assets acquired 6,348  22,517  28,865 
Goodwill 37,646  (22,729) 14,917 
  $ 43,994  $ (212) $ 43,782 
   
In accordance with the requirements of the purchase method of accounting for acquisitions, accounts receivable and inventories were recorded at fair market value. As of the Closing Date, the fair value of accounts receivable approximated historical cost. The gross contractual amount of accounts receivable at the Closing Date was $1,368, of which there was no amount deemed uncollectible. Fair value of inventory is defined as estimated selling prices less the sum of (a) costs of disposal and (b) a reasonable profit allowance for the selling effort of the acquiring entity, which the Company determined acquired cost equalled fair value of the inventory acquired.
The Company’s cost of goods sold for the three and nine months ended September 30, 2021 includes a pre-tax charge of $148 of additional amortization expense related to identified intangible assets, which would have been recorded during the reporting period if the adjustments to the provisional amounts had been recognized as of the Closing Date. The Company’s other operating expense, net for the three and nine months ended September 30, 2021 includes a pre-tax charge of $1,108 of additional amortization expense related to identified intangible assets, which would have been recorded during the reporting period if the adjustments to the provisional amounts had been recognized as of the Closing Date.
The valuation of intangibles assets acquired and the related weighted-average amortization periods are as follows:
Amount Weighted-Average
Expected Useful Life
(in years)
Intangible assets subject to amortization:
Customer relationships $ 16,000  10
Technical know-how 3,800  10
Contracts 700  5
Trade names 1,600  10
Total intangible assets subject to amortization $ 22,100 
The Company’s condensed consolidated financial statements include Chem32’s results of operations from the Closing Date through September 30, 2021. Net sales and net income attributable to Chem32 during this period are included in the Company’s condensed consolidated statement of income and are immaterial for the periods presented. Pro forma financial information has not been presented as it is immaterial for the three and nine months ended September 30, 2021 and 2020.
The Company believes that the Acquisition will enable it to offer a more robust portfolio of services within the refining industry leveraging the Company’s existing relationships, which contributed to a total purchase price that resulted in the recognition of goodwill. The Company assigned all of the goodwill to the Ecoservices segment. The goodwill associated with the Acquisition is deductible for tax purposes.