|9 Months Ended|
Sep. 30, 2022
|Business Combinations [Abstract]|
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. Based in Orange, Texas, Chem32 is a leader in ex situ pre-sulfiding and pre-activation for hydro-processing catalysts. The net cash paid by the Company was $42,639, after certain customary adjustments for indebtedness, working capital, cash and a holdback amount pursuant to the agreement. A portion of the holdback was settled in September 2022 for a payment of $488, with $512 of the holdback remaining as of September 30, 2022.
Chem32 is reported as part of the Ecoservices segment. The Company believes that the Acquisition will offer a more robust portfolio of services within the refining industry by leveraging the Company’s existing relationships, therefore contributing to a total purchase price that resulted in the recognition of $14,778 of goodwill, which was deductible for tax purposes. During the nine months ended September 30, 2022, the Company recorded an immaterial adjustment between goodwill and deferred tax liabilities related to the final tax purchase price allocation. See Note 8 to these condensed consolidated financial statements for further information.
The following table sets forth the calculation of the purchase price to the identifiable net assets acquired with respect to the Acquisition, which was complete as of December 31, 2021:
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 equaled fair value of the inventory acquired.
The Company’s cost of goods sold for the 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 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 were as follows:
Net sales and net income attributable to Chem32 during the period from the Closing Date through September 30, 2021 were immaterial. Pro forma financial information has not been presented as it is immaterial for the three and nine months ended September 30, 2021. Acquisition and integration costs were $680 for the nine months ended September 30, 2021 and are included in other operating expense, net in the Company’s consolidated statement of income.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef