ACQUISITION OF TRECORA CHEMICAL, INC. (formerly SSI Chusei, Inc.)
|12 Months Ended|
Dec. 31, 2014
|ACQUISITION OF TRECORA CHEMICAL, INC. (formerly SSI Chusei, Inc.) [Abstract]|
|ACQUISITION OF TRECORA CHEMICAL, INC. (formerly SSI Chusei, Inc.)||
NOTE 3 –ACQUITITION OF TRECORA CHEMICAL, INC. (formerly SSI Chusei, Inc)
On October 1, 2014, we completed the acquisition of 100% of the Class A common stock of SSI Chusei, Inc. (“SSI”), a Texas corporation (the “Acquisition”) in exchange for a cash payment of $74.8 million which was funded by (i) $4,702,000 from TREC’s existing cash balances and (ii) $70,000,000 from the proceeds of a senior secured financing. The Acquisition was completed pursuant to a Stock Purchase Agreement dated as of September 19, 2014, by and among TREC, Tocco, Schumann/Steier Holdings, LLC (“SSH”), a Delaware limited liability company, and SSI. On November 15, 2014, SSI’s name was officially changed to Trecora Chemical, Inc. (“TC”).
TC is a leading manufacturer of specialty synthetic waxes and custom processing services located in Pasadena, Texas. We believe the Acquisition increases our product diversification, expands our footprint in the industry, and provides geographic diversity. TC will make up the specialty synthetic wax segment of our business.
We have accounted for the Acquisition in accordance with the acquisition method of accounting under Financial Accounting Standards Board Accounting Standards Codification Topic 805 “Business Combinations” (“ASC 805”). In accordance with ASC 805, we used our best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the Acquisition Date. Goodwill as of the Acquisition Date is measured as the excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired.
The assets and certain liabilities acquired from TC on October 1, 2014, have been included in our consolidated balance sheets and our consolidated statements of income since the date of acquisition. The sales and operating loss of TC that are included in the consolidated statements of income for the year ended December 31, 2014, was $5.3 million and $1.1 million, respectively. In connection with the Acquisition, we incurred acquisition costs of $1.0 million which are reflected in general and administrative expenses in the consolidated statements of income. The financial results of TC’s business are reported as a separate business segment.
The following table summarizes the consideration paid for TC (in thousands):
We recorded $21.8 million of Goodwill as a result of the Acquisition, all of which was recorded within TC’s operating segment. Goodwill recognized in the Acquisition relates primarily to enhancing our strategic platform for expansion into other specialty products such as specialty waxes and custom processing services. All of the Goodwill recognized is expected to be deductible for income tax purposes. The allocation of the aggregate purchase price is as follows (in thousands):
The components of the other intangible assets listed in the table above, based upon a third party appraisal, were as follows (in thousands):
The following unaudited pro forma financial information reflects the consolidated results of operation of the Company as if the Acquisition had taken place on January 1, 2013 (in thousands):
Our historical financial information was adjusted to give effect to the pro forma events that were directly attributable to the Acquisition. This unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of results of operations that would have been achieved had the pro forma events taken place on the dates indicated or the future consolidated results of operations of the combined Company.
For the year ended December 31, 2014, the unaudited pro forma financial information reflects adjustments to depreciation expense resulting from the adjustment to fair value of TC’s plant and equipment, amortization expense on other intangible assets, non-recurring acquisition costs, salary costs in connection with employment contracts with certain officers, interest expense on the secured financing, and estimated tax effect on the incremental change.
For the year ended December 31, 2013, the unaudited pro forma financial information reflects adjustments to depreciation expense resulting from the adjustment to fair value of TC’s plant and equipment, amortization expense on other intangible assets, salary costs in connection with employment contracts with certain officers, interest expense on the secured financing, and estimated tax effect on the incremental change.
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://www.xbrl.org/2003/role/presentationRef