Acquisition | 9 Months Ended |
Mar. 31, 2014 |
Business Combinations [Abstract] | ' |
ACQUISITION | ' |
ACQUISITIONS |
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TMB |
On November 4, 2013, the Company completed its transaction to acquire the Tungsten Materials Business (TMB) from Allegheny Technologies Incorporated (ATI) which included all of the assets of TDY Industries, LLC, a wholly owned subsidiary of ATI, used or held for use by TDY in connection with the business; and all of the shares of TDY Limited and ATI Holdings SAS, both wholly-owned subsidiaries of ATI, for a purchase price of $607.0 million, net of cash acquired. We funded the acquisition primarily through a combination of cash from operations and available borrowings under our existing credit facility. |
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TMB, with approximately $340.0 million in annual sales in calendar 2012, is a leading producer of tungsten metallurgical powders, as well as tooling technologies and components. The business has approximately 1,175 employees in 12 locations across 7 countries. The acquisition aligns with the Company's long-term growth strategies, expands presence in aerospace and energy end markets, further augments the Company's tooling portfolio and accelerates our metallurgical strategy including planned tungsten carbide recycling and production. |
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As part of the acquisition of TMB, Kennametal incurred $2.4 million and $5.3 million for the three and nine months ended March 31, 2014 of acquisition-related costs, which are included in operating expense. |
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Purchase Price Allocation |
In accordance with the accounting guidance for business combinations, the TMB acquisition was accounted for under the acquisition method of accounting and accordingly, the purchase price has been allocated to the assets acquired and liabilities assumed based on estimated fair values at the date of acquisition. The condensed consolidated balance sheet as of March 31, 2014 reflects the preliminary allocation of the purchase price and is subject to revision when appraisals are finalized, which is expected to be in the fourth quarter of fiscal 2014. |
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The preliminary allocation of the purchase price to the fair values of the assets acquired and liabilities assumed is as follows: |
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(in thousands) | Total | | | | | | | | | |
ASSETS | | | | | | | | | | |
Current assets: | | | | | | | | | | |
Cash and cash equivalents | $ | 1,294 | | | | | | | | | | |
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Accounts Receivable | 41,164 | | | | | | | | | | |
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Inventory | 98,664 | | | | | | | | | | |
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Other current assets | 4,014 | | | | | | | | | | |
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Total current assets | $ | 145,136 | | | | | | | | | | |
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Property and equipment | 129,752 | | | | | | | | | | |
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Goodwill | 240,948 | | | | | | | | | | |
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Other intangible assets | 125,305 | | | | | | | | | | |
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Deferred income taxes | 6,419 | | | | | | | | | | |
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Other | 603 | | | | | | | | | | |
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Total assets | $ | 648,163 | | | | | | | | | | |
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LIABILITIES | | | | | | | | | | |
Current liabilities: | | | | | | | | | | |
Accounts payable | $ | 21,001 | | | | | | | | | | |
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Accrued payroll | 3,646 | | | | | | | | | | |
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Accrued expenses | 3,159 | | | | | | | | | | |
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Total current liabilities | $ | 27,806 | | | | | | | | | | |
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Deferred income taxes | 4,145 | | | | | | | | | | |
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Other long-term liabilities | 7,982 | | | | | | | | | | |
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Total liabilities | 39,933 | | | | | | | | | | |
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Net assets acquired | $ | 608,230 | | | | | | | | | | |
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In connection with this acquisition, we identified and valued certain intangible assets, including existing customer relationships, technologies and trademarks, as further discussed in Note 18. It is expected that the majority of the preliminary goodwill recorded of $240.9 million will be deductible for tax purposes. The goodwill is attributable to the operating synergies we expect to gain from the acquisition. These intangible assets are part of both the Industrial and Infrastructure segments. |
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TMB contributed net sales of $77.7 million and net loss of $4.4 million during the three months ended March 31, 2014. TMB contributed net sales of $122.5 million and net loss of $11.5 million during the five months ended March 31, 2014. |
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Unaudited Pro Forma Financial Information |
The following unaudited pro forma summary of operating results presents the consolidated results of operations as if the TMB acquisition had occurred on July 1, 2012. These amounts were calculated after applying our accounting policies and adjusting TMB's results to reflect increased depreciation and amortization expense resulting from recording fixed assets and intangible assets at fair value, as well as increased amortization resulting from recording inventory at fair value. The pro forma results for the three and nine months ended March 31, 2014 exclude $2.5 million and $4.4 million of acquisition-related and restructuring-related pre-tax costs, respectively. The pro forma results for the three and nine months ended March 31, 2013 includes $7.7 million and $8.4 million, respectively, of integration-related pre-tax costs. The pro forma results have been presented for comparative purposes only, include no expected sales or cost synergies and are not indicative of future results of operations or what would have occurred had the acquisition been made on July 1, 2012. |
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Unaudited pro forma summary of operating results of Kennametal, assuming the acquisition had occurred as of July 1, 2012, are as follows: |
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| Three Months Ended March 31, | Nine Months Ended March 31, |
(in thousands, except per share amounts) | 2014 | | 2013 | | 2014 | | 2013 | |
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Pro forma (unaudited): | | | | |
Net Sales | $ | 755,242 | | $ | 736,052 | | $ | 2,189,492 | | $ | 2,123,556 | |
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Net income attributable to Kennametal | $ | 55,019 | | $ | 45,860 | | $ | 126,060 | | $ | 128,421 | |
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Per share data attributable to Kennametal: | | | | |
Basic earnings per share | $ | 0.7 | | $ | 0.58 | | $ | 1.6 | | $ | 1.61 | |
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Diluted earnings per share | $ | 0.69 | | $ | 0.57 | | $ | 1.58 | | $ | 1.59 | |
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Emura |
On August 1, 2013, the Company acquired the operating assets of Comercializadora Emura S.R.L. and certain related entities (Emura), based in La Paz, Bolivia, and secured related material sourcing agreements for a purchase price of $40.1 million, of which $26.1 million represents cash paid, of which $25.6 million was paid in fiscal year 2014 and $0.5 million was paid in fiscal year 2013, and $14.0 million of contingent consideration (see Note 6). Emura's principal operations is engaged in collecting, testing, processing and exporting tungsten ore material, and was a long-standing supplier to Kennametal. The addition of Emura enhances the Company's strategic tungsten sourcing capabilities to serve growth globally. |
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Other |
On September 30, 2013, the Company completed one other acquisition in the Infrastructure segment for $2.0 million. |