Ascent Industries Co. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Acquisitions

Acquisitions

12 Months Ended

Dec. 31, 2020

Acquisition of the Assets and Operations of American Stainless Tubing, Inc.

On January 1, 2019, ASTI completed the American Stainless Tubing, Inc. ("American Stainless") acquisition. The purchase price for the all-cash acquisition was $21.9 million, subject to a post-closing working capital adjustment. The Company funded the acquisition with a new five-year $20 million term note and a draw against asset-based line of credit (see Note 6).

The transaction is accounted for using the acquisition method of accounting for business combinations. Under this method, the total consideration transferred to consummate the acquisition is allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition. The acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired and liabilities assumed. During the third quarter of 2019, the Company finalized the purchase price allocation for the American Stainless acquisition.

The excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets is reflected as goodwill. Goodwill consists of manufacturing cost synergies expected from combining American Stainless' production capabilities with the Metals Segment current operations. All of the goodwill recognized was assigned to the Company's Metals Segment.

During the second quarter of 2019, management identified circumstances that existed on the date of acquisition and as a result, revised the purchase price allocation of certain acquired assets and liabilities as allowable during the measurement period.

The following table shows the initial estimate of value and revisions made during 2019:


(in thousands)	Initial estimate		Revisions		Final
Inventories	$	5,564	$	—	$	5,564
Accounts receivable	3,534		—		3,534
Other current assets - production and maintenance supplies	605		—		605
Property, plant and equipment	2,793		—		2,793
Customer list intangible	10,000		(496)		9,504
Goodwill	7,044		714		7,758
Contingent consideration (earn-out liability)	(6,148)		(218)		(6,366)
Accounts payable	(1,400)		—		(1,400)
Other liabilities	(97)		—		(97)
	$	21,895	$	—	$	21,895

For the year ended December 31, 2019, cost of sales included $1.1 million representing the fair value above predecessor cost associated with acquired inventory that was sold during the year ended December 31, 2019.