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ACQUISITIONS AND INVESTMENTS | 6 Months Ended
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Jun. 27, 2020
Business Combinations [Abstract] |
ACQUISITIONS AND INVESTMENTS | ACQUISITIONS AND INVESTMENTS2020 ACQUISITION CAM On February 24, 2020, the Company acquired CAM for a total estimated purchase price of approximately $1.46 billion, net of cash acquired. The estimated purchase price consists of an initial cash payment of approximately $1.30 billion, net of cash acquired, and future payments up to $200.0 million contingent on The Boeing Company ("Boeing") 737 MAX Airplanes receiving Federal Aviation Administration authorization to return to service and Boeing achieving certain production levels, which were valued at $155.3 million as of the acquisition date. Refer to Note M, Fair Value Measurements, for additional details. CAM is an industry-leading manufacturer of specialty fasteners and components for the aerospace and defense markets. The acquisition further diversifies the Company's presence in the industrial markets and expands its portfolio of specialty fasteners in the aerospace and defense markets. The results of CAM subsequent to the date of acquisition are included in the Company's Industrial segment. The CAM acquisition is being accounted for as a business combination using the acquisition method of accounting, which requires, among other things, certain assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The following table summarizes the estimated acquisition date value of identifiable net assets acquired and liabilities assumed:
(Millions of Dollars) |
Cash and cash equivalents | $ | 35.9 |
Accounts receivable, net | 48.6 |
Inventories, net | 127.6 |
Prepaid expenses and other assets | 2.7 |
Property, plant and equipment | 132.6 |
Trade names | 25.0 |
Customer relationships | 565.0 |
Accounts payable | (26.3) |
Accrued expenses | (20.9) |
Deferred taxes | (19.4) |
Other liabilities | (0.6) |
Total identifiable net assets | $ | 870.2 |
Goodwill | 621.5 |
Contingent consideration | (155.3) |
Total consideration paid | $ | 1,336.4 |
The weighted-average useful life assigned to the intangible assets is 20 years. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected cost synergies of the combined business and assembled workforce. It is estimated that $619.5 million of goodwill will be deductible for tax purposes. The acquisition accounting for CAM is preliminary in certain respects. During the measurement period, the Company expects to record adjustments relating to the finalization of intangible assets and property, plant and equipment valuations, working capital accounts, leases, opening balance sheet contingencies, and various income tax matters, amongst others. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The Company’s judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact the Company’s results from operations. The Company will complete its acquisition accounting as soon as reasonably possible within the measurement period. 2019 ACQUISITIONS IES Attachments On March 8, 2019, the Company acquired IES Attachments for $653.5 million, net of cash acquired. IES Attachments is a manufacturer of high quality, performance-driven heavy equipment attachment tools for off-highway applications. The acquisition further diversifies the Company's presence in the industrial markets, expands its portfolio of attachment solutions and provides a meaningful platform for growth. The results of IES Attachments subsequent to the date of acquisition are included in the Company's Industrial segment. The IES Attachments acquisition was accounted for as a business combination using the acquisition method of accounting, which requires, among other things, certain assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date. The estimated acquisition date value of identifiable net assets acquired, which includes $77.8 million of working capital (primarily inventory), $78.3 million of deferred tax liabilities, and $328.0 million of intangible assets, was $342.2 million. The related goodwill was $311.3 million. The amount allocated to intangible assets included $304.0 million for customer relationships. The weighted-average useful life assigned to the intangible assets was 14 years. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the expected cost synergies of the combined business and assembled workforce. It is estimated that $2.4 million of goodwill, relating to the pre-acquisition historical tax basis of goodwill, will be deductible for tax purposes. The acquisition accounting for IES Attachments is complete. The measurement period adjustments recorded in 2020 did not have a material impact to the Company's Condensed Consolidated Financial Statements. Other 2019 Acquisitions During 2019, the Company completed five smaller acquisitions for $40.8 million, net of cash acquired. The estimated acquisition date value of the identifiable net assets acquired, which includes $5.9 million of working capital and $8.8 million of customer relationships, is $19.0 million. The related goodwill is $21.8 million. The useful life assigned to the customer relationships range from 8 to 10 years. The results of these acquisitions subsequent to the dates of acquisition are included in the Company's Industrial and Security segments. The acquisition accounting for these acquisitions is substantially complete with the exception of certain minor items and will be completed within the measurement period. ACTUAL AND PRO-FORMA IMPACT OF THE ACQUISITIONS Actual Impact from Acquisition The net sales and net loss from the 2020 acquisition included in the Company's Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 27, 2020 are shown in the table below. The net loss includes amortization relating to intangible assets recorded upon acquisition, inventory step-up charges, transaction costs, and other integration-related costs.
(Millions of Dollars) | Second Quarter 2020 |  | Year-to-Date 2020
Net sales | $ | 65.3 |  |  | $ | 98.4 |
Net loss attributable to common shareowners | $ | (30.6) |  |  | $ | (51.4) |
Pro-forma Impact from Acquisitions The following table presents supplemental pro-forma information as if the 2020 acquisition had occurred on December 30, 2018 and the 2019 acquisitions had occurred on December 31, 2017. The pro-forma consolidated results are not necessarily indicative of what the Company’s consolidated net sales and net earnings would have been had the Company completed the acquisitions on the aforementioned dates. In addition, the pro-forma consolidated results do not purport to project the future results of the Company.
|  | Second Quarter |  |  |  | Year-to-Date |  |
(Millions of Dollars, except per share amounts) |  | 2020 |  | 2019 |  | 2020 |  | 2019
Net sales |  | $ | 3,147.4 |  |  | $ | 3,854.5 |  |  | $ | 6,322.8 |  |  | $ | 7,357.4 |
Net earnings attributable to common shareowners |  | $ | 251.3 |  |  | $ | 350.3 |  |  | $ | 399.2 |  |  | $ | 504.9 |
Diluted earnings per share |  | $ | 1.63 |  |  | $ | 2.33 |  |  | $ | 2.60 |  |  | $ | 3.36 |
2020 Pro-forma Results The 2020 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2020 acquisition for its respective pre-acquisition period. Accordingly, the following adjustments were made: •Elimination of the historical pre-acquisition intangible asset amortization expense and the addition of intangible asset amortization expense related to intangibles valued as part of the acquisition accounting that would have been incurred from December 29, 2019 to the acquisition date. •Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred from December 29, 2019 to the acquisition date. •Because the 2020 acquisition was assumed to occur on December 30, 2018, there were no acquisition-related costs or inventory step-up charges factored into the 2020 pro-forma period, as such expenses would have occurred in the first year following the assumed acquisition date. 2019 Pro-forma Results The 2019 pro-forma results were calculated by combining the results of Stanley Black & Decker with the stand-alone results of the 2019 and 2020 acquisitions for their respective pre-acquisition periods. Accordingly, the following adjustments were made: •Elimination of the historical pre-acquisition intangible asset amortization expense and the addition of intangible asset amortization expense related to intangibles valued as part of the acquisition accounting that would have been incurred from December 30, 2018 to the acquisition dates for the 2019 acquisitions and from December 30, 2018 to June 29, 2019 for the 2020 acquisitions. •Additional depreciation expense for the property, plant, and equipment fair value adjustments that would have been incurred from December 30, 2018 to the acquisition date of IES Attachments and from December 30, 2018 to June 29, 2019 for CAM. •Additional expense for acquisition-related costs and inventory step-up charges relating to the 2020 acquisition, as such expenses would have been incurred from December 30, 2018 to June 29, 2019. •Because the 2019 acquisitions were assumed to occur on December 31, 2017, there were no acquisition-related costs or inventory step-up charges factored into the 2019 pro-forma period, as such expenses would have occurred in the first year following the assumed acquisition date. INVESTMENTS On January 2, 2019, the Company acquired a 20 percent interest in MTD, a privately held global manufacturer of outdoor power equipment, for $234 million in cash. With 2019 annual revenue of approximately $2.4 billion, MTD manufactures and distributes gas-powered lawn tractors, zero turn mowers, walk behind mowers, snow throwers, trimmers, chain saws, utility vehicles and other outdoor power equipment. Under the terms of the agreement, the Company has the option to acquire the remaining 80 percent of MTD beginning on July 1, 2021 and ending on January 2, 2029. In the event the option is exercised, the companies have agreed to a valuation multiple based on MTD’s 2018 EBITDA, with an equitable sharing arrangement for future EBITDA growth. The Company is applying the equity method of accounting to the MTD investment. During 2019 and 2020, the Company made additional immaterial investments that are not accounted for under the equity method, which are included in Other assets in the Condensed Consolidated Balance Sheets. The Company acquired less than a 20 percent interest in each investment and does not have the ability to significantly influence any of the investees.

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- Definition 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). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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