XML 36 R25.htm IDEA: XBRL DOCUMENT
v3.23.2

Business Combinations | 6 Months Ended
--- | ---
Jul. 01, 2023
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | 18. Business Combinations Sound United Acquisition On April 11, 2022, the Company completed the previously announced acquisition of Sound United, pursuant to a Merger Agreement dated as of February 15, 2022 (Merger Agreement), by and among the Company, Sonic Boom Acquisition Corp., a wholly-owned subsidiary of the Company (Merger Sub), Viper Holdings Corporation (Sound United), and, solely in its capacity as the Seller Representative, Viper Holdings, LLC, Merger Sub merged with and into Sound United, with Sound United continuing as a wholly-owned subsidiary of the Company (Merger). Sound United is a leading innovator of premium, high-performance audio products for consumers around the world, which operates iconic consumer brands: Bowers & Wilkins®, Denon™, Marantz™, HEOS™, Classé™, Polk Audio™, Boston Acoustics™ and Definitive Technology™. The brands are linked by a commitment to the highest production standards and a focus on unparalleled audio quality and audio performance. Sound United delivers significant competitive benefits through its platform advantages including global distribution across online, retail, and custom installation channels; a cloud-connected home ecosystem; and a state-of-the-art research and development function focused on creating the highest-quality consumer products with world-class industrial design. The Company acquired 100% of the equity interests of Sound United for $1.0575 billion in cash, subject to adjustments based on Sound United’s net working capital, transaction expenses, cash and debt as of the closing of the Merger (Closing), payable by the Company in cash. The transaction was primarily funded with the proceeds from the Credit Facility. See Note 15, “Debt”, for additional information about the Credit Facility. There was no contingent consideration resulting from the transaction. The results of operations of Sound United subsequent to the acquisition date and the acquired assets and assumed liabilities, including the allocation of goodwill and intangible assets, are included in the non-healthcare segment. For the period of April 11, 2022 to July 2, 2022 the Company recorded revenue of $208.3 million and a net loss of $26.9 million from Sound United. For the period of January 1, 2023 to July 1, 2023, the Company recorded revenue of $390.7 million and a net loss of $3.3 million from Sound United. Acquisitions Costs The Company recognized transaction costs related to the Sound United acquisition of $15.1 million for the three and six months ended July 2, 2022. The Company recognized no transaction costs related to the Sound United Acquisition for the three and six months ended July 1, 2023. Purchase Price Allocations The purchase price allocation for the Sound United Acquisition is final. Goodwill was calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination and represents the future economic benefits expected to arise from intangible assets acquired that do not qualify for separate recognition, including the assembled workforce. Goodwill is not expected to be deductible for tax purposes. The measurement period adjustments resulted primarily from valuation inputs pertaining to certain acquired assets based on facts and circumstances that existed as of the acquisition date and did not result from events subsequent to the acquisition date. The table below summarizes the final allocation of fair value of assets acquired and liabilities assumed.
(in millions) |  | Sound United
Cash consideration(1) |  | $ | 1,057.5 |
Purchase price |  | $ | 1,057.5 |
Assets acquired: |  |
Cash and cash equivalents |  | $ | 82.6 |
Accounts receivables |  | 108.5 |
Inventories |  | 238.6 |
Prepaid expenses and other current assets |  | 30.0 |
Property, plant and equipment |  | 113.2 |
Intangible asset |  | 649.0 |
Goodwill |  | 325.8 |
Long-term other assets |  | 7.4 |
Total assets acquired |  | $ | 1,555.1 |
Liabilities assumed: |  |
Accounts payable |  | $ | (118.8) |
Accrued liabilities and other current liabilities |  | (148.9) |
Deferred tax liabilities |  | (152.9) |
Other long-term liabilities |  | (77.0) |
Total liabilities assumed |  | $ | (497.6) |
______________ (1) The purchase price allocation for the Sound United Acquisition is final. Identifiable Intangible Assets The following table sets forth the components of identifiable intangible assets acquired and the weighted average amortization period as of the acquisition date:
|  | Weighted average amortization period (in years) |  | April 11, 2022 (in millions)
Trademarks/tradenames |  | 10 |  | $ | 6.0 |
Customer relationships |  | 17 |  | 196.0 |
Developed technology |  | 8 |  | 156.0 |
Contractual license agreements |  | 15 |  | 29.0 |
Subtotal |  | 14 years |  | $ | 387.0 |
Indefinite trademarks/tradenames |  | N/A |  | 262.0 |
Total |  |  |  | $ | 649.0 |
In determining the fair value of the identifiable intangible assets, the Company utilized various forms of the income approach, depending on the asset being valued. The estimation of fair value requires significant judgment related to cash flow forecasts, discount rates reflecting the risk inherent in each cash flow stream, competitive trends, market comparables and other factors. Other inputs included historical data, current and anticipated market conditions, and growth rates. Contractual license agreements have a weighted-average amortization period of five years until the next renewal term. The intangible assets were valued using the following valuation approaches: Customer relationships The fair value of customer relationships was determined using the multi-period excess earnings method. The multi-period excess earnings method involves forecasting the net earnings expected to be generated by the asset, reducing them by appropriate returns on contributory assets, and then discounting the resulting net cash flows to a present value using an appropriate discount rate. Trademarks/tradenames The fair values of the trademark/tradenames were determined using the relief-from-royalty method under the income approach. This involves forecasting avoided royalties, reducing them by taxes, and discounting the resulting net cash flows to a present value using an appropriate discount rate. Judgment was applied for a number of assumptions in valuing the identified intangible assets, including revenue and cash flow forecasts, survival rates, technology life, royalty rate, obsolescence and discount rate. Developed technology The fair values of the developed technology were determined using the relief-from-royalty method under the income approach. This involves forecasting avoided royalties, reducing them by taxes, and discounting the resulting net cash flows to a present value using an appropriate discount rate. Judgment was applied for a number of assumptions in valuing the identified intangible assets including revenue and cash flow forecasts, survival rates, technology life, royalty rate, obsolescence and discount rate. Contractual licensing agreements The fair value of the contractual license agreements was determined using a variation of the multi-period excess earnings method. This method involves forecasting the net earnings expected to be generated by the asset and then discounting the resulting net cash flows to a present value using an appropriate discount rate.

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationAndAssetAcquisitionAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration