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Acquisitions and Purchase Accounting | 3 Months Ended
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Mar. 28, 2020
Business Combinations [Abstract] |
Business Combination Disclosure | Acquisitions and Purchase Accounting The company operates in a highly fragmented industry and has completed numerous acquisitions over the past several years as a component of its growth strategy. The company has acquired industry leading brands and technologies to position itself as a leader in the commercial foodservice equipment, food processing equipment and residential kitchen equipment industries. The company has accounted for all business combinations using the acquisition method to record a new cost basis for the assets acquired and liabilities assumed. The difference between the purchase price and the fair value of the assets acquired and liabilities assumed has been recorded as goodwill in the financial statements. The company also recognizes identifiable intangible assets, primarily trade names and customer relationships, at their fair value using a discounted cash flow model. The significant assumptions used to estimate the value of the intangible assets include revenue growth rates, projected profit margins, discount rates, royalty rates, and customer attrition rates. These significant assumptions are forward-looking and could be affected by future economic and market conditions. The results of operations are reflected in the consolidated financial statements of the company from the dates of acquisition. The following represents the company's significant acquisitions in 2020 and 2019 as well as summarized information on various acquisitions that were not individually material. The company also made smaller acquisitions not presented below which are individually and collectively immaterial. Cooking Solutions Group On April 1, 2019, the company completed its acquisition of all of the capital stock of Cooking Solutions Group, Inc. ("Cooking Solutions Group") from Standex International Corporation, which consists of the brands APW Wyott, Bakers Pride, BKI and Ultrafryer with locations in Texas, South Carolina and Mexico for a purchase price of approximately $106.1 million, net of cash acquired. During the third quarter of 2019, the company finalized the working capital provision provided for by the purchase agreement resulting in a payment due to the sellers of $0.1 million. The final allocation of consideration paid for the Cooking Solutions Group acquisition is summarized as follows (in thousands):
| (as initially reported) April 1, 2019 |  | Measurement Period Adjustments |  | (as adjusted) April 1, 2019
Cash | $ | 843 |  |  | $ | — |  |  | $ | 843 |
Current assets | 33,666 |  |  | (1,625 | ) |  | 32,041 |
Property, plant and equipment | 15,959 |  |  | (58 | ) |  | 15,901 |
Goodwill | 31,207 |  |  | 6,330 |  |  | 37,537 |
Other intangibles | 53,450 |  |  | (5,850 | ) |  | 47,600 |
Other assets | — |  |  | 1,470 |  |  | 1,470 |
Current liabilities | (15,130 | ) |  | (1,583 | ) |  | (16,713 | )
Long-term deferred tax liability | (13,082 | ) |  | 2,553 |  |  | (10,529 | )
Other non-current liabilities | — |  |  | (1,163 | ) |  | (1,163 | )
Net assets acquired and liabilities assumed | $ | 106,913 |  |  | $ | 74 |  |  | $ | 106,987 |
The long-term deferred tax liability amounted to $10.5 million. The net deferred tax liability is comprised of $11.6 million of deferred tax liability related to the difference between the book and tax basis on identifiable intangible asset and liability accounts and $1.1 million of deferred tax asset related to the difference between the book and tax basis on identifiable tangible assets and liability accounts. The goodwill and $24.7 million of other intangibles associated with the trade name are subject to the non-amortization provisions of ASC 350. Other intangibles also include $22.5 million allocated to customer relationships and $0.4 million allocated to backlog, which are being amortized over periods of 9 years and 3 months, respectively. Goodwill and other intangibles of Cooking Solutions Group are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. These assets are not expected to be deductible for tax purposes. Other 2019 Acquisitions During 2019, the company completed various other acquisitions that were not individually material. The estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition dates for the other 2019 acquisitions and are summarized as follows (in thousands):
| Preliminary Opening Balance Sheet |  | Preliminary Measurement Period Adjustments |  | Adjusted Opening Balance Sheet
Cash | $ | 2,683 |  |  | $ | (10 | ) |  | $ | 2,673 |
Current assets | 21,525 |  |  | 922 |  |  | 22,447 |
Property, plant and equipment | 8,920 |  |  | (166 | ) |  | 8,754 |
Goodwill | 99,838 |  |  | (3,300 | ) |  | 96,538 |
Other intangibles | 64,019 |  |  | 389 |  |  | 64,408 |
Long-term deferred tax asset | 1,288 |  |  | 1,428 |  |  | 2,716 |
Other assets | 137 |  |  | 854 |  |  | 991 |
Current liabilities | (20,437 | ) |  | (201 | ) |  | (20,638 | )
Other non-current liabilities | (6,170 | ) |  | (529 | ) |  | (6,699 | )
Consideration paid at closing | $ | 171,803 |  |  | $ | (613 | ) |  | $ | 171,190 |
Deferred payments | 2,404 |  |  | — |  |  | 2,404 |
Contingent consideration | 4,258 |  |  | — |  |  | 4,258 |
Net assets acquired and liabilities assumed | $ | 178,465 |  |  | $ | (613 | ) |  | $ | 177,852 |
The long-term deferred tax asset amounted to $2.7 million. The net deferred tax asset is comprised of $2.9 million of deferred tax asset related to tax loss carryforwards, $1.0 million of deferred tax liability related to the difference between the book and tax basis of identifiable intangible assets and $0.8 million of deferred tax asset related to the difference between the book and tax basis on identifiable tangible asset and liability accounts. The goodwill and $29.6 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $22.3 million allocated to customer relationships, $11.1 million allocated to developed technology and $1.4 million allocated to backlog, which are being amortized over periods of 2 to 10 years, 5 to 7 years, and 3 months, respectively. Goodwill of $42.8 million and other intangibles of $35.5 million of the companies are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Goodwill of $43.7 million and other intangibles of $21.3 million are allocated to the Food Processing Equipment Group for segment reporting purposes. Goodwill of $9.9 million and other intangibles of $7.6 million are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Of these assets, goodwill of $85.5 million and intangibles of $53.8 million are expected to be deductible for tax purposes. One purchase agreement includes deferred payments and earnout provisions providing for contingent payments due to the sellers to the extent certain financial targets are exceeded. The deferred payments are payable between 2020 and 2022. The contractual obligation associated with the deferred payments on the acquisition date is $2.4 million. The earnout is payable in 2022, if the company exceeds certain sales and earnings targets. The contractual obligation associated with the contingent earnout provision recognized on the acquisition date is $4.3 million. The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the company is waiting for additional information necessary to finalize those fair values for substantially all 2019 acquisitions. Thus, the provisional measurements of fair value set forth above are subject to change. The company expects to complete the purchase price allocations during 2020. 2020 Acquisitions As of March 28, 2020, the company has completed various acquisitions that were not individually material. The following estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition dates for the acquisitions and are summarized as follows (in thousands):
| Preliminary Opening Balance Sheet
Cash | $ | 2,347 |
Current assets | 31,089 |
Property, plant and equipment | 1,032 |
Goodwill | 12,776 |
Other intangibles | 16,484 |
Other assets | 1,708 |
Current liabilities | (30,005 | )
Other non-current liabilities | (3,070 | )
Consideration paid at closing | $ | 32,361 |
Deferred payments | 1,250 |
Contingent consideration | 1,774 |
Net assets acquired and liabilities assumed | $ | 35,385 |
The goodwill and $9.0 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $6.5 million allocated to customer relationships, $0.2 million allocated to developed technology and $0.8 million allocated to backlog, which are being amortized over periods of 7 years, 7 years, and 6 months, respectively. Goodwill of $12.8 million and other intangibles of $16.5 million of the companies are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes and are expected to be deductible for tax purposes. One purchase agreement includes a deferred payment and earnout provision providing for contingent payments due to the sellers to the extent certain financial targets are exceeded. The deferred payment is payable during 2020. The contractual obligation associated with the deferred payments on the acquisition date is $1.3 million. The earnout is payable in 2023, if the company exceeds certain sales and earnings targets. The contractual obligation associated with the contingent earnout provision recognized on the acquisition date is $1.8 million. The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the company is waiting for additional information necessary to finalize those fair values for substantially all 2020 acquisitions to date. Thus, the provisional measurements of fair value set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. Pro Forma Financial Information In accordance with ASC 805 Business Combinations, the following unaudited pro forma results of operations for the three months ended March 28, 2020 and March 30, 2019, assumes the 2019 and 2020 acquisitions described above were completed on December 30, 2018 (first day of fiscal year 2019). The following pro forma results include adjustments to reflect additional interest expense to fund the acquisitions, amortization of intangibles associated with the acquisitions, and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data):
| Three Months Ended
| March 28, 2020 |  | March 30, 2019
Net sales | $ | 679,980 |  |  | $ | 734,592 |
Net earnings | 73,810 |  |  | 55,471 |
Net earnings per share: |  |  |  |  |
Basic | $ | 1.33 |  |  | $ | 1.00 |
Diluted | $ | 1.33 |  |  | $ | 1.00 |
The historical consolidated financial information of the Company and the acquisitions have been adjusted in the pro forma information to give effect to pro forma events that are (1) directly attributable to the transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. Pro forma data may not be indicative of the results that would have been obtained had these acquisitions occurred at the beginning of the periods presented, nor is it intended to be a projection of future results. Additionally, the pro forma financial information does not reflect the costs which the company has incurred or may incur to integrate the acquired businesses.

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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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