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Acquisitions and Purchase Accounting | 9 Months Ended
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Oct. 02, 2021
Business Combinations [Abstract] |
Business Combination Disclosure | Acquisitions and Purchase Accounting The company accounts 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 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. Termination of Welbilt Merger As previously disclosed, on April 20, 2021, Middleby, entered into a Merger Agreement with Welbilt, Inc., a Delaware corporation ("Welbilt"), Middleby Marshall Inc., a Delaware corporation and a direct wholly owned subsidiary of Middleby ("Acquiror") and Mosaic Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of Acquiror ("Merger Sub"), which provided that, upon the terms and subject to the conditions set forth therein, Merger Sub would merge with and into Welbilt, with Welbilt surviving as an indirect, wholly-owned subsidiary of Middleby. As previously disclosed, on July 13, 2021, Middleby announced that, under the terms of the Merger Agreement, it would not exercise its right to propose any modifications to the terms of the Merger Agreement and would allow the five-day match period to expire. Accordingly, on July 14, 2021, Welbilt delivered to Middleby a written notice terminating the Merger Agreement in accordance with Section 7.1(c)(iii) of the Merger Agreement and, concurrently with Middleby’s receipt of the termination fee of $110.0 million in cash from Welbilt, the Merger Agreement was terminated on July 14, 2021. The termination fee received is reflected in the Condensed Consolidated Statements of Comprehensive Income as the "merger termination fee" and $19.7 million of deal costs associated with the transaction are reflected in selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income. The following represents the company's significant acquisitions in 2021 and 2020 as well as summarized information on various acquisitions that were not individually material. 2020 Acquisitions During 2020, the company completed various 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 2020 acquisitions and are summarized as follows (in thousands):
| Preliminary Opening Balance Sheet |  | Preliminary Measurement Period Adjustments |  | Adjusted Opening Balance Sheet
Cash | $ | 14,647 |  |  | $ | — |  |  | $ | 14,647 |
Current assets | 43,670 |  |  | (13,391) |  |  | 30,279 |
Property, plant and equipment | 3,014 |  |  | (241) |  |  | 2,773 |
Goodwill | 55,335 |  |  | 3,740 |  |  | 59,075 |
Other intangibles | 63,201 |  |  | (4,375) |  |  | 58,826 |
Other assets | 6,121 |  |  | 52 |  |  | 6,173 |
Current liabilities | (54,478) |  |  | 13,037 |  |  | (41,441) |
Long-term deferred tax liability | (123) |  |  | 387 |  |  | 264 |
Other non-current liabilities | (21,902) |  |  | 791 |  |  | (21,111) |
Consideration paid at closing | $ | 109,485 |  |  | $ | — |  |  | $ | 109,485 |
Deferred payments | 8,666 |  |  | (468) |  |  | 8,198 |
Contingent consideration | 16,144 |  |  | (836) |  |  | 15,308 |
Net assets acquired and liabilities assumed | $ | 134,295 |  |  | $ | (1,304) |  |  | $ | 132,991 |
The long-term deferred tax asset amounted to $0.3 million and is related to the difference between the book and tax basis on other assets and liability accounts. The goodwill and $15.7 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $10.6 million allocated to customer relationships, $26.2 million allocated to developed technology and $6.3 million allocated to backlog, which are being amortized over periods of 6 to 9 years, 6 to 12 years, and 3 to 9 months, respectively. Goodwill of $59.1 million and other intangibles of $58.8 million of the companies are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Of these assets, goodwill of $24.4 million and intangibles of $58.5 million are expected to be deductible for tax purposes. Several purchase agreements include deferred payment 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 2021 and 2022. The contractual obligations associated with the deferred payments on the acquisition date amount to $8.2 million. The earnouts are payable between 2021 and 2023, if the company exceeds certain sales and earnings targets. The contractual obligations associated with the contingent earnout provisions recognized on the acquisition date amount to $15.3 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 various 2020 acquisitions. Thus, the provisional measurements of fair values 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. Novy Invest NV On July 12, 2021, the company completed its acquisition of all of the capital stock of Novy Invest NV ("Novy"), a leading manufacturer of premium residential ventilation hoods and cook tops located in Belgium, for a purchase price of approximately $250.9 million, net of cash acquired. The following estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair values of assets acquired and liabilities assumed (in thousands):
| Preliminary Opening Balance Sheet |  |  |  |
Cash | $ | 16,152 |  |  |  |  |
Current assets | 23,762 |  |  |  |  |
Property, plant and equipment | 17,058 |  |  |  |  |
Goodwill | 142,741 |  |  |  |  |
Other intangibles | 126,557 |  |  |  |  |
Other assets | 26 |  |  |  |  |
Current liabilities | (23,440) |  |  |  |  |
Long-term deferred tax liability | (33,918) |  |  |  |  |
Other non-current liabilities | (1,930) |  |  |  |  |
Net assets acquired and liabilities assumed | $ | 267,008 |  |  |  |  |
The long-term deferred tax liability amounted to $33.9 million. The deferred tax liability is comprised of $31.6 million related to the difference between the book and tax basis of identifiable intangible assets and $2.3 million related to the difference between the book and tax basis on identifiable tangible asset and liability accounts. The goodwill and $89.5 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $33.9 million allocated to customer relationships, $2.3 million allocated to developed technology and $0.9 million allocated to backlog, which are being amortized over periods of 7 years, 7 years, and 3 months, respectively. Goodwill of $142.7 million and other intangibles of $126.6 million of the company are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Goodwill and other intangibles are not expected to be deductible for tax purposes. Imperial Manufacturing Company On September 24, 2021, the company completed its acquisition of all of the capital stock of Spenuzza, Inc. (dba Imperial Manufacturing Company) ("Imperial") located in Corona, CA, a manufacturer of ranges, fryers, ovens, countertop equipment and other specialty cooking products for commercial kitchens, for a purchase price of approximately $127.3 million, net of cash acquired. The following estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair values of assets acquired and liabilities assumed (in thousands):
| Preliminary Opening Balance Sheet |  |  |  |
Cash | $ | 347 |  |  |  |  |
Current assets | 8,070 |  |  |  |  |
Property, plant and equipment | 19,120 |  |  |  |  |
Goodwill | 42,570 |  |  |  |  |
Other intangibles | 65,230 |  |  |  |  |
Other assets | 6 |  |  |  |  |
Current liabilities | (7,701) |  |  |  |  |
Net assets acquired and liabilities assumed | $ | 127,642 |  |  |  |  |
The goodwill and $35.5 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $28.3 million allocated to customer relationships, $0.9 million allocated to developed technology and $0.6 million allocated to backlog, which are being amortized over periods of 7 years, 7 years, and 3 months, respectively. Goodwill of $42.6 million and other intangibles of $65.2 million of the company are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes and are expected to be deductible for tax purposes. 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 all 2021 acquisitions to date. Thus, the provisional measurements of fair values 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 nine months ended October 2, 2021 and September 26, 2020, assumes the 2020 and 2021 acquisitions described above were completed on December 29, 2019 (first day of fiscal year 2020). The following pro forma results include adjustments to reflect amortization of intangibles associated with the acquisition and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data):
| Nine Months Ended
| October 2, 2021 |  | September 26, 2020
Net sales | $ | 2,472,306 |  |  | $ | 1,899,883 |
Net earnings | 407,715 |  |  | 155,067 |
Net earnings per share: |  |  |
Basic | $ | 7.38 |  |  | $ | 2.81 |
Diluted | $ | 7.21 |  |  | $ | 2.81 |
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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