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Acquisitions and Purchase Accounting | 3 Months Ended
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Apr. 01, 2023
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. The company completed no material acquisitions during the three months ended April 1, 2023. Other 2022 Acquisitions During 2022, the company 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 other 2022 acquisitions and are summarized as follows (in thousands):
| Preliminary Opening Balance Sheet |  | Preliminary Measurement Period Adjustments |  | Adjusted Opening Balance Sheet
Cash | $ | 25,860 |  |  | $ | 159 |  |  | $ | 26,019 |
Current assets | 115,264 |  |  | (2,983) |  |  | 112,281 |
Property, plant and equipment | 44,598 |  |  | 709 |  |  | 45,307 |
Goodwill | 139,633 |  |  | 5,527 |  |  | 145,160 |
Other intangibles | 93,147 |  |  | 2,212 |  |  | 95,359 |
Long-term deferred tax asset | 426 |  |  | 104 |  |  | 530 |
Other assets | 1,420 |  |  | 3,039 |  |  | 4,459 |
Current portion of long-term debt | (22,841) |  |  | 2,154 |  |  | (20,687) |
Current liabilities | (57,158) |  |  | (1,479) |  |  | (58,637) |
Long term debt | (5,646) |  |  | (2,320) |  |  | (7,966) |
Long-term deferred tax liability | (23,137) |  |  | 1,858 |  |  | (21,279) |
Other non-current liabilities | (19,061) |  |  | (6,737) |  |  | (25,798) |
Consideration paid at closing | $ | 292,505 |  | 292505000 | $ | 2,243 |  |  | $ | 294,748 |
Contingent consideration | 19,105 |  |  | 3,969 |  |  | 23,074 |
Net assets acquired and liabilities assumed | $ | 311,610 |  |  | $ | 6,212 |  |  | $ | 317,822 |
The net long-term deferred tax liability amounted to $20.7 million. The net deferred tax liability is comprised of $19.6 million related to the difference between the book and tax basis of identifiable intangible assets and $1.1 million related to the difference between the book and tax basis on identifiable tangible asset and liability accounts. The goodwill and $42.9 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $37.7 million allocated to customer relationships, $6.3 million allocated to developed technology, and $8.4 million allocated to backlog, which are being amortized over periods of 7 years, 5 to 10 years, and 3 to 6 months, respectively. Goodwill of $112.0 million and other intangibles of $59.1 million are allocated to the Food Processing Equipment Group for segment reporting purposes. Goodwill of $30.9 million and other intangibles of $35.5 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. Goodwill of $2.3 million and other intangibles of $0.8 million are allocated to the Residential Kitchen Equipment Group for segment reporting purposes. Of these assets, goodwill of $20.7 million and intangibles of $11.8 million are expected to be deductible for tax purposes. Four purchase agreements include earnout provisions providing for a contingent payment due to the sellers for the achievement of certain targets. Three earnouts are payable to the extent certain EBITDA targets are met with measurement dates ending between 2022 and 2025. One earnout is payable yearly through 2026 based on product sales. One earnout is payable yearly through 2027 based on product sales. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amount to $23.1 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 all acquisitions completed during 2022. Certain intangible assets are preliminarily valued using historical information from the Commercial Foodservice Equipment Group, Food Processing Equipment Group and Residential Kitchen Equipment Group and qualitative assessments of the individual businesses at acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous 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. Other 2023 Acquisitions During 2023, the company 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 other 2023 acquisitions and are summarized as follows (in thousands):
| Preliminary Opening Balance Sheet |  |  |  |
Cash | $ | 851 |  |  |  |  |
Current assets | 2,668 |  |  |  |  |
Property, plant and equipment | 955 |  |  |  |  |
Goodwill | 3,149 |  |  |  |  |
Other intangibles | 11,221 |  |  |  |  |
Current liabilities | (644) |  |  |  |  |
Other non-current liabilities | (741) |  |  |  |  |
Consideration paid at closing | $ | 17,459 |  |  |  |  |
Contingent consideration | 741 |  |  |  |  |
Net assets acquired and liabilities assumed | $ | 18,200 |  |  |  |  |
The goodwill and $3.0 million of other intangibles associated with the trade names are subject to the non-amortization provisions of ASC 350. Other intangibles also include $2.4 million allocated to customer relationships, and $5.8 million allocated to developed technology, which are being amortized over periods of 7 years and 7 years to 12 years, respectively. Goodwill of $3.1 million and other intangibles of $11.2 million are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. All of the goodwill and other intangibles are expected to be deductible for tax reporting purposes. One purchase agreement includes an earnout provision providing for a contingent payment due to the sellers for the achievement of certain targets. The earnout is payable during 2025 to the extent certain EBITDA targets are met. The contractual obligation associated with the contingent earnout provisions recognized on the acquisition date amount to $0.7 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 all acquisitions completed during 2023. Certain intangible assets are preliminarily valued using historical information from the Commercial Foodservice Equipment Group and qualitative assessments of the individual businesses at acquisition date. Specifically, the company estimated the fair values of the intangible assets based on the percentage of purchase price assigned to similar intangible assets in previous 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. Pro Forma Financial Information In accordance with ASC 805 Business Combinations, the following unaudited pro forma results of operations for the three months ended April 1, 2023 and April 2, 2022, assumes the 2022 and 2023 acquisitions described above were completed on January 2, 2022 (first day of fiscal year 2022). 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):
| Three Months Ended
| April 1, 2023 |  | April 2, 2022
Net sales | $ | 1,007,624 |  |  | $ | 1,033,298 |
Net earnings | 102,272 |  |  | 72,593 |
Net earnings per share: |  |  |
Basic | $ | 1.91 |  |  | $ | 1.33 |
Diluted | $ | 1.88 |  |  | $ | 1.29 |
The historical consolidated financial information of the company and the acquisitions have been adjusted in the pro forma information to give effect to 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://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
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