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Acquisitions | 3 Months Ended
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Apr. 01, 2023
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, “Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired business are included in the Company’s Condensed Consolidated Financial Statements from the date of the acquisition. Western Automation On February 3, 2023, the Company completed the previously announced acquisition of Western Automation Research and Development Limited (“Western Automation”) for approximately $162 million in cash. Headquartered in Galway, Ireland, Western Automation is a designer and manufacturer of electrical shock protection devices used across a broad range of high-growth end markets, including e-Mobility off-board charging infrastructure, industrial safety and renewables. At the time the Company and Western Automation entered into the definitive agreement, Western Automation had annualized sales of approximately $25 million. The business is reported within the Company’s Industrial segment. The acquisition was funded with cash on hand. The total purchase consideration of $158.3 million, net of cash, has been allocated, on a preliminary basis, to assets acquired and liabilities assumed, as of the completion of the acquisition, based on preliminary estimated fair values. The purchase price allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process. The primary area not yet finalized relates to the completion of the valuation of certain acquired income tax assets and liabilities. As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized. The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in the Western Automation acquisition:
(in thousands) | Purchase Price Allocation
Total purchase consideration: |
Cash, net of cash acquired | $ | 158,260 |
Allocation of consideration to assets acquired and liabilities assumed: |
Trade receivables, net | 3,389 |
Inventories | 3,678 |
Other current assets | 718 |
Property, plant, and equipment | 1,328 |
Intangible assets | 68,000 |
Goodwill | 94,823 |
Other non-current assets | 573 |
Current liabilities | (5,251) |
Other non-current liabilities | (8,998) |
| $ | 158,260 |
All Western Automation assets and liabilities were recorded in the Industrial segment and are primarily reflected in the Europe geographic area. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synerg ies from combining Western Automation’s products and technology with the Company’s existing Industrial products portfolio. Goodwill resulting from the Western Automation acquisition is not expected to be deductible for tax purposes. Included in the Company’s Condensed Consolidated Statements of Net Income for the three months ended April 1, 2023 are net sales of $2.7 million, and a loss before income taxes of $0.1 million, since the February 3, 2023 acquisition of Western Automation. During the three months ended April 1, 2023, the Company incurred approximately $1.4 million of legal and professional fees related to the Western Automation acquisition recognized as Selling, general, and administrative expenses. These costs were reflected as other non-segment costs. C&K Switches On July 19, 2022, the Company completed the previously announced acquisition of C&K Switches (“C&K”) for $540 million in cash. Founded in 1928, C&K is a leading designer and manufacturer of high-performance electromechanical switches and interconnect solutions with a strong global presence across a broad range of end markets, including industrial, transportation, datacom, and aerospace. At the time the Company and C&K entered into the definitive agreement, C&K had annualized sales of over $200 million. The business is reported as part of the electronics-passive products and sensors business within the Company's Electronics segment. The acquisition was funded through a combination of cash on hand and debt. The total purchase consideration of $523.0 million, net of cash acquired, has been allocated, on a preliminary basis, to assets acquired and liabilities assumed, as of the completion of the acquisition, based on preliminary estimated fair values. The purchase price allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process. As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized. The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in the C&K acquisition:
(in thousands) | Purchase Price Allocation
Total purchase consideration: |
Cash, net of cash acquired | $ | 523,014 |
Allocation of consideration to assets acquired and liabilities assumed: |
Trade receivables, net | 20,967 |
Inventories | 42,968 |
Other current assets | 2,932 |
Property, plant, and equipment | 32,791 |
Intangible assets | 254,700 |
Goodwill | 270,245 |
Other non-current assets | 14,797 |
Current liabilities | (47,734) |
Long- term debt | (9,626) |
Other non-current liabilities | (59,026) |
| $ | 523,014 |
All C&K goodwill, other assets and liabilities were recorded in the Electronics segment and are reflected in the Americas, Europe and Asia-Pacific geographic areas. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining C&K’s products and technology with the Company’s existing Electronics products portfolio. Goodwill resulting from the C&K acquisition is not expected to be deductible for tax purposes. As required by purchase accounting rules, the Company recorded a $10.8 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of sales during the third and fourth quarter of 2022 as the acquired inventory was sold and reflected as other non-segment costs. Embed On April 12, 2022, the Company acquired Embed Ltd. (“Embed”). Founded in 2005, Embed is a proven provider of embedded software and firmware developed for a broad range of applications serving transportation end markets, primarily including commercial vehicle electrification and eMobility. The business is included in the commercial vehicle business within the Company's Transportation segment. The acquisition was funded with the Company’s cash on hand. The total purchase consideration was $9.2 million, net of cash. Pro Forma Results The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company and Western Automation as though the acquisition had occurred as of January 2, 2022, and C&K as though the acquisition had occurred as of December 27, 2020, and Carling as though the acquisition had occurred as of December 29, 2019. The Company has not included pro forma results of operations for Embed as its operations were not material to the Company. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the Western Automation acquisition occurred as of January 2, 2022, and had the C&K acquisition occurred as of December 27, 2020 and had Carling acquisition occurred as of December 29, 2019 or of future consolidated operating results.
|  | For the Three Months Ended |  |
(in thousands, except per share amounts) |  | April 1, 2023 |  | April 2, 2022 |  |  |  |
Net sales |  | $ | 611,668 |  |  | $ | 691,751 |  |  |  |  |
Income before income taxes |  | 110,613 |  |  | 149,479 |  |  |  |  |
Net income |  | 90,241 |  |  | 128,696 |  |  |  |  |
Net income per share — basic |  | 3.64 |  |  | 5.21 |  |  |  |  |
Net income per share — diluted |  | 3.60 |  |  | 5.15 |  |  |  |  |
Pro forma results presented above primarily reflect the following adjustments:
|  | For the Three Months Ended |  |
(in thousands) |  | April 1, 2023 |  | April 2, 2022 |  |  |  |
Amortization (a) |  | $ | (479) |  |  | $ | (3,731) |  |  |  |  |
Depreciation |  | — |  |  | 723 |  |  |  |  |
Transaction costs (b) |  | 1,397 |  |  | 1,979 |  |  |  |  |
Amortization of inventory step-up (c) |  | — |  |  | 4,769 |  |  |  |  |
Interest expense (d) |  | — |  |  | 194 |  |  |  |  |
Income tax expense of above items |  | (115) |  |  | (1,195) |  |  |  |  |
(a) The amortization adjustment for the three months ended April 1, 2023 and April 2, 2022 primarily reflects incremental amortization resulting from the measurement of intangibles at their fair values. (b) The transaction cost adjustments reflect the reversal of certain legal and professional fees from the three months ended April 1, 2023 and April 2, 2022, and recognition of those fees during the three months ended April 2, 2022. (c) The amortization of inventory step-up adjustment reflects the reversal of the amount recognized related to the Carling acquisition during the three months ended April 2, 2022. The inventory step-up was amortized over four months as the inventory was sold. (d) The interest expense adjustment reflects incremental interest expense related to the financing of the C&K acquisition.

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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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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