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Acquisitions | 9 Months Ended
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Oct. 03, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions OTN Systems N.V. We acquired 100% of the shares of OTN Systems on January 29, 2021 for a preliminary purchase price, net of cash acquired, of $73.3 million, which was funded with cash on hand. OTN Systems, based in Olen, Belgium, is a leading provider of easy to use and highly-reliable network solutions tailored for specific applications in harsh, mission-critical environments. The acquisition of OTN Systems supports one of our key strategic priorities related to the growing demand for industrial automation by adding proprietary technology and mission-critical hardware and software products for more complete end-to-end solutions. The results of OTN Systems have been included in our Condensed Consolidated Financial Statements from January 29, 2021, and are reported within the Industrial Solutions segment. Belden assumed $1.8 million of OTN Systems' debt as part of the transaction, which was subsequently paid on the acquisition date. A subsidiary of OTN Systems includes a noncontrolling interest. Because OTN Systems has a controlling financial interest in the subsidiary, it is consolidated into our financial statements. The results that are attributable to the noncontrolling interest holder are presented as net income (loss) attributable to noncontrolling interests in the Condensed Consolidated Statements of Operations. The following table summarizes the estimated, preliminary fair values of the assets acquired and the liabilities assumed as of January 29, 2021 (in thousands):
Receivables |  | $ | 5,036 |
Inventories |  | 10,700 |
Other current assets |  | 1,361 |
Property, plant and equipment |  | 602 |
Intangible assets |  | 39,930 |
Goodwill |  | 38,915 |
Operating lease right-of-use assets |  | 4,144 |
Other long-lived assets |  | 706 |
Total assets acquired |  | $ | 101,394 |
Accounts payable |  | $ | 5,931 |
Accrued liabilities |  | 4,485 |
Deferred revenues |  | 3,260 |
Long-term debt |  | 1,841 |
Post retirement benefits |  | 3,581 |
Deferred income taxes |  | 4,889 |
Long-term operating lease liabilities |  | 3,271 |
Other long-term liabilities |  | 771 |
Total liabilities assumed |  | $ | 28,029 |
Net assets |  | $ | 73,365 |
Noncontrolling interests |  | 20 |
Net assets attributable to Belden |  | $ | 73,345 |
The above purchase price allocation is preliminary, and is subject to revision as additional information about the fair value of individual assets and liabilities becomes available. The preliminary measurement of receivables, inventories, intangible assets, goodwill, deferred income taxes, other assets and liabilities, and noncontrolling interests are subject to change. A change in the estimated fair value of the net assets acquired or noncontrolling interests will change the amount of the purchase price allocable to goodwill. The preliminary fair value of acquired receivables is $5.0 million, which is equivalent to its gross contractual amount. During the third quarter of 2021, we recorded measurement-period adjustments that decreased goodwill by $0.6 million. The impact of these adjustments to the Condensed Consolidated Statements of Operations was immaterial. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The judgments we have used in estimating the preliminary fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations. For purposes of the above allocation, we based our preliminary estimate of the fair values for the acquired inventory, intangible assets, deferred revenue, and noncontrolling interests on valuation studies performed by a third party valuation firm. We have estimated a preliminary fair value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of disposal, and a reasonable profit allowance for our post acquisition selling efforts. We used various valuation methods including discounted cash flows, lost income, excess earnings, and relief from royalty to estimate the preliminary fair value of the identifiable intangible assets and deferred revenue (Level 3 valuation). Goodwill and other intangible assets reflected above were determined to meet the criteria for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to the expansion of industrial automation product offerings in complete end-to-end solutions. Our tax basis in the acquired goodwill is zero. The intangible assets related to the acquisition consisted of the following:
|  | Fair Value |  | Amortization Period
|  | (In thousands) |  | (In years)
Intangible assets subject to amortization: |  |  |  |
Developed technologies |  | $ | 26,400 |  |  | 6.8
Customer relationships |  | 6,200 |  |  | 15.0
Sales backlog |  | 3,600 |  |  | 5.0
Trademarks |  | 3,070 |  |  | 14.8
Non-compete agreements |  | 660 |  |  | 2
Total intangible assets subject to amortization |  | $ | 39,930 |  |  |
Intangible assets not subject to amortization: |  |  |  |
Goodwill |  | $ | 38,915 |  |  | n/a
Total intangible assets not subject to amortization |  | $ | 38,915 |  |  |
Total intangible assets |  | $ | 78,845 |  |  |
Weighted average amortization period |  |  |  | 8.5
The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the developed technology intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period and pattern of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of estimated sales from recurring customers. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship and control of the items transfers. The useful life for the trademarks was based on the period of time we expect to continue to go to market using the trademarks. The useful life of the non-compete agreements was based on the term of the agreements. Our consolidated revenues and income before taxes for the three months ended October 3, 2021 included $7.6 million and $(2.9) million, respectively, from OTN Systems. For the three months ended October 3, 2021, income before taxes included $0.6 million of severance and other restructuring costs, $1.4 million of amortization of intangible assets, and $0.4 million of cost of sales related to the adjustment of acquired inventory to fair value for OTN Systems. Our consolidated revenues and income before taxes for the nine months ended October 3, 2021 included $20.5 million and $(7.1) million, respectively, from OTN Systems. For the nine months ended October 3, 2021, income before taxes included $2.3 million of severance and other restructuring costs, $3.7 million of amortization of intangible assets, and $2.4 million of cost of sales related to the adjustment of acquired inventory to fair value for OTN Systems. The following table illustrates the unaudited pro forma effect on operating results as if the OTN Systems acquisition had been completed as of January 1, 2020.
|  | Three Months Ended |  | Nine Months Ended
|  | October 3, 2021 |  | September 27, 2020 |  | October 3, 2021 |  | September 27, 2020
|  | (In thousands, except per share data)
|  | (Unaudited)
Revenues |  | $ | 631,338 |  |  | $ | 479,137 |  |  | $ | 1,770,941 |  |  | $ | 1,380,778 |
Net income from continuing operations attributable to Belden common stockholders |  | 42,041 |  |  | 17,071 |  |  | 114,752 |  |  | 30,285 |
Diluted income from continuing operations per share attributable to Belden common stockholders |  | $ | 0.93 |  |  | $ | 0.38 |  |  | $ | 2.54 |  |  | $ | 0.67 |
The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition. Opterna International Corp. Our acquisition of Opterna International Corp. (Opterna) in 2019 included potential earn-out consideration. As of the acquisition date, we estimated the fair value of the earn-out to be $5.8 million. The earn-out period ended in 2021, and the financial targets tied to the earn-out were not achieved. We reduced the earn-out liability to zero and recognized a $5.8 million benefit in Selling, General and Administrative Expenses in the nine months ended October 3, 2021. This benefit was excluded from Segment EBITDA of our Enterprise Solutions segment.

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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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