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Business Acquisitions and Investments | 12 Months Ended
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Dec. 30, 2017
Business Combinations [Abstract] |
Business Acquisitions and Investments | 3. Business Acquisitions and Investments On October 26, 2017, we acquired 100% of the outstanding stock of MAS Automotive Distribution Inc. (“MAS Industries” or “MAS”), a privately-held manufacturer of premium chassis and control arms based in Montreal, Canada. The purchase price was $67.3 million net of $3.3 million of cash acquired and including contingent consideration and other purchase price adjustments. The Company believes MAS is complementary to our business and growth strategy. We see opportunities to leverage MAS’ existing presence in the automotive aftermarket, as well as our product development capabilities and financial resources to accelerate the growth of MAS’ premium chassis and control arms. We have included the results of MAS in our Consolidated Financial Statements since the acquisition date of October 26, 2017. The Consolidated Statement of Operations for the year ended December 30, 2017 includes $7.0 million of net sales and an immaterial amount of net income related to MAS. The Consolidated Balance Sheet as of December 30, 2017 reflects the acquisition of MAS Industries, effective October 26, 2017. The following table summarizes the preliminary fair value of the total consideration at October 26, 2017:
(in thousands) |  | Total Acquisition Date Fair Value |
Cash consideration (net of $3.3 million cash received) |  | $ | 56,859 |
Contingent cash consideration |  |  | 7,982 |
Seller liability assumed |  |  | 896 |
Working capital adjustment |  |  | 1,539 |
Total consideration assigned to net assets acquired |  | $ | 67,276 |
Included in the table above is $8.0 million of estimated contingent payments which represents the fair value of the estimated payments which will become due if certain sales thresholds are achieved through December 2020. The fair value of the contingent cash consideration was estimated by using the option pricing model framework. The maximum contingent payment would be $11.7 million. Also excluded from the table above are working capital and other purchase price adjustments which will be finalized in fiscal 2018 based on the MAS standalone audited 2017 financial statements. The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the assets acquired and liabilities assumed were recorded at fair value, with the remaining purchase price recorded as goodwill. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed as of October 26, 2017 (in thousands):
Current assets (net of $3.3 million cash received) |  | $ | 21,756 |
Property, plant and equipment |  |  | 1,615 |
Intangible assets |  |  | 20,440 |
Goodwill |  |  | 35,624 |
Total assets acquired |  |  | 79,435 |
Current liabilities |  |  | 5,691 |
Long-term liabilities |  |  | 6,468 |
Total liabilities assumed |  |  | 12,159 |
Net assets acquired |  | $ | 67,276 |
The estimated fair value of the MAS assets acquired and liabilities assumed are provisional as of December 30, 2017 and are based on information that is currently available to the Company. Additional information about conditions that existed as of the date of acquisition are being gathered to finalize these provisional measurements, particularly with respect to net working capital, intangible assets, contingent liabilities, deferred income taxes and income taxes payable. Accordingly, the measurement of the MAS assets acquired and liabilities assumed may change significantly upon finalization of the Company’s valuations and completion of the purchase price allocation, both of which are expected to occur no later than one year from the acquisition date. The valuation of the intangible assets acquired and related amortization periods are as follows:
(in thousands) |  | Valuation |  |  | Amortization Period (in years)
Customer relationships |  | $ | 14,840 |  |  | 8-12
Tradenames |  |  | 5,600 |  |  | 15
Total |  | $ | 20,440 |  |  |
The preliminary fair values of the Customer relationships and Tradenames were estimated using a discounted present value income approach. Under this method, an intangible asset’s fair value is equal to the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. To calculate fair value, we used cash flows discounted at rates ranging from 15% to 17%, which were considered appropriate given the inherent risks associated with each type of asset. We believe that the level and timing of cash flows appropriately reflect market participant assumptions. The goodwill recognized is attributable primarily to strategic and synergistic opportunities related to existing automotive aftermarket businesses, the assembled workforce of MAS and other factors. The goodwill is expected to be deductible for tax purposes. Pro Forma Financial Information (Unaudited) The unaudited pro forma information for the periods set forth below gives effect to the MAS acquisition as if it had occurred as of December 27, 2015, the start of our 2016 fiscal year. The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time:
(in thousands) |  | 2017 |  | 2016 |
Net sales |  | $ | 933,446 |  | $ | 888,851 |
Net income |  |  | 107,948 |  |  | 102,686 |
Diluted earnings per share |  |  | 3.17 |  |  | 2.97 |
The 2017 unaudited pro forma net income set forth above was adjusted to include amortization of intangible assets and to exclude the impact of the nonrecurring acquisition date fair value adjustments to inventory as well as acquisition and financing costs of MAS which we do not believe would have occurred. The 2016 unaudited pro forma net income set forth above was adjusted for these same adjustments as if the acquisition had occurred on December 27, 2015. On January 27, 2017 we acquired a 33% minority equity interest in a supplier for $10.0 million. We are accounting for our interest using the equity method of accounting, as our investment gives us the ability to exercise significant influence, but not control, over the investee. On January 6, 2017, we acquired certain assets of Ingalls Engineering Company, Inc., a chassis and suspension business, primarily to expand our product portfolio. The purchase price was $4.8 million, comprised of $3.1 million of cash and $1.7 million of estimated contingent payments as of the date of acquisition. The contingent payment arrangement is based upon future net sales of the acquired business. In connection with this acquisition, we have completed our purchase price allocation procedures and recorded $2.8 million in goodwill and other intangible assets and $2.0 million of other net assets. All of the intangible assets resulting from the asset purchase are expected to be deductible for tax purposes. The financial results of the acquisition have been included in the Consolidated Financial Statements since the acquisition date.

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