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Business Combinations | 9 Months Ended
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Oct. 01, 2021
Business Combinations [Abstract] |
Business Combinations | 3. Business Combinations On August 30, 2021, the Company acquired 100% of the outstanding shares of ATI Industrial Automation, Inc. (“ATI”), an Apex, North Carolina-based leading supplier of intelligent end-of-arm technology solutions to OEMs for advanced industrial and surgical robots for an initial cash purchase price of $170.0 million, net of cash acquired, and $51.9 million estimated fair value of contingent consideration. The contingent consideration will be payable in 2022 based on a multiple of actual standalone ATI Adjusted EBITDA, as defined in the purchase and sale agreement, for the fiscal year ending December 31, 2021. The initial cash purchase price was financed with borrowings under the Company’s revolving credit facility and cash available on hand. The addition of ATI is expected to complement and add intelligent technology solutions to further expand the Company’s position in mission critical robotic applications. ATI will contribute to the Company’s operations and growth within the Precision Motion reportable segment. On August 31, 2021, the Company acquired 100% of the outstanding shares of Schneider Electric Motion USA, Inc. (“SEM”), a Marlborough, Connecticut-based manufacturer of integrated stepper motors and electronic controls for automation equipment for a total purchase price of $115.1 million, net of cash acquired, subject to customary working capital adjustments. The acquisition was financed with borrowings under our revolving credit facility. The addition of SEM is expected to complement and expand the Company’s presence in life science applications and solutions for industrial automation applications within the Precision Motion reportable segment. Allocation of Purchase Price The acquisitions of ATI and SEM have been accounted for as business combinations. The purchase price for each acquisition is allocated based upon a valuation of the fair values of assets acquired and liabilities assumed as of the acquisition date. The fair values of intangible assets were based on valuations using a discounted cash flow income approach and a relief from royalty income approach, with estimates and assumptions developed by management. The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The excess of the purchase price over the fair values of tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill for each acquisition. The Company’s estimates and assumptions in determining the estimated fair values of certain assets and liabilities are subject to change within the measurement period (up to one year from the acquisition date) as a result of additional information obtained with regards to facts and circumstances that existed as of the acquisition date. ATI Based upon a preliminary valuation, the total purchase price for ATI was allocated as follows (in thousands):
| Purchase Price |
| Allocation |
Cash | $ | 10,709 |
Accounts receivable |  | 12,596 |
Inventories |  | 17,431 |
Property, plant and equipment |  | 4,195 |
Intangible assets |  | 52,400 |
Goodwill |  | 143,851 |
Deferred tax assets |  | 345 |
Other assets |  | 11,425 |
Total assets acquired |  | 252,952 |
Accounts payable |  | 5,135 |
Deferred tax liabilities |  | 228 |
Other liabilities |  | 14,938 |
Total liabilities assumed |  | 20,301 |
Total assets acquired, net of liabilities assumed |  | 232,651 |
Less: cash acquired |  | 10,709 |
Less: contingent consideration |  | 51,900 |
Initial purchase price, net of cash acquired | $ | 170,042 |
The purchase price allocation is preliminary as the Company is in the process of collecting additional information for the valuation of inventories, property plant and equipment, intangible assets, other liabilities, contingent consideration and unrecognized tax benefits. The fair value of intangible assets for ATI is comprised of the following (dollar amounts in thousands):
|  |  |  |  | Weighted Average
| Estimated Fair |  |  | Amortization
| Value |  |  | Period
Developed technologies | $ | 19,800 |  |  | 15 years
Customer relationships |  | 23,600 |  |  | 15 years
Trademarks and trade names |  | 5,600 |  |  | 15 years
Backlog |  | 3,400 |  |  | 1 year
Total | $ | 52,400 |  |  |
The purchase price allocation resulted in $52.4 million of identifiable intangible assets and $143.9 million of goodwill. Goodwill amounting to $143.4 million is expected to be deductible for U.S. income tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized. The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) ATI’s ability to grow the business with existing and new customers, including leveraging the Company’s customer base; (ii) ATI’s ability to grow the business through new product introductions; and (iii) cost improvements due to the integration of ATI’s operations into the Company’s existing infrastructure. The operating results of ATI were included in the Company’s results of operations beginning on August 31, 2021. ATI contributed revenues of $8.7 million and a profit before income taxes of $0.8 million to the Company’s operating results for the nine months ended October 1, 2021. ATI’s profit before income taxes for the period from the acquisition date through October 1, 2021 included amortization of inventory fair value adjustments and amortization of purchased intangible assets of $0.8 million. SEM Based upon a preliminary valuation, the total purchase price for SEM was allocated as follows (in thousands):
| Purchase Price |
| Allocation |
Cash | $ | 3,881 |
Accounts receivable |  | 4,240 |
Inventories |  | 2,499 |
Property, plant and equipment |  | 452 |
Intangible assets |  | 54,570 |
Goodwill |  | 70,064 |
Other assets |  | 776 |
Total assets acquired |  | 136,482 |
Accounts payable |  | 1,325 |
Deferred tax liabilities |  | 12,387 |
Other liabilities |  | 3,750 |
Total liabilities assumed |  | 17,462 |
Total assets acquired, net of liabilities assumed |  | 119,020 |
Less: cash acquired |  | 3,881 |
Total purchase price, net of cash acquired | $ | 115,139 |
The purchase price allocation is preliminary as the Company is in the process of collecting additional information for the valuation of inventories, intangible assets, other liabilities and unrecognized tax benefits. The fair value of intangible assets for SEM is comprised of the following (dollar amounts in thousands):
|  |  |  |  | Weighted Average
| Estimated Fair |  |  | Amortization
| Value |  |  | Period
Developed technologies | $ | 9,110 |  |  | 15 years
Customer relationships |  | 41,740 |  |  | 20 years
Trademarks and trade names |  | 370 |  |  | 4 years
Backlog |  | 3,350 |  |  | 1 year
Total | $ | 54,570 |  |  |
The purchase price allocation resulted in $54.6 million of identifiable intangible assets and $70.1 million of goodwill. As the SEM acquisition was structured as a stock acquisition for income tax purposes, the goodwill is not expected to be deductible for income tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized. The goodwill recorded represents the anticipated incremental value of future cash flows potentially attributable to: (i) SEM’s ability to grow the business with existing and new customers, including leveraging the Company’s customer base; (ii) SEM’s ability to grow the business through new product introductions; and (iii) cost improvements due to the integration of SEM’s operations into the Company’s existing infrastructure. The operating results of SEM were included in the Company’s results of operations beginning on September 1, 2021. SEM contributed revenues of $2.4 million and a profit before income taxes of $0.1 million to the Company’s operating results for the nine months ended October 1, 2021. SEM’s profit before income taxes for the period from the acquisition date through October 1, 2021 included amortization of inventory fair value adjustments and amortization of purchased intangible assets of $0.5 million. Unaudited Pro Forma Information The pro forma information for all periods presented below includes the effects of business combination accounting resulting from the acquisitions of ATI and SEM, including amortization of inventory fair value adjustments, amortization of intangible assets, interest expense on borrowings in connection with the acquisition, and the related tax effects, assuming that the acquisitions had been consummated as of January 1, 2020. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisitions had taken place on January 1, 2020.
| Three Months Ended |  |  | Nine Months Ended |
| October 1, |  |  | October 2, |  |  | October 1, |  |  | October 2, |
| 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Revenue | $ | 197,715 |  |  | $ | 186,919 |  |  | $ | 584,051 |  |  | $ | 508,906 |
Consolidated net income | $ | 13,995 |  |  | $ | 9,908 |  |  | $ | 38,188 |  |  | $ | 25,551 |
Acquisition Costs Acquisition costs are included in restructuring and acquisition related costs in the consolidated statements of operations. Acquisition-related costs for ATI and SEM acquisitions are as follows (in thousands):
| Three Months Ended |  |  | Nine Months Ended |
| October 1, |  |  | October 1, |
| 2021 |  |  | 2021 |
ATI | $ | 1,956 |  |  | $ | 3,321 |
SEM | $ | 864 |  |  | $ | 1,052 |

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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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