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Acquisition | 3 Months Ended
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Mar. 30, 2019
Business Combinations [Abstract] |
Acquisition | Acquisition The Company’s acquisitions have been accounted for using the purchase method of accounting and its results are included in its condensed consolidated financial statements from the date of acquisition. Historically, the Company’s acquisitions have been made at prices above the fair value of identifiable net assets, resulting in goodwill. Acquisition transaction costs are included in selling, general, and administrative expenses (SG&A) in the accompanying condensed consolidated statement of income as incurred. The Company recorded acquisition transaction costs of $843,000 in the first three months of 2019 relating to its recent acquisition described below. On January 2, 2019, the Company acquired, directly and indirectly, all the outstanding equity interests of Syntron Material Handling Group, LLC and certain of its affiliates (SMH) pursuant to an equity purchase agreement, dated December 9, 2018, for approximately $176,855,000, net of cash acquired, which includes a post-closing adjustment of $1,567,000 that was paid by the Company in April 2019. The Company funded the acquisition through borrowings under its revolving credit facility. SMH, which comprises the Company's new Material Handling Systems segment, has manufacturing operations in Mississippi, United States and in China. SMH is a leading provider of material handling equipment and systems to various process industries, including mining, aggregates, food processing, packaging, and pulp and paper. Revenues for SMH were approximately $89,365,000 for the trailing twelve months ended October 31, 2018. The Company expects several synergies in connection with this acquisition, including expansion of product sales into new markets by leveraging SMH's existing presence, strengthening of SMH's relationships in the pulp and paper industry, and sourcing efficiencies. Goodwill from the SMH acquisition was $86,502,000, of which $64,438,000 is expected to be deductible for tax purposes over 15 years. In addition, intangible assets acquired were $77,140,000, of which $66,725,000 is expected to be deductible for tax purposes over 15 years. For the quarter ended March 30, 2019, the Company recorded revenues of $20,584,000 and an operating loss of $1,353,000 for SMH from the date of acquisition, including amortization expense of $3,308,000 associated with acquired profit in inventory and backlog, and $843,000 of acquisition transaction costs. The following table summarizes the estimated fair values of assets acquired and liabilities assumed and the purchase price for SMH. The final purchase accounting and purchase price allocation remain subject to change as the Company continues to refine its preliminary valuation of certain acquired assets and the valuation of acquired intangibles.
(In thousands) |  |
Net Assets Acquired: |  |
Cash, Cash Equivalents, and Restricted Cash |  | $ | 2,431 |
Accounts Receivable |  | 10,271 |
Inventory |  | 12,982 |
Other Current Assets |  | 900 |
Property, Plant, and Equipment |  | 7,730 |
Other Assets |  | 10,994 |
Definite-Lived Intangible Assets |  |
Customer relationships |  | 52,900 |
Product technology |  | 10,500 |
Other |  | 4,040 |
Indefinite-Lived Intangible Assets |  |
Tradenames |  | 9,700 |
Goodwill |  | 86,502 |
Total assets acquired |  | 208,950 |
Accounts Payable |  | 4,663 |
Customer Deposits |  | 2,919 |
Other Current Liabilities |  | 3,724 |
Long-Term Lease Liabilities |  | 15,244 |
Long-Term Deferred Income Taxes |  | 3,114 |
Total liabilities assumed |  | 29,664 |
Net assets acquired |  | $ | 179,286 |
Purchase Price: |  |
Cash Paid to Seller Borrowed Under Revolving Credit Facility |  | $ | 177,719 |
Post-Closing Adjustment to be Paid to Seller |  | 1,567 |
Total Purchase Price |  | $ | 179,286 |
The weighted-average amortization period for definite-lived intangible assets is 14 years, including weighted-average amortization periods of 15 years for customer relationships, 14 years for product technology, and 8 years for other intangible assets. Unaudited Supplemental Pro Forma Information Had the acquisition of SMH been completed as of the beginning of 2018, the Company’s pro forma results of operations for the three months ended March 30, 2019 and March 31, 2018 would have been as follows:
|  | Three Months Ended
(In thousands, except per share amounts) |  | March 30, 2019 |  | March 31, 2018
Revenues |  | $ | 171,316 |  |  | $ | 170,532 |
Net Income Attributable to Kadant |  | $ | 14,112 |  |  | $ | 8,475 |
Earnings per Share Attributable to Kadant: |  |  |  |
Basic |  | $ | 1.27 |  |  | $ | 0.77 |
Diluted |  | $ | 1.24 |  |  | $ | 0.75 |
Pro forma results include the following non-recurring pro forma adjustments that were directly attributable to the business combination:
• | Pre-tax charge to SG&A expenses of $843,000 in 2018 and reversal in 2019, for acquisition transaction costs.
• | Estimated pre-tax charge to cost of revenues of $2,310,000 in 2018 and reversal in 2019, for the sale of SMH inventory revalued at the date of acquisition.
• | Estimated pre-tax charge to SG&A expenses of $998,000 in 2018 and reversal in 2019, for intangible asset amortization related to acquired backlog.
These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that would have resulted had the acquisition of SMH occurred as of the beginning of 2018, or that may result in the future.

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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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- References No definition available. + Details
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