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Acquisition | 9 Months Ended
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Sep. 28, 2019
Business Combinations [Abstract] |
Acquisition | Acquisitions The Company’s acquisitions have been accounted for using the purchase method of accounting and the results of the acquired businesses 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. In the third quarter of 2019, the Company signed an agreement to acquire certain assets of a business in Brazil for its Papermaking Systems segment for approximately $407,000, of which $203,000 was paid in the third quarter of 2019. The Company expects the remaining amount to be paid by year end. 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. The Company funded the acquisition through borrowings under its revolving credit facility. SMH, which comprises the Company's Material Handling Systems segment, has manufacturing operations in Mississippi, United States, and 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. 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 $80,296,000, of which $58,450,000 is expected to be deductible for tax purposes over 15 years. In addition, intangible assets acquired were $83,020,000, of which $70,925,000 is expected to be deductible for tax purposes over 15 years. For the nine months ended September 28, 2019, the Company recorded revenues of $61,063,000 and operating income of $877,000 for SMH from the date of acquisition, including amortization expense of $4,852,000 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 is substantially complete but remains subject to change as the Company continues to refine its valuation of certain acquired assets and liabilities, primarily related to the finalization of income taxes.
(In thousands) |  | Total
Net Assets Acquired: |  |
Cash, Cash Equivalents, and Restricted Cash |  | $ | 2,431 |
Accounts Receivable |  | 10,275 |
Inventory |  | 13,061 |
Other Current Assets |  | 900 |
Property, Plant, and Equipment |  | 7,085 |
Other Assets |  | 11,083 |
Definite-Lived Intangible Assets |  |
Customer relationships |  | 58,300 |
Product technology |  | 11,000 |
Other |  | 4,220 |
Indefinite-Lived Intangible Assets |  |
Tradenames |  | 9,500 |
Goodwill |  | 80,296 |
Total assets acquired |  | 208,151 |
Accounts Payable |  | 3,380 |
Other Current Liabilities |  | 7,954 |
Long-Term Lease Liabilities |  | 15,244 |
Long-Term Deferred Income Taxes |  | 2,287 |
Total liabilities assumed |  | 28,865 |
Net assets acquired |  | $ | 179,286 |
Purchase Price: |  |
Cash Paid to Seller Borrowed Under Revolving Credit Facility |  | $ | 179,286 |
The weighted-average amortization period for the definite-lived intangible assets above 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- and nine-month periods ended September 28, 2019 and September 29, 2018 would have been as follows:
|  | Three Months Ended |  | Nine Months Ended
(In thousands, except per share amounts) |  | September 28, 2019 |  | September 29, 2018 |  | September 28, 2019 |  | September 29, 2018
Revenues |  | $ | 173,504 |  |  | $ | 187,084 |  |  | $ | 521,985 |  |  | $ | 533,868 |
Net Income Attributable to Kadant |  | $ | 16,167 |  |  | $ | 18,564 |  |  | $ | 47,515 |  |  | $ | 38,158 |
Earnings per Share Attributable to Kadant: |  |  |  |  |  |  |  |
Basic |  | $ | 1.43 |  |  | $ | 1.67 |  |  | $ | 4.24 |  |  | $ | 3.44 |
Diluted |  | $ | 1.41 |  |  | $ | 1.63 |  |  | $ | 4.16 |  |  | $ | 3.35 |
The historical consolidated financial information of the Company and SMH has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the acquisition and related financing arrangements, are expected to have a continuing impact on the Company, and are factually supportable. Pro forma results include the following non-recurring pro forma adjustments that were directly attributable to the acquisition:
• | Pre-tax charge to SG&A expenses of $843,000 in the nine months ended September 29, 2018 and reversal of $843,000 in the nine months ended September 28, 2019, for acquisition transaction costs.
• | Estimated pre-tax charge to cost of revenues of $3,549,000 in the nine months ended September 29, 2018 and reversal of $3,549,000 in the nine months ended September 28, 2019, for the sale of inventory revalued at the date of acquisition.
• | Estimated pre-tax charge to SG&A expenses of $21,000 in the three months ended September 29, 2018 and $1,303,000 in the nine months ended September 29, 2018 and reversal of $21,000 in the three months ended September 28, 2019 and $1,303,000 in the nine months ended September 28, 2019, for intangible asset amortization related to acquired backlog.
• | Estimated tax effects related to pro forma adjustments.
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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