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Note 2 - Acquisitions

9 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Business Combination Disclosure [Text Block]

2) Acquisitions

At the time of the acquisition and March 31, 2024, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.

Subsequent to the end of the third quarter of fiscal year 2024, on May 3, 2024, the Company paid approximately $5.7 million for the purchase of all the issued and outstanding equity interests of a distributor of reed relays, a privately held company. Its results will be reporting within the Electronics segment beginning in the fourth quarter of fiscal year 2024.

Sanyu

On February 19, 2024, the Company completed the purchase of all the issued and outstanding equity interests of Sanyu Switch Co., Ltd (Sanyu), a privately held company for $20.9 million, net of cash acquired. Sanyu designs and manufactures reed relays for test and measurement and other switching applications. Products include surface mount relays, high current relays, high insulation relays, high density relays for test boards, and RF relays which are used in semi-conductors, other electronics manufacturing and other switching applications. Sanyu's' results are reported within the Company's Electronics segment. The Company paid $22.2 million in cash in the third quarter of fiscal year 2024 and recorded $2.5 million as holdback amounts. Holdback amounts are used to withhold a portion of the initial purchase price payment until certain post-closing conditions are satisfied and are expected to be settled within 24 months from the date of acquisition.

The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a valuation of their fair values on the closing date. Goodwill recorded from this transaction is attributable to Sanyu's technical and applications expertise, which is highly complementary to the Company's existing business.

Identifiable intangible assets of $2.6 million consist primarily of $0.7 million for indefinite lived tradenames and $1.9 million of customer relationships to be amortized over 12 years. The goodwill of $6.7 million created by the transaction is not deductible for income tax purposes. The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

The components of the fair value of the Sanyu acquisition, including the preliminary allocation of the purchase price are as follows (in thousands):

		*Preliminary Allocation March 31, 2024*
Total purchase consideration:
Cash payments		$	22,178
Holdbacks			2,464
Less cash acquired			(3,711	)
Total		$	20,931

		*Preliminary Allocation March 31, 2024*
Identifiable assets acquired and liabilities assumed:
Other acquired assets		$	9,453
Inventories			5,709
Property, plant, & equipment			4,791
Identifiable intangible assets			2,600
Goodwill			6,696
Liabilities assumed			(8,318	)
Total		$	20,931

Minntronix

On July 31, 2023, the Company paid $29.2 million in cash for the purchase of all the issued and outstanding equity interests of Minntronix, a privately held company. Minntronix designs and manufactures customized as well as standard magnetics components and products including transformers, inductors, current sensors, coils, chokes, and filters. The products are used in applications across cable fiber, smart meters, industrial control and lighting, electric vehicles, and home security markets. Minntronix' results are reported within the Company's Electronics segment.

The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a valuation of their fair values on the closing date. Goodwill recorded from this transaction is attributable to Minntronix's technical and applications expertise, which is highly complementary to the Company's existing business.

Identifiable intangible assets of $10.7 million consist primarily of $3.2 million for indefinite lived tradenames and $7.5 million of customer relationships to be amortized over 15 years. The goodwill of $13.9 million created by the transaction is not deductible for income tax purposes. The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

The components of the fair value of the Minntronix acquisition, including the preliminary allocation of the purchase price are as follows (in thousands):

		*Preliminary Allocation March 31, 2024*
Fair value of business combination:
Cash payments		$	33,890
Less, cash acquired			(4,661	)
Total		$	29,229

		*Preliminary Allocation March 31, 2024*
Identifiable assets acquired and liabilities assumed:
Other acquired assets		$	8,282
Customer backlog			1,120
Inventories			1,780
Property, plant, & equipment			1,039
Identifiable intangible assets			10,700
Goodwill			13,889
Liabilities assumed			(7,581	)
Total		$	29,229

Acquisition Related Costs

Acquisition related costs include costs related to acquired businesses and other pending acquisitions. These costs consist of (i) deferred compensation arrangements and (ii) acquisition related professional service fees and expenses, including financial advisory, legal, accounting, and other outside services incurred in connection with acquisition activities, and regulatory matters related to acquired entities. These costs do not include purchase accounting expenses, which we define as acquired backlog and the step-up of inventory to fair value, or the amortization of the acquired intangible assets.

Acquisition related costs for the three months ended March 31, 2024 and 2023 were $0.5 million and less than $0.1 million, respectively. Acquisition related costs for the nine months ended March 31, 2024 and 2023 were $2.2 million and $0.5 million, respectively.