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Acquisition | 9 Months Ended
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Sep. 29, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract] |
Acquisition | Acquisition On July 10, 2024, we acquired all of the issued and outstanding limited liability interests of Dura Investment Holdings LLC, the parent company of Supreme Cabinetry Brands, Inc. (“Supreme”), a cabinetry company, from GHK Capital Partners LP for $520.0 million in cash, subject to customary purchase price adjustments set forth in the Merger Agreement. Supreme is a domestic manufacturer of residential cabinetry with a portfolio of product lines significantly focused on premium products. Supreme, with manufacturing facilities located in Minnesota, Iowa and North Carolina, and its two brands, Dura Supreme and Bertch cabinetry, crafts framed and frameless cabinetry for a nationwide network of dealers. The combined company is reaching more customers, through its highly complementary dealer networks, with greater efficiency and effectiveness. Through this transaction, MasterBrand broadened its portfolio of premium cabinetry in the resilient and attractive kitchen and bath categories, further diversifying its channel distribution and adding to its strategically located facility footprint. The acquisition was funded with a combination of cash on hand and proceeds from our revolving credit facility. The purchase consideration was $527.1 million, which was determined as follows:
(U.S. Dollars presented in millions) |  |
Cash considerations paid to Supreme shareholders |  | $ | 336.4 |
Cash paid for transaction costs of Supreme |  | 13.9 |
Repayment of Supreme existing indebtedness and accrued interest |  | 178.2 |
Total Cash Consideration |  | $ | 528.5 |
Preliminary purchase price adjustments |  | (1.4) |
Total Preliminary Purchase Consideration |  | $ | 527.1 |
The purchase price of Supreme was allocated on a preliminary basis as of the closing date of July 10, 2024. Assets acquired and liabilities assumed were recorded at estimated fair values based on management’s estimates, available information, and supportable assumptions that management considered reasonable. Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed of Supreme are recognized and measured at fair value. Due to the timing of acquisition close, the preliminary fair value estimates and assumptions are subject to change as we obtain additional information over the measurement period. The primary areas of the purchase accounting that remain preliminary for completion of the related valuations relate to, but are not limited to, property, plant and equipment, other intangible assets and the related deferred income tax impacts. The following table sets forth the preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed of Supreme, with the excess recorded to goodwill:
(U.S. Dollars presented in millions) |  |
Preliminary Net Assets Acquired |  | Fair Value
Cash and cash equivalents |  | $ | 11.8 |
Accounts receivable |  | 11.5 |
Inventories |  | 17.3 |
Other current assets |  | 2.1 |
Property, plant and equipment |  | 115.9 |
Operating lease right-of-use assets |  | 17.6 |
Other intangible assets |  | 256.9 |
Other assets |  | 1.9 |
|  | $ | 435.0 |
Accounts payable |  | $ | 7.2 |
Current operating lease liabilities |  | 2.4 |
Other current liabilities |  | 18.0 |
Deferred income taxes |  | 69.8 |
Operating lease liabilities |  | 15.1 |
Other non-current liabilities |  | 0.3 |
|  | $ | 112.8 |
Net Assets Acquired |  | $ | 322.2 |
Goodwill |  | 204.9 |
Purchase Consideration |  | $ | 527.1 |
The estimated value of Property, Plant and Equipment includes adjustments totaling $73.7 million to increase the net book value of $42.2 million to the preliminary fair value estimate of $115.9 million. This estimate is based on other comparable acquisitions and historical experience, and preliminary expectations as to the duration of time we expect to realize benefits from those assets. The estimated fair values of identifiable intangible assets acquired were prepared using an income valuation approach, which requires a forecast of expected future cash flows either through the use of the relief-from-royalty method or the multi-period excess earnings method. The estimated useful lives are based on our historical experience and expectations as to the duration of time we expect to realize benefits from those assets. We applied significant judgment in determining the fair value of the intangible assets, which involved the use of Level 3 inputs, including estimates and assumptions of future revenues, royalty rates and discount rates. The estimated fair values of the identifiable intangible assets acquired, their estimated useful lives and the related valuation methodology are as follows:
(U.S. Dollars presented in millions) |  |  |  |  |  |
Asset Type |  | Fair Value |  | Useful Life |  | Valuation Methodology
Customer relationships |  | $ | 171.8 |  |  | 17.5 years |  | Multi-period excess earnings
Tradenames |  | 85.1 |  |  | Indefinite |  | Relief from royalty method
Total other intangible assets |  | $ | 256.9 |  |  |  |  |
The Company recognized $204.9 million of goodwill, of which $180.8 million is tax deductible. The $204.9 million of goodwill recognized is attributable to synergies that are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future products that have yet to be determined and Supreme’s assembled workforce. The Company incurred $15.0 million and $19.4 million of acquisition-related costs associated with the acquisition in the thirteen and thirty-nine weeks ended September 29, 2024, respectively, which are recorded within selling, general and administrative expenses in the condensed consolidated statements of income. Pro forma financial information Net sales and earnings related to the operations of Supreme that have been included in our condensed consolidated statements of income for the period from July 10, 2024 to September 29, 2024 are as follows:
(U.S. Dollars presented in millions) |  |
Net Sales |  | $ | 60.8 |
Net Income |  | $ | 4.2 |
The following table summarizes, on a pro forma basis, the combined results of operations of Supreme and MasterBrand as though the acquisition and the related financing had occurred as of December 26, 2022. The pro forma results are not necessarily indicative of either the actual consolidated results had the acquisition of Supreme occurred on December 26, 2022, nor are they indicative of future consolidated operating results.
|  | 13 Weeks Ended |  | 39 Weeks Ended
(U.S. Dollars presented in millions) |  | September 29, 2024 |  | September 24, 2023 |  | September 29, 2024 |  | September 24, 2023
Net Sales |  | $ | 718.1 |  |  | $ | 738.5 |  |  | $ | 2,168.7 |  |  | $ | 2,242.4 |
Net Income |  | $ | 42.0 |  |  | $ | 56.7 |  |  | $ | 118.3 |  |  | $ | 124.5 |
These pro forma amounts have been calculated after applying our accounting policies and making certain adjustments, which primarily include: (i) depreciation adjustments relating to fair value step-ups to property, plant and equipment; (ii) amortization adjustments relating to fair value estimates of acquired intangible assets; (iii) incremental interest expense associated with the revolving credit facility used, in part, to fund the acquisition, and related debt issuance costs; (iv) cost of products sold adjustments relating to fair value step-ups to inventory; and (v) transaction related costs of both MasterBrand and Supreme.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent + Details
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