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Cincinnati Sub-Zero Acquisition | 6 Months Ended
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Jun. 30, 2016
Business Combinations [Abstract] |
Cincinnati Sub-Zero Acquisition | Note 3 – Cincinnati Sub-Zero Acquisition CSZ develops, manufactures and sells patient temperature management systems and product testing equipment. The patient temperature management systems regulate the body temperature of medical patients during and after surgery. The product testing equipment simulates temperature, humidity, altitude and vibration conditions and is customized for use in a wide variety of industrial manufacturing applications. Results of operations for CSZ are included in the Company’s consolidated condensed financial statements beginning April 1, 2016. CSZ contributed $16,978 in product revenues and a net loss of $1,644 for the three and six month periods ended June 30, 2016. Purchase Price Allocation The purchase price of $73,666, net of cash acquired of $985, has been allocated to the values of assets acquired and liabilities assumed as of April 1, 2016. The allocation of the purchase price is preliminary. The Company is in the process of obtaining additional information required to finalize the valuation. An appraisal is currently underway by an independent third party valuation firm to assist management in determining the fair value of acquired assets and assumed liabilities, including identifiable intangible assets. The final purchase price allocation may be materially different than the preliminary allocation recorded. The purchase price allocation is expected to be finalized by December 31, 2016. The preliminary allocation as of April 1, 2016 was as follows:
Accounts receivable |  | $ | 10,790 |
Inventory |  |  | 16,284 |
Prepaid expenses and other assets |  |  | 1,144 |
Property and equipment |  |  | 12,974 |
Customer relationships |  |  | 11,600 |
Technology |  |  | 3,200 |
Trade name |  |  | 6,370 |
Goodwill |  |  | 22,739 | a
Assumed liabilities |  |  | (11,435 | )
Net assets acquired |  |  | 73,666 |
Cash acquired |  |  | 985 |
Purchase price |  | $ | 74,651 |
| (a) | The preliminary amount recorded to goodwill is expected to change due to additional consideration owed to the seller for a tax gross up.
The gross contractual amount due of accounts receivable is $11,126 of which $336 is expected to be uncollectible. The purchase price allocation includes an approximate $4,000 step-up in the underlying net book value of the inventory to its fair value. This inventory was sold to customers and expensed to cost of goods sold during the three month period ended June 30, 2016. Note 3 – Cincinnati Sub-Zero Acquisition – Continued Supplemental Pro Forma Information The unaudited pro forma combined historical results including the amounts of CSZ’s revenue and earnings that would have been included in the Company’s consolidated condensed statements of income had the acquisition date been January 1, 2016 or January 1, 2015 are as follows:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2015 |  |  | 2016 |  |  | 2015 |
Product revenues |  | $ | 221,136 |  |  | $ | 464,339 |  |  | $ | 449,638 |
Net income |  | $ | 17,456 |  |  | $ | 30,732 |  |  | $ | 37,366 |
Basic earnings per share |  | $ | 0.48 |  |  | $ | 0.84 |  |  | $ | 1.04 |
Diluted earnings per share |  | $ | 0.48 |  |  | $ | 0.84 |  |  | $ | 1.03 |
The pro forma information includes adjustments for the effect of the amortization of intangible assets recognized in the acquisition. This pro forma information is not indicative of future operating results. Goodwill We recorded goodwill of approximately $22,739 arising from the acquisition. The acquired goodwill represents intangible assets that do not qualify for separate recognition. It is estimated that all of the goodwill recognized will be deductible for income tax purposes. Intangible Assets In conjunction with the acquisition, intangible assets of $21,170 were recorded. The Company’s estimate of the fair value of these assets at the time of the acquisition is preliminary and will be determined with the assistance of an independent third-party valuation firm. As part of the estimated valuation, an estimated useful life for the assets was determined. Intangible assets, net consisted of the following:
|  | June 30, 2016
|  | Gross Value |  |  | Accumulated Amortization |  |  | Net Value |  |  | Useful Life
Customer relationships |  | $ | 11,600 |  |  | $ | 193 |  |  | $ | 11,407 |  |  | 15 yrs
Technology |  |  | 3,200 |  |  |  | 130 |  |  |  | 3,070 |  |  | 5 -7 yrs
Trade name |  |  | 6,370 |  |  |  | — |  |  |  | 6,370 |  |  | Indefinite
Total |  | $ | 21,170 |  |  | $ | 323 |  |  | $ | 20,847 |  |  |
Amortization expense of $323 for the three and six months ended June 30, 2016 was recorded as follows:
|  | Three and Six Months Ended June 30, 2016 |
Product revenues |  | $ | 193 |
Selling, general and administrative expense |  |  | 130 |
Note 3 – Cincinnati Sub-Zero Acquisition – Continued Amortization expense for the prospective five years is estimated to be as follows:
July 1, 2016 through December 31, 2016 |  | $ | 647 |
2017 |  | $ | 1,293 |
2018 |  | $ | 1,293 |
2019 |  | $ | 1,293 |
2020 |  | $ | 1,293 |
2021 |  | $ | 1,293 |
Property, Plant & Equipment Property and equipment consist of the following:
Asset category |  | Useful life |  | Amount |
Land |  | Indefinite |  | $ | 1,630 |
Buildings |  | 20 yrs |  |  | 6,066 |
Machinery and equipment |  | 5-7 yrs |  |  | 3,867 |
Computer hardware and software |  | 3-5 yrs |  |  | 450 |
Assets under construction |  |  |  |  | 961 |
|  |  |  | $ | 12,974 |

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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