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Nu Aire Acquisition | 9 Months Ended
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Jan. 31, 2025
Business Combination and Asset Acquisition [Abstract] |
Nu Aire Acquisition | Nu Aire Acquisition On November 1, 2024 (the “Closing Date”), the Company completed the acquisition of Nu Aire, Inc. ("Nu Aire"), a leading manufacturer of equipment for a diverse range of laboratory and pharmacy environments, by acquiring all of the Nu Aire capital stock that was issued and outstanding as of the date of acquisition (the "Transaction"). The Transaction expands the Company's capabilities, allowing the combined organization to better meet the needs of end-users in laboratory furnishings and accelerates the Company's vision of becoming the market leader in the design and manufacturing of laboratory furniture and technical products essential for outfitting laboratories. The Company purchased all the outstanding stock of Nu Aire for $55.0 million, subject to certain adjustments for debt, cash, transaction expenses, and net working capital resulting in aggregate acquisition consideration of $53.0 million as shown in the table below. $23.0 million of the purchase price payable at closing of the Transaction was funded pursuant to subordinated seller notes. The remaining purchase price payable at closing of the Transaction was paid in cash, which cash was funded, in part, through the Revolving Credit Facility (as defined in Note H, Long-term Debt and Other Credit Arrangements), and Term Loan (as defined in Note H, Long-term Debt and Other Credit Arrangements), provided to the Company by PNC Bank, National Association ("PNC"). The following table summarizes the aggregate acquisition consideration for Nu Aire:
($ in thousands) |  |
Cash paid to Nu Aire |  | $ | 29,669 |
Subordinated Promissory Notes due to Nu Aire |  | 23,000 |
Payment of Nu Aire transaction expenses |  | 311 |
Purchase Price |  | $ | 52,980 |
The Transaction was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations. The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, none of which is expected to be deductible for tax purposes. Goodwill arising from the Transaction is attributable to the value of the acquired assembled workforce and the premium paid. The January 31, 2025 Consolidated Balance Sheet includes the assets and liabilities of Nu Aire. The preliminary allocation of purchase price recorded for Nu Aire was as follows:
($ in thousands) |  |
Assets acquired: |  |
Cash and cash equivalents |  | $ | 1,245 |
Receivables |  | 10,650 |
Inventories |  | 13,744 |
Prepaid expenses and other current assets |  | 852 |
Property, plant and equipment |  | 7,349 |
Other intangible assets |  | 18,600 |
Goodwill |  | 14,150 |
Right of use assets |  | 7,376 |
Other assets |  | 7 |
Total assets acquired |  | 73,973 |
Liabilities assumed: |  |
Current portion of operating lease liabilities |  | (965) |
Accounts payable |  | (4,318) |
Employee compensation and amounts withheld |  | (2,642) |
Deferred revenue |  | (935) |
Other accrued expenses |  | (1,591) |
Long-term portion of operating lease liabilities |  | (5,167) |
Deferred income taxes |  | (5,375) |
Total liabilities assumed |  | (20,993) |
Preliminary aggregate acquisition consideration |  | $ | 52,980 |
The above fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date. The fair values of the assets acquired and liabilities assumed were preliminarily determined using the income and cost approaches. In many cases, the determination of the fair values required estimates about discount rates, future expected cash flows and other future events that are judgmental and subject to change. The fair value measurements were primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement of the fair value hierarchy as defined in ASC 820, Fair Value Measurements. Intangible assets consisting of customer relationships, trade names and trademarks, and developed technology were valued using the multi-period excess earnings method ("MEEM"), or the relief from royalty ("RFR") method, both are forms of the income approach. A cost approach was applied for property, plant and equipment. •Customer relationship intangible assets were valued using the MEEM method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue and profit attributable to the asset, customer attrition rates, applicable tax rate, and contributory asset charges, among other factors), the discount rate reflecting the risks inherent in the future cash flow stream, an assessment of the asset's life cycle and the tax amortization benefit, among other factors. •The trade names and trademarks and developed technology intangible assets were valued using the RFR method. The significant assumptions used include the estimated annual net cash flows (including appropriate revenue attributable to the asset, applicable tax rate, royalty rate, and other factors such as technology related obsolescence rates), the discount rate, reflecting the risks inherent in the future cash flow stream, and the tax amortization benefit, among other factors. •The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used for property, plant, and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the property, less an allowance for loss in value due to depreciation. The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on the Company's continuing review of matters related to the Transaction. The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the Closing Date. The amounts, based on preliminary valuations and subject to final adjustment, allocated to intangible assets are as follows:
($ in thousands) |  | Preliminary Fair Value |  | Estimated Useful Life
Customer relationships |  | $ | 9,800 |  |  | 10 years
Trade names and trademarks |  | 4,900 |  |  | indefinite
Developed technology |  | 3,900 |  |  | 7 years
Intangible assets acquired |  | $ | 18,600 |  |  |
Since the Closing Date, the results of operations for Nu Aire of $18.3 million of revenue and $71,000 of net loss for the three months ended January 31, 2025, have been included within the accompanying Consolidated Statements of Operations. The following unaudited supplemental pro forma combined financial information presents the Company's results of operations for the three and nine months ended January 31, 2025 and 2024 as if the acquisition of Nu Aire had occurred on May 1, 2023. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the Company's operating results that may have actually occurred had the acquisition of Nu Aire been completed on May 1, 2023. In addition, the unaudited pro forma financial information does not give effect to any anticipated cost savings, operating efficiencies, or other synergies that may be associated with the Transaction, or any estimated costs that have been or will be incurred by the Company to integrate the assets and operations of Nu Aire.
| Three Months Ended January 31, |  | Nine Months Ended January 31,
($ in thousands, except per share amounts) | 2025 |  | 2024 |  | 2025 |  | 2024
Net sales | $ | 67,167 |  |  | $ | 66,914 |  |  | $ | 199,548 |  |  | $ | 208,948 |
Net earnings | 1,856 |  |  | 3,284 |  |  | 6,812 |  |  | 7,905 |
Net earnings per share attributable to Kewaunee Scientific Corporation stockholders: |  |  |  |  |  |  |
Basic | $ | 0.65 |  |  | $ | 1.14 |  |  | $ | 2.38 |  |  | $ | 2.74 |
Diluted | $ | 0.62 |  |  | $ | 1.11 |  |  | $ | 2.29 |  |  | $ | 2.70 |

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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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