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Note 3 - Acquisition | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Business Combination Disclosure [Text Block] |
(3) | ACQUISITION
On March 12, 2024, we completed the acquisition of Alfamation S.p.A., an Italian joint-stock company (“Alfamation™”) headquartered in Milan, Italy. Alfamation™ is a leading global provider of state-of-the-art test and measurement solutions for the automotive, life sciences and specialty consumer electronics markets. Alfamation™ is included in our Electronic Test operating segment. The acquisition of Alfamation™ deepens our presence in the automotive/EV and life science markets, expands our exposure in consumer electronics, extends our geographic reach with a sizable footprint in Europe, and widens our portfolio of products and solutions. Additionally, we believe Alfamation™ brings engineering talent and a management team that culturally aligns with our mission to provide innovative, engineered solutions that address the high-value challenges of our customers. The aggregate purchase price was approximately €20 million comprised of: (i) €18 million, or $19.7 million, in cash; and (ii) 187,432 shares of our common stock, valued at $2.1 million based on the closing price of our stock on the date of acquisition. The cash portion of the purchase price was subject to customary working capital adjustments. These adjustments were finalized in June 2024 and resulted in recording an additional €129 thousand, or $141 thousand of cash purchase price for assets delivered at closing in excess of agreed upon thresholds. The liabilities assumed in connection with the acquisition included debt of approximately €10.3 million, or $11.3 million. The debt assumed is discussed further in “Note (10) Debt.” Total acquisition costs incurred to complete this transaction were $1.2 million. Acquisition costs were expensed as incurred and included in general and administrative expense. This acquisition has been accounted for as a business combination using purchase accounting, and, accordingly, the results of Alfamation™ have been included in our consolidated results of operations from the date of acquisition. During the fourth quarter of 2024 we completed our allocation of the estimated fair values as of March 12, 2024, with final adjustments made primarily to inventories, identifiable intangible assets and goodwill. The “inventory step-up” of approximately $1.6 million was the most significant adjustment. Partially offsetting the decrease in customer backlog were increases to acquired technology and customer relationships. Other less significant changes affected property and equipment, other current assets, accrued expenses and deferred tax liability. The excess of the purchase price over the identifiable intangible and net tangible assets was allocated to goodwill and is not deductible for tax purposes. Goodwill is attributed to synergies that are expected to result from the operations of the combined businesses. The fair value of the net assets acquired, and net liabilities assumed, has been allocated as follows:
(in thousands) | March 12, 2024 |
Goodwill | $ | 9,883 |
Identifiable intangible assets |  | 13,332 |
Tangible assets acquired and liabilities assumed: |  |  |
Cash |  | 1,088 |
Trade accounts receivable |  | 6,061 |
Inventories |  | 13,117 |
Other current assets |  | 1,468 |
Property and equipment |  | 1,739 |
Other assets |  | 1,755 |
Accounts payable |  | (4,669 | )
Accrued expenses and other current liabilities |  | (5,221 | )
Deferred tax liability |  | (2,326 | )
Debt (current and long-term) |  | (11,274 | )
Other non-current liabilities |  | (3,052 | )
Total purchase price | $ | 21,901 |
We estimated the fair value of identifiable intangible assets acquired using the income approach. Identifiable intangible assets acquired include customer relationships, customer backlog, technology and a tradename. We are amortizing the finite-lived intangible assets acquired over their estimated useful lives based on the pattern in which the economic benefits of the intangible asset are expected to be consumed. The following table summarizes the estimated fair value of Alfamation™’s identifiable intangible assets and their estimated useful lives as of the acquisition date:
|  | Fair Value |  |  | Weighted Average Estimated Useful Life |
(in thousands) |  |  |  |  |  | (in years) |
Finite-lived intangible assets: |  |  |  |  |  |  |  |
Customer relationships |  | $ | 8,196 |  |  |  | 20.0 |
Technology |  |  | 3,169 |  |  |  | 10.0 |
Total finite-lived intangible assets |  |  | 11,365 |  |  |  |  |
Indefinite-lived intangible assets: |  |  |  |  |  |  |  |
Trade name |  |  | 1,967 |  |  |  |  |
Total intangible assets |  | $ | 13,332 |  |  |  |  |
For the period from March 13, 2024, to December 31, 2024, Alfamation™ contributed $25.0 million of revenue and had a net loss of $621 thousand. The following unaudited pro forma information gives effect to the acquisition of Alfamation™ as if the acquisition occurred on January 1, 2023. These proforma summaries do not reflect any operating efficiencies or costs savings that may be achieved by the combined businesses. These proforma summaries are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been had the acquisition taken place as of that date, nor are they indicative of future consolidated results of operations:
|  | Years Ended December 31, |
(in thousands except per share data) |  | 2024 |  |  | 2023 |
Revenue |  | $ | 135,753 |  |  | $ | 150,548 |
Net earnings |  | $ | 2,848 |  |  | $ | 11,560 |
Diluted earnings per share |  | $ | 0.23 |  |  | $ | 0.97 |
The pro forma results shown above do not reflect the impact on general and administrative expense of investment advisory costs, legal costs and other costs of $1.2 million incurred by us as a direct result of the transaction. In connection with the acquisition, we entered into a lease agreement (the “Lease Agreement”) with the former owner of Alfamation™ who will continue to serve as the managing director of Alfamation™ under our ownership. The Lease Agreement commenced on March 12, 2024, and will last for six years. It will be automatically renewed for the same period of time unless terminated by either party. Under the terms of the Lease Agreement, Alfamation will lease warehouse and office space totaling about 52 thousand square feet. Alfamation™ will pay a yearly lease payment of €260 thousand broken up into two equal payments. At the date of the signing of the Lease Agreement, the yearly lease payment equated to approximately $284 thousand.

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