Business Combinations

9 Months Ended

Sep. 26, 2014

Business Combinations [Abstract]

Business Combinations

3. Business Combinations

On March 14, 2014, the Company completed the acquisition of JADAK LLC, JADAK Technologies, Inc. and Advanced Data Capture Corporation (together, “JADAK”), a North Syracuse, New York-based provider of optical data collection and machine vision technologies to OEM medical device manufacturers, for $93.7 million in cash, net of working capital adjustments. The Company expects that the addition of JADAK will enable the Company to offer a broader range of highly engineered enabling technologies to leading medical equipment manufacturers. Acquisition-related costs are included in restructuring and acquisition related costs in the consolidated statements of operations. Acquisition related costs are as follows (in thousands):

	Three Months		Nine Months		Cumulative
	Ended		Ended		Costs
	September 26,		September 26,		September 26,
	2014		2014		2014
Acquisition-related costs	$	—	$	668	$	975

The acquisition of JADAK has been accounted for as a business combination. The allocation of the purchase price is based upon a valuation of assets and liabilities acquired. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The fair values of intangible assets were based on valuations using an income approach, with estimates and assumptions provided by management of JADAK and the Company. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The Company’s estimates and assumptions in determining the estimated fair values of certain assets and liabilities are subject to change within the measurement period (up to one year from the acquisition date) as a result of additional information obtained with regards to facts and circumstances that existed as of the acquisition date. The purchase price allocation is preliminary and the primary areas of the purchase price allocation that are not yet finalized relate to income taxes and the amount of residual goodwill.

Based upon a preliminary valuation, the total purchase price was allocated as follows (in thousands):

	PurchasePrice
	Allocation
Cash	$	1,140
Accounts receivable		7,907
Inventory		6,791
Property and equipment		904
Intangible assets		40,250
Goodwill		45,045
Other assets		1,979
Total assets acquired		104,016
Accounts payable		3,057
Other liabilities		2,074
Deferred tax liabilities		4,089
Total liabilities assumed		9,220
Total purchase price		94,796
Less cash acquired		(1,140	)
Total purchase price, net of cash acquired	$	93,656

During the third quarter of 2014, the Company made adjustments to the preliminary purchase price allocation primarily related to the inventory valuation and an adjustment to other liabilities, resulting in an increase in goodwill of $0.6 million.

The fair value of intangible assets is comprised of the following (dollar amounts in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Customer relationships	$	23,570	20 years
Developed technology		10,910	10 years
Trademarks and trade names		2,130	10 years
Backlog		1,810	1 year
Non-compete covenant		1,830	5 years
Total	$	40,250

The purchase price allocation resulted in $45.0 million of goodwill and $40.3 million of identifiable intangible assets, $63.1 million of which is expected to be deductible for tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized. The goodwill recorded represents the anticipated incremental value of future cash flow potential attributable to: (i) JADAK’s ability to develop and market new products and technologies, (ii) JADAK’s ability to develop relationships with new customers, and (iii) expected sales synergies from cross-selling current and future product offerings of both JADAK and the Company to OEM customers.

The operating results of JADAK have been included in our consolidated statement of operations since the acquisition date. JADAK has contributed sales of $14.9 million and $32.6 million for the three and nine months ended September 26, 2014, respectively, and operating income from continuing operations of $1.2 million and $2.3 million for the three and nine months ended September 26, 2014, respectively. The pro forma information for all periods presented below includes the effects of business combination accounting resulting from the acquisition of JADAK, including amortization charges from acquired intangible assets, interest expense on borrowings in connection with the acquisition, earn-out expenses, and the related tax effects as though the acquisition had been consummated at the beginning of 2013. These pro forma results exclude the impact of transaction costs and the related tax effects included in the historical results. The pro forma financial information is presented for comparative information purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had actually taken place at the beginning of 2013.

	ThreeMonths Ended				Nine Months Ended
	September 26,		September 27,		September 26,		September 27,
	2014		2013		2014		2013
Sales	$	94,656	$	93,681	$	281,725	$	273,429
Income from continuing operations	$	5,342	$	2,591	$	12,404	$	4,859
Earnings per share from continuing operations - Basic	$	0.15	$	0.08	$	0.35	$	0.14
Earnings per share from continuing operations - Diluted	$	0.15	$	0.08	$	0.35	$	0.14