Acquisitions

6 Months Ended

Jun. 30, 2020

AcquisitionsOn September 25, 2019, we acquired all of the equity securities of LeanTeq. LeanTeq primarily provides refurbishment services for critical components and assemblies used in state-of-the-art semiconductor equipment. This equipment is used to produce the latest and most technologically advanced microchips for smartphones, autonomous vehicles, high-speed wireless connectivity, artificial intelligence, and other leading-edge applications. Founded in 2011 and headquartered in Taoyuan City,

Taiwan, LeanTeq has two locations in Taiwan and one in the United States (Silicon Valley). LeanTeq is included as part of our Technetics Group within the Sealing Products segment.

On July 2, 2019, we acquired 100% of the stock of The Aseptic Group (comprising Aseptic Process Equipment SAS and Aseptic Services SARL, collectively referred to as “Aseptic”), which distributes, designs and manufactures aseptic fluid transfer products for the pharmaceutical and biopharmaceutical industries. Aseptic, headquartered in Limonest, France, is included as part of our Garlock group of companies within the Sealing Products segment.

The following pro forma condensed consolidated financial results of operations for the quarter and six months ended June 30, 2019 are presented as if the acquisitions had been completed prior to 2019:


	Quarter Ended June 30, 2019		Six Months Ended June 30, 2019
	(in millions)
Pro forma net sales	$	327.7	$	642.5
Pro forma income from continuing operations	$	15.3	$	22.0

These amounts have been calculated after applying our accounting policies and adjusting the results of LeanTeq and Aseptic to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied prior to 2019 as well as additional interest expense to reflect financing required, together with the consequential tax effects. These pro forma financial results have been prepared for comparative purposes only and do not reflect the effect of synergies that would have been expected to result from the integration of these acquisitions. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred prior to 2019, or of future results of the consolidated entities.

We received $0.1 million in the first quarter of 2020 as a result of a final working capital adjustment that related to our LeanTeq acquisition.

Since the completion of the acquisition of Taiwan based LeanTeq in September 2019, we commenced an analysis regarding whether we would permanently retain LeanTeq’s earnings in Taiwan or repatriate them to the United States. During the second quarter of 2020 we finalized our analysis and determined that, given the significance of the incremental tax cash cost to EnPro of repatriating LeanTeq earnings to the United States, we will retain any earnings generated by LeanTeq in Taiwan as long as there was a significant incremental tax cash cost of repatriating amounts to the United States.

As a result of the decision to retain earnings in Taiwan, the income tax rate utilized in establishing deferred tax liabilities in the acquisition date balance sheet of LeanTeq was increased from 20% to 23.6%, reflecting a local tax of approximately 3.6% on undistributed earnings. The increase in the income tax rate results in an increase in goodwill and deferred tax liabilities in the acquisition date balance sheet of $7.2 million. which has been reflected in the balance sheet at June 30, 2020. The decision on our retention of LeanTeq’s earnings in Taiwan was our final required purchase accounting determination. Management has concluded that the purchase accounting for the LeanTeq acquisition is now finalized.