Acquisitions and Dispositions

6 Months Ended

Sep. 30, 2023

Acquisitions and Dispositions [Abstract]

Note 2: Acquisitions and Dispositions

Acquisition of Napps Technology Corporation

On July 1, 2023, the Company acquired substantially all of the net operating assets of Napps Technology Corporation (“Napps”) for consideration totaling $5.8 million. The Company paid $4.8 million during the second quarter of fiscal 2024 and, based upon the terms of the agreement, expects to pay the remaining $1.0 million to the seller one year after closing.

Napps is a Texas-based manufacturer of air- and water-cooled chillers, condensing units and heat pumps. This acquisition expands the Company’s indoor air quality product portfolio and supports its growth strategy and mission of improving indoor air quality. Napps has historical annual sales of approximately $5.0 million. Since the date of the acquisition, the Company has reported the financial results of the Napps business within the Climate Solutions segment.

For the September 30, 2023 condensed consolidated financial statements, the Company has preliminarily allocated the purchase price to the identifiable tangible and intangible assets acquired and the liabilities assumed based upon their estimated fair values as of the acquisition date. The Company engaged a third-party valuation specialist to assist in determining the fair value of the acquired intangible assets. The valuation analysis considered the expected future cash flows of the acquired business. The Company recorded $2.9 million of intangible assets, including customer relationship and acquired technology assets. The Company is amortizing the acquired intangible assets using a weighted-average life of approximately ten years. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $1.0 million, which is deductible for income tax purposes.

The Company’s preliminary allocation of the purchase price for its acquisition of Napps was as follows:

Trade accounts receivable	$	1.2
Inventories		1.3
Property, plant and equipment and other assets		0.1
Intangible assets		2.9
Goodwill		1.0
Accounts payable and other liabilities		(0.7	)
Purchase price	$	5.8

Disposition of two coatings facilities

On September 19, 2023, the Company sold two coatings facilities, located in California and Florida, to Protecall, LLC. These facilities provide aftermarket application services, in which HVAC units are sprayed with an anti-corrosion protective coating. The Company’s other coatings businesses will continue to own and license its spray-applied coatings used in aftermarket applications and are strategically pursuing growth through product licensing arrangements. Prior to the disposition, the Company reported the financial results of these businesses within the Performance Technologies segment. In fiscal 2023, the net sales of these two businesses totaled $6.4 million. As a result of this transaction, the Company wrote-off $0.7 million of goodwill attributable to the disposed businesses and recorded a gain on sale of less than $0.1 million during the second quarter of fiscal 2024.

Germany automotive businesses held for sale

On September 6, 2023, the Company signed a definitive agreement to sell three automotive businesses based in Germany (the “disposal group”) to affiliates of Regent, L.P. The Company expects that the sale of these businesses, which produce air- and liquid-cooled products for internal combustion diesel and gasoline engines for the European automotive market, will support its strategic prioritization of resources towards higher-margin technologies. The Company reports financial results of the disposal group within its Performance Technologies segment. During the first six months of fiscal 2024 and 2023, net sales of the disposal group totaled $46.2 million and $36.6 million, respectively.

The Company classified the disposal group as held for sale beginning on September 6, 2023. Upon classification as held for sale, the Company compared the disposal group’s carrying value with its fair value, less costs to sell. Through this review, the Company identified an implied gain on sale that is not material to its consolidated financial statements. In addition, the Company determined the disposal group does not qualify as a discontinued operation for reporting purposes under U.S. GAAP. As part of its evaluation, the Company considered anticipated future sales to automotive and other vehicular customers with similar product offerings and using similar heat-transfer technology within the Performance Technologies segment. The Company will also continue to operate in Europe as it does today.

For the September 30, 2023 consolidated balance sheet, the Company separately classified the assets and liabilities of the disposal group as held for sale. The major classes of assets and liabilities held for sale were as follows:

	September 30, 2023
ASSETS
Cash and cash equivalents	$	1.5
Trade accounts receivables – net		8.5
Inventories		5.4
Other current assets		0.8
Property, plant and equipment – net		1.6
Other noncurrent assets		0.6
Total assets held for sale	$	18.4

LIABILITIES
Accounts payable	$	6.6
Accrued compensation and employee benefits		3.6
Other current liabilities		1.9
Pensions		7.2
Other noncurrent liabilities		1.8
Total liabilities held for sale	$	21.1

This sale transaction closed on October 31, 2023. The determination of the final purchase price is pending and will be adjusted for net working capital and certain other items, as defined by the sale agreement. The Company currently expects that the total net proceeds and the resulting gain or loss on sale, to be recorded during the third quarter of fiscal 2024, will be immaterial to its consolidated financial statements.