Business Acquisition

12 Months Ended

Sep. 27, 2014

Business Acquisition [Abstract]

Business Acquisition

11.  Business Acquisition:

On June 17, 2014, the Company acquired Roehrig Engineering, Inc. (“REI”) for a total estimated purchase price of $14.8 million.  REI is a leader in testing systems utilizing electric and electromagnetic actuation technology and is based in Lexington, North Carolina. The acquisition is part of the Company’s continued investment to expand the Company’s technology base and supplement its organic growth initiatives.

The transaction was accounted for under the acquisition method of accounting and the results of operations of the entity are included in the Company’s Consolidated Statements of Income as of and since June 17, 2014, the date of acquisition, and are reported in the Company’s Test segment. The acquisition of REI’s assets and liabilities does not constitute a material business combination and accordingly, pro forma results have not been included.

The purchase price of REI consists of the following:

(expressed in thousands) :		Amount
Cash paid at closing, net of cash acquired	$	14,192
Estimated contingent consideration		650
Total purchase price, net of cash acquired	$	14,842

The purchase price for REI includes cash consideration of $14.2 million funded from our existing credit facility and an earn-out-based contingent consideration of up to a maximum of $2.0 million based on customer orders obtained by REI during the calendar years of 2014 and 2015. During the fourth quarter of fiscal 2014, the Company determined that the 2014 earn-out milestone would not be achieved and as a result,$1.0 million of the estimated earn-out was adjusted to goodwill.  Additionally, the Company has revised the estimate for the 2015 earn-out milestone from $1.0 million to $0.7 million. After the provisional period, subsequent changes in the fair value of this obligation will be recognized as adjustments to contingent consideration and reflected within the Company’s Consolidated Statements of Income.  Of the $14.2 million paid, $2.0 million is held in escrow until certain conditions of the escrow agreement are fulfilled. The escrow will be settled by no later than June 30, 2017.  Costs associated with the acquisition of REI were not significant and were expensed as incurred. 

The purchase price of REI has been preliminarily allocated and exceeds the net of the acquisition-date amount of the identifiable assets acquired and the liabilities assumed by $9.6 million. Cash flows used to determine the purchase price included strategic and synergistic benefits (investment value) specific to the Company, which resulted in a purchase price in excess of the fair value of identifiable net liabilities. The purchase price also included the fair values of other assets that were not identifiable, not separately recognizable under accounting rules (e.g. assembled workforce) of immaterial value in addition to a going-concern element that represents the Company’s ability to earn a higher rate of return on the group of assets than would be expected on the separate assets as determined during the valuation process.  This additional investment value resulted in goodwill which is not expected to be deductible for income tax purposes.

The following table summarizes the preliminary provisional allocation of the purchase price to the fair values assigned to the assets acquired and liabilities assumed at the date of acquisition:

(expressed in thousands) :		Amount
Accounts receivable and inventory	$	1,763
Machinery and equipment		477
Deferred Tax Asset		289
Current liabilities		(1,900)
Identifiable Intangible Assets		4,593
Net Assets acquired		5,222
Goodwill		9,620
Total purchase price consideration	$	14,842

As of September 27, 2014,the fair value determinations for all of the elements of the REI acquisition are preliminary. The Company will record any adjustments to the allocation of purchase price, if required, in the subsequent quarter.