Acquisitions and Purchase Accounting

The company operates in a highly fragmented industry and has completed numerous acquisitions over the past several years as a component of its growth strategy. The company has acquired industry leading brands and technologies to position itself as a leader in the commercial foodservice equipment, food processing equipment and residential kitchen equipment industries.

The company has accounted for all business combinations using the acquisition method to record a new cost basis for the assets acquired and liabilities assumed. For the company's acquisitions, goodwill is calculated as the difference between the acquisition fair value of the consideration transferred and the fair value of the net assets acquired, and represents future economic benefits, including synergies, and assembled workforce, that are expected to be achieved as a result of the acquisition. The results of operations are reflected in the consolidated financial statements of the company from the dates of acquisition.

The following represents the company's more significant acquisitions in 2019 and 2018. The company also made smaller acquisitions not listed below which are individually and collectively immaterial.

Hinds-Bock

On February 16, 2018, the company completed its acquisition of all of the capital stock of Hinds-Bock Corporation ("Hinds-Bock"), a leading manufacturer of solutions for filling and depositing bakery and food product located in Bothell, Washington, for a purchase price of $25.4 million, net of cash acquired. During the third quarter of 2018, the company finalized the working capital provision provided by the purchase agreement resulting in a refund from the seller of $0.4 million.

The final allocation of consideration paid for the Hinds-Bock acquisition is summarized as follows (in thousands):



	(as initially reported) February 16, 2018			Measurement Period Adjustments			(as adjusted) February 16, 2018
Cash	$	5		$	—		$	5
Current assets	5,301			(3		)	5,298
Property, plant and equipment	3,557			—			3,557
Goodwill	12,686			(1,166		)	11,520
Other intangibles	8,081			1,119			9,200
Long term deferred tax asset	—			115			115
Current liabilities	(3,800		)	(465		)	(4,265		)

Net assets acquired and liabilities assumed	$	25,830		$	(400	)	$	25,430

The goodwill and $4.9 million of other intangibles associated with the trade name are subject to the non-amortization provisions of ASC 350 "Intangibles - Goodwill and Other". Other intangibles also include $3.7 million allocated to customer relationships and $0.6 million allocated to backlog, which are to be amortized over periods of 6 years and 3 months, respectively. Goodwill and other intangibles of Hinds-Bock are allocated to the Food Processing Equipment Group for segment reporting purposes. These assets are expected to be deductible for tax purposes.

Ve.Ma.C

On April 3, 2018, the company completed its acquisition of all of the capital stock of Ve.Ma.C S.r.l. ("Ve.Ma.C"), a leading designer and manufacturer of handling, automation and robotics solutions for protein food processing lines located in Castelnuovo Rangone, Italy, for a purchase price of approximately $10.5 million, net of cash acquired. During the third quarter of 2018, the company finalized the working capital provision provided by the purchase agreement, resulting in no additional payment by either party.

The final allocation of consideration paid for the Ve.Ma.C acquisition is summarized as follows (in thousands):



	(as initially reported) April 3, 2018			Measurement Period Adjustments			(as adjusted) April 3, 2018
Cash	$	1,833		$	—		$	1,833
Current assets	10,722			—			10,722
Property, plant and equipment	389			—			389
Goodwill	7,278			(2,506		)	4,772
Other intangibles	2,584			3,776			6,360
Other assets	12			—			12
Current portion of long-term debt	(1,901		)	—			(1,901		)
Current liabilities	(8,076		)	(216		)	(8,292		)
Long term deferred tax liability	(340		)	(1,054		)	(1,394		)
Other non-current liabilities	(212		)	—			(212		)

Net assets acquired and liabilities assumed	$	12,289		$	—		$	12,289

The long term deferred tax liability amounted to $1.4 million. The net liability is comprised of $1.8 million of deferred tax liability related to the difference between the book and tax basis of identifiable intangible assets and $0.4 million of deferred tax asset related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $2.1 million of other intangibles associated with the trade name are subject to the non-amortization provisions of ASC 350. Other intangibles also include $2.6 million allocated to customer relationships and $1.6 million allocated to backlog, which are to be amortized over periods of 6 years and up to 1 year, respectively. Goodwill and other intangibles of Ve.Ma.C are allocated to the Food Processing Equipment Group for segment reporting purposes. These assets are not expected to be deductible for tax purposes.

Firex

On April 27, 2018, the company completed its acquisition of all of the capital stock of Firex S.r.l. ("Firex"), a leading manufacturer of steam cooking equipment for the commercial foodservice industry located in Sedico, Italy, for a purchase price of approximately $53.7 million, net of cash acquired. During the third quarter of 2018, the company finalized the working capital provision provided for by the purchase agreement resulting in a refund from the seller of $0.3 million.

The final allocation of consideration paid for the Firex acquisition is summarized as follows (in thousands):



	(as initially reported) April 27, 2018			Measurement Period Adjustments			(as adjusted) April 27, 2018
Cash	$	10,652		$	(37	)	$	10,615
Current assets	7,656			39			7,695
Property, plant and equipment	2,447			—			2,447
Goodwill	36,706			(1,424		)	35,282
Other intangibles	19,806			2,294			22,100
Current portion of long-term debt	(1,210		)	—			(1,210		)
Current liabilities	(4,099		)	(471		)	(4,570		)
Long term deferred tax liability	(4,995		)	(652		)	(5,647		)
Long-term debt	(1,069		)	—			(1,069		)
Other non-current liabilities	(1,318		)	—			(1,318		)

Net assets acquired and liabilities assumed	$	64,576		$	(251	)	$	64,325

The long term deferred tax liability amounted to $5.6 million. The net liability is comprised of $6.1 million of deferred tax liability related to the difference between the book and tax basis of identifiable intangible assets and $0.5 million of deferred tax asset related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $10.2 million of other intangibles associated with the trade name are subject to the non-amortization provisions of ASC 350. Other intangibles also include $11.3 million allocated to customer relationships and $0.6 million allocated to backlog, which are to be amortized over periods of 7 years and 3 months, respectively. Goodwill and other intangibles of Firex are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. These assets are not expected to be deductible for tax purposes.

Josper

On May 10, 2018, the company completed its acquisition of all of the issued share capital of Josper, a leading manufacturer of charcoal grill and oven cooking equipment for commercial foodservice and residential applications located in Pineda de Mar, Spain, for a purchase price of approximately $39.3 million, net of cash acquired. During the fourth quarter of 2018, the company finalized the working capital provision provided for by the purchase agreement resulting in a refund from the seller of $0.2 million.

The final allocation of consideration paid for the Josper acquisition is summarized as follows (in thousands):



	(as initially reported) May 10, 2018			Measurement Period Adjustments			(as adjusted) May 10, 2018
Cash	$	3,308		$	—		$	3,308
Current assets	6,579			13			6,592
Property, plant and equipment	4,739			—			4,739
Goodwill	27,140			(3,345		)	23,795
Other intangibles	13,136			4,754			17,890
Other assets	2			—			2
Current portion of long-term debt	(217		)	—			(217		)
Current liabilities	(5,146		)	(89		)	(5,235		)
Long-term debt	(1,608		)	—			(1,608		)
Long term deferred tax liability	(2,934		)	(1,579		)	(4,513		)
Other non-current liabilities	(2,169		)	—			(2,169		)

Consideration paid at closing	$	42,830		$	(246	)	$	42,584

Contingent consideration	3,454			—			3,454

Net assets acquired and liabilities assumed	$	46,284		$	(246	)	$	46,038

The long term deferred tax liability amounted to $4.5 million. The net liability is comprised of $4.4 million of deferred tax liability related to the difference between the book and tax basis of identifiable intangible assets and $0.1 million of deferred tax liability related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $9.5 million of other intangibles associated with the trade name are subject to the non-amortization provisions of ASC 350. Other intangibles also include $8.3 million allocated to customer relationships and $0.1 million allocated to backlog, which are to be amortized over periods of 7 years and 3 months, respectively. Goodwill and other intangibles of Josper are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. These assets are not expected to be deductible for tax purposes.

The Josper purchase agreement includes an earnout provision providing for a contingent payment due to the sellers to the extent certain financial targets are exceeded. This earnout is payable in 2019, 2020 and 2021, if Josper exceeds certain earnings targets for the twelve months ended December 31, 2018, December 31, 2019 and December 31, 2020, respectively. The contractual obligation associated with this contingent earnout provision recognized on the acquisition date is $3.5 million.

Taylor

On June 22, 2018, the company completed its acquisition of all of the capital stock of the Taylor Company ("Taylor"), a world leader in beverage solutions, soft serve and ice cream dispensing equipment, frozen drink machines, and automated double-sided grills, located in Rockton, Illinois, for a purchase price of approximately $1.0 billion. During the fourth quarter of 2018, the company finalized the working capital provision provided for by the purchase agreement resulting in a refund from the seller of $11.5 million.

The following estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed (in thousands):



	(as initially reported) June 22, 2018			Preliminary Measurement Period Adjustments			(as adjusted) June 22, 2018
Cash	$	2,551		$	64		$	2,615
Current assets	71,162			(1,359		)	69,803
Property, plant and equipment	21,187			9			21,196
Goodwill	491,339			(102,657		)	388,682
Other intangibles	484,210			99,500			583,710
Other assets	—			361			361
Long-term deferred tax asset	—			227			227
Current liabilities	(48,417		)	(3,106		)	(51,523		)
Other non-current liabilities	(8,161		)	(648		)	(8,809		)

Net assets acquired and liabilities assumed	$	1,013,871		$	(7,609	)	$	1,006,262

The goodwill and $290.0 million of other intangibles associated with the trade name are subject to the non-amortization provisions of ASC 350. Other intangibles also include $270.0 million allocated to customer relationships, $15.0 million allocated to developed technology, and $1.7 million of existing developed oven technology and $7.0 million of backlogs, which are to be amortized over periods of 12.5 years, 7 years, 5 years and up to 3 years, respectively. Goodwill and other intangibles of Taylor are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. A significant portion of the assets are expected to be deductible for tax purposes.

The company estimated the fair value of the assets and liabilities of Taylor on a preliminary basis at the time of acquisition based on third-party appraisals used to assist in determining the fair market value for acquired tangible and intangible assets. Changes to these allocations will occur as additional information becomes available. The company is in the process of obtaining third-party valuations related to the fair value of tangible and intangible assets, in addition to determining and recording the tax effects of the transaction to include all assets/liabilities since those are recorded at fair value. Thus, the provisional measurements of fair value set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date. Acquired goodwill represents the premium paid over the fair value of assets acquired and liabilities assumed.

M-TEK

On October 1, 2018, the company completed its acquisition of all of the capital stock of the M-TEK Corporation ("M-TEK"), a leading manufacturer of Modified Atmospheric Packaging (MAP) systems located in Elgin, Illinois, for a purchase price of approximately $20.0 million. During the first quarter of 2019, the company finalized the working capital provision provided by the purchase agreement resulting in no adjustment to the purchase price.



	(as initially reported) October 1, 2018			Preliminary Measurement Period Adjustments		(as adjusted) October 1, 2018
Current assets	$	2,745		$	—	$	2,745
Property, plant and equipment	2,497			—		2,497
Goodwill	11,610			—		11,610
Other intangibles	3,294			—		3,294
Current liabilities	(144		)	—		(144		)

Net assets acquired and liabilities assumed	$	20,002		$	—	$	20,002

The goodwill is subject to the non-amortization provisions of ASC 350. Other intangibles also include $2.7 million allocated to customer relationships, $0.3 million allocated to developed technology, and $0.3 million allocated to backlog, which are to be amortized over periods of 5 years, 5 years and 3 months, respectively. Goodwill and other intangibles of M-TEK are allocated to the Food Processing Equipment Group for segment reporting purposes. A significant portion of the assets are expected to be deductible for tax purposes.

The company believes that information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the company is waiting for additional information necessary to finalize those fair values. Thus, the provisional measurements of fair value set forth above are subject to change. The company expects to complete the purchase price allocation as soon as practicable but no later than one year from the acquisition date.

Crown

On December 3, 2018, the company completed its acquisition of all of the capital stock of the Crown Food Service Equipment, Ltd. ("Crown"), a leading design and manufacturer of steam cooking equipment for the commercial foodservice industry located in Toronto, Canada, for a purchase price of approximately $42.0 million, net of cash acquired. The purchase price is subject to adjustment based upon a working capital provision provided by the purchase agreement. The company expects to finalize this in the second quarter of 2019.



	(as initially reported) December 3, 2018			Preliminary Measurement Period Adjustments			(as adjusted) December 3, 2018
Cash	$	495		$	—		$	495
Current assets	5,045			—			5,045
Property, plant and equipment	8,710			3,658			12,368
Goodwill	31,226			(10,172		)	21,054
Other intangibles	—			10,564			10,564
Current liabilities	(2,340		)	(281		)	(2,621		)
Long-term deferred tax liability	(668		)	(3,769		)	(4,437		)

Net assets acquired and liabilities assumed	$	42,468		$	—		$	42,468

The long term deferred tax liability amounted to $4.4 million. The net deferred tax liability is comprised of $2.8 million of deferred tax liability related to the difference between the book and tax basis of identifiable intangible assets and $1.6 million of deferred tax liability related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $10.6 million of other intangibles associated with the trade name are subject to the non-amortization provisions of ASC 350. Goodwill and other intangibles of Crown are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. This asset is not expected to be deductible for tax purposes.

EVO

On December 31, 2018, the company completed its acquisition of all of the capital stock of EVO America, Inc. ("EVO"), a leading design and manufacturer of ventless cooking equipment for the commercial foodservice industry, located near Portland, Oregon, for a purchase price of approximately $12.4 million, net of cash acquired. The purchase price is subject to adjustment based upon a working capital provision provided by the purchase agreement. The company expects to finalize this in the second quarter of 2019.



	(as initially reported) December 31, 2018
Cash	$	162
Current assets	1,490
Goodwill	6,896
Other intangibles	5,081
Current liabilities	(518		)
Long-term deferred tax liability	(540		)
Other non-current liabilities	(12		)

Net assets acquired and liabilities assumed	$	12,559

The long term deferred tax liability amounted to $0.5 million. The net deferred tax liability is comprised of $0.6 million of deferred tax liability related to the difference between the book and tax basis on identifiable tangible asset and liability accounts and $0.1 million of deferred tax asset related to the difference between the book and tax basis on identifiable tangible asset and liability accounts.

The goodwill and $3.0 million of other intangibles associated with the trade name is subject to the non-amortization provisions of ASC 350. Other intangibles also include $1.9 million allocated to customer relationships and $0.2 million allocated to developed technology, which are to be amortized over periods of 10 years and 7 years, respectively. Goodwill and other intangibles of EVO are allocated to the Commercial Foodservice Equipment Group for segment reporting purposes. These assets are not expected to be deductible for tax purposes.

Pro Forma Financial Information

In accordance with ASC 805 “Business Combinations”, the following unaudited pro forma results of operations for the three months ended March 30, 2019 and March 31, 2018, assumes the 2018 acquisitions of Hinds-Bock, Ve.Ma.C, Josper, Firex, Taylor, M-TEK and Crown and the 2019 acquisition of EVO were completed on December 31, 2017 (first day of fiscal year 2018). The following pro forma results include adjustments to reflect additional interest expense to fund the acquisitions, amortization of intangibles associated with the acquisitions, and the effects of adjustments made to the carrying value of certain assets (in thousands, except per share data):



	Three Months Ended
	March 30, 2019		March 31, 2018
Net sales	$	686,802	$	686,387
Net earnings	70,309		49,880

Net earnings per share:
Basic	$	1.26	$	0.90
Diluted	1.26		0.90

The historical consolidated financial information of the Company and the acquisitions have been adjusted in the pro forma information to give effect to pro forma events that are (1) directly attributable to the transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. Pro forma data may not be indicative of the results that would have been obtained had these acquisitions occurred at the beginning of the periods presented, nor is it intended to be a projection of future results. Additionally, the pro forma financial information does not reflect the costs which the company has incurred or may incur to integrate the acquired businesses.