Acquisitions

6 Months Ended

Jun. 26, 2021

Business Combination and Asset Acquisition [Abstract]

The Company accounts for acquisitions using the acquisition method in accordance with ASC 805, “Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired business are included in the Company’s Consolidated Financial Statements from the date of the acquisition.

Hartland Controls

On January 28, 2021, the Company acquired Hartland Controls ("Hartland"), a manufacturer and leading supplier of electrical components used primarily in heating, ventilation, air conditioning (HVAC) and other industrial and control systems applications with annualized sales of approximately $70 million. The purchase price for Hartland was approximately $112.3 million and the operations of Hartland are included in the Industrial segment.

The total purchase consideration of $109.9 million, net of cash, cash equivalents, and restricted cash has been allocated, on a preliminary basis, to assets acquired and liabilities assumed, as of the completion of the acquisition, based on preliminary estimated fair values. The purchase consideration is subject to change for the final working capital adjustments. As of June 26, 2021, the Company had restricted cash of $1.7 million in an escrow account for general indemnification purposes. The purchase price allocation is preliminary because the evaluations necessary to assess the fair values of the net assets acquired are still in process. The primary areas that are not yet finalized relate to the completion of the valuation of certain contingent liabilities. As a result, these allocations are subject to change during the purchase price allocation period as the valuations are finalized.

The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the Hartland acquisition:


(in thousands)	Purchase Price Allocation
Total purchase consideration:
Cash, net of cash acquired, and restricted cash	$	109,852
Allocation of consideration to assets acquired and liabilities assumed:
Trade receivables, net	13,027
Inventories	35,808
Other current assets	2,224
Property, plant, and equipment	6,296
Intangible assets	39,660
Goodwill	40,442
Other non-current assets	3,787
Current liabilities	(24,846)
Other non-current liabilities	(6,546)
	$	109,852

During the three months ended June 26, 2021, the Company recorded a cumulative net measurement period adjustment that increased goodwill by $ 1.5 million and resulted in a decrease to the fair value assigned to trade receivables, inventories and net current liabilities of $1.3 million, $0.5 million and $0.3 million, respectively. The measurement period adjustment was primarily associated with certain contingent liabilities and customer settlements. The Company made these measurement period adjustments to reflect facts and circumstances that existed as of the acquisition date.

All Hartland goodwill, other assets and liabilities were recorded in the Industrial segment and are primarily reflected in the Americas and Asia-Pacific geographic areas. The goodwill resulting from this acquisition consists largely of the Company’s expected future product sales and synergies from combining Hartland’s products and technology with the Company’s existing industrial products portfolio. Goodwill resulting from the Hartland acquisition is not expected to be deductible for tax purposes.

Included in the Company’s Condensed Consolidated Statements of Net Income for the three and six months ended June 26, 2021 are net sales of approximately $26.4 million and $43.1 million respectively, and a loss before income taxes of $0.3 million and $2.5 million, respectively since the January 28, 2021 acquisition of Hartland.

The Company recorded a $6.8 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during the first and second quarters of 2021, as the acquired inventory was sold, and is reflected as other non-segment costs. During the three and six months ended June 26, 2021, the Company recognized a charge of $3.3 million and $6.8 million for the amortization of this fair value inventory step-up.

During the three and six months ended June 26, 2021, the Company incurred approximately $0.1 million and $0.8 million of legal and professional fees related to this acquisition recognized as Selling, general, and administrative expenses. These costs were reflected as other non-segment costs.

Pro Forma Results

The following table summarizes, on an unaudited pro forma basis, the combined results of operations of the Company and Hartland as though the acquisition had occurred as of December 29, 2019. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the Hartland acquisition occurred as of December 29, 2019 or of future consolidated operating results.


	For the Three Months Ended				For the Six Months Ended
(in thousands, except per share amounts)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Net sales	$	523,488	$	323,713	$	994,320	$	687,330
Income (loss) before income taxes	98,644		(10,392)		175,939		21,039
Net income (loss)	84,818		(8,873)		146,143		12,565
Net income (loss) per share — basic	3.45		(0.36)		5.95		0.52
Net income (loss) per share — diluted	3.41		(0.36)		5.87		0.51

Pro forma results presented above primarily reflect the following adjustments:


	For the Three Months Ended				For the Six Months Ended
(in thousands)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Amortization(a)	$	—	$	(837)	$	(280)	$	(1,676)
Depreciation	—		47		7		95
Transaction costs(b)	128		(128)		835		(835)
Amortization of inventory step-up(c)	3,319		(1,659)		6,808		(6,796)
Income tax (expense) benefit of above items	(724)		541		(1,555)		1,940

(a)The amortization adjustment for the three and six months ended June 27, 2020 primarily reflects incremental amortization resulting for the measurement of intangibles at their fair values.

(b)The transaction cost adjustments reflect the reversal of certain legal and professional fees from the three and six months ended June 26, 2021 and recognition of those fees during the three and six months ended June 27, 2020.

(c)The amortization of inventory step-up adjustment reflects the reversal of the amount recognized during the three and six months ended June 26, 2021 and the recognition of the amortization during the three and six months ended June 27, 2020. The inventory step-up was amortized over four months as the inventory was sold.