Acquisition

3 Months Ended

Dec. 31, 2023

Business Combination and Asset Acquisition [Abstract]

On August 31, 2023 (“Acquisition Date”), the Company completed its acquisition of MB Aerospace Holdings Inc., a Delaware corporation ("MB Aerospace"), along with such entity's subsidiaries (the "Transaction") by acquiring all of the issued and outstanding shares of capital stock of MB Aerospace. MB Aerospace is a leading provider of precision aero-engine component manufacture and repair services serving major aerospace and defense engine original equipment manufacturers (“OEMs”), tier 1 suppliers and maintenance, repair and overhaul ("MRO") providers. This business, which is being integrated into our Aerospace segment, provides significant growth opportunities and enhances the Company’s ability to deliver value-add solutions across the aero-engine value chain. Further, the acquisition of MB Aerospace increases customer diversification within both commercial aerospace and defense platforms and provides the Company with a well-balanced portfolio across aerospace and industrial end markets.

The Company acquired MB Aerospace for an aggregate purchase price of $728,448, which includes post-closing adjustments under the terms of the Stock Purchase Agreement ("the Agreement"). The Company paid $718,782, net of $9,825 of cash acquired, in cash, using cash on hand and borrowings under the Company’s $1,000,000 Revolving Credit Facility and its $650,000 Term Loan Facility (see Note 8). In connection with the terms of the Agreement, the Company recorded $159 of post-closing adjustments due from the seller within Accounts receivable as of December 31, 2023.

During the twelve months ended December 31, 2023, the Company incurred $23,829 of acquisition-related costs related to the acquisition of MB Aerospace. These costs include $2,071 of due diligence costs and $21,758 of transaction costs to complete the acquisition. These acquisition related costs have been recognized in the Company's Consolidated Statements of Income, of which $14,223 was recognized as selling and administrative expenses and of which $9,606 primarily relating to the bridge loan facility financing was recognized as Interest expense (see Note 8).

The operating results of MB Aerospace have been included in the Consolidated Statements of Income since the Acquisition Date. The Company reported $114,469 in net sales and an operating loss of $13,884 from MB Aerospace, included within the Aerospace segment's operating profit, inclusive of $19,192 of short-term purchase accounting adjustments related to inventory step-up and backlog intangible amortization and $8,182 of amortization of other intangible assets acquired, for the period from the Acquisition Date through December 31, 2023.

Estimated Fair Value of Assets Acquired and Liabilities Assumed

The Company accounted for the MB Aerospace acquisition as a business combination. The identifiable assets acquired and liabilities assumed are recorded at their preliminary fair values as of the Acquisition Date, inclusive of subsequent purchase price adjustments, and are consolidated into the Company’s consolidated financial statements. The assignment of fair market value requires significant judgments regarding the estimates and assumptions used to value the acquired assets and liabilities assumed. In determining the fair values of the assets acquired and liabilities assumed, the Company utilized the cost, income and market approaches from the perspective of a market participant. The fair value of the customer relationship intangible asset was determined as of the acquisition date utilizing the multi-period excess earnings method. This method is based on estimates and judgments relating to expectations for the future after-tax cash flows arising from customer relationships that existed on the acquisition date over their estimated lives, including those related to forecasted revenue growth rates, gross margins and customer attrition rates, all of which are discounted to present value using appropriate discount rates. The fair value of the developed technology intangible asset was determined utilizing the relief from royalty method which is a form of the income approach. Under this method, an after-tax royalty rate based on market royalty rates is applied to forecasted revenue growth rates associated with the developed technology and discounted to present value using appropriate discount rates. The Company used third party valuation professionals to aid in the determination of the estimated fair value of certain assets acquired and liabilities assumed.

The following table summarizes the estimated fair values for each major class of assets acquired, net of cash acquired, and liabilities assumed at the Acquisition Date, inclusive of subsequent purchase price adjustments:


Accounts receivable	$	50,715
Inventories	77,914
Prepaid expenses and other current assets	18,093

Property, plant and equipment	80,480
Goodwill	320,883
Other intangible assets	320,000
Other Assets	10,627
Total Assets Acquired	878,712

Accounts payable	(21,826)
Accrued liabilities	(35,701)
Deferred income taxes	(83,480)
Other liabilities	(9,659)
Debt assumed	(9,423)
Total Liabilities Assumed	(160,089)
Net Assets Acquired	$	718,623

Goodwill represents the excess of the purchase consideration over the fair value of the underlying acquired net tangible and intangible assets. Goodwill has been allocated to the Company’s Aerospace segment. The Company recorded the estimated fair values of the assets acquired and liabilities assumed of MB Aerospace as of August 31, 2023. The final purchase price

allocation is subject to the finalization of fair value estimates. Estimates and assumptions used in such valuations are subject to change, which could be significant, within the measurement period up to one year from the acquisition date. The areas of the valuations that are not yet finalized relate to the amounts for property, plant and equipment, leases, income taxes, long term intangible assets and the final amount of residual goodwill. The Company may obtain additional information to assist in determining fair values of net assets acquired at the Acquisition Date during the measurement period. The Company recorded purchase accounting adjustments during the fourth quarter of 2023 and allocated an additional $2,576 to Goodwill. None of the recognized goodwill from the acquisition of MB Aerospace is expected to be deductible for income tax purposes (see Note 6).

The Other intangible assets in the table above consist of backlog, developed technology, and customer relationships, which are amortized over their respective estimated useful lives (see Note 6).

Supplemental Pro Forma Information

The following table reflects the unaudited pro forma operating results of the Company for the twelve months ended December 31, 2023 and 2022, which give effect to the acquisition of MB Aerospace as if it had occurred on January 1, 2022. The pro forma results are based on assumptions that the Company believes are reasonable under the circumstances. The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisition been effective January 1, 2022, nor are they intended to be indicative of results that may occur in the future. The underlying pro forma information includes the historical financial results of the Company and MB Aerospace adjusted for certain items including depreciation and amortization expense associated with the assets acquired and the Company’s expense related to financing arrangements, with the related tax effects.

The unaudited pro forma combined condensed financial information has been prepared using the acquisition method of accounting in accordance with Accounting Standards Codification 805, Business Combinations (“ASC 805”).

The pro forma information does not include the effects of any synergies or cost reduction initiatives related to the acquisition.


	Twelve months ended December 31,
	2023		2022
Net sales	$	1,664,652	$	1,544,888
Net income (loss)	21,942		(77,355)

The unaudited pro forma combined condensed financial information during the twelve months ended December 31, 2023 were adjusted to include:

a.Depreciation and Amortization - Adjustment of $(4,413) to reflect the adjustment to property, plant, and equipment depreciation and amortization expense from the acquired backlog, developed technology and customer relationships.

b.Transaction Costs - Adjustment of $(14,224) to reflect the elimination of non-recurring transaction costs.

c.Interest Expense - Adjustment of $3,209 to reflect the adjustment to interest expense resulting from interest on the new debt to finance the acquisition of MB Aerospace and the extinguishment of MB Aerospace’s existing debt and the amortization of related debt issuance costs.

d.Inventory Step-Up - Adjustment of $(8,318) to eliminate the inventory fair value adjustment that was recognized in cost of sales.

e.Income Taxes - The estimated tax impacts of the pro forma adjustments have been reflected within the unaudited pro forma condensed combined statement of operations by using a blended foreign, federal and state statutory income tax rate.

The unaudited pro forma combined condensed financial information during the twelve months ended December 31, 2022 were adjusted to include:

a.Depreciation and Amortization - Adjustment of $21,924 to reflect the adjustment to property, plant, and equipment depreciation and the amortization expense from the acquired backlog, developed technology and customer relationships.

b.Transaction Costs - Adjustment of $14,224 to reflect non-recurring transaction costs.

c.Interest Expense - Adjustment of $26,881 to reflect the adjustment to interest expense resulting from interest on the new debt to finance the acquisition of MB Aerospace and the extinguishment of MB Aerospace’s existing debt and the amortization of related debt issuance costs.

d.Inventory Step-Up - Adjustment of $9,635 to reflect the increase in cost of sales for the impact of the $9,635 fair value adjustment to inventory for the acquired inventory.