Annual report pursuant to Section 13 and 15(d)

Acquisitions

v2.4.0.8
Acquisitions
12 Months Ended
Dec. 31, 2013
Business Combinations [Abstract]  
Acquisitions

NOTE 19 — ACQUISITIONS

PGA Electronic S.A.

On December 5, 2013 we acquired 100% of the stock of PGA, a designer and manufacturer of seat motion and lighting systems primarily for business and first class aircraft seats and is Europe’s leading provider of in-flight entertainment/communication systems as well as cabin management systems for private VVIP aircraft. The addition of PGA further diversifies the products and technologies that Astronics offers. The purchase price was approximately $32.9 million for which approximately $10.7 million, net of cash acquired, was paid in cash and the balance paid with 264,168 shares of Astronics stock valued at $51.00 per share. PGA is included in our Aerospace reporting segment. The purchase price allocation for this acquisition is not finalized as the fair value valuation of assets and liabilities is not complete.

Astronics AeroSat Corporation

On October 1, 2013, we acquired certain assets and liabilities from AeroSat Corporation and related entities, a supplier of aircraft antenna systems for $12 million in cash, plus the a potential additional purchase consideration of up to $53 million based upon the achievement of certain revenue targets in 2014 and 2015. The addition of AeroSat further diversifies the products and technologies that Astronics offers. The additional contingent purchase consideration is recorded at its estimated fair value of approximately $5.0 million at the date of acquisition based upon the Company’s assessment of the probability of AeroSat achieving the revenue growth targets. Substantially all of the goodwill and purchased intangible assets are expected to be deductible for tax purposes over 15 years. The purchase price allocation for this acquisition is not complete. The purchase price allocation for this acquisition is not finalized as the fair value valuation of the earn out liability is still being evaluated.

 

Peco, Inc.

On July 18, 2013, we acquired 100% of the stock of Peco, Inc. which designs and manufacturers highly engineered commercial aerospace interior components and systems for the aerospace industry. The company specializes in PSUs which incorporate air handling, emergency oxygen, electrical power management and cabin lighting systems. It also manufactures a wide range of fuel access doors that meet stringent strength, fuel sealing and anti-corrosion requirements. The addition of Peco diversifies the products and technologies that Astronics offers. We purchased the outstanding stock of Peco for $136.0 million in cash. Peco’s unaudited 2013 revenue prior to the acquisition date was approximately $46.2 million. Peco is included in our Aerospace reporting segment.

The allocation of the purchase price paid for Peco is based on fair values of the acquired assets and liabilities assumed of Peco as of July 18, 2013.

The allocation of purchase price based on appraised fair values was as follows (In thousands):

 

Accounts Receivable

   $ 8,002   

Inventory

     15,473   

Other Current Assets

     1,881   

Fixed Assets

     5,153   

Purchased Intangible Assets

     69,000   

Goodwill

     69,494   

Accounts Payable, Accrued Expenses, and Other Current Liabilities

     (4,114

Deferred Income Taxes

     (28,889
  

 

 

 

Total Purchase Price

   $ 136,000   
  

 

 

 

The amounts allocated to the purchased intangible assets consist of the following:

 

(In thousands)

  

Weighted
Average Life

   Acquisition
Fair Value
 

Trademark

   10 Years    $ 4,200   

Technology

   10 Years      3,300   

Customer Relationships/Backlog

   1.5-16 Years      61,500   
     

 

 

 
      $ 69,000   
     

 

 

 

Goodwill and other intangible assets reflected above were determined to meet the criterion for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to expected synergies and the assembled workforce. Purchased intangible assets and goodwill are not deductible for tax purposes.

The following is a summary of the sales and amounts included in income from operations for Peco included in the consolidated financial statements of the Company from the date of acquisition to December 31, 2013 (in thousands):

 

Sales

   $ 36,452   

Operating Income

   $ 122   

The following summary, prepared on a pro forma basis, combines the consolidated results of operations of the Company with those of Peco as if the acquisition took place on January 1, 2012. The pro forma consolidated results include the impact of certain adjustments, including increased interest expense on acquisition debt, amortization of purchased intangible assets and income taxes.

 

(in thousands, except earnings per share)

   2013      2012  

Sales

   $ 386,170       $ 344,233   

Net income

   $ 29,456       $ 24,348   

Basic earnings per share

   $ 1.68       $ 1.42   

Diluted earnings per share

   $ 1.60       $ 1.34   

 

The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been in effect for the year ended December 31, 2013 and 2012. In addition, they are not intended to be a projection of future results.

Max-Viz, Inc.

On July 30, 2012 we acquired by merger, 100% of the stock of Max-Viz, Inc., a manufacturer of industry-leading Enhanced Vision Systems for defense and commercial aerospace applications for the purpose of improving situational awareness. The addition of Max-Viz diversifies the products and technologies that Astronics offers. We purchased the outstanding stock of Max-Viz for $10.7 million in cash plus contingent purchase consideration up to a maximum of $8.0 million subject to meeting certain revenue growth targets over the next three years. Max-Viz is included in our Aerospace reporting segment. The additional contingent purchase consideration was recorded at its estimated fair value at the date of acquisition based upon the Company’s assessment of the probability of Max-Viz achieving the revenue growth targets.

There was no significant change in the fair value estimate of the contingent consideration, from the date of the acquisition to December 31, 2013. The goodwill recognized is comprised primarily of intangible assets that do not require separate recognition. Substantially all of the goodwill and purchased intangible assets are expected to be deductible for tax purposes over 15 years. The purchase price allocation for the 2012 acquisition is complete.