Acquisition and Divestiture Activities
|6 Months Ended|
Jun. 27, 2020
|Discontinued Operations and Disposal Groups [Abstract]|
|Acquisitions and Divestiture Activities||Acquisition and Divestiture Activities
Diagnosys Inc. and its affiliates
On October 4, 2019, the Company acquired the stock of the primary operating subsidiaries as well as certain other assets from mass transit and defense market test solution provider, Diagnosys Test Systems Limited for $7.0 million in cash, plus an earn-out estimated at a fair value of $2.5 million. The terms of the acquisition allow for a potential earn-out of up to an additional $13.0 million over the three years post-acquisition based on achievement of new order levels of over $72.0 million during that period. The acquired business has operations in Westford, Massachusetts as well as Ferndown, England, and an engineering center of excellence in Bangalore, India. Diagnosys is included in our Test Systems segment. Diagnosys is a developer and manufacturer of comprehensive automated test equipment providing test, support, and repair of high value electronics, electro-mechanical, pneumatic and printed circuit boards focused on the global mass transit and defense markets.
The purchase price allocation for this acquisition has not yet been finalized. Purchased intangible assets and goodwill are not expected to be deductible for tax purposes. This transaction was not considered material to the Company’s financial position or results of operations.
Freedom Communication Technologies, Inc.
On July 1, 2019, the Company acquired all of the issued and outstanding capital stock of Freedom. Freedom, located in Kilgore, Texas, is a leader in wireless communication testing, primarily for the civil land mobile radio market. Freedom is included in our Test Systems segment. The total consideration for the transaction was $21.8 million, net of $0.6 million in cash acquired. The purchase price allocation for this acquisition has been finalized. Purchased intangible assets and goodwill are not deductible for tax purposes. This transaction was not considered material to the Company’s financial position or results of operations.
Semiconductor Test Business
On February 13, 2019, the Company completed a divestiture of its semiconductor business within the Test Systems segment. The business was not core to the future of the Test Systems segment. The total proceeds of the divestiture amounted to $103.8 million. The Company recorded a pre-tax gain on the sale of $80.1 million in the first quarter of 2019. The income tax expense relating to the gain was $19.7 million.
The transaction also included two elements of contingent earnouts. The First Earnout is calculated based on a multiple of all future sales of existing and certain future derivative products to existing and future customers in each annual period from 2019 through 2022. The First Earnout may not exceed $35.0 million in total. The Second Earnout is calculated based on a multiple of future sales related to an existing product and program with an existing customer exceeding an annual threshold for each annual period from 2019 through 2022. The Second Earnout is not capped. For the Second Earnout, if the applicable sales in an annual period do not exceed the annual threshold, no amounts will be paid relative to such annual period; the sales in such annual period do not carry over to the next annual period. Due to the degree of uncertainty associated with estimating the future sales levels of the divested business and its underlying programs, and the lack of reliable predictive market information, the Company will recognize such earnout proceeds, if received, as additional gain on sale when such proceeds are realized or realizable. No amounts were payable to the Company under the First Earnout for the year ending December 31, 2019.
Airfield Lighting Product Line
On July 12, 2019, the Company sold intellectual property and certain assets with its Airfield Lighting product line for $1.0 million in cash. The Airfield Lighting product line, part of the Aerospace segment, was not core to the business and represented less than 1% of revenue. The Company recorded a pre-tax loss on the sale of approximately $1.3 million during the third quarter of 2019.
Other Disposal Activity
As of December 31, 2019, the Company had agreed to sell certain facilities within the Aerospace segment. Accordingly, the property, plant and equipment assets associated with these facilities of $1.5 million was classified as held for sale in the Consolidated Condensed Balance Sheet at December 31, 2019. The sale was completed in the first quarter of 2020.
The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef