Note 3 - Acquisition

3 Months Ended

Mar. 31, 2024

Notes to Financial Statements

Business Combination Disclosure [Text Block]

(3) ACQUISITION

On March 12, 2024 we completed the acquisition of Alfamation S.p.A., an Italian joint-stock company (“Alfamation”). Alfamation is a leading global provider of state-of-the-art test and measurement solutions for the automotive, life sciences and specialty consumer electronics markets. Alfamation is included in our Electronic Test operating segment. The acquisition of Alfamation deepens our presence in the automotive/EV and life science markets, expands our exposure in consumer electronics, extends our geographic reach with a sizable footprint in Europe, and widens our portfolio of products and solutions. Additionally, we believe Alfamation brings engineering talent and a management team that culturally aligns with our mission to provide innovative, engineered solutions that address the high-value challenges of our customers. The aggregate purchase price was approximately EUR 20,000 comprised of: (i) EUR 18,000, or $19,674, in cash; and (ii) 187,432 shares of our common stock, valued at $2,086 based on the closing price of our stock on the date of acquisition. The cash portion of the purchase price is subject to customary working capital adjustments. We currently expect this to result in an additional payment of EUR 542, or $593 for assets delivered at closing in excess of agreed upon thresholds. The liabilities assumed in connection with the acquisition included debt of approximately EUR 8,616, or $9,418. The debt assumed is discussed further in Note 10. Total acquisition costs incurred to complete this transaction were $1,013. Acquisition costs were expensed as incurred and included in general and administrative expense.

In connection with the acquisition, we have entered into a lease agreement (the “Lease Agreement”) with the former owner of Alfamation who will continue to serve as the managing director of Alfamation under our ownership. The Lease Agreement commenced on March 12, 2024 and will last for six years. It will be automatically renewed for the same period of time unless terminated by either party. Under the terms of the Lease Agreement, Alfamation will lease warehouse and office space totaling about 51,817 square feet. Alfamation will pay a yearly lease payment of EUR 260 broken up into two equal payments. At the date of the signing of the Lease Agreement, the yearly lease payment equated to approximately $284.

The acquisition of Alfamation has been accounted for as a business combination using purchase accounting, and, accordingly, the results of Alfamation have been included in our consolidated results of operations from the date of acquisition. The allocation of the purchase price for Alfamation is not yet complete. The preliminary allocation of the Alfamation purchase price was based on estimated fair values as of March 12, 2024. We are currently working with third-party valuation specialists to assist us with our purchase accounting. The information that needs to be gathered from multiple sources, including the records and personnel at Alfamation, is not yet fully assembled. As a result, the values reflected below are preliminary and we expect that they may change. In particular, we expect that the total value assigned to our technology and customer relationships and the related deferred tax liabilities, the fair value of acquired accounts receivable, inventory and certain accrued expenses may all change as we finalize our assessments. In addition, the final working capital adjustment has also not yet been completed. Adjustments to these preliminary amounts will be included in the final allocation of the purchase price for Alfamation, which we expect to finalize in the second or third quarter of 2024. These adjustments could be material.

The excess of the purchase price over the identifiable intangible and net tangible assets was allocated to goodwill and is not deductible for tax purposes. Goodwill is attributed to synergies that are expected to result from the operations of the combined businesses.

The total purchase price of $22,353 has been allocated as follows:

Goodwill	$	11,796
Identifiable intangible assets		13,087
Tangible assets acquired and liabilities assumed:
Cash		811
Trade accounts receivable		4,004
Inventories		11,243
Other current assets		2,169
Property and equipment		1,597
Other assets		1,650
Accounts payable		(4,644	)
Accrued expenses		(4,311	)
Other current liabilities		(278	)
Deferred tax liability		(2,391	)
Debt (current and long-term)		(9,418	)
Other non-current liabilities		(2,962	)
Total purchase price	$	22,353

We estimated the fair value of identifiable intangible assets acquired using the income approach. Identifiable intangible assets acquired include customer relationships, customer backlog, technology and a tradename. We are amortizing the finite-lived intangible assets acquired over their estimated useful lives based on the pattern in which the economic benefits of the intangible asset are expected to be consumed.

The following table summarizes the estimated fair value of Alfamation’s identifiable intangible assets and their estimated useful lives as of the acquisition date:

	Fair Value		Weighted Average Estimated Useful Life
			(in years)
Finite-lived intangible assets:
Customer relationships	$	5,949		15.0
Technology		340		10.0
Customer backlog		3,399		1.0
Total finite-lived intangible assets		9,688		9.9
Indefinite-lived intangible assets:
Trade name		3,399
Total intangible assets	$	13,087

For the period from March 13, 2024 to March 31, 2024, Alfamation contributed $1,379 of revenue and had a net loss of $101.

The following unaudited pro forma information gives effect to the acquisition of Alfamation as if the acquisition occurred on January 1, 2023. These proforma summaries do not reflect any operating efficiencies or costs savings that may be achieved by the combined businesses. These proforma summaries are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been had the acquisition taken place as of that date, nor are they indicative of future consolidated results of operations:

	Three Months Ended March 31,
	2024		2023
Revenue	$	34,752	$	38,473
Net earnings	$	480	$	3,227
Diluted earnings per share	$	0.04	$	0.29

The pro forma results shown above do not reflect the impact on general and administrative expense of investment advisory costs, legal costs and other costs of $1,013 incurred by us as a direct result of the transaction.