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Business Acquisitions Business Acquisitions (Tables)
 12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table summarizes the acquisition date fair value of the assets acquired and the liabilities assumed:
(in thousands)
Preliminary Fair Value of Assets Acquired
 
Measurement Period Adjustment
 
Finalized Fair Value of Assets Acquired
Cash and cash equivalents (a)
$
63,403

 
$
—

 
$
63,403

Restricted cash (a)
1,911

 
—

 
1,911

Accounts receivable
77,970

 
(2,128
)
 
75,842

Inventory
79,329

 
(402
)
 
78,927

Prepaid expenses and other current assets
16,937

 
(1,348
)
 
15,589

Property, plant and equipment
115,891

 
5,033

 
120,924

Identifiable intangible assets
388,000

 
(3,000
)
 
385,000

Other assets
338

 
586

 
924

Accounts payable
(46,045
)
 
20

 
(46,025
)
Cash payable to seller (a)
(65,314
)
 
—

 
(65,314
)
Accrued and other expenses
(63,115
)
 
(9,273
)
 
(72,388
)
Long-term post-retirement liabilities
(143,067
)
 
2,600

 
(140,467
)
Other long-term liabilities
(11,215
)
 
—

 
(11,215
)
Deferred tax liabilities
(4,479
)
 
(10,366
)
 
(14,845
)
Total identifiable net assets
410,544

 
(18,278
)
 
392,266

Goodwill
293,344

 
8,195

 
301,539

Total purchase price
$
703,888

 
$
(10,083
)
 
$
693,805

 
 
 
 
 
 
Consideration
 
 
 
 
 
Base purchase price
$
542,000

 
$
—

 
$
542,000

Net working capital and other purchase accounting adjustments
18,121

 
(6,300
)
 
11,821

Common Stock
143,767

 
(3,783
)
 
139,984

Total
$
703,888

 
$
(10,083
)
 
$
693,805

 
 
 
 
 
 
(a) Cash acquired and returned to seller by the second quarter of 2018, net of FX impact of $2.3 million and cash withheld to pay Colfax obligations to foreign taxing authorities of $1.8 million.

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination
The FH acquisition resulted in the preliminary identification of the following identifiable intangible assets (in thousands):


Original Estimate
 
Measurement Period Adjustment
 
Fair Value
 
Weighted average amortization period (in years)
Customer relationships
$
215,000

 
$
—

 
$
215,000

 
19
Acquired technologies
107,000

 
6,000

 
113,000

 
20
Trade names
44,000

 
(3,000
)
 
41,000

 
Indefinite-life
Backlog
22,000

 
(6,000
)
 
16,000

 
4
Total intangible assets
$
388,000

 
$
(3,000
)
 
$
385,000

 
 
Pro Forma Information

On September 24, 2017, CIRCOR entered into a Purchase Agreement (the “Purchase Agreement”) with Colfax Corporation (“Colfax”). Pursuant to the Purchase Agreement, on December 11, 2017, the Company acquired the fluid handling business of Colfax ("FH") for consideration consisting of $542.0 million in cash, 3,283,424 unregistered shares of the Company's common stock, with a fair value of approximately $140.0 million at closing, and the assumption of net pension and post-retirement liabilities of FH. The Company financed the cash consideration through a combination of committed debt financing and cash on hand. During the second quarter of 2018, the shares were registered and sold with all proceeds going to Colfax.

FH is a leader in the engineering, development‚ manufacturing‚ distribution‚ service and support of fluid handling systems. With a history dating back to 1860‚ FH is a leading supplier of screw pumps for high demand, severe service applications across a range of markets including general industry, commercial marine, defense, and oil & gas. FH leverages differentiated technology, and provides critical aftermarket customer support, to maintain leading positions in high demand niche markets.

The operating results of FH have been split between each of our operating segments, Energy, Aerospace & Defense, and Industrial based upon the end markets of the sub-businesses within FH.

The purchase price allocation is based upon a valuation of assets and liabilities that was prepared with assistance from a third party valuation specialist. The purchase accounting was finalized in the fourth quarter of 2018.

During 2018, the Company paid Colfax approximately $2.6 million pursuant to a transition services agreement which facilitated the orderly separation of the FH business from Colfax.  Colfax was a significant shareholder of the Company during the first six months of 2018.

The following table summarizes the acquisition date fair value of the assets acquired and the liabilities assumed:
(in thousands)
Preliminary Fair Value of Assets Acquired
 
Measurement Period Adjustment
 
Finalized Fair Value of Assets Acquired
Cash and cash equivalents (a)
$
63,403

 
$
—

 
$
63,403

Restricted cash (a)
1,911

 
—

 
1,911

Accounts receivable
77,970

 
(2,128
)
 
75,842

Inventory
79,329

 
(402
)
 
78,927

Prepaid expenses and other current assets
16,937

 
(1,348
)
 
15,589

Property, plant and equipment
115,891

 
5,033

 
120,924

Identifiable intangible assets
388,000

 
(3,000
)
 
385,000

Other assets
338

 
586

 
924

Accounts payable
(46,045
)
 
20

 
(46,025
)
Cash payable to seller (a)
(65,314
)
 
—

 
(65,314
)
Accrued and other expenses
(63,115
)
 
(9,273
)
 
(72,388
)
Long-term post-retirement liabilities
(143,067
)
 
2,600

 
(140,467
)
Other long-term liabilities
(11,215
)
 
—

 
(11,215
)
Deferred tax liabilities
(4,479
)
 
(10,366
)
 
(14,845
)
Total identifiable net assets
410,544

 
(18,278
)
 
392,266

Goodwill
293,344

 
8,195

 
301,539

Total purchase price
$
703,888

 
$
(10,083
)
 
$
693,805

 
 
 
 
 
 
Consideration
 
 
 
 
 
Base purchase price
$
542,000

 
$
—

 
$
542,000

Net working capital and other purchase accounting adjustments
18,121

 
(6,300
)
 
11,821

Common Stock
143,767

 
(3,783
)
 
139,984

Total
$
703,888

 
$
(10,083
)
 
$
693,805

 
 
 
 
 
 
(a) Cash acquired and returned to seller by the second quarter of 2018, net of FX impact of $2.3 million and cash withheld to pay Colfax obligations to foreign taxing authorities of $1.8 million.


As illustrated in the table above, during the measurement period we identified certain uncollectible account receivable balances, unsubstantiated prepaid and other assets, certain existence or valuation adjustments to inventory amounts, revised valuation of property, plant, and equipment from our third party specialists, revised valuation of intangibles from our third party specialists, and accrual adjustments primarily relating to a loss contract for which we needed to establish a liability in purchase accounting. Additionally, we settled customary working capital adjustments ($11.8 million) with Colfax.

The excess of purchase price paid over the fair value of FH's net assets was recorded to goodwill, which is primarily attributable to projected future profitable growth, market penetration, as well as an expanded customer base for the acquired businesses. As of December 31, 2019, approximately 65.5% of goodwill is projected to be deductible for income tax purposes.

The FH acquisition resulted in the preliminary identification of the following identifiable intangible assets (in thousands):


Original Estimate
 
Measurement Period Adjustment
 
Fair Value
 
Weighted average amortization period (in years)
Customer relationships
$
215,000

 
$
—

 
$
215,000

 
19
Acquired technologies
107,000

 
6,000

 
113,000

 
20
Trade names
44,000

 
(3,000
)
 
41,000

 
Indefinite-life
Backlog
22,000

 
(6,000
)
 
16,000

 
4
Total intangible assets
$
388,000

 
$
(3,000
)
 
$
385,000

 
 

During the measurement period, with the help of third party specialists, we adjusted the fair value of the acquired FH intangibles based upon better information regarding discount rates, royalty rates, and more detailed business unit forecasts that was determinable at the time of acquisition. The revised fair value of acquired FH intangibles have been recorded against our FH opening balance sheet during 2018.

The fair value of the intangible assets was based on variations of the income approach, which estimates fair value based on the present value of cash flows that the assets are expected to generate. These approaches included the relief-from-royalty method and multi-period excess earnings method, depending on the intangible asset being valued. Customer relationships, backlog, and existing technology are amortized on a cash flow basis which reflects the economic benefit consumed. The trade name was assigned an indefinite life based on the Company’s intention to keep the trade names for an indefinite period of time. Refer to Note 10, Goodwill and Intangibles, net for future expected amortization to be recorded.

The results of operations of FH have been included in our consolidated financial statements beginning on the acquisition date and reported within the Industrial segment, with the exception of the U.S. Defense business which is reported in the Aerospace & Defense segment and RS business which is reported in the Energy segment. As disclosed in Note 1, Description of Business, the RS business was sold in January 2019. The consolidated results for the year ended December 31, 2018 include $484.8 million of net revenue and $6.1 million operating loss. The results for the year ended December 31, 2017 include $36.5 million of net revenue and a $1.1 million operating loss.

The following unaudited pro forma information presents the combined results of operations as if the acquisition had been completed on January 1, 2017, the beginning of the comparable prior annual reporting period. The unaudited pro forma results include: (i) amortization associated with preliminary estimates for the acquired intangible assets; (ii) interest expense on borrowings in connection with the acquisition; (iii) the associated tax impact on these unaudited pro forma adjustments; and the transaction costs presented in the earliest period (2017).

The unaudited pro forma results do not reflect any cost saving synergies from operating efficiencies or the effect of the incremental costs incurred in integrating the two companies. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations (in thousands):
(Unaudited)
Year ended December 31,
 
2017
Net Revenues
$
942,760

Net Income
$
(6,475
)