Business Combinations

12 Months Ended

Jun. 30, 2020

The operating results of all acquired entities are included within the consolidated operating results of the Company from the date of each respective acquisition.

Fiscal 2020 Acquisitions

On August 21, 2019, the Company acquired 100% of the outstanding shares of Olympus Controls (Olympus), a Portland, Oregon automation solutions provider - including design, assembly, integration, and distribution - of motion control, machine vision, and robotic technologies. Olympus is included in the Fluid Power & Flow Control segment. The purchase price for the acquisition was $36,642, net tangible assets acquired were $9,540, and intangible assets including goodwill was $27,102 based upon estimated fair values at the acquisition date. The Company funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements.

Fiscal 2019 Acquisitions

On March 4, 2019, the Company acquired substantially all of the net assets of MilRoc Distribution (MilRoc) and Woodward Steel (Woodward). MilRoc is an Oklahoma based distributor of oilfield specific products, namely pumps and valves, as well as equipment repair services and industrial parts to the oil & gas industry. Woodward is an Oklahoma based steel supplier to the oil & gas and agriculture industries. MilRoc and Woodward are both included in the Service Center Based Distribution segment. The purchase price for the acquisition was $35,000, net tangible assets acquired were $17,788, and intangible assets including goodwill was $17,212 based upon estimated fair values at the acquisition date. The purchase price includes acquisition holdback payments of $4,375, of which $1,666 was paid during the year ended June 30, 2020. The remaining balance of $2,709 is included in other current liabilities and other liabilities on the consolidated balance sheet as of June 30, 2020, and which will be paid on the second and third anniversaries of the acquisition date with interest at a fixed rate of 2.0% per annum. The Company funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements.

On November 2, 2018, the Company acquired substantially all of the net assets of Fluid Power Sales, Inc. (FPS), a Baldwinsville, New York based manufacturer and distributor of fluid power components, specializing in the engineering and fabrication of manifolds and power units. FPS is included in the Fluid Power & Flow Control segment. The purchase price for the acquisition was $8,066, net tangible assets acquired were $4,151, and goodwill was $3,915 based upon estimated fair values at the acquisition date. The purchase price includes acquisition holdback payments of $1,200, of which $600 was paid during the year-end June 30, 2020. The remaining balance of $600 is included in other current liabilities on the consolidated balance sheet as of June 30, 2020, and will be paid on the second anniversary of the acquisition date with interest at a fixed rate of 1.5% per annum. The Company funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements.

FCX Acquisition

On January 31, 2018, the Company completed the acquisition of 100% of the outstanding shares of FCX Performance, Inc. (FCX), a Columbus, Ohio based distributor of specialty process flow control products and services. The total consideration transferred for the acquisition was $781,781, which was financed by cash-on-hand and a new credit facility comprised of a $780,000 Term Loan A and a $250,000 revolver, effective with the transaction closing. See note 6 Debt. As a distributor of engineered valves, instruments, pumps and lifecycle services to MRO and OEM customers across diverse industrial and process end markets, this business is included in the Fluid Power & Flow Control Segment.

The following table summarizes the consideration transferred, assets acquired, and liabilities assumed in connection with the acquisition of FCX based on their estimated fair values at the acquisition date.



	FCX Acquisition
	2018
Cash	$	11,141
Accounts receivable	80,836
Inventories	44,669
Other current assets	1,753
Property	8,282
Identifiable intangible assets	305,420
Goodwill	440,012
Other assets	775
Total assets acquired	$	892,888
Accounts payable and accrued liabilities	54,035
Other liabilities	2,677
Deferred tax liabilities	54,395
Net assets acquired	$	781,781

Purchase price	$	784,281
Reconciliation of fair value transferred:
Working Capital Adjustments	(2,500		)
Total Consideration	$	781,781

The change in the carrying amount of goodwill for FCX since the acquisition is as follows:



Balance at 1/31/2018	$	440,012
Impairment	131,000
Balance at 6/30/2020	$	309,012

Goodwill acquired of $161,452 was deductible for income tax purposes at the time of the acquisition. Subsequent to the goodwill impairment recorded during the year ended June 30, 2020, $112,922 remains deductible for income tax purposes as of June 30, 2020.

Net sales, operating income and net income from the FCX acquisition included in the Company’s results since January 31, 2018, the date of the acquisition, are as follows:



	2020 (1)			2019		January 31, 2018 to June 30, 2018
Net sales	$	490,743		$	549,833	$	249,752
Operating income	(97,300		)	38,186		16,845
Net income	(91,739		)	28,075		8,758


(1)	There was a $131,000 goodwill impairment charge during the year ended June 30, 2020. See note 5, Goodwill and Intangibles, for further information.

The Company incurred $2,849 in third-party costs during 2018 pertaining to the acquisition of FCX, which are included in selling, distribution and administration expense in the statements of consolidated income for fiscal 2018.

Other Fiscal 2018 Acquisition

On July 3, 2017, the Company acquired 100% of the outstanding stock of Diseños, Construcciones y Fabricaciones Hispanoamericanas, S.A. ("DICOFASA"), a distributor of accessories and components for hydraulic systems and lubrication, located in Puebla, Mexico. DICOFASA is included in the Service Center Based Distribution segment. The purchase price for the acquisition was $5,920, net tangible assets acquired were $3,395, and goodwill was

$2,525 based upon estimated fair values at the acquisition date. The purchase price includes $906 of acquisition holdback payments, of which $201 and $219 was paid during fiscal year 2020 and 2019, respectively. Due to changes in foreign currency exchange rates, the remaining balance of $356 is included in other current liabilities on the consolidated balance sheet as of June 30, 2020, which will be paid on the third anniversary of the acquisition date with interest at a fixed rate of 1.5% per annum. The Company funded this acquisition using available cash. The acquisition price and the results of operations for the acquired entity are not material in relation to the Company's consolidated financial statements.

Holdback Liabilities for Acquisitions

Acquisition holdback payments of approximately $2,563, $1,448 and $75 will be made in fiscal 2021, 2022 and 2024, respectively. The related liabilities for these payments are recorded in the consolidated balance sheets in other current liabilities for the amounts due in fiscal year 2021 and other liabilities for the amounts due in fiscal years 2022 and 2024.