Acquisitions

6 Months Ended

Jul. 02, 2011

Acquisitions [Abstract]

Acquisitions

5. Acquisitions

In May 2011, the Company consummated an agreement to acquire substantially all of the assets and liabilities of Danfoss Bauer GmbH relating to its gear motor business for a cash consideration of €43.1 million ($62.3 million). Following closing, the Company made additional payments in the amount of €4.7 million ($6.8 million) to reflect an adjustment for working capital and other items.

Bauer is a European manufacturer of high-quality gear motors, offering engineered solutions to a variety of industries, including material handling, metals, food processing and energy. In addition to a presence in Germany, Bauer has a well-established sales network in 15 additional countries in Western and Eastern Europe, China, and the United States. The Company expects that the Bauer acquisition will be accretive to earnings in 2011 and future periods. The Bauer acquisition opened certain previously underpenetrated geographic regions and the Company believes it will provide a favourable environment to continue to further execute the Company’s acquisition strategy.

The closing date of the Bauer acquisition was May 29, 2011, and as a result, the Company’s consolidated financial statements reflect Bauer’s results of operations from the beginning of business on May 30, 2011 forward. Revenue and earnings for the one month of Bauer activity included in the quarter and year to date period ended July 2, 2011 was $8.8 million and -$0.9 million, respectively.

The Company is in the process of completing its final purchase price allocation. The value of the acquired assets, assumed liabilities and identified intangibles from the acquisition of Bauer, as presented below, are based upon the Company’s preliminary estimate of the fair value as of the date of the acquisition. The purchase price allocation as of the acquisition date is as follows:

Total purchase price, excluding acquisition costs of approximately $2.9 million	$	62,332
Cash and cash equivalents		41
Trade receivables		18,248
Inventories		21,397
Prepaid expenses and other		2,331
Property, plant and equipment		18,516
Intangible assets		15,458
Total assets acquired	$	75,991
Accounts payable		3,946
Accrued expenses and other current liabilities		7,571
Other liabilities		9,019
Total liabilities assumed	$	20,536
Net assets acquired		55,455
Excess purchase price over fair value of net assets acquired	$	6,877

The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. The Company is currently in the process of analyzing tax deductable goodwill for Bauer. The Company expects to develop synergies, such as lower cost country sourcing, global procurement, ability to cross-sell product, as well as penetrating certain geographic areas, as a result of the acquisition of Bauer.

The estimated amounts recorded as intangible assets consist of the following:

Customer relationships, subject to amortization	$	12,063
Trade names and trademarks, not subject to amortization		3,395
Total intangible assets	$	15,458

Customer relationships are subject to amortization which will be straight-lined over their estimated useful lives of 9 years representing the anticipated period over which the Company estimates it will benefit from the acquired assets.

The following table sets forth the unaudited pro forma results of operations of the Company for the year and quarter to date periods ended July 2, 2011 and July 3, 2010 as if the Company had acquired Bauer at the beginning of the respective periods. The pro forma information contains the actual operating results of the Company and Bauer, adjusted to include the pro forma impact of (i) additional depreciation expense as a result of estimated depreciation on fair value of fixed assets; (ii) additional expense as a result of estimated amortization of identifiable intangible assets; (iii) additional interest expense associated with the Convertible Notes issued on March 7, 2011 in connection with the Bauer acquisition; (iv) elimination of certain acquisition related costs; and (v) the elimination of additional expense as a result of fair value adjustment to inventory recorded in connection with the acquisition. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions occurred at the beginning of the respective periods or that may be obtained in the future.

	Pro Forma (unaudited)				Pro Forma (unaudited)
	Quarter to Date Period Ended				Year to Date Period Ended
	July 2,		July 3,		July 2,		July 3,
	2011		2010		2011		2010
Total revenues	$	185,153	$	159,955	$	375,173	$	310,800
Net income	$	11,029	$	5,701	$	22,521	$	8,102
Basic earnings per share:
Net income	$	0.42	$	0.22	$	0.85	$	0.31
Diluted earnings per share:
Net income	$	0.41	$	0.22	$	0.84	$	0.31