Acquisition Activity

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Diversified Technical Systems, Inc.

On June 1, 2021, VPG completed the acquisition of California-based Diversified Technical Systems, Inc. (“DTS”), a manufacturer of data acquisition systems and sensors for product safety and testing, for a purchase price of $47.2 million. The Company used cash on hand and borrowings under its revolving credit facility to fund the purchase price under the purchase agreement. DTS reports into the Company's Measurement System segment. The following table summarizes the provisional fair values assigned to the assets and liabilities of DTS as of June 1, 2021 (in thousands):


	June 1, 2021
Working capital	$	12,587
Property and equipment	1,209
Deferred income tax liability	(6,178)

Intangible assets:
Acquired technology	13,167
Customer relationships	8,135
Trade names	2,393
Total intangible assets	23,695
Fair value of acquired identifiable assets	31,313
Purchase price	$	47,216
Goodwill	$	15,903

(a) Working capital accounts include accounts receivable, inventory, prepaid expenses, accounts payable, accrued expenses, and accrued payroll.

The Company utilizes certain valuations and studies to determine the fair value of the tangible and intangible assets acquired. These valuations and studies are currently being analyzed and have yet to be finalized. Accordingly, the assets and liabilities assumed are subject to adjustment once the detailed analysis is completed. The provisional estimated weighted average useful lives for the acquired technology and customer relationships are 15 years. Trade names are treated as indefinite-lived intangible assets. None of the goodwill associated with DTS will be deductible for income tax purposes.

The Company recorded acquisition costs associated with this transaction as follows (in thousands):


	Year Ended December 31,
	2021
Legal fees	$	341
Appraisal fees	18
Investment banker fees and insurance costs	839
	$	1,198

Included in the results of the operations of the Company, starting on June 1, 2021, are net revenues of $19.2 million and net earnings of $1.2 million for the year ended December 31, 2021. DTS results include amortization of the inventory step-up of $2.7 million and amortization of intangible assets of $0.8 million for year ended December 31, 2021.

Following are the supplemental consolidated financial results for the Company on an unaudited pro forma basis, as if the DTS acquisition had been consummated on January 1, 2020 (unaudited):


	Year ended December 31,		Year ended December 31,
	2021		2020
	(unaudited)		(unaudited)
Pro forma net revenues	$	331,155	$	301,577

Pro forma net earnings attributable to VPG stockholders	$	25,109	$	14,289

Pro forma basic earnings per share attributable to VPG stockholders	$	1.84	$	1.05
Pro forma diluted earnings per share attributable to VPG stockholders	$	1.84	$	1.05

Dynamic Systems Inc.

On November 1, 2019, VPG completed the acquisition of New York-based Dynamic Systems Inc. ("DSI"), a provider of specialized dynamic thermal-mechanical test and simulation systems used to develop new metal alloys and optimize production processes, for a purchase price of $40.3 million. DSI reports into the Company's Measurement Systems segment. The following table summarizes the final fair values assigned to the assets and liabilities of DSI as of November 1, 2019 (in thousands):


	November 1, 2019
Working capital (a)	$	6,740
Property and equipment	1,727
Long-term deferred income tax liability	(2,643)
Non-Controlling interest	(299)
Intangible assets:
Patents and acquired technology	10,250
Customer relationships	4,344
Trade names	3,300
Total intangible assets	17,894
Fair value of acquired identifiable assets and liabilities	23,419
Purchase price	40,325
Goodwill	$	16,906

(a) Working capital accounts include accounts receivable, inventory, prepaid expenses, accounts payable, accrued expenses, and accrued payroll.

The weighted average useful lives for the patents and acquired technology and customer relationships are 16 years and 15 years, respectively. Most of the goodwill associated with DSI is deductible for income tax purposes.

The Company recorded acquisition costs of associated with this transaction in its consolidated statements of operation as follows (in thousands):


	Year ended December 31,
	2019
Accounting and legal fees	$	214
Appraisal fees	13
Other	216
	$	443