Acquisition

6 Months Ended

Jul. 01, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisition

ACQUISITION

On April 20, 2022, the Company completed its acquisition of Carestream Dental Technology Parent Limited’s (“Carestream”) intraoral scanner business (the “Intraoral Scanner Business”) for total consideration of $580.0 million, including contingent consideration of $7.5 million, and subject to certain customary adjustments as provided in the Stock and Asset Purchase Agreement dated December 21, 2021and as subsequently amended by the closing agreement dated as of April 20, 2022. The Intraoral Scanner Business manufactures, markets, sells, commercializes, distributes, services, trains, supports, and maintains operations of intraoral scanners and software. The Company purchased the Intraoral Scanner Business through the acquisition of certain assets and the assumption of certain liabilities as well as the acquisition of all of the equity of certain subsidiaries of Carestream.

The Company continually evaluates potential acquisitions that either strategically fit with the Company’s existing portfolio or expand the Company’s portfolio into new and attractive business areas. The Company has completed a number of acquisitions that have been accounted for as business combinations and have resulted in the recognition of goodwill in the Company’s financial statements. Among other things, goodwill arises because the purchase prices for these businesses reflect a number of factors including the future earnings and cash flow potential of these businesses, the multiple to earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers, the competitive nature of the processes by which the Company acquired the businesses, avoidance of the time and costs which would be required (and the associated risks that would be encountered) to enhance the Company’s existing product offerings to key target markets and enter into new and profitable businesses and the complementary strategic fit and resulting synergies these businesses bring to existing operations.

The Company makes an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities. The Company obtains this information during due diligence and through other sources. In the months after closing, up to 12 months, as the Company obtains additional information that existed at the acquisition date about these assets and liabilities, it is able to refine the estimates of fair value and more accurately allocate the purchase price. Only items that existed as of the acquisition date are considered for subsequent adjustment. The finalization of the acquisition accounting valuation assessment may result in a change in the valuation of the deferred tax assets and goodwill, which could have a material impact on the Company’s financial statements. The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date ($ in millions):

	April 20, 2022
Assets acquired:
Cash	$	2.7
Accounts receivable	0.1
Inventories	6.2
Intangible assets	129.8
Property, plant and equipment	0.4
Goodwill	370.1
Non-current deferred tax asset	98.5
Other long-term assets	1.1
Total assets acquired	608.9
Liabilities assumed:
Accounts payable	(0.5)
Accrued expenses and other liabilities	(27.9)
Other long-term liabilities	(0.5)
Total liabilities assumed	(28.9)
Total net assets acquired	$	580.0

The intangible assets acquired consist of developed technology and distributor relationships. The weighted average amortization period of the acquired intangible assets in the aggregate is 8 years.

The excess of the purchase price over the fair value assigned to the assets acquired and liabilities assumed represents the goodwill resulting from the acquisition. Goodwill attributable to the acquisition has been recorded as a non-current asset and is not amortized, but is subject to review at least on an annual basis for impairment. Goodwill recognized was primarily attributable to expected operating efficiencies and expansion opportunities in the business acquired. The goodwill has been allocated to the Company’s Equipment & Consumables reportable segment and is not deductible for income tax purposes.

For the three and six months ended July 1, 2022, legal, accounting, and other professional service costs associated with the acquisition of the Intraoral Scanner Business were $8.2 million and $10.7 million, respectively and have been recorded as selling, general and administrative expense in the Condensed Consolidated Statements of Income.

For the three and six months ended July 1, 2022, the Intraoral Scanner Business’ revenue and earnings were not material to the Condensed Consolidated Statements of Income and therefore, the pro forma impact of this acquisition is not presented.