Note 3 - Acquisition of Businesses

6 Months Ended

Jun. 29, 2013

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

3. Acquisition of Businesses

The company accounts for acquisitions using the purchase method in accordance with ASC 805, “Business Combinations.” The results of operations of each acquisition have been included in the accompanying consolidated financial statements as of the dates of the acquisition.

Hamlin, Inc.

On May 31, 2013, the company acquired 100% of Hamlin, Inc. (“Hamlin”) from Key Safety Systems, for $145.0 million (net of cash acquired). Hamlin is a manufacturer of sensor technology providing standard products and custom solutions for leading global manufacturers in the automotive and electronic industries. The acquisition allows the company to expand its automotive and electronics product offerings in the global sensor market in both the Automotive and Electronics business segments. Hamlin is headquartered in Lake Mills, Wisconsin and has manufacturing, engineering and sales offices in the U.S., Mexico, Europe and Asia. The company funded the acquisition with available cash raised from borrowings on the company’s new credit arrangement. (See Note 7).

The following table sets forth the preliminary purchase price allocation, as of June 29, 2013, for Hamlin acquisition-date net assets, in accordance with the purchase method of accounting with adjustments to record the acquired net assets at their estimated fair values.

Hamlin preliminary purchase price allocation (in thousands):
Cash	$	15,473
Current assets, net		31,257
Property, plant and equipment		22,767
Goodwill		53,082
Distribution network		33,098
Patents and licenses		15,365
Trademarks		6,483
Non-current assets		1,390
Current liabilities		(8,816	)
Non-current liabilities		(9,626	)
	$	160,473

All Hamlin goodwill and other assets and liabilities were recorded in the Automotive and Electronics business unit segments and reflected in the Americas, Europe and Asia-Pacific geographical areas. The distribution network, trademarks and patents and licenses are all being amortized over 10 years. The goodwill resulting from this acquisition consists largely of the company’s expected future product sales and synergies from combining Hamlin’s products with the company’s existing product offerings. A portion of the goodwill for the acquisition is not expected to be deductible for tax purposes.

As required by purchase accounting rules, the company recorded a $2.1 million step-up of inventory to its fair value as of the acquisition date. During the second quarter of 2013, as a portion of this inventory was sold, cost of goods sold included $1.7 million of non-cash charges for this step-up.

The following unaudited pro forma results are provided below for the company’s acquisition of Hamlin and assume that the acquisition of Hamlin had been completed as of the beginning of fiscal year 2012.

	(In thousands except for per share amounts)
	For the three months ended				For the six months ended
	June 29, 2013		June 30, 2012		June 29, 2013		June 30, 2012
	(Unaudited)		(As restated)		(Unaudited)		(As restated)
			(Unaudited)				(Unaudited)
Revenues	$	201,346	$	190,215	$	390,055	$	368,242
Net income	$	26,239	$	23,700	$	41,962	$	41,765
Net income per share:
Basic	$	1.17	$	1.08	$	1.88	$	1.92
Diluted	$	1.16	$	1.07	$	1.86	$	1.90
Weighted-average shares and equivalent shares outstanding:
Basic		22,296		21,778		22,197		21,693
Diluted		22,499		22,074		22,431		22,004

For the three and six months ended June 29, 2013, Hamlin added approximately $7.0 million in revenue and a $0.8 million net loss to the company’s consolidated results.

Accel AB

On May 31, 2012, the company acquired 100% of ACCEL AB (“Accel”), a manufacturer of advanced electromechanical products, including sensors and switches primarily for the automotive industry, for approximately $23.9 million. The acquisition allows the company to expand its automotive product offering and establish a presence in the growing automotive sensor market within its Automotive business unit segment. Accel is based in Vänersborg, Sweden with a manufacturing facility located in Kaunas, Lithuania. The company funded the acquisition with available cash.

The following table sets forth the final purchase price allocation, as of June 29, 2013, for Accel acquisition-date net assets, in accordance with the purchase method of accounting with adjustments to record the acquired net assets at their estimated fair values.

Accel AB purchase price allocation (in thousands):
Cash	$	344
Current assets, net		8,643
Property, plant and equipment		3,731
Other assets		7
Goodwill		11,536
Distribution network		1,321
Trademarks		1,259
Patents and licenses		2,435
Current liabilities		(5,411	)
	$	23,865

All Accel goodwill and other assets and liabilities were recorded in the Automotive business unit segment and reflected in the Europe geographical area. The distribution network is being amortized over three to 10 years. Trademarks are being amortized over five years. Patents and licenses are being amortized over 10 years. The goodwill resulting from this acquisition consists largely of the company’s expected future product sales and synergies from combining Accel’s products with the company’s existing product offerings. Goodwill for the above acquisition is not expected to be deductible for tax purposes.

As required by purchase accounting rules, the company recorded a $0.4 million step-up of inventory to its fair value as of the acquisition date. During the third quarter of 2012, as the inventory was sold, cost of goods sold included $0.4 million of non-cash charges for this step-up.

Terra Power Systems, LLC

On September 26, 2012, the company acquired 100% of Terra Power Systems, LLC (“Terra Power”), a U.S. manufacturer of electromechanical components including power distribution modules and fuse holders for commercial vehicle products for $10.6 million. The acquisition allows the company to strengthen its position in the commercial vehicle products market by adding new products and new customers within its Automotive business unit segment. Terra Power is based in Bellingham, Washington. The company funded the acquisition with available cash.

All Terra Power goodwill and other assets and liabilities were recorded in the Automotive business unit segment and reflected in the Americas geographical area. The goodwill resulting from this acquisition consists largely of the company’s expected future product sales and synergies from combining Terra Power’s products with the company’s existing commercial vehicle product offerings. Goodwill for the above acquisition is expected to be deductible for tax purposes.

The following table sets forth the preliminary purchase price allocation for Terra Power acquisition-date net assets, in accordance with the purchase method of accounting with adjustments to record the acquired net assets at their estimated fair values. The preliminary purchase price allocation reflected below is based on internal estimates and is expected to be finalized in the third quarter of 2013 although further adjustments are not anticipated to be significant.

Terra Power preliminary purchase price allocation (in thousands):
Cash	$	105
Current assets, net		1,625
Property, plant and equipment		457
Goodwill		4,562
Other intangibles		4,064
Current liabilities		(213	)
	$	10,600

Pro forma financial information is not presented for the company’s 2012 business acquisitions described above due to amounts not being materially different than actual results.