BUSINESS ACQUISITIONS

3 Months Ended

Mar. 31, 2020

BUSINESS ACQUISITIONS

BUSINESS ACQUISITIONS

NOTE 2.     BUSINESS ACQUISITIONS

Artesyn’s Embedded Power Business

In September 2019, we completed the acquisition of Artesyn Embedded Technologies, Inc.’s (“Artesyn”) Embedded Power business pursuant to the Stock Purchase Agreement, dated May 14, 2019 as amended (the “Acquisition Agreement”). Pursuant to the Acquisition Agreement, we acquired all of Artesyn’s issued and outstanding shares for a purchase price of $361.3 million including the assumption of certain liabilities and subject to an adjustment for net working capital. In connection with the Acquisition Agreement, we entered into a credit agreement that provided us with aggregate financing of $500.0 million which was used to partially fund the Artesyn acquisition. See Note 22. Credit Facility for additional details related to the credit agreement.

Artesyn’s Embedded Power business is one of the world’s largest providers of highly engineered, application-specific power supplies for demanding applications. This acquisition diversified our product portfolio and gave us access to additional growth markets, including hyperscale data centers, telecom infrastructure in next generation 5G networks, embedded industrial power applications and medical power for diagnostic and treatment applications.

The components of the fair value of the total consideration transferred for the acquisition is as follows:

Cash paid for acquisition	$	389,326
Non-cash consideration		2,000
Contingent consideration and working capital adjustments		(6,848)
Total fair value of consideration transferred		384,478
Less cash acquired		(23,225)
Total purchase price	$	361,253

The following table summarizes the estimated preliminary fair values of the assets acquired and liabilities assumed from the acquisition, along with the measurement period adjustments that occurred during the quarter:

	Preliminary: September 10, 2019		Measurement Period Adjustments		Preliminary: September 10, 2019
Accounts and other receivable, net	$	128,221	$	4,245	$	132,466
Inventories		139,778		16,629		156,407
Property and equipment		63,032		289		63,321
Operating lease right-of-use assets		60,073		(5,634)		54,439
Goodwill		113,040		(421)		112,619
Intangible assets		124,000		-		124,000
Other assets		64,018		(155)		63,863
Total assets acquired		692,162		14,953		707,115
Accounts payable		144,702		7,933		152,635
Operating lease liability		60,111		(5,634)		54,477
Pension liability		48,686		(371)		48,315
Deferred income tax liabilities		5,846		24		5,870
Other liabilities		71,564		13,001		84,565
Total liabilities assumed		330,909		14,953		345,862
Total fair value of net assets acquired	$	361,253	$	-	$	361,253

A summary of the intangible assets acquired, amortization method and estimated useful lives are as follows:

			Amortization
	Artesyn		Method	Useful Life
Technology	$	28,000	Straight-line	5
Customer relationships		75,000	Straight-line	15
Tradename		21,000	Straight-line	10
Total	$	124,000

Goodwill and intangible assets are recorded in the functional currency of the entity and are subject to changes due to translation at each balance sheet date. The goodwill represents expected operating synergies from combining operations with the acquired company and the estimated value associated with the enhancements to our comprehensive product lines and access to new markets. Advanced Energy is still evaluating the fair value for the assets acquired and liabilities assumed related to the Artesyn acquisition. Accordingly, the purchase price allocation presented above is preliminary.

Pro forma results for Advanced Energy Inc. giving effect to the Artesyn Embedded Power Business Transactions

The following unaudited pro forma financial information presents the combined results of operations of Advanced Energy and Artesyn as if the acquisition had been completed at the beginning of fiscal year 2019. The unaudited pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of the year prior to the acquisition dates, nor are they indicative of future results.

The unaudited pro forma financial information for the three months ended March 31, 2019 combines Advanced Energy’s results with the pre-acquisition results of Artesyn for that period.

The following table presents our unaudited pro forma results for the acquisition of Artesyn for the three months ended March 31, 2019:

	Three Months Ended March 31,
	2019
	As Reported		Pro Forma
Total sales	$	140,743	$	295,975
Net income attributable to Advanced Energy Industries, Inc.	$	15,370	$	21,544
Earnings per share:
Basic earnings per share	$	0.40	$	0.56
Diluted earnings per share	$	0.40	$	0.56

The unaudited pro forma results for all periods presented include adjustments made to account for certain costs and transactions that would have been incurred had the acquisitions been completed at the beginning of the year prior to the year of acquisition. These include adjustments to amortization charges for acquired intangible assets, interest and financing expenses, transaction costs, amortization of purchased gross profit and the alignment of various accounting policies. These adjustments are net of any applicable tax impact and were included to arrive at the pro forma results above.

Artesyn’s operating results have been included in the Advanced Energy’s operating results for the periods subsequent to the completion of the acquisition on September 10, 2019. Artesyn contributed total sales of $153.9 million and net loss of $1.0 million for the three months ended March 31, 2020.