Acquisitions | 3 Months Ended |
Sep. 30, 2013 |
Business Combinations [Abstract] | ' |
Acquisitions | ' |
Acquisitions |
Aydin Displays, Inc. — On August 30, 2013, the Company completed the acquisition of certain assets and liabilities related to the contract manufacturing business of Aydin Displays, Inc. ("Aydin Displays" or “Aydin”) in a $15.0 million all-cash transaction, subject to certain post-closing adjustments and financed through the use of borrowings under the Company's Credit Facility. At September 30, 2013, the Company has recorded additional estimated contingent consideration of accounts receivable of $0.4 million in relation to a post-closing working capital adjustment, which is expected to be settled in the second quarter of the Company's fiscal 2014 year. Additional acquisition consideration of up to $6.6 million is contingent upon Aydin attaining certain performance thresholds during the twelve month period following the transaction. The transaction includes an approximate $1.2 million escrowed holdback which is available to fund the working capital adjustment and potential seller indemnification obligations in relation to the acquisition agreement. |
The acquired business, which will be part of the Company's DSS segment and which is expected to add $18 million (unaudited) in annualized revenue, develops enhanced flat panel display and touch-screen solutions with application-critical performance criteria including ruggedization, high resolution, color accuracy, response/refresh times, sunlight readability and other criteria such as magnetic interference and emanations security for the Military & Aerospace and Civil Marine markets. These products are currently specified in the U.S. Navy P8A Poseidon ASW aircraft behind-the-cockpit control center, the command and control centers of many U.S. Navy ships, Federal Aviation Administration air traffic control systems, and cockpit command centers for various civil marine applications. The acquired business will continue to operate as Aydin Displays. |
The Company is in the process of obtaining valuations of certain tangible and intangible assets and liabilities and expects to complete the purchase price allocation in fiscal year 2014 after these valuations are finalized. The following table represents the preliminary allocation of the total consideration to assets acquired and liabilities assumed in the acquisition of Aydin based on Sparton’s preliminary estimate of their respective fair values (in thousands): |
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Total purchase consideration: | |
Cash | $ | 15,000 | |
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Estimated additional consideration payable for post-closing working capital adjustment | 357 | |
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Total purchase consideration | $ | 15,357 | |
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Assets acquired and liabilities assumed: | |
Accounts receivable, net | $ | 4,237 | |
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Inventory | 8,025 | |
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Other current assets | 192 | |
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Property, plant and equipment | 374 | |
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Goodwill | 4,000 | |
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Other long-term assets | 1 | |
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Accounts payable | (1,215 | ) |
Other current liabilities | (257 | ) |
Total assets acquired and liabilities assumed | $ | 15,357 | |
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Total purchase consideration has been preliminarily allocated to the tangible assets acquired and liabilities assumed based on their provisionally estimated fair values at the acquisition date. Additional acquisition consideration of up to $6.6 million is contingent upon Aydin attaining certain performance thresholds. The Company has provisionally assigned no fair value to this contingent liability. It is possible that acquired assets may additionally include customer relationships, the Aydin Displays trade name, unpatented technology and a favorable lease acquired in the transaction. The Company was unable at September 30, 2013 to assign provisionally estimated fair values to these potential assets. The Aydin acquisition has preliminarily resulted in approximately $4 million of goodwill, which will be adjusted downward or upward based on the final values assigned to all acquired assets and liabilities. The Company believes that any goodwill remaining after the valuations are finalized will primarily relate to strategic fit, resulting synergies and the acquired workforce that this business brings to existing operations. Goodwill associated with this acquisition is expected to be deductible for tax purposes and has been assigned entirely to the Company’s DSS segment. |
Included in the Company’s Condensed Consolidated Statements of Operations for the three months ended September 30, 2013 are net sales of approximately $1.2 million and loss before benefit from income taxes of less than $0.1 million, resulting from the acquisition of Aydin since August 30, 2013. |
The Company incurred legal, professional and other costs related to this acquisition aggregating approximately $0.2 million. These costs were recognized as selling and administrative expenses in the three months ended September 30, 2013. |
A portion of Aydin's revenue is derived from contracts to manufacture video displays and other related products to a buyer’s specification under long-term contracts. Revenue and profit is recognized under these contracts using the percentage of completion method based on the ratio of costs incurred to estimated total costs at completion. |
Creonix, LLC — On June 6, 2013, the Company completed the acquisition of certain assets related to the contract manufacturing business of Creonix, LLC (“Creonix”) in a $2.1 million all-cash transaction, subject to certain post-closing adjustments and financed through the use of borrowings under the Company's credit facility. At September 30, 2013, the Company has recognized accounts receivable of $0.1 million as consideration to be returned in relation to a post-closing working capital adjustment, which will be settled in the second quarter of the Company's fiscal 2014 year. The transaction includes an approximate $0.3 million escrowed holdback which is available to fund the working capital adjustment and potential seller indemnification obligations in relation to the acquisition agreement. |
The acquired business, which is reported in the Company's Complex Systems segment, provides the Company with the capability of cable and wire harness engineering and assembly. Additionally, the acquisition provides further expansion into the Industrial and Military & Aerospace markets, diversifies Sparton's customer base and increases utilization of the Company's existing assets through the expected consolidation of this business into Complex Systems's Brooksville, Florida plant during the first six months of fiscal 2014. Creonix primarily manufactures products and components for battery monitoring, high speed optical imaging, neuromuscular incapacitation, imaging and wiring assemblies for military applications, and electrical grid transformer protection systems. |
During the three months ended September 30, 2013, the Company finalized the inventory adjustment under the Creonix asset purchase agreement resulting in a decrease in the previously recorded related receivable from the seller. This measurement period increase in total purchase consideration resulted in the retrospective elimination of the previously recognized gain on acquisition recorded in the fourth quarter of fiscal 2013 of less than $0.1 million and resulting in the recognition of approximately $0.1 million of goodwill. The Company's June 30, 2013 balance sheet has been restated to reflect this adjustment. The following table presents the final allocation of the total consideration to assets acquired and liabilities assumed from Creonix based on Sparton’s estimate of their respective fair values (in thousands): |
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Total purchase consideration: | |
Cash | $ | 2,100 | |
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Accounts receivable recognized in relation to inventory adjustment | (105 | ) |
Total purchase consideration | $ | 1,995 | |
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Assets acquired and liabilities assumed: | |
Inventory | $ | 1,321 | |
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Equipment | 304 | |
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Intangible assets — customer relationships | 270 | |
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Goodwill | 100 | |
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Total assets acquired and liabilities assumed | $ | 1,995 | |
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