Annual report pursuant to Section 13 and 15(d)

Acquisitions

v2.4.0.6
Acquisitions
 12 Months Ended
Dec. 29, 2012
Acquisitions [Abstract]  
ACQUISITIONS

9. ACQUISITIONS

On October 18, 2012, the Company, through Sun Korea, purchased all of the outstanding stock of Seungwon Solutions Corporation (“Seungwon”) for approximately $1,458. Seungwon is a component supplier to Sun Korea, which represents approximately 80% of Seungwon’s sales.

The results of operations of Seungwon have been included in the Company’s consolidated results since the date of acquisition. Supplemental pro forma information and disclosure of acquired assets and liabilities has not been provided as the acquisition did not have a material impact on the consolidated financial statements.

The Company recorded approximately $1,731 in goodwill and approximately $80 in transaction costs related to the acquisition.

On September 27, 2011, Sun purchased the remaining preferred and common shares of HCT that it did not already own. HCT designs and produces encapsulated, modular, highly ruggedized digital and analog electronic controller products for the global fluid power and motion control industry. HCT’s products complement Sun’s electro-hydraulic line of valves providing reliable, easy, simple and accurate control of individual valves, or seamless management of systems and sub-systems.

Goodwill arising from the acquisition was $1,976 consisting of the value of the workforce, synergies and competitive advantages obtained as a result of the acquisition. Identifiable intangible assets arising from the acquisition consist of the HCT Trade Name, Patented Technology, Unpatented Technology, and Customer Relationships. These identifiable intangibles totaled $2,658, and are amortized over ten years with the exception of Customer Relationships, which are amortized over twenty years. These amounts are recorded as other assets on the consolidated balance sheet.

The following table summarizes the consideration paid for HCT and the amounts of the assets acquired and liabilities assumed, recognized at the acquisition date.

 

         
At September 27, 2011      
   

Consideration

        

Cash

   $ 1,894  

Stock

     12  
   

 

 

  

Fair value of total consideration transferred

   $ 1,906  
   

Fair value of Sun’s equity interest in HCT held before the business combination

     1,472  
   

 

 

  

Total

   $ 3,378  
   

Acquisition-related costs (included in Selling, engineering, and administrative expenses)

     40  
   

Recognized amounts of identifiable assets acquired and liabilities assumed

        

Cash

   $ 130  

Accounts receivable

     570  

Inventory

     444  

Property, plant, and equipment

     317  

Identifiable intangible assets

     2,658  

Other assets

     210  

Accounts payable and accrued expenses

     (748 ) 

Notes payable

     (2,123 ) 

Other liabilities

     (56 ) 
   

 

 

  

Total identifiable net assets

   $ 1,402  

Goodwill

     1,976  
   

 

 

  

Total

   $ 3,378  

Approximately half of the acquisition related costs above were incurred in the third quarter with the remainder incurred in the Company’s fourth quarter. The amount of notes payable above is primarily made up of amounts due to Sun Hydraulics and eliminated upon consolidation.

Sun Hydraulics’ fair value of the equity interest in HCT held before the business combination was $1,472. The fair value of the previously held equity interest was determined based on the current purchase price per the purchase agreement before the deduction for option and warrant proceeds. Sun Hydraulics recognized a gain of $1,244 as a result of remeasuring to fair value, based on the current purchase price, its 38% equity interest in HCT held before the business combination. The equity interest was diluted from the original investment as a result of warrant and option exercises. This gain is included in net miscellaneous income on the Consolidated Statement of Operations for the year ending December 31, 2011.

The revenue and earnings for HCT included in Sun’s Consolidated Statement of Operations for the year ended December 29, 2012, and the revenue and earnings of the combined entities had the acquisition date been January 2, 2011, are included in the table below.

 

                 
    Revenue     Earnings  
    (unaudited)     (unaudited)  

Actual from 01/01/2012 - 12/29/2012

   $ 3,791     $ (534 ) 
     

Supplemental pro forma from 01/02/2011 to 12/31/2011

   $ 206,968     $ 37,534