Acquisitions (Notes) |
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Sep. 29, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisitions |
Acquisitions
On August 9, 2018, the Company completed its acquisition of the Global Marine Business of Power Products Holdings, LLC (Power Products) for $910.0 million in cash, on a cash-free, debt-free basis. Brunswick used a combination of 364-day, three-year and five-year term loans (Term Loans), totaling $800 million, along with cash on hand, to finance the acquisition as described in Note 16 – Debt in the Notes to Condensed Consolidated Financial Statements.
Power Products is a leading provider of electrical products to marine and other recreational and specialty vehicle markets. The acquisition advances Brunswick’s leadership by adding integrated electrical systems solutions to the marine market and an array of other mobile, specialty vehicle and industrial applications. Power Products is managed as part of the Marine Engine segment.
The Company accounted for the acquisition using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with Brunswick being the acquiring entity, and reflects estimates and assumptions deemed appropriate by Company management. Transaction costs related to the acquisition were expensed as incurred within Selling, general and administrative expense and totaled $10.5 million and $13.0 million for the three months and nine months ended September 29, 2018, respectively. The net sales and operating loss of Power Products consolidated into Brunswick's financial statements since the date of acquisition were $33.3 million and $1.0 million, respectively, for both the three months and nine months ended September 29, 2018. The operating loss included $9.4 million of purchase accounting amortization.
Due to the recent timing of this acquisition, the purchase price allocation for the assets acquired and liabilities assumed is preliminary and subject to change within the allowed measurement period as the Company finalizes its fair value estimates. The following table is a summary of the assets acquired, liabilities assumed and net cash consideration paid for the Power Products acquisition during 2018:
(A) The goodwill recorded for the acquisition of Power Products is not deductible for tax purposes.
Pro Forma Financial Information (Unaudited)
Prior to the acquisition, Power Products utilized a fiscal year ending August 31, and Brunswick’s fiscal year ends on December 31 of each year. As the Brunswick and Power Products fiscal years differ by more than 93 days, pursuant to Rule 11-02(c)(3) of Regulation S-X, Power Products’ historical unaudited financial information was adjusted for the purpose of presenting the Unaudited Pro Forma Net sales and Net earnings for the three months and nine months ended September 30, 2017. The Unaudited Pro Forma Net sales and Net earnings for the three months ended September 30, 2017 was prepared using Power Products’ historical unaudited Net sales and Net earnings for the three months ended November 30, 2017. The Unaudited Pro Forma Net sales and Net earnings for the nine months ended September 30, 2017 was prepared using Power Products’ historical unaudited Net sales and Net earnings for the nine months ended November 30, 2017.
The pro forma information has been prepared as if the Power Products acquisition and the related debt financing had occurred on January 1, 2017. These pro forma results are based on estimates and assumptions which the Company believes to be reasonable. They are not the results that would have been realized had the acquisition actually occurred on January 1, 2017 and are not necessarily indicative of Brunswick's consolidated results of net earnings in future periods. The pro forma results include adjustments primarily related to interest expense on the Term Loans and amortization of intangible assets. Additionally, the pro forma adjustments include the following non-recurring amounts:
(A) Transaction costs and;
(B) Expense related to the estimated fair value adjustment to inventory recognized as part of the application of purchase accounting.
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