v3.26.1
Note T - Acquisitions
 12 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Business Combination [Text Block]

T. ACQUISITION

 

Kobelt Manufacturing Co., Ltd., Inc.

 

On February 14, 2025, the Company completed the acquisition of 100% of the outstanding common stock of Kobelt. Based in Surrey, British Columbia, Kobelt is a Canadian manufacturer of controls, propulsion, steering, and braking systems to the marine, oil and gas, and industrial markets. This acquisition was pursuant to a Sale and Purchase Agreement (“Purchase Agreement”) entered into by Twin Disc Canada Holdings Ltd, a wholly-owned subsidiary of the Company, with the prior owners, on February 14, 2025. Immediately following the acquisition, Kobelt and Twin Disc Canada Holdings Ltd amalgamated to continue a wholly-owned subsidiary of the Company, retaining the Kobelt name.

 

Under the terms of the Purchase Agreement, the Company paid an aggregate of approximately $17,236 in cash at closing, which included a base payment plus adjustments for net cash, working capital, and earnout. The Company paid an additional $516 for the net working capital adjustment. The amount is still subject to a final determination of the earnout calculation. The transaction is considered a taxable stock acquisition.

 

The Company, in part, financed the payment of the cash consideration through borrowings of $6,500 under a credit agreement entered into on February 14, 2025 with Bank of Montreal (the “Credit Agreement”). The Credit Agreement is further discussed in Note G, Debt.

 

Kobelt brings a complementary range of products that enhance and diversify the Company's portfolio, reinforcing Twin Disc’s position as a global leader in power transmission solutions. Kobelt's in-house foundry and expertise in bronze die casting, precision machining, assembly and testing ensure complete quality control, which aligns perfectly with the Company's commitment to engineering excellence.

 

With over 60 years of experience designing and manufacturing high-quality products, Kobelt is a well-suited addition to the Twin Disc family. This acquisition opens new opportunities for growth and partnerships, leveraging the Company's global sales and service teams to drive even greater success.

 

For fiscal years ended 2026 and 2025, the Company included in its consolidated statement of operations and comprehensive income net sales and earnings (loss) for Kobelt of $13,414 and $232, and $4,870 and ($164), respectively.

 

 

Purchase Price Allocation

 

The acquisition of Kobelt met the criteria for a business combination to be accounted for using the acquisition method under ASC 805, Business Combinations (“ASC 805”), with the Company identified as the legal and the accounting acquirer. The Company recognized approximately $0.7 million of acquisition-related costs which were expensed in the consolidated statement of operations for the quarter ended March 28, 2025.

 

The following table details the final allocation of the purchase price of the assets acquired and liabilities assumed in connection with the acquisition of Kobelt.

 

Cash purchase price

 $17,102 

Earnout

  374 

Total consideration

 $17,476 
     

Assets acquired:

    

Cash

 $240 

Trade accounts receivable

  1,881 

Inventories

  5,984 

Other current assets

  290 

Property, plant and equipment

  5,031 

Intangible assets

  2,847 

Total assets acquired

 $16,273 
     
     

Liabilities assumed :

    

Accounts payable

 $924 

Accrued liabilities

  520 

Deferred tax liability

  159 

Total liabilities assumed

 $1,603 
     
     

Total identified net assets acquired:

 $14,670 

Goodwill

  2,806 

Purchase price consideration

 $17,476 

 

 

Final Fair Value of Assets Acquired and Liabilities Assumed

 

The Company has completed its review of the fair value of the assets acquired and liabilities assumed in connection with the acquisition of Kobelt. The measurement period has ended, and the Company has made its final determination of the acquisition-date fair values of the assets acquired and liabilities assumed. The amounts reflected in the purchase price allocation table represent the final allocation of the purchase price based on information obtained about facts and circumstances that existed as of the acquisition date.

 

The excess of the purchase price over the final fair values assigned to the identifiable assets acquired and liabilities assumed was recorded as goodwill. Goodwill recognized in the acquisition is primarily attributable to the expected benefits from combining Kobelt’s operations with the Company’s existing business, including anticipated operating synergies, expanded product offerings and future growth opportunities.

 

The following summarizes the final fair value of the assets acquired and liabilities assumed at the acquisition date:

 

Assets acquired and liabilities assumed:

     

Cash

 $240  

Trade accounts receivable

  1,881 (a)

Inventories, net

  5,984 (b)

Other current assets

  290  

Property, plant and equipment

  5,031 (c)

Intangible assets, net

  2,847 (d)

Accounts payable

  (924) 

Accrued liabilities

  (520)(e)

Deferred tax liability

  (159) 

Total identified net assets acquired:

  14,670  

Goodwill

  2,806 (f)

Purchase price consideration

 $17,476  

 

The following information provides further details about the final fair values assigned to certain assets acquired and liabilities assumed at the acquisition date for key balance sheet items.

 

 

(a)

Accounts receivable represent contractual amounts receivable from customers. The amounts approximate fair value.

 

 

(b)

Inventory consists of:

Raw materials

 $4,622 

Work in progress at fair value

  520 

Finished goods at fair value

  842 

Inventories at fair value

 $5,984 

Inventories at book value

  5,558 

Step-up

 $426 

 

 

(c)

The value of property, plant and equipment is as follows:

Dies, tools and fixtures

 $2,976 

Machinery and equipment

  1,718 

Other

  337 

Property, plant and equipment at fair value

 $5,031 

Property, plant and equipment at book value

  2,156 

Step-up

 $2,875 

 

 

(d)

Intangible assets consist of:

  

Estimated

fair value

  

Estimated average

useful lives

 

Tradename

  636   20 

Backlog

  21  

<1

 

Customer relationship

  1,201   15 

Computer Software - External

  71   5 

Developed technology

  918   20 
  $2,847     

 

 

(e)

The amounts approximate fair value.

 

 

(f)

The Company recorded goodwill of $2,806 associated with the acquisition. The goodwill represents the excess of the purchase price consideration over the final fair value assigned to the identifiable assets acquired and liabilities assumed.