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| Acquisitions | Acquisitions F.A.T.I.
On October 2, 2024, we acquired Fabbrica Apparecchiature Termoelettriche Industriali – F.A.T.I. – S.r.l. ("F.A.T.I.") (the "F.A.T.I. Acquisition"). F.A.T.I., based in Italy, is a leading designer and manufacturer of electrical heaters and heating systems for a broad range of industrial end markets, including oil and gas, pharmaceutical, renewables, nuclear and HVAC. Since its founding nearly 80 years ago, F.A.T.I. has built a high-quality portfolio of technologically advanced and reliable solutions for the industrial electric heating market that are available in over 30 countries around the globe. In fiscal 2025, F.A.T.I. contributed $6,584 in Sales and $409 in Net income to our consolidated operating results.
The initial purchase price was €12,500, or approximately $13,807, with cash acquired of $2,278, for a net closing purchase price of $11,529. In fiscal 2025, we adjusted the purchase price for excess cash acquired to €13,339, or approximately $14,733. The initial purchase price is still subject to customary adjustments, including liabilities such as warranty reserves. Measurement period adjustments may be made up to one year from the acquisition date. The initial purchase price was funded with cash on hand, and includes F.A.T.I.'s manufacturing facility in Milan, which enhances our global production capabilities. The F.A.T.I. Acquisition is expected to strengthen our market position worldwide. We have integrated F.A.T.I. into our Europe, Middle East, and Africa ("EMEA") reportable segment.
Acquisition Costs
In accordance with GAAP, costs incurred to complete an acquisition are expensed as incurred. Total acquisition costs, which represent transaction costs, legal fees, and third-party professional fees, were $116, reflected in "Selling, general and administrative expenses" in our consolidated statement of operations and comprehensive income.
Purchase Price Allocation
We have accounted for the F.A.T.I. Acquisition according to the business combinations guidance found in ASC 805, Business Combinations, henceforth referred to as acquisition accounting. We used Level 2 and 3 inputs to allocate the purchase price to the major categories of assets and liabilities shown below. For valuing the customer relationships intangible asset, we used a common income-based approach called the multi-period excess earnings method; for the trademarks and developed technology intangible assets, we used a relief-from-royalty method; and for the contract-based intangible asset, we used the with and without method. The carrying values of the assets and liabilities shown below approximated their respective fair values at the time of closing.
Vapor Power
On January 2, 2024, we announced our acquisition (the "Vapor Power Acquisition") of 100% of the issued and outstanding equity interests of Vapor Power International, LLC and its affiliates (“Vapor Power”), a leading provider of high-quality industrial process heating solutions, including electric, electrode and gas fired boilers. The acquisition was consummated on December 29, 2023 (the "Vapor Power Acquisition Date") and the seller was Stone Pointe, LLC. We have integrated Vapor Power into our United States and Latin America ("US-LAM") reportable segment. Vapor Power contributed $52,186 and $10,931 in sales and $4,456 and $698 in net income to our consolidated operating results in fiscal 2025 and 2024, respectively.
The total purchase price for Vapor Power was $107,523, inclusive of cash acquired of $7,051, for a net closing purchase price of $100,472. The total purchase price is based on customary adjustments for cash acquired, preliminary working capital adjustments, outstanding indebtedness, and transaction expenses. Approximately $5,043 was paid to extinguish Vapor Power indebtedness present just before the acquisition, which we did not legally assume or acquire. During fiscal 2025, we adjusted the preliminary purchase price allocation by $1,566 for customary working capital adjustments for a total purchase price of $105,957. The Vapor Power Acquisition was funded with cash on hand, borrowings under our existing revolving credit facility, and an increased term loan, which was amended on December 29, 2023 in connection with the acquisition.
Acquisition Costs
In accordance with GAAP, costs to complete an acquisition are expensed as incurred. Total acquisition costs recognized in the Vapor Power Acquisition were approximately $1,766, primarily in fiscal 2024. These fees represent legal, advisory, and other professional fees paid by the Company to complete the acquisition and are reflected in "Selling, general and administrative expenses" in our consolidated statement of operations and comprehensive income.
Purchase Price Allocation
We have accounted for the Vapor Power Acquisition using acquisition accounting. We used primarily Level 2 and 3 inputs to allocate the purchase price to the major categories of assets and liabilities shown below. For valuing the customer-related intangible assets, we used a common income-based approach called the multi-period excess earnings method; for the marketing-related and developed technology intangible assets, we used a relief-from-royalty method. The carrying values of inventories and property, plant, and equipment, and leases were adjusted to fair value, while the carrying value of any other assets and liabilities acquired approximated the respective fair value at time of closing.
The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, is based upon preliminary information and was subject to measurement period adjustments. The measurement period for the Vapor Power acquisition is now closed.
(1) Included in the customer relationships intangible assets is $4,407 related to customer backlog with an estimated useful life of 2 years.
Unaudited Pro Forma Financial Information
The following unaudited pro forma results of operations assume that both acquisitions mentioned above occurred at the beginning of the periods presented. These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if both of our recent acquisitions had occurred at the beginning of the periods presented, nor are they indicative of future results of operations. The pro forma results presented below are adjusted for the removal of transaction related costs of $355, $6,346, and zero in the fiscal years ended March 31, 2025, 2024, and 2023, respectively.
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