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ACQUISITIONS | 9 Months Ended
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Sep. 30, 2014
ACQUISITIONS [Abstract] |
ACQUISITIONS | 3. ACQUISITIONS 2014 Acquisitions: On June 19, 2014, the Company completed its acquisition of Power Solutions for $110.0 million, net of cash acquired. Power Solutions is a leading provider of high-efficiency and high-density power conversion products for server, storage and networking equipment, industrial applications and power systems. Power Solutions offers a premier line of standard, modified-standard and custom designed AC/DC, DC/DC and other specific power conversion products for a variety of technologies in data centers, telecommunications and industrial applications. The acquisition of Power Solutions brings a complementary, industry-leading power product portfolio to Bel's existing line of power products, expands our current customer base in the areas of server, storage and networking equipment and adds industrial and additional transportation applications to the Company's product offering. On July 25, 2014, the Company completed its acquisition of the U.S. and U.K. entities of the Emerson Network Power Connectivity Solutions business ("CS") from Emerson Electric Co. with a payment, net of cash acquired and including a working capital adjustment, of $90.7 million. On August 29, 2014, an additional payment of $9 million was made in connection with the closing of the China portion of the transaction. CS is a leading provider of high‑performance RF/Microwave and Harsh Environment Optical Connectors and Assemblies for military, aerospace, wireless communications, data communications, broadcast and industrial applications. CS is headquartered in Bannockburn, Illinois, and has manufacturing facilities in North America, the U.K. and China. CS will become part of Bel's Connectivity Solutions product group under the Cinch Connector business. Management believes the acquisition of CS will enable the Company to further expand into the aerospace and military markets where long-term product reliability resulting from highly engineered solutions is critical. The addition of the CS Stratos brand with our Fibreco/Gigacom Interconnect products will also give the Company a solid position in the expanded beam fiber optic market place. The CS group will also significantly expand the Company's existing copper‑based product offerings with the addition of RF/Microwave components and assemblies. During the three and nine months ended September 30, 2014, the Company incurred $3.8 million and $5.3 million, respectively, of acquisition-related costs associated with the 2014 Acquisitions. These costs are included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2014. While the initial accounting related to the acquisitions of Power Solutions and Connectivity Solutions is not complete as of the filing date of this Quarterly Report on Form 10-Q, the following table depicts the Company's current estimate of the respective acquisition date fair values of the consideration paid and identifiable net assets acquired (in thousands):
|  | Power Solutions |  |  |  | Connectivity Solutions |  |  |  | 2014 Acquisitions |
|  |  |  |  | Measurement |  |  | June 19, |  |  |  |  |  |  |  | Acquisition-Date |
|  | June 19, |  |  | Period |  |  | 2014 |  |  |  | July 25/August 29, |  |  |  | Fair Values |
|  | 2014 |  |  | Adjustments |  |  | (As adjusted) |  |  |  | 2014* |  |  |  | (As adjusted) |
Cash |  | $ | 20,913 |  |  | $ | - |  |  | $ | 20,913 |  |  |  | $ | 6,544 |  |  |  | $ | 27,457 |
Accounts receivable |  |  | 29,388 |  |  |  | 1 |  |  |  | 29,389 |  |  |  |  | 9,413 |  |  |  |  | 38,802 |
Inventories |  |  | 33,156 |  |  |  | 3,273 |  |  |  | 36,429 |  | (a) |  |  | 17,601 |  | (a) |  |  | 54,030 |
Other current assets |  |  | 5,387 |  |  |  | 1,688 |  |  |  | 7,075 |  |  |  |  | 2,634 |  |  |  |  | 9,709 |
Property, plant and equipment |  |  | 28,176 |  |  |  | - |  |  |  | 28,176 |  | (b) |  |  | 10,440 |  | (b) |  |  | 38,616 |
Intangible assets |  |  | 21,188 |  |  |  | (9,153 | ) |  |  | 12,035 |  | (c) |  |  | 46,505 |  | (c) |  |  | 58,540 |
Other assets |  |  | 536 |  |  |  | 18,212 |  |  |  | 18,748 |  | (d) |  |  | 2,684 |  |  |  |  | 21,432 |
Total identifiable assets |  |  | 138,744 |  |  |  | 14,021 |  |  |  | 152,765 |  |  |  |  | 95,821 |  |  |  |  | 248,586 |
Accounts payable |  |  | (26,180 | ) |  |  | - |  |  |  | (26,180 | ) |  |  |  | (10,682 | ) |  |  |  | (36,862 | )
Accrued expenses |  |  | (20,290 | ) |  |  | (4,505 | ) |  |  | (24,795 | ) | (d) |  |  | (4,934 | ) |  |  |  | (29,729 | )
Other current liabilities |  |  | 223 |  |  |  | - |  |  |  | 223 |  |  |  |  | (57 | ) |  |  |  | 166 |
Noncurrent liabilities |  |  | 761 |  |  |  | (39,686 | ) |  |  | (38,925 | ) | (d) |  |  | (21,195 | ) |  |  |  | (60,120 | )
Total liabilities assumed |  |  | (45,486 | ) |  |  | (44,191 | ) |  |  | (89,677 | ) |  |  |  | (36,868 | ) |  |  |  | (126,545 | )
Net identifiable assets acquired |  |  | 93,258 |  |  |  | (30,170 | ) |  |  | 63,088 |  |  |  |  | 58,953 |  |  |  |  | 122,041 |
Goodwill |  |  | 37,534 |  |  |  | 30,170 |  |  |  | 67,704 |  | (e) |  |  | 44,248 |  | (e) |  |  | 111,952 |
Net assets acquired |  | $ | 130,792 |  |  | $ | - |  |  | $ | 130,792 |  |  |  | $ | 103,201 |  |  |  | $ | 233,993 |
Cash paid |  | $ | 130,792 |  |  | $ | - |  |  | $ | 130,792 |  |  |  | $ | 103,201 |  |  |  | $ | 233,993 |
Assumption of liability |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  | - |  |  |  |  | - |
Fair value of consideration |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
transferred |  |  | 130,792 |  |  |  | - |  |  |  | 130,792 |  |  |  |  | 103,201 |  |  |  |  | 233,993 |
Deferred consideration |  |  | - |  |  |  | - |  |  |  | - |  |  |  |  | - |  |  |  |  | - |
Total consideration paid |  | $ | 130,792 |  |  | $ | - |  |  | $ | 130,792 |  |  |  | $ | 103,201 |  |  |  | $ | 233,993 |
* The Company acquired the U.S. and U.K. entities of Connectivity Solutions on July 25, 2014 and the China entity of Connectivity Solutions on August 29, 2014. These values represent the estimated fair values as of the respective acquisition date.
(a) | The inventory amounts noted above for both Power Solutions and Connectivity Solutions include preliminary adjustments to acquisition-date fair value.
(b) | The appraisals related to machinery and equipment acquired were still in progress as of this filing date; however, the amount noted above for Connectivity Solutions includes preliminary adjustments to acquisition-date fair value. The amounts noted above for Power Solutions property, plant and equipment only include the carrying value of those assets on Power Solutions' balance sheet as of the acquisition date.
(c) | The Company has identified certain intangible assets related to the Power Solutions acquisition, including trademarks and trade names, developed technology and potential in-process research and development, license agreements, non-compete agreements, an investment in a 49%-owned joint venture and customer relationships, which are being valued by a third-party appraiser. These appraisals were not complete as of the date of this filing. The Company has also identified certain intangible assets related to the Connectivity Solutions acquisition, including trademarks, developed technology and customer relationships, which are being valued by a third-party appraiser. While these appraisals were still in progress as of the date of this filing, preliminary estimated adjustments to fair value have been reflected in the table above.
(d) | The Company recorded measurement period adjustments related to estimated uncertain tax provisions and other tax liabilities, including an indemnification asset related to certain liabilities. While these estimates were still in progress as of the date of this filing, preliminary estimated adjustments to these liabilities have been reflected in the table above.
(e) | The amount of goodwill is provisional as of the filing date, as the fair value determination of inventory acquired, and appraisals related to property, plant and equipment, various intangible assets and certain liabilities such as lease liabilities are still underway. As the final amount of goodwill has not yet been determined or allocated by segment, the Company is unable to determine at this time the portion of goodwill, if any, that will be deductible for tax purposes.
The preliminary fair value of identifiable intangible assets related to the 2014 Acquired Companies is shown in the table below (dollars in thousands). For those intangible assets with finite lives, the acquisition-date fair values will be amortized over their respective estimated future lives utilizing the straight-line method.
| Weighted-Average Life |  | Acquisition-Date Fair Value |
Trademarks | Indefinite |  | $ | 7,115 |
Technology | 20 years |  |  | 20,818 |
Customer relationships | 15 years |  |  | 30,607 |
Total identifiable intangible assets acquired |  |  | $ | 58,540 |
The results of operations of the 2014 Acquired Companies have been included in the Company's consolidated financial statements for the period subsequent to their respective acquisition dates. During the three and nine months ended September 30, 2014, the 2014 Acquired Companies contributed revenue of $63.1 million and $70.3 million, respectively, and net loss of approximately $0.8 million and $1.6 million, respectively, to the Company's consolidated financial results. The following unaudited pro forma information presents a summary of the combined results of operations of the Company and the aggregate results of TRP, Array, Power Solutions and Connectivity Solutions for the periods presented as if the 2013 Acquisitions had occurred on January 1, 2012 and the 2014 Acquisitions had occurred on January 1, 2013, along with certain pro forma adjustments. These pro forma adjustments give effect to the amortization of certain definite-lived intangible assets, adjusted depreciation based upon estimated fair value of assets acquired, interest expense and amortization of deferred financing costs related to the financing of the business combinations, and related tax effects. The 2014 unaudited pro forma net earnings for the three and nine months ended September 30, 2014 were adjusted to exclude $3.9 million and $5.4 million ($2.4 million and $3.3 million after tax), respectively, of non-recurring expenses which were incurred in connection with the 2013 and 2014 Acquisitions. The 2013 unaudited pro forma net earnings were adjusted to include these charges in addition to an estimated non-recurring expense related to a fair value adjustment to acquisition-date inventory of $4.6 million ($4.4 million after tax) during each of the three and nine months ended September 30, 2013, respectively. The 2013 results reflected below include merger-related charges incurred by Power Solutions in connection with its acquisition by ABB in July 2013. The pro forma results do not reflect the realization of any potential cost savings, or any related integration costs. Certain cost savings may result from these acquisitions; however, there can be no assurance that these cost savings will be achieved. The unaudited pro forma results are presented for illustrative purposes only and are not necessarily indicative of the results that would have actually been obtained if the acquisitions had occurred on the assumed dates, nor is the pro forma data intended to be a projection of results that may be obtained in the future (in thousands):
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Revenue |  | $ | 163,040 |  |  | $ | 185,091 |  |  | $ | 480,482 |  |  | $ | 533,605 |
Net earnings |  |  | 8,417 |  |  |  | (28,213 | ) |  |  | 6,388 |  |  |  | (39,714 | )
Earnings per Class A common share - basic and diluted |  |  | 0.68 |  |  |  | (2.38 | ) |  |  | 0.51 |  |  |  | (3.36 | )
Earnings per Class B common share - basic and diluted |  |  | 0.72 |  |  |  | (2.50 | ) |  |  | 0.56 |  |  |  | (3.51 | )
2013 Acquisitions: On March 29, 2013, the Company completed its acquisition of TRP for $21.0 million, net of cash acquired. The Company's purchase of TRP consisted of the integrated connector module ("ICM") family of products, including RJ45, 10/100 Gigabit, 10G, PoE/PoE+, MRJ21 and RJ.5, a line of modules for smart-grid applications, and discrete magnetics. On August 20, 2013, the Company completed its acquisition of Array, a manufacturer of aerospace and mil-spec connector products based in Miami, Florida, for $10.0 million in cash. The acquisition of Array expands the Company's portfolio of connector products that can be offered to the combined customer base, and provides an opportunity to sell other products that Bel manufactures to Array's customers. Array has become part of Bel's Cinch Connector business. During the three and nine months ended September 30, 2014, the Company incurred less than $0.1 million and $0.1 million, respectively, of acquisition-related costs associated with the 2012 and 2013 Acquisitions. During the three and nine months ended September 30, 2013, the Company incurred acquisition costs of $0.1 million and $0.8 million, respectively, related to the 2012 and 2013 Acquisitions. These costs are included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2014 and 2013. The purchase price allocations for TRP and Array were finalized during the first quarter of 2014. The following table depicts the finalized respective acquisition date fair values of the consideration paid and identifiable net assets acquired (in thousands):
|  | TRP |  |  | Array |  |  | 2013 Acquisitions |
|  |  |  |  | Measurement |  |  | March 29, |  |  |  |  |  | Measurement |  |  | August 20, |  |  | Acquisition-Date |
|  | March 29, |  |  | Period |  |  | 2013 |  |  | August 20, |  |  | Period |  |  | 2013 |  |  | Fair Values |
|  | 2013 |  |  | Adjustments |  |  | (As finalized) |  |  | 2013 |  |  | Adjustments |  |  | (As finalized) |  |  | (As finalized) |
Cash |  | $ | 8,388 |  |  | $ | - |  |  | $ | 8,388 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 8,388 |
Accounts receivable |  |  | 11,580 |  |  |  | (39 | ) |  |  | 11,541 |  |  |  | 994 |  |  |  | - |  |  |  | 994 |  |  |  | 12,535 |
Inventories |  |  | 6,258 |  |  |  | 1,097 |  |  |  | 7,355 |  |  |  | 2,588 |  |  |  | (1,595 | ) |  |  | 993 |  |  |  | 8,348 |
Other current assets |  |  | 1,953 |  |  |  | (334 | ) |  |  | 1,619 |  |  |  | 83 |  |  |  | 345 |  |  |  | 428 |  |  |  | 2,047 |
Property, plant and equipment |  |  | 4,693 |  |  |  | 1,097 |  |  |  | 5,790 |  |  |  | 2,285 |  |  |  | 1,225 |  |  |  | 3,510 |  |  |  | 9,300 |
Intangible assets |  |  | - |  |  |  | 6,110 |  |  |  | 6,110 |  |  |  | - |  |  |  | 1,470 |  |  |  | 1,470 |  |  |  | 7,580 |
Other assets |  |  | 1,151 |  |  |  | 198 |  |  |  | 1,349 |  |  |  | 84 |  |  |  | 1,663 |  |  |  | 1,747 |  |  |  | 3,096 |
Total identifiable assets |  |  | 34,023 |  |  |  | 8,129 |  |  |  | 42,152 |  |  |  | 6,034 |  |  |  | 3,108 |  |  |  | 9,142 |  |  |  | 51,294 |
Accounts payable |  |  | (8,565 | ) |  |  | 331 |  |  |  | (8,234 | ) |  |  | (677 | ) |  |  | 1 |  |  |  | (676 | ) |  |  | (8,910 | )
Accrued expenses |  |  | (4,003 | ) |  |  | (462 | ) |  |  | (4,465 | ) |  |  | (206 | ) |  |  | (79 | ) |  |  | (285 | ) |  |  | (4,750 | )
Other current liabilities |  |  | (25 | ) |  |  | (734 | ) |  |  | (759 | ) |  |  | (214 | ) |  |  | 214 |  |  |  | - |  |  |  | (759 | )
Noncurrent liabilities |  |  | - |  |  |  | (586 | ) |  |  | (586 | ) |  |  | (643 | ) |  |  | (1,105 | ) |  |  | (1,748 | ) |  |  | (2,334 | )
Total liabilities assumed |  |  | (12,593 | ) |  |  | (1,451 | ) |  |  | (14,044 | ) |  |  | (1,740 | ) |  |  | (969 | ) |  |  | (2,709 | ) |  |  | (16,753 | )
Net identifiable assets acquired |  |  | 21,430 |  |  |  | 6,678 |  |  |  | 28,108 |  |  |  | 4,294 |  |  |  | 2,139 |  |  |  | 6,433 |  |  |  | 34,541 |
Goodwill |  |  | 8,278 |  |  |  | (7,038 | ) |  |  | 1,240 |  |  |  | 5,666 |  |  |  | (2,094 | ) |  |  | 3,572 |  |  |  | 4,812 |
Net assets acquired |  | $ | 29,708 |  |  | $ | (360 | ) |  | $ | 29,348 |  |  | $ | 9,960 |  |  | $ | 45 |  |  | $ | 10,005 |  |  | $ | 39,353 |
Cash paid |  | $ | 22,400 |  |  | $ | 6,948 |  |  | $ | 29,348 |  |  | $ | 9,960 |  |  | $ | 45 |  |  | $ | 10,005 |  |  | $ | 39,353 |
Assumption of severance payment |  |  | 109 |  |  |  | (109 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Fair value of consideration |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
transferred |  |  | 22,509 |  |  |  | 6,839 |  |  |  | 29,348 |  |  |  | 9,960 |  |  |  | 45 |  |  |  | 10,005 |  |  |  | 39,353 |
Deferred consideration |  |  | 7,199 |  |  |  | (7,199 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total consideration paid |  | $ | 29,708 |  |  | $ | (360 | ) |  | $ | 29,348 |  |  | $ | 9,960 |  |  | $ | 45 |  |  | $ | 10,005 |  |  | $ | 39,353 |
The measurement period adjustments noted above primarily relate to adjustments to fair value based on the appraisals on inventory, property, plant and equipment, and intangible assets. In addition, various other asset and liability accounts had measurement period adjustments related to deferred taxes. The results of operations of the 2013 Acquired Companies have been included in the Company's consolidated financial statements for the period subsequent to their respective acquisition dates. During the three and nine months ended September 30, 2014, the 2013 Acquired Companies contributed revenue of $20.7 million and $58.3 million, respectively, and net earnings of $4.0 million and $8.9 million, respectively, to the Company's consolidated financial results. During the three and nine months ended September 30, 2013, the 2013 Acquired Companies contributed revenue of $26.4 million and $48.6 million, respectively, and net earnings of $4.2 million and $7.4 million, respectively, to the Company's consolidated financial results.

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