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Acquisitions | 12 Months Ended
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Dec. 31, 2014
Acquisitions [Abstract] |
Acquisitions |
2. | Acquisitions
2014 Acquisitions: On June 19, 2014, the Company completed its acquisition of Power Solutions for $109.9 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. On August 29, 2014, the China portion of the transaction closed. Collectively, the U.S., U.K. and China closings are referred to as the "CS Transaction". In connection with the CS Transaction, the Company paid a total of $98.8 million, net of cash acquired and including a working capital adjustment. 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 year ended December 31, 2014, the Company incurred $7.3 million of acquisition-related costs associated with the 2014 Acquisitions primarily for audit-related costs, investment banker fees and legal fees. These costs are included in selling, general and administrative expenses on the consolidated statements of operations. Fair Value Estimate of Assets Acquired and Liabilities Assumed With respect to the 2014 Acquisitions, we are continuing our review of our fair value estimate of assets acquired and liabilities assumed during the measurement period, which will conclude as soon as we receive the information we are seeking about facts and circumstances that existed as of the acquisition date, or learn that more information is not available. This measurement period will not exceed one year from the acquisition date. At the effective date of the acquisition, the assets acquired and liabilities assumed are generally required to be measured at fair value. Our fair value estimate of assets acquired and liabilities assumed is pending completion of several elements, including the finalization of an independent appraisal and valuations of fair value of the assets acquired and liabilities assumed and final review by our management. The primary areas that are not yet finalized relate to the tangible assets acquired and liabilities assumed, the valuation of property and equipment, the valuation of intangible assets acquired, legal reserves, favorable or unfavorable contracts, operating leases or commitments, contingent liabilities and income and non-income based taxes. Accordingly, there could be material adjustments to our consolidated financial statements, including changes to our depreciation and amortization expense related to the valuation of property and equipment and intangible assets acquired and their respective useful lives among other adjustments. The companies included in the 2014 Acquisitions are subject to legal and regulatory requirements, including but not limited to those related to environmental matters and taxation, in each of the jurisdictions in which they operate. We have conducted a preliminary assessment of the liabilities arising from these matters in each of these jurisdictions and have recognized provisional amounts in our initial accounting for the 2014 Acquisitions for all identified liabilities. However, we are continuing our review of these matters during the measurement period, and if new information obtained about facts and circumstances that existed at the acquisition date identifies adjustments to the liabilities initially recognized, as well as any additional liabilities that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized. The final determination of the assets acquired and liabilities assumed will be based on the established fair value of the assets acquired and the liabilities assumed as of the acquisition date. The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill. The final determination of the purchase price, fair values and resulting goodwill may differ significantly from what is reflected in these consolidated financial statements. The following table depicts the Company's current preliminary estimates of the respective acquisition date fair values of the consideration paid, identifiable net assets acquired and goodwill:
|  | Power Solutions |  |  |  | Connectivity Solutions |  |  |  | 2014 Acquisitions |
|  | June 19, |  |  |  | July 25/August 29, |  |  |  | Acquisition-Date |
|  | 2014 |  |  |  | 2014* |  |  |  | Fair Values |
|  | (As adjusted) |  |  |  | (As adjusted) |  |  |  | (As adjusted) |
Cash |  | $ | 20,912 |  |  |  | $ | 6,544 |  |  |  | $ | 27,456 |
Accounts receivable |  |  | 29,389 |  |  |  |  | 9,375 |  |  |  |  | 38,764 |
Inventories |  |  | 36,429 |  | (a) |  |  | 17,632 |  | (a) |  |  | 54,061 |
Other current assets |  |  | 7,350 |  |  |  |  | 2,615 |  |  |  |  | 9,965 |
Property, plant and equipment |  |  | 28,175 |  | (b) |  |  | 9,900 |  | (b) |  |  | 38,075 |
Intangible assets |  |  | 33,220 |  | (c) |  |  | 40,000 |  | (c) |  |  | 73,220 |
Other assets |  |  | 19,171 |  | (d) |  |  | 2,345 |  |  |  |  | 21,516 |
Total identifiable assets |  |  | 174,646 |  |  |  |  | 88,411 |  |  |  |  | 263,057 |
Accounts payable |  |  | (26,180 | ) |  |  |  | (10,682 | ) |  |  |  | (36,862 | )
Accrued expenses |  |  | (25,545 | ) | (e) |  |  | (5,307 | ) |  |  |  | (30,852 | )
Other current liabilities |  |  | 223 |  |  |  |  | (57 | ) |  |  |  | 166 |
Noncurrent liabilities |  |  | (42,062 | ) | (d)(e)(f) |  |  | (17,314 | ) |  |  |  | (59,376 | )
Total liabilities assumed |  |  | (93,564 | ) |  |  |  | (33,360 | ) |  |  |  | (126,924 | )
Net identifiable assets acquired |  |  | 81,082 |  |  |  |  | 55,051 |  |  |  |  | 136,133 |
Goodwill |  |  | 49,710 |  | (g) |  |  | 50,306 |  | (e) |  |  | 100,016 |
Net assets acquired |  | $ | 130,792 |  |  |  | $ | 105,357 |  |  |  | $ | 236,149 |
Cash paid |  | $ | 130,792 |  |  |  | $ | 105,357 |  |  |  | $ | 236,149 |
Assumption of liability |  |  | - |  |  |  |  | - |  |  |  |  | - |
Fair value of consideration |  |  |  |  |  |  |  |  |  |  |  |  |  |
transferred |  |  | 130,792 |  |  |  |  | 105,357 |  |  |  |  | 236,149 |
Deferred consideration |  |  | - |  |  |  |  | - |  |  |  |  | - |
Total consideration paid |  | $ | 130,792 |  |  |  | $ | 105,357 |  |  |  | $ | 236,149 |
* 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 dates.
(a) | The inventories noted include the following estimated net step-up in fair value:
|  | Estimated Net Step-Up in Fair Value |
Power Solutions |  | $ | 3,273 |
Connectivity Solutions |  |  | 2,651 |
2014 Acquisitions total |  | $ | 5,924 |
(b) | The property, plant and equipment noted above for Connectivity Solutions includes a $4.3 million step-up based on estimated acquisition-date fair value. There was no step-up for property, plant and equipment for Power Solutions since the estimated acquisition-date fair value approximated the carrying value of those assets.
(c) | The preliminary fair value of identifiable intangible assets related to the 2014 Acquired Companies is shown in the table below. 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.
|  | Acquisition-date Fair Values |  |
|  | Power Solutions |  |  | Connectivity Solutions |  |  | 2014 Acquisitions |  | Weighted-Average Life
Trademarks |  | $ | 890 |  |  | $ | 7,500 |  |  | $ | 8,390 |  | Indefinite
Customer relationships |  |  | 12,200 |  |  |  | 22,000 |  |  |  | 34,200 |  | 16 years
Technology |  |  | 7,800 |  |  |  | 9,000 |  |  |  | 16,800 |  | 14 years
License agreements |  |  | 11,800 |  |  |  | - |  |  |  | 11,800 |  | 8 years
Non-compete agreements |  |  | 530 |  |  |  | 1,500 |  |  |  | 2,030 |  | 3 years
Total intangible assets acquired |  | $ | 33,220 |  |  | $ | 40,000 |  |  | $ | 73,220 |  |
(d) | These amounts include a $12.0 million noncurrent liability and offsetting indemnification asset related to an ongoing claim by the Arezzo Revenue Agency in Italy concerning certain tax matters related to what was then Power-One Asia Pacific Electronics Shenzhen Co. Ltd. (now Bel Power Solutions Asia Pacific Electronics Shenzhen Co. Ltd.) for the years 2004 through 2006, as further described in Note 16.
(e) | The Company acquired a liability for uncertain tax positions related to various tax matters for the years 2007 through 2013. While resolution of these tax matters are being actively pursued with the applicable taxing authority, these issues remained unresolved as of the filing date of this Annual Report on Form 10-K.
(f) | Deferred taxes have been established on the previously-mentioned step-ups for inventories, property, plant and equipment and intangible assets.
(g) | The amount of goodwill is provisional as of the filing date, as the fair value determination of inventories acquired, and appraisals related to property, plant and equipment, various intangible assets and certain liabilities such as lease liabilities is still under review. The portion of goodwill, if any, that will be deductible for tax purposes is yet to be determined.
In connection with its acquisition of Power Solutions, the Company acquired a 49% interest in a joint venture in the PRC. The Company provisionally assigned no value to this investment. See Note 18, Related Party Transactions, for additional information. 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 year ended December 31, 2014, the 2014 Acquired Companies contributed revenue of $134.3 million and an operating loss of approximately $1.9 million 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 year ended December 31, 2014 were adjusted to exclude $14.9 million ($9.8 million after tax) of non-recurring expenses, including audit, legal and other transaction fees, IT migration costs and employee-related 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 $5.9 million ($4.1 million after tax) during the year ended December 31, 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:
|  | Year Ended |
|  | December 31, |
|  | 2014 |  |  | 2013 |
Revenue |  | $ | 629,132 |  |  | $ | 710,937 |
Net earnings |  |  | 11,705 |  |  |  | (65,299 | )
Earnings per Class A common share - basic and diluted |  |  | 0.94 |  |  |  | (5.52 | )
Earnings per Class B common share - basic and diluted |  |  | 1.02 |  |  |  | (5.77 | )
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 years ended December 31, 2014, 2013 and 2012, the Company incurred $0.1 million, $0.9 million and $1.3 million, respectively, of combined acquisition-related costs associated with the 2012 and 2013 Acquisitions. These costs are included in selling, general and administrative expense in the accompanying consolidated statements of operations for the years ended December 31, 2014, 2013 and 2012. 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:
|  | TRP |  |  | Array |  |  | 2013 Acquisitions |
|  | March 29, |  |  | August 20, |  |  | Acquisition-Date |
|  | 2013 |  |  | 2013 |  |  | Fair Values |
|  | (As finalized) |  |  | (As finalized) |  |  | (As finalized) |
Cash |  | $ | 8,388 |  |  | $ | - |  |  | $ | 8,388 |
Accounts receivable |  |  | 11,541 |  |  |  | 994 |  |  |  | 12,535 |
Inventories |  |  | 7,355 |  |  |  | 993 |  |  |  | 8,348 |
Other current assets |  |  | 1,619 |  |  |  | 428 |  |  |  | 2,047 |
Property, plant and equipment |  |  | 5,790 |  |  |  | 3,510 |  |  |  | 9,300 |
Intangible assets |  |  | 6,110 |  |  |  | 1,470 |  |  |  | 7,580 |
Other assets |  |  | 1,349 |  |  |  | 1,747 |  |  |  | 3,096 |
Total identifiable assets |  |  | 42,152 |  |  |  | 9,142 |  |  |  | 51,294 |
Accounts payable |  |  | (8,234 | ) |  |  | (676 | ) |  |  | (8,910 | )
Accrued expenses |  |  | (4,465 | ) |  |  | (285 | ) |  |  | (4,750 | )
Other current liabilities |  |  | (759 | ) |  |  | - |  |  |  | (759 | )
Noncurrent liabilities |  |  | (586 | ) |  |  | (1,748 | ) |  |  | (2,334 | )
Total liabilities assumed |  |  | (14,044 | ) |  |  | (2,709 | ) |  |  | (16,753 | )
Net identifiable assets acquired |  |  | 28,108 |  |  |  | 6,433 |  |  |  | 34,541 |
Goodwill |  |  | 1,240 |  |  |  | 3,572 |  |  |  | 4,812 |
Net assets acquired |  | $ | 29,348 |  |  | $ | 10,005 |  |  | $ | 39,353 |
Fair value of consideration transferred |  | $ | 29,348 |  |  | $ | 10,005 |  |  | $ | 39,353 |
The measurement period adjustments primarily related 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 years ended December 31, 2014 and 2013, the 2013 Acquired Companies contributed revenue of $75.4 million and $68.6 million, respectively, and operating income of $12.7 million and $8.4 million, respectively, to the Company's consolidated financial results. 2012 Acquisitions: On March 9, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of GigaCom with a cash payment of $2.7 million (£1.7 million). GigaCom, located in Gothenburg, Sweden, is a supplier of expanded beam fiber optic technology. On July 31, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Fibreco with a cash payment, net of $2.7 million of cash acquired, of $13.7 million (£8.7 million). Fibreco, located in the United Kingdom, is a supplier of a broad range of expanded beam fiber optic components for use in military communications, outside broadcast and offshore exploration applications. Both GigaCom and Fibreco have become part of Bel's Cinch Connectivity Solutions business. On September 12, 2012, the Company completed its acquisition of 100% of the issued and outstanding capital stock of Powerbox, now known as Bel Power Europe, with a cash payment, net of $0.2 million of cash acquired, of $3.0 million and 30,000 restricted shares of the Company's Class B common stock with a grant date fair value of $0.6 million. Bel Power Europe, located near Milan, Italy, develops high-power AC-DC power conversion solutions targeted at the broadcasting market. The purchase accounting related to the 2012 Acquisitions was finalized within one year of the respective acquisition dates. The final purchase price allocation related to the 2012 Acquisitions is outlined in Note 2 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The contributions to revenue and operating income from the 2012 Acquisitions is detailed in Note 12 to the notes to consolidated financial statements.

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