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Global Thermoelectric Acquisition | 6 Months Ended
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Jun. 30, 2014
Global Thermoelectric Acquisition | Note 3 – Global Thermoelectric Acquisition GTE develops, manufactures and sells thermoelectric and non-thermoelectric systems and related products. The principal application for these technologies include natural gas well and pipeline protection systems and remote power generation for instrumentation, automation and telecommunication systems. Results of operations for GTE are included in the Company’s consolidated condensed financial statements beginning April 1, 2014. GTE contributed $8,174 in product revenues and an operating loss of $42 for the three and six month periods ended June 30, 2014. Purchase Price Allocation The purchase price of approximately $34,163, net of cash acquired of $3,061, has been allocated to the values of assets acquired and liabilities assumed as of April 1, 2014. The allocation of the purchase price is preliminary. The Company is in the process of obtaining additional information required to finalize the valuation. An appraisal will be completed to assist management in determining the fair value of acquired assets and assumed liabilities, including identifiable intangible assets. The final purchase price allocation may be materially different than the preliminary allocation recorded. The purchase price allocation is expected to be finalized by December 31, 2014. The preliminary allocation as of April 1, 2014 was as follows:
Accounts receivable |  | $ | 10,200 |
Inventory |  |  | 6,487 |
Deferred income tax assets, net |  |  | 3,499 |
Order backlog |  |  | 815 |
Prepaid expenses and other assets |  |  | 258 |
Property and equipment |  |  | 716 |
Customer relationships |  |  | 5,524 |
Technology |  |  | 2,807 |
Trade name |  |  | 725 |
Goodwill |  |  | 6,601 |
Assumed liabilities |  |  | (6,530 | )
Net assets acquired |  |  | 31,102 |
Cash acquired |  |  | 3,061 |
Purchase price |  | $ | 34,163 |
The gross contractual amount due of accounts receivable is $10,306 of which $106 is expected to be uncollectible. Note 3 – Global Thermoelectric Acquisition – Continued Supplemental Pro Forma Information The unaudited pro forma combined historical results for the amounts of GTE’s revenue and earnings that would have been included in the Company’s consolidated condensed statements of income had the acquisition date been January 1, 2014 or January 1, 2013 are as follows:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2013 |  |  | 2014 |  |  | 2013 |
Product revenues |  | $ | 170,846 |  |  | $ | 413,131 |  |  | $ | 325,084 |
Net income |  |  | 4,533 |  |  |  | 34,880 |  |  |  | 11,824 |
The pro forma information includes adjustments for the effect of the amortization of intangible assets recognized in the acquisition. This pro forma information is not necessarily indicative of future operating results. Goodwill We recorded goodwill of approximately $6,601 arising from the acquisition. It is estimated that none of the goodwill recognized will be deductible for income tax purposes. Intangible Assets In conjunction with the acquisition, intangible assets of $9,871 were recorded. The Company’s estimate of the fair value of these assets at the time of the acquisition is preliminary and will be determined with the assistance of an independent third-party valuation firm. As part of the estimated valuation, an estimated useful life for the assets was determined. Intangible assets, net consisted of the following (balances are higher as of June 30, 2014 than as of April 1, 2014, the acquisition date, due to fluctuations in foreign currency exchange rates totaling $362):
|  | June 30, 2014
|  | Gross Value |  |  | Accumulated Amortization |  |  | Net Value |  |  | Useful Life
Customer relationships |  | $ | 5,727 |  |  | $ | (119 | ) |  | $ | 5,608 |  |  | 12 yrs
Order backlog |  |  | 845 |  |  |  | (422 | ) |  |  | 423 |  |  | 0.5 yrs
Technology |  |  | 2,910 |  |  |  | (73 | ) |  |  | 2,837 |  |  | 10 yrs
Trade name |  |  | 751 |  |  |  | (54 | ) |  |  | 697 |  |  | 3.5 yrs
Total |  | $ | 10,233 |  |  | $ | (668 | ) |  | $ | 9,565 |  |  |
Amortization expense of $649 for the three and six months ended June 30, 2014 respectively, was recorded as follows:
|  | Three and Six Months Ended June 30, 2014 |
Product revenues |  | $ | (116 | )
Selling, general and administrative expense |  |  | 533 |
Note 3 – Global Thermoelectric Acquisition – Continued Amortization expense for the prospective five years is estimated to be as follows:
July 1, 2014 through December 31, 2014 |  | $ | 914 |
2015 |  |  | 983 |
2016 |  |  | 983 |
2017 |  |  | 929 |
2018 |  |  | 768 |
Property, Plant & Equipment Property and equipment consist of the following:
Asset category |  | Useful life |  | Amount |
Land |  | Indefinite |  | $ | 15 |
Buildings |  | 20 yrs |  |  | 81 |
Leasehold improvements |  | 5-7 yrs |  |  | 28 |
Machinery and equipment |  | 2-5 yrs |  |  | 423 |
Computer hardware and software |  | 3-5 yrs |  |  | 169 |
|  |  |  | $ | 716 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e6996-128479 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4922-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4934-128472 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4926-128472 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e7000-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e6927-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e7008-128479 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4845-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463 + Details
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