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Etratech Acquisition | 12 Months Ended
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Dec. 31, 2017
Etratech Inc. |
Acquisition | Note 4 — Etratech Acquisition Etratech designs, develops, manufactures and sells electronic control modules and control systems to customers across a range of industries, including automotive, recreational vehicles and marine, HVAC systems and medical, amongst others. Each function is part of an integrated, customer-focused process designed to exceed customer expectations for product quality, reliability and cost. Etratech’s global manufacturing footprint will enable us to provide customers with scalable and flexible manufacturing solutions across a variety of application and geographies. Results of operations for Etratech are included in the Company’s consolidated condensed financial statements beginning November 1, 2017. Etratech contributed $8,398 in product revenues and a net loss of $510 for the year ended December 31, 2017. Note 4 – Etratech Acquisition (Continued) Purchase Price Allocation The purchase price of $64,994, net of cash acquired of $670, has been allocated to the values of assets acquired and liabilities assumed as of November 1, 2017. 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 by an independent third party valuation firm 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 March 31, 2018. The allocation as of November 1, 2017 was as follows:
Accounts receivable |  | $ | 12,654 |
Inventory |  |  | 7,014 |
Prepaid expenses and other assets |  |  | 535 |
Property and equipment |  |  | 6,205 |
Customer relationships |  |  | 24,774 |
Technology |  |  | 8,588 |
Goodwill |  |  | 14,866 |
Assumed liabilities |  |  | (9,642 | )
Net assets acquired |  |  | 64,994 |
Cash acquired |  |  | 670 |
Purchase price |  | $ | 65,664 |
The gross contractual amount due of accounts receivable is $12,654, all of which is expected to be collectible. Supplemental Pro Forma Information The unaudited pro forma combined historical results including the amounts of Etratech revenue and earnings that would have been included in the Company’s consolidated statements of income had the acquisition date been January 1, 2017 or January 1, 2016 are as follows:
|  | Twelve Months Ended December 31, |
|  | 2017 |  |  | 2016 |
Product revenues |  | $ | 1,032,273 |  |  | $ | 966,355 |
Net income |  | $ | 35,911 |  |  | $ | 77,577 |
Basic earnings per share |  | $ | 0.98 |  |  | $ | 2.13 |
Diluted earnings per share |  | $ | 0.98 |  |  | $ | 2.12 |
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 indicative of future operating results. Goodwill We recorded goodwill of approximately $14,866 arising from the acquisition. The acquired goodwill represents intangible assets that do not qualify for separate recognition. It is estimated that approximately $8,651 of the goodwill recognized will not be deductible for income tax purposes. Note 4 – Etratech Acquisition (Continued) Intangible Assets In conjunction with the acquisition, intangible assets of $33,362 were recorded. The Company’s estimate of the fair value of these assets at the time of the acquisition was 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:
|  | December 31, 2017
|  | Gross Value |  |  | Accumulated Amortization |  |  | Net Value |  |  | Useful Life
Customer relationships |  | $ | 24,774 |  |  | $ | 358 |  |  | $ | 24,416 |  |  | 8 -12 yrs
Technology |  |  | 8,588 |  |  |  | 277 |  |  |  | 8,311 |  |  | 5 -6 yrs
Total |  | $ | 33,362 |  |  | $ | 635 |  |  | $ | 32,727 |  |  |
Amortization expense of $635 for the period November 1, 2017 through December 31, 2017 was recorded as follows:
|  | Three Months Ended December 31, 2017 |  | Twelve Months Ended December 31, 2017 |
Product revenues |  | $ | 358 |  | $ | 358 |
Research and development expenses |  |  | 277 |  |  | 277 |
Amortization expense for the prospective five years is estimated to be as follows:
2018 |  | $ | 3,769 |
2019 |  | $ | 3,769 |
2020 |  | $ | 3,769 |
2021 |  | $ | 3,706 |
2022 |  | $ | 3,278 |
Property, Plant & Equipment Property and equipment consist of the following:
Asset category |  | Useful life |  | Amount |
Leashold improvements |  | 10 yrs |  | $ | 342 |
Machinery and equipment |  | 4-11 yrs |  |  | 5,248 |
Furniture and fittings |  | 4 yrs |  |  | 230 |
Motor vehicles |  | 3 yrs |  |  | 25 |
Computer hardware and software |  | 1 yrs |  |  | 360 |
|  |  |  | $ | 6,205 |

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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 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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