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Etratech Acquisition | 9 Months Ended
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Sep. 30, 2018
Business Combinations [Abstract] |
Etratech Acquisition | Note 3 – 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 $12,070 and $42,459 in product revenues and $2,529 and $2,103 in net losses for the three- and nine-month periods ended September 30, 2018, respectively. Purchase Price Allocation The purchase price of $65,009, net of cash acquired of $670, has been allocated to the values of assets acquired and liabilities assumed as of November 1, 2017. The purchase price allocation was finalized March 31, 2018. The purchase price 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 |  |  | 14,881 |
Assumed liabilities |  |  | (9,642 | )
Net assets acquired |  |  | 65,009 |
Cash acquired |  |  | 670 |
Purchase price |  | $ | 65,679 |
The gross contractual amount due of accounts receivable is $12,654, all of which was subsequently collected. Note 3 – Etratech Acquisition – Continued 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 is as follows:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2017 |  |  | 2017 |
Product revenues |  | $ | 250,369 |  |  | $ | 769,845 |
Net income |  | $ | 6,411 |  |  | $ | 41,257 |
Basic earnings per share |  | $ | 0.17 |  |  | $ | 1.12 |
Diluted earnings per share |  | $ | 0.17 |  |  | $ | 1.12 |
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 $14,881 arising from the acquisition. The acquired goodwill represents intangible assets that do not qualify for separate recognition. Approximately $8,787 of the goodwill recognized will not be deductible for income tax purposes. 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 (balances are lower as of September 30, 2018 than as of November 1, 2017, the acquisition date, due to fluctuations in foreign currency exchange rates totaling $464):
|  | September 30, 2018
|  | Gross Value |  |  | Accumulated Amortization |  |  | Net Value |  |  | Useful Life
Customer relationships |  | $ | 24,424 |  |  | $ | 1,909 |  |  | $ | 22,515 |  |  | 8 -12 yrs
Technology |  |  | 8,474 |  |  |  | 1,501 |  |  |  | 6,973 |  |  | 5 -6 yrs
Total |  | $ | 32,898 |  |  | $ | 3,410 |  |  | $ | 29,488 |  |  |
Amortization expenses of $943 and $2,790 during the three- and nine-month periods ended September 30, 2018, respectively, were recognized in our consolidated condensed statement of income as follows:
|  | Three Months Ended September 30, 2018 |  |  | Nine Months Ended September 30, 2018 |
Product revenues |  | $ | 528 |  |  | $ | 1,562 |
Cost of sales |  |  | 415 |  |  |  | 1,228 |
Note 3 – Etratech Acquisition – Continued Amortization expense for the prospective five years is expected to be as follows:
October 1, 2018 through December 31, 2018 |  | $ | 938 |
2019 |  | $ | 3,753 |
2020 |  | $ | 3,753 |
2021 |  | $ | 3,691 |
2022 |  | $ | 3,264 |
2023 |  | $ | 2,590 |
Property, Plant & Equipment Property and equipment consist of the following:
Asset category |  | Useful life |  | Amount |
Leasehold 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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