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Acquisitions | 12 Months Ended
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Sep. 30, 2013
Acquisitions |
Acquisitions | 4. Acquisitions Truck Center Acquisition On June 1, 2011, the Company acquired the assets of Truckcenter.com, LLC. (TC) for approximately $15,989,000. The acquisition price included an upfront cash payment of $9,000,000 and an earn-out payment. Under the terms of the agreement, the earn-out is based on EBITDA earned by TC during the trailing 12 months ending August 31, 2012, and the revenue earned by TC during each of the two 12 month periods after the closing date of the acquisition through May 31, 2013. The Company estimated the fair value of the earn-out as of September 30, 2011 to be $6,989,000 out of a possible total earn out payment of $9,000,000. During 2012, based upon revised projections, the Company determined that the fair value of the earn-out was zero and reversed the liability of $6,989,000 with a corresponding reduction (credit) in the Acquisition costs line in the Consolidated Statement of Operations. No amounts were paid under the earn-out. Goodwill, which is deductible for tax purposes due to the asset purchase structure, was created as part of the acquisition as the Company acquired an experienced and knowledgeable workforce. The purchase consideration was allocated to acquired tangible assets, identifiable intangible assets, and liabilities assumed at fair value and goodwill as follows:
|  | Consideration Amount |
--- | --- | --- | ---
|  | (in thousands) |
Current assets |  | $ | 239 |
Goodwill |  |  | 14,167 |
Brand assets |  |  | 623 |
Intangible technology assets |  |  | 250 |
Covenants not to compete |  |  | 700 |
Property and equipment |  |  | 48 |
Current liabilities |  |  | (38 | )
Total consideration |  | $ | 15,989 |
Jacobs Trading Acquisition On October 1, 2011, LSI completed its acquisition of the assets of Jacobs Trading, LLC. The acquisition price included an upfront cash payment of $80.0 million, a seller subordinated 5% unsecured note of $40.0 million, which the Company paid in full in November 2012, the issuance of 900,171 shares of restricted stock (valued at $24.5 million by applying a 15% discount to the Company's closing share price on September 30, 2011) and an earn-out payment. The stock consideration contained a restriction that it is not freely tradable for six months following the acquisition date and the Company used the put option analysis method to fair value the stock. Under the terms of the agreement, the earn-out is based on EBITDA earned by Jacobs during the trailing 12 months ending December 31, 2012 and 2013. The Company's estimate of the fair value of the earn-out as of October 1, 2011 was $8.3 million out of a possible total earn out payment of $30.0 million. During 2012, based on the performance of the business and revised projections, the Company accrued an additional $6.2 million for the earn-out. As of September 30, 2012, the fair value of the earn-out was $14.5 million. During the three months ended December 31, 2012, based on the performance of the business and revised projections, the Company accrued an additional $5.1 million and paid out $17.4 million. During the three months ended March 31, 2013, the Company paid out the remaining $2.2 million earn-out out under the 2012 target. Based on the performance of the business and projections in comparison to the elevated earn-out targets for calendar year 2013 relative to the targets for calendar year 2012, the Company believes the fair value of the calendar year 2013 earn-out as of September 30, 2013 is zero. The total purchase price is allocated to Jacobs' net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of October 1, 2011, the effective date of the acquisition of Jacobs. The purchase price was allocated as follows:
|  | Consideration Amount |
--- | --- | --- | ---
|  | (in thousands) |
Accounts receivable |  | $ | 4,710 |
Inventory |  |  | 6,059 |
Prepaid expenses |  |  | 120 |
Goodwill |  |  | 110,226 |
Vendor contract intangible asset |  |  | 33,300 |
Covenants not to compete |  |  | 2,400 |
Property and equipment |  |  | 847 |
Accounts payable |  |  | (1,837 | )
Accrued liabilities |  |  | (3,101 | )
Total consideration |  | $ | 152,724 |
Goodwill, which is deductible for tax purposes due to the asset purchase structure, was created as part of the acquisition as the Company acquired an experienced and knowledgeable workforce. GoIndustry Acquisition In July 2012, the Company completed its purchase of GoIndustry, for 73 pence per share ($11.6 million). GoIndustry is a global provider of surplus asset management, auction and valuation services operating in over 25 countries in North America, Europe and Asia. The acquisition expands the Company's client roster with leading global manufacturers across the aerospace, consumer packaged goods, electronics, pharmaceutical, technology and transportation industry verticals. The total purchase price is allocated to GoIndustry's net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of July 1, 2012, the effective date of the acquisition of GoIndustry. Based on management's estimate of the fair value of tangible and intangible assets acquired and liabilities assumed, the purchase price was allocated as follows:
|  | Consideration Amount |
--- | --- | --- | ---
|  | (in thousands) |
Cash |  | $ | 10,091 |
Accounts receivable |  |  | 3,987 |
Inventory |  |  | 297 |
Prepaid expenses and deposits |  |  | 1,075 |
Goodwill |  |  | 34,152 |
Brand and technology intangible assets |  |  | 4,877 |
Property and equipment |  |  | 354 |
Accounts payable |  |  | (5,788 | )
Accrued liabilities |  |  | (11,087 | )
Pension liability |  |  | (6,468 | )
Due to customers |  |  | (19,017 | )
Other liabilities |  |  | (846 | )
Total consideration |  | $ | 11,627 |
Goodwill was created as part of the acquisition as the Company acquired an experienced and knowledgeable workforce, of which approximately $5.5 million of the goodwill and all of the intangible assets are expected to be tax deductible, as a result of the structure of the transaction. The amount of revenue included in the 2013 consolidated statement of operations related to GoIndustry was $38.6 million. National Electronic Service Association (NESA) On November 1, 2012, the Company acquired the assets and assumed liabilities of National Electronic Service Association (NESA) in an all cash transaction. The acquisition price included an upfront cash payment of approximately $18.3 million and an earn-out payment. Under the terms of the agreement, the earn-out is based on EBITDA earned by NESA during the 36-48 months after closing. EBITDA growth used in the calculation is capped at 20% of prior period. The Company's estimate for the total payout ranges from zero to a maximum $37.7 million. The Company's estimate of the fair value of the earn-out as of the date of acquisition was $18.0 million. As of September 30, 2013, the Company's best estimate of the fair value of the earn out is $18.3 million. NESA is a Canadian provider of returns management, refurbishment and reverse logistics services for high-value consumer products. NESA provides expertise and focused services to Fortune 1000 companies in the management of Consumer Electronics, Telecommunications, and Information Technology products. Under the acquisition method of accounting, the total estimated purchase price is allocated to NESA's net tangible and intangible assets acquired based on their estimated fair values as of November 1, 2012. Based on management's valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, the purchase price was allocated as follows:
|  | Consideration Amount |
--- | --- | --- | ---
|  | (in thousands) |
Cash |  | $ | 3,760 |
Goodwill |  |  | 27,009 |
Vendor contract intangible asset |  |  | 3,936 |
Covenants not to compete |  |  | 1,400 |
Other intangible asset |  |  | 225 |
Property and equipment |  |  | 234 |
Accrued liabilities |  |  | (204 | )
Total consideration |  | $ | 36,360 |
Goodwill was created as part of the acquisition as the Company acquired an experienced and knowledgeable workforce, 75% of which is expected to be tax deductible as a result of the asset purchase structure of the transaction.

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