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Acquisition
 9 Months Ended
Sep. 30, 2012
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]

(3) Acquisition

 

PST Eletrônica Ltda.

 

As of December 31, 2011, the Company acquired a controlling interest in PST Eletrônica Ltda. (“PST”), by increasing its interest from 50% to 74%. Prior to the acquisition of the additional interest, the PST joint venture was accounted for under the equity method of accounting. On the date of acquisition of controlling interest, PST became a consolidated subsidiary of the Company. PST’s results of operations were consolidated and included in the Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2012. For the three and nine months ended September 30, 2011, PST’s results of operations and cash flows were included in the Company’s condensed consolidated statements of operations and cash flows as equity in earnings of investees. PST’s financial position is included in the condensed consolidated balance sheet at both September 30, 2012 and December 31, 2011. Effective December 31, 2011, PST became a new reportable segment of the Company.

 

PST specializes in the design, manufacture and sale of electronic vehicle security alarms, convenience accessories, vehicle tracking devices and monitoring services and in-vehicle audio and video devices. PST sells its products through the aftermarket distribution channel, to factory authorized dealer installers, also referred to as original equipment services, direct to Original Equipment Manufacturers (“OEMs”) and through mass merchandisers in South America.

 

As a result of obtaining a controlling interest in PST, the Company’s previously held equity interest in PST of 50% was remeasured to an acquisition date fair value of $104,118. The Company recognized a one-time non-cash pre-tax gain on previously held equity interest of $65,372 as a result of the remeasurment in the fourth quarter of 2011.

 

The acquisition date fair value of the remaining 26% noncontrolling interest in PST was measured at $48,727 at December 31, 2011. The noncontrolling interest was recorded as a component of total shareholder’s equity on the condensed consolidated balance sheet at December 31, 2011. Noncontrolling interest in PST decreased to $43,834 at September 30, 2012 due to changes in foreign currency translation of approximately $3,647 and its proportionate share of its net loss of $1,246 for the first nine months of 2012.

 

The acquisition date fair value of the total consideration transferred consisted of the following:

 

Cash   $ 29,669  
Common Shares (1,940,413 shares)     15,310  
Fair value of consideration transferred     44,979  
Fair value of the Company's previously held equity interest     104,118  
Fair value of noncontrolling interest     48,727  
Total fair value of PST   $ 197,824  

 

Of the $44,979 consideration transferred for the additional 24% interest, $29,976 ($19,779 of cash and $10,197 of the fair value of 1,293,609 Company Common Shares) was transferred on January 5, 2012, in accordance with the terms of the purchase agreement. This amount was recorded as a liability owed to the selling shareholders and was included as a component of accrued expenses and other current liabilities on the condensed consolidated balance sheet as of December 31, 2011.

 

The fair value of the Common Shares transferred was based on the closing market price of the Company’s Common Shares on the acquisition date, less a discount for a lack of short-term marketability as the Common Shares transferred were issued through a private placement.

 

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. These values represent a revision to the initial allocation of the purchase price subject to finalization of post-closing procedures. The purchase price allocation remains preliminary pending management’s completion of the evaluation and measurement of acquired income tax attributes and contingencies.

  

As of December 31, 2011 (controlling interest acquired date)

 

    Initially
Reported		     Interim
Revisions		  
             
Cash   $ 2,137     $ 2,137  
Accounts receivable     48,993       48,993  
Inventory     56,204       56,204  
Prepaids and other current assets     9,547       9,257  
Property, plant and equipment     42,389       42,482  
Identifiable intangible assets     102,090       102,090  
Other long-term assets     1,479       1,479  
Total identifiable assets acquired     262,839       262,642  
                 
Accounts payable     9,825       9,825  
Other current liabilities     25,801       25,917  
Debt     54,068       54,068  
Deferred tax liabilities     39,392       39,603  
Total liabilities assumed     129,086       129,413  
Net identifiable assets acquired     133,753       133,229  
Goodwill     64,071       64,595  
Net assets acquired   $ 197,824     $ 197,824  

 

During the first nine months of 2012 goodwill was increased by $524, the net result of measurement period purchase accounting adjustments to the fair value of assets acquired and liabilities assumed primarily related to changes to income tax liabilities. The Company did not retrospectively adjust the provisional assets and liabilities previously recorded in the Company’s Form 10-K as of December 31, 2011 for measurement period adjustments as they have been deemed immaterial because they do not impact reported operations or cash flows.

 

Goodwill is calculated as the excess of the fair value of consideration transferred over the fair market value of the identifiable assets and liabilities and represents the future economic benefits arising from other assets acquired that could not be separately recognized. The goodwill is reported in the Company’s PST segment and is not deductible for income tax purposes.

 

Of the $102,090 of acquired identifiable intangible assets, $51,818 was assigned to customer lists with a 15 year useful life; $31,400 was assigned to trademarks with a 20 year useful life; and $18,872 was assigned to technology with a 17 year weighted average useful life. The fair value of the identifiable intangible assets was determined using an income approach.

 

The following unaudited pro forma information reflects the Company’s consolidated results of operations as if the acquisition had occurred on January 1, 2011. The unaudited pro forma information is not necessarily indicative of the results of operations that the Company would have reported had the transaction actually occurred at the beginning of these periods, nor is it necessarily indicative of future results.

 

    Three months ended     Nine months ended  
    September 30, 2011     September 30, 2011  
                 
Net sales   $ 261,784     $ 761,179  
Net income attributable to Stoneridge, Inc.   $ 4,625     $ 9,950  

 

The unaudited pro forma financial information presented in the table above has been adjusted to give effect to adjustments that are directly related to the business combination and factually supportable. These tax affected adjustments include, but are not limited to depreciation and amortization related to fair value adjustments to property, plant, and equipment, intangible assets and inventory.