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Acquisition of Orlaco | 6 Months Ended
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Jun. 30, 2017
Acquisition of Orlaco [Abstract] |
Acquisition of Orlaco | (3) Acquisition of Orlaco ﻿ On January 31, 2017, Stoneridge B.V., an indirect wholly-owned subsidiary of Stoneridge, Inc., entered into and closed an agreement to acquire Orlaco. Orlaco designs, manufactures and sells a variety of camera-based vision systems, monitors and related electronic products primarily to the heavy off-road machinery, commercial vehicle, lifting crane and warehousing and logistics industries. Stoneridge and Orlaco jointly developed the MirrorEye mirror replacement system, which is a system solution to improve the safety and fuel economy of commercial vehicles. The MirrorEye system integrates Orlaco’s vision processing technology and Stoneridge’s driver information capabilities as well as the combined software capabilities of both companies. The acquisition of Orlaco enhances the Stoneridge’s Electronics segment global technical capabilities in vision systems and facilitates entry into new markets. The aggregate consideration for the Orlaco acquisition was €74,939 ($79,675), which included customary estimated adjustments to the purchase price. The Company paid €67,439 ($71,701) in cash, and €7,500 ($7,974) is held in an escrow account to secure the payment obligations of the seller under the terms of the purchase agreement. The purchase price is subject to certain customary adjustments set forth in the purchase agreement. The escrow amount will be transferred promptly following the completion of the escrow period. The Company may also be required pay up to an additional €7,500 as contingent consideration (“earn-out consideration”) if certain performance targets are achieved during the first two years. ﻿ The acquisition date fair value of the total consideration transferred consisted of the following: ﻿
﻿ |  |
﻿ |  |
﻿Cash |  | $ 79,675
﻿Fair value of earn-out consideration and other adjustments |  | 4,208
﻿Total purchase price |  | $ 83,883
﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ ﻿ The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (including measurement period adjustments). The purchase price and associated allocation is preliminary pending completion of the valuation of acquired inventory, property, plant and equipment, intangible assets and deferred income taxes and may be subsequently adjusted to reflect final valuation results and purchase price adjustments. Based upon information obtained, certain of the fair value amounts previously estimated were adjusted during the measurement period. These measurement period adjustments related to updated valuation reports and appraisals received from our external valuation specialists, as well as revisions to internal estimates. The changes in estimates recorded at June 30, 2017 include an increase in inventory of $265; an increase in intangible assets of $113; an increase in accrued liabilities of $29; a decrease in accounts receivable of $201 and a decrease in earn-out consideration of $1,007. The measurement period and working capital adjustments resulted in a decrease to goodwill $1,411. ﻿ ﻿
﻿ |  |
﻿At January 31, 2017 |  |
﻿Cash |  | $ 2,165
﻿Accounts receivable |  | 7,929
﻿Inventory |  | 9,409
﻿Prepaid and other current assets |  | 298
﻿Property, plant and equipment |  | 6,668
﻿Identifiable intangible assets |  | 38,739
﻿Other long-term assets |  | 690
﻿Total identifiable assets acquired |  | 65,898
﻿ |  |
﻿Accounts payable |  | 3,020
﻿Other current liabilities |  | 834
﻿Deferred tax liabilities |  | 9,994
﻿Warranty liability |  | 1,462
﻿Total liabilities assumed |  | 15,310
﻿Net identifiable assets acquired |  | 50,588
﻿Goodwill |  | 33,295
﻿Net assets acquired |  | $ 83,883
﻿ Assets a cquired and liabilities assumed were recorded at estimated fair values based on management's estimates, available information, and reasonable and supportable assumptions. Also, the Company utilized a third-party to assist with certain estimates of fair values, including:
| · |  | Fair value estimate for inventory was based on a comparative sales method
| · |  | Fair value estimate for property, plant and equipment was based on appraised values utilizing cost and market approaches
| · |  | Fair values for intangible assets were based on a combination of market and income approaches, including the relief from royalty method
| · |  | Fair value for the earn-out consideration was based on a Monte Carlo simulation utilizing forecast ed earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the 2017 and 2018 measurement period
These non-recurring fair value meas urements are classified within L evel 3 of the fair value hierarchy. ﻿ ﻿ 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 not deductible for income tax purposes. Of the $38,739 of acquired identifiable intangible assets, $27,518 was provisionally assigned to customer lists with a 15-year useful life; $5,142 was provisionally assigned to trademarks with a 20 year useful life; and $6,079 was provisionally assigned to technology with a 7 year weighted-average useful life. ﻿ The preliminary estimated fair value of the earn-out consideration was $4,102 which was adjusted to $3,243 as of the January 31, 2017 acquisition date. ﻿ The Company recognized $41 and $1,259 of acquisition related costs in the condensed consolidated statement of operations as a component of selling, general and administrative expense for the three and six months ended June 30, 2017, re spectively. Included in the Company's statement of operations for the three and six months ended June 30, 2017 are post-acquisition sales of $17,313 and $28,454, and net (loss) income of $(547) and $45, respectively, related to Orlaco which are included in the Electronics segment. The Company’s statement of operations also included $657 and $1,636 of expense in cost of goods sold for the three and six months ended June 30, 2017, respectively, associated with the step up of the Orlaco inventory to fair value and the $2,103 fair value adjustment for earn-out consideration in selling, general and administrative expenses for the three and six months ended June 30, 2017. ﻿ The following unaudited pro forma information reflects the Company’s condensed consolidated results of operations as if the acquisition had taken place on January 1, 2016. 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. ﻿ ﻿
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﻿ |  |  | Three months ended |  | Six months ended
﻿ |  |  | June 30, |  | June 30,
﻿ |  |  | 2017 |  | 2016 |  | 2017 |  | 2016
﻿ |  |  |  |  |  |  |  |  |
﻿Net sales |  | $ | 209,111 | $ | 201,397 | $ | 418,452 | $ | 378,892
﻿Net income attributable to Stoneridge, Inc. and subsidiaries | $ | 9,019 | $ | 12,889 | $ | 18,326 | $ | 21,789
﻿ 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 are factually supportable. These adjustments include, but are not limited to, depreciation and amortization related to fair value adjustments to property, plant, and equipment and finite-lived intangible assets. Also, an adjustment has been made for management fees expensed by Orlaco.

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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 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: 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=65885119&loc=d3e1490-128463 Reference 3: 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=65885119&loc=d3e1392-128463 Reference 4: 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=35744584&loc=d3e7008-128479 Reference 5: 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=65885119&loc=d3e1486-128463 Reference 6: 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=35744584&loc=d3e6927-128479 Reference 7: 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=73530397&loc=d3e4845-128472 Reference 8: 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=65885119&loc=d3e1524-128463 Reference 9: 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=35744584&loc=d3e7000-128479 Reference 10: 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=73530397&loc=d3e4922-128472 Reference 11: 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=73530397&loc=d3e4934-128472 Reference 12: 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=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: 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=65885119&loc=d3e1383-128463 Reference 15: 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=35744584&loc=d3e6996-128479 + Details
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