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Acquisition of Orlaco | 3 Months Ended
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Mar. 31, 2018
Acquisition of Orlaco [Abstract] |
Acquisition of Orlaco | (4) 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 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 businesses. The ac quisition of Orlaco enhances Stoneridge’s Electronics segment global technical capabilities in vision systems and facilitates entry into new markets. The aggregate consideration for the Orlaco acquisition on January 31, 2017 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 for a period of eighteen months 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 to pay an additional amount up to €7,500 as contingent consideration (“earn-out consideration”) if certain performance targets are achiev ed during the first two years. ﻿ The acquisition date fair value of the total consideration transferred consisted of the following: ﻿
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﻿Cash |  | $ 79,675
﻿Fair value of earn-out consideration and other adjustments |  | 4,208
﻿Total purchase price |  | $ 83,883
﻿ ﻿ The following table summarizes the fair value of the assets acquired and liabilities assumed at the acquisition date (including measurement period 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. At March 31, 2018, t he purchase price and associated allocation reflect s the final valuation results and purchase price adjustments. There were no changes in estimates recorded during the quarter ended March 31, 2018.
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﻿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 |  | 6
﻿Total identifiable assets acquired |  | 65,214
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﻿Accounts payable |  | 3,020
﻿Other current liabilities |  | 834
﻿Deferred tax liabilities |  | 10,206
﻿Warranty liability |  | 899
﻿Total liabilities assumed |  | 14,959
﻿Net identifiable assets acquired |  | 50,255
﻿Goodwill |  | 33,628
﻿Net assets acquired |  | $ 83,883
﻿ Assets acquired 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 forecasted earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the 2017 and 2018 earn-out period as well as a growth rate reduced by the market required rate of return
These fair value measurements are classified within Level 3 of the fair value hierarchy. See Note 6 for details on 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 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 Company recognized $1,2 14 9 of acquisition related costs in the condensed consolidated statement of operations as a component of selling, general and administrative (“SG&A”) expense for the three months ended March 31, 2017. There were no acquisition related costs for the three months ended March 31, 2018. ﻿ Included in the Company's statement of operations for the three m onths ended March 31, 201 8 and 2017 are post-acquisition sales and net income of $11,100 and $600, respectively, related to Orlaco which are included in results of the Electronics segment. The Company’s statement of operations for the three m onths ended March 31, 2017 included $9 79 of expense in cost of goods sold (“COGS”) associated with the step-up of the Orlaco inventory to fair value. The Company’s statement of operations for the three m onths ended March 31, 2018 included $369 of expense for the fair value adjustment for earn-out consideration in SG&A expenses. ﻿ 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, 201 7. 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 March 31, |  |  | 2017
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﻿Net sales |  | $ | 209,341
﻿Net income attributable to Stoneridge, Inc. and subsidiaries | $ | 9,307
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