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ACQUISITION OF BUSINESS
 9 Months Ended
Jul. 31, 2013
ACQUISITION OF BUSINESS [Abstract]  
ACQUISITION OF BUSINESS
  7. ACQUISITION OF BUSINESS

 

On July 1, 2013, we acquired the machine tool component business of LCM S.r.l, an Italian designer and manufacturer of highly innovative high-end electro-mechanical components and accessories for machine tools. We are operating this business as LCM Precision Technology S.r.l. (LCM). The purchase price has been preliminarily allocated to the assets acquired and the liabilities assumed based on their fair values. The purchase price for the acquired assets and the assumed liabilities was $5.0 million. The allocation of the opening balance sheet as of July 1, 2013 is as follows (in thousands):

 

Current assets   $ 6,659  
Property plant and equipment     933  
Intangibles     1,437  
Goodwill     2,477  
 Total assets   $ 11,506  
         
Current liabilities   $ 4,793  
Short term debt     4,643  
Non-current liabilities     1,690  
 Total Liabilities   $ 11,126  
         
Cash expended, net of cash acquired     380  
Indebtedness assumed     4,643  
 Total purchase price   $ 5,023  

 

Intangible assets of $1.4 million were recorded as a result of the purchase of the LCM assets. The fair value of the intangible assets was based upon a discounted cash flow method that involves inputs that are not observable in the market (Level 3). Intangible assets are amortized primarily using a straight-line methodology. The intangible assets preliminarily consisted of the following (in thousands):

 

          Remaining
Economic
          Useful Life
Trademark/name   $ 274      13 years
Technology and manufacturing know how     1,110      13 years
Customer relationships     52      16 years
    $ 1,437      

 

The excess purchase price over the fair value of the assets acquired and the liabilities assumed was recorded as goodwill and was preliminarily recorded as $2.5 million. Goodwill recognized in the acquisition relates primarily to advancing our machine tool technology and expanding our current product offering. We expect the amount recorded as goodwill to be fully deductible for tax purposes.

 

The results of operations of LCM have been included in the consolidated financial statements from the date of acquisition. We incurred various costs related to the purchase of certain assets and assumed liabilities of LCM business including professional fees for due diligence, legal and accounting services. These costs totaled approximately $464,000 and $675,000 for the three and nine month period ending July 31, 2013, and have been recorded as operating expenses in the Condensed Consolidated Statements of Operations.