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Acquisitions (Notes)
 6 Months Ended
Jun. 30, 2013
Business Combinations [Abstract]  
Acquisitions
Acquisition
On May 11, 2013, KVH Industries U.K. Limited, a newly formed, wholly owned subsidiary of KVH, entered into a Share Purchase Agreement with Oakley Capital Private Equity L.P., Mark Woodhead, Andrew Michael Galvin and the Trustees of the Headland Media Limited Employee Benefit Trust to acquire all of the issued share capital of Headland Media Limited, a media and entertainment service company based in the United Kingdom that distributes premium news, sports, movies and music content for commercial and leisure customers in the maritime, hotel, and retail markets, for an aggregate purchase price of approximately £15,500 ($24,000 at the exchange rate of £1.00: $1.5517 on May 11, 2013). The acquisition was consummated on the same day. The acquisition of Headland Media Limited was accounted for under the acquisition method of accounting for the business combination. The purchase price was determined as a result of arms-length negotiation and is subject to a potential post-closing adjustment based on the value of the net assets delivered at the closing.
The Share Purchase Agreement contains certain representations, warranties, covenants and indemnification provisions. The Share Purchase Agreement provides that 10% of the purchase price shall be held in escrow for a period of at least eighteen months after the closing in order to satisfy valid indemnification claims that KVH may assert for specified breaches of representations, warranties and covenants.
The total purchase price and related preliminary excess total purchase price over fair value of net assets acquired is as follows, excluding approximately $8,200 of acquired intercompany debt due KVH from Headland Media Limited (in thousands):
Consideration transferred - cash
 
 
$
24,000

Book value of net assets acquired
$
282

 
 
Fair value adjustments to deferred revenue
123

 
 
           Fair value of tangible net assets acquired
 
 
$
405

 
 
 
 
Identifiable intangibles at acquisition-date fair value
 
 
 
           Subscriber relationships
8,271

 
 
           Distribution rights
4,888

 
 
           Internally developed software
543

 
 
           Proprietary content
186

 
 
 
 
 
13,888

Deferred income taxes
 
 
(3,134
)
Goodwill
 
 
$
12,841



Our fair value estimate of assets acquired and liabilities assumed is pending completion of several elements, including the finalization of valuations of the assets acquired and liabilities assumed and final review by our management. The primary areas that are not yet finalized relate to the fair value of certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, and income and non-income based taxes. The final determination of the assets acquired and liabilities assumed will be based on the established fair value of the assets acquired and the liabilities assumed as of the acquisition date. The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill. The final determination of the purchase price, fair values and resulting goodwill may differ significantly from what is reflected.
The acquired finite-lived intangible assets from the Headland Media Limited acquisition were recorded at their estimated fair value of $13,888 on the acquisition date. The weighted-average useful life of the acquired intangible assets is estimated at approximately 11 years.
The goodwill of $12,841 arising from the Headland Media Limited acquisition largely reflects the expansion of our service offerings complementary to our existing products. The Headland Media Limited acquisition was intended to expand our future VSAT broadband communications product offerings by offering new media content to our customers.
Total service revenue of approximately $1,900 from Headland Media Limited is included in the Company's results for the three months ended June 30, 2013.
Pro Forma Financial Information
The following table summarizes the supplemental statements of operations information on an unaudited pro forma basis as if the Headland Media Limited acquisition had occurred on January 1, 2012:
 
 
Six Months Ended
 
Six Months Ended
 
 
June 30, 2013
 
June 30, 2012
Pro forma net revenues
 
$
87,887

 
$
65,012

Pro forma net income (loss)
 
3,704

 
(625
)
Basic pro forma net income (loss) per share
 
$
0.25

 
$
(0.04
)
Diluted pro forma net income (loss) per share
 
$
0.24

 
$
(0.04
)

The pro forma results presented above are for illustrative purposes only for the periods presented and do not purport to be indicative of the actual results which would have occurred had the transaction been completed as of the beginning of the period, nor are they indicative of results of operations which may occur in the future.