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Acquisitions | 9 Months Ended
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Sep. 30, 2015
Acquisitions [Abstract] |
Acquisitions | 3. ACQUISITIONS Since January 1, 2014, the Company has acquired three businesses in the U.S. These acquisitions have allowed the Company to expand its products and service capabilities and offer its customers a greater breadth of solutions for their electrical power distribution and backup power needs. A summary of the acquisitions is as follows:
Business Acquired |  | Closing |  | Net Assets Acquired (in 000s) |  | Segment |  | Primary Form of Consideration
Titan Energy Worldwide, Inc. |  | 12/02/14 |  | $ | 1,958 |  | Critical Power |  | Cash/stock
Harmonics Holdings Inc. |  | 01/16/15 |  |  | 1,202 |  | T&D Solutions |  | Seller note/debt forgiveness
Pacific Power Systems Integration, Inc. |  | 08/01/15 |  |  | 2,013 |  | T&D Solutions |  | Cash
|  |  |  | $ | 5,173 |  |  |  |
Each of the acquired businesses has been included in the Company’s results of operations since the date of closing its respective closing. 2014 Acquisition On December 2, 2014, the Company acquired voting control of Titan Energy Worldwide, Inc. (“Titan”), a Minneapolis-headquartered provider of sales and service for commercial and industrial-scale onsite power systems, including generators and associated switching equipment. By December 31, 2014, the Company had acquired 100% ownership of Titan. The Company funded the acquisition through a new term loan provided under its U.S. credit facilities and the issuance of shares of its common stock to former convertible preferred stock holders and note holders of Titan. The following table summarizes the consideration paid for the Titan acquisition and presents the allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of December 2, 2014 (in thousands):
|  |  |  | Titan Acquisition
Purchase Price |  |  |  |  |
Cash consideration |  |  |  | $ | 953
Common stock consideration |  |  |  |  | 1,005
|  |  |  | $ | 1,958
Purchase Price Allocation |  |  |  |  |
Current assets, including cash and cash equivalents of $0.1 million |  |  |  | $ | 3,721
Property, plant and equipment |  |  |  |  | 410
Identifiable intangible assets |  |  |  |  | 5,147
Goodwill |  |  |  |  | 2,893
Total assets acquired |  |  |  |  | 12,171
Current liabilities |  |  |  |  | (7,055)
Notes payable |  |  |  |  | (3,158)
Net assets acquired |  |  |  | $ | 1,958
The Company determined the preliminary purchase price allocation based on estimates of the fair values of the tangible and intangible assets acquired and liabilities assumed. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can impact the Company’s results of operations. Management utilized recognized valuation techniques, including the income approach and cost approach for the net assets acquired, in addition to relying on asset appraisals. The major classes of intangible assets arising from the acquisition of Titan, their respective amortization periods, and the amount of amortization expense recognized during the nine months ended September 30, 2015 are as follows (in thousands):
| Weighted Average Amortization Years |  | Titan Acquisition
Acquired Intangible Assets |  |  |  |
Customer relationships | 4 |  | $ | 4,320
Distributor territory license | 4 |  |  | 474
Internally developed software | 7 |  |  | 289
Trade names | 1 |  |  | 64
|  |  | $ | 5,147
Amortization expense recorded during the nine months ended September 30, 2015 |  | $ | 978
All of the goodwill and intangibles arising out of the Titan acquisition are amortizable for tax purposes. The Company incurred $0.7 million of transaction, due diligence and integration costs during the year ended December 31, 2014 that were reflected in the Company’s results as a period expense. These costs included legal reorganization expenses, professional fees and integration costs and were included in the Company’s other expense in its statements of operations. 2015 Acquisitions On January 16, 2015, the Company, through its Jefferson Electric, Inc. subsidiary, acquired substantially all the assets of Harmonics Holdings Inc. (“Harmonics”), consisting primarily of intellectual property, forgiveness of debt, accounts receivable and machinery and equipment. Harmonics is a Connecticut-based specialty provider of equipment that incorporates a patented technology for the elimination of harmonic currents in power distribution systems. The transaction was accounted for under the purchase method of accounting and the Company funded the acquisition from available cash on hand and forgiveness of debt. On August 1, 2015, the Company, through its Pioneer Custom Electrical Products Corp. subsidiary. acquired substantially all the assets comprising the business of Pacific Power Systems Integration, Inc. (“Pacific”). Located in Santa Fe Springs, California, Pacific is a manufacturer of low and medium voltage switchgear, primarily serving customers in the oil refining, mass transit and utility sectors. The transaction was accounted for under the purchase method of accounting and the Company funded the cash consideration for the acquisition with debt drawn under one of the Company’s revolving credit facilities. The following table summarizes the consideration paid for the Harmonics and Pacific acquisitions and presents the preliminary allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of January 16, 2015 and August 1, 2015, respectively (in thousands):
| Harmonics Acquisition |  | Pacific Acquisition
Purchase Price |  |  |  |  |
Cash consideration | $ | 93 |  | $ | 2,013
Forgiveness of trade payables and indebtedness due to purchaser |  | 609 |  |  | -
Deferred payments due to seller |  | 500 |  |  | -
| $ | 1,202 |  | $ | 2,013
Purchase Price Allocation |  |  |  |  |
Current assets | $ | 21 |  | $ | 18
Property, plant and equipment |  | 4 |  |  | 147
Goodwill |  | 1,177 |  |  | 1,848
Total assets acquired |  | 1,202 |  |  | 2,013
Current liabilities |  | - |  |  | -
Net assets acquired | $ | 1,202 |  | $ | 2,013
The acquisitions resulted in the recognition of goodwill in the Company’s consolidated financial statements because the purchase prices exceeded the net tangible asset values, and reflects the future earnings and cash flow potential of the acquired businesses. The Company made initial allocations of the purchase price at the date of each acquisition, based upon its understanding of the fair value of the acquired tangible assets and assumed liabilities. In each case, the excess of the purchase price over the net tangible assets acquired was attributed to goodwill. After additional information is obtained about the intangible assets of the acquired businesses, the Company anticipates that its final allocation of the purchase price will result in a reduction to goodwill by an amount representing the estimated fair value of the intangible assets identified, which are likely to be certain technology-related industry accreditations, intellectual property, customer relationships, non-compete agreements and certain trademarks. The Company incurred approximately $13,000 of transaction costs related to the Harmonics acquisition, and $56,000 related to the Pacific acquisition, during the nine months ended September 30, 2015 that are reflected in the Company’s statement of operations as a period expense.

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