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Acquisitions | 12 Months Ended
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Dec. 31, 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:
|  |  |  | Net Assets |  |  |  |  |
|  |  |  | Acquired |  |  |  |  |
Business Acquired |  | Closing |  | (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 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 |  |  | 2,969 |
Total assets acquired |  |  | 12,247 |
Current liabilities |  |  | (7,131) |
Notes payable |  |  | (3,158) |
Net assets acquired |  | $ | 1,958 |
The Company determined the 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 Company reports Titan results of operations in the Critical Power segment for the years ended December 31, 2014 and 2015. 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 year ended December 31, 2015 (in thousands):
|  | Weighted Average |  |  |
|  | Amortization Years |  | 2014 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 year ended December 31, 2015 |  |  |  | $ | 1,304 |
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 are reflected in the Company’s results as a period expense. These costs included pre-acquisition due diligence costs, transaction and integration costs and are included in the Company’s other expense in its statement of operations for the year ended December 31, 2014. 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 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 |  | Pacific |
|  | Acquisition |  | Acquisition |
Purchase Price |  |  |  |  |  |  |
Cash consideration |  | $ | 93 |  | $ | 2,013 |
Forgiveness of trade payables and indebtedness due to purchaser |  |  | 609 |  |  | - |
Deferred payments due to seller |  |  | 341 |  |  | - |
|  | $ | 1,043 |  | $ | 2,013 |
Purchase Price Allocation |  |  |  |  |  |  |
Current assets |  | $ | 21 |  | $ | 18 |
Property, plant and equipment |  |  | 4 |  |  | 147 |
Intangible assets |  |  | 995 |  |  | 1,500 |
Goodwill |  |  | 23 |  |  | 348 |
Total assets acquired |  |  | 1,043 |  |  | 2,013 |
Current liabilities |  |  | - |  |  | - |
Net assets acquired |  | $ | 1,043 |  | $ | 2,013 |
As of December 31, 2015, the company has finalized the purchase price allocation for Harmonics, while the Pacific allocation presented above is preliminary. 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 net income and cash flow potential of the acquired businesses. The major classes of intangible assets arising from the acquisition of Harmonics and Pacific, their respective amortization periods, and the amount of amortization expense recognized during the year ended December 31, 2015 (in thousands):
|  | Weighted Average |  | Harmonics |
|  | Amortization Years |  | Acquisition |
Acquired Intangible Assets |  |  |  |  |  |  |
Customer relationships |  |  | 10 |  | $ | 319 |
Non-compete agreements |  |  | 5 |  |  | 75 |
Developed technology |  |  | 10 |  |  | 492 |
Trademark |  |  | Indefinite |  |  | 26 |
Technology-related industry accreditations |  |  | Indefinite |  |  | 83 |
|  |  |  |  | $ | 995 |
Amortization expense recorded during the year ended December 31, 2015 |  |  |  |  | $ | 99 |
|  | Weighted Average Amortization Years |  | Pacific Acquisition |
Acquired Intangible Assets |  |  |  |  |  |  |
Customer relationships |  |  | 7 |  | $ | 400 |
Non-compete agreements |  |  | 7 |  |  | 100 |
Technology-related industry accreditations |  |  | Indefinite |  |  | 1,000 |
|  |  |  |  | $ | 1,500 |
Amortization expense recorded during the year ended December 31, 2015 |  |  |  |  | $ | 30 |
The Company incurred approximately $13 of transaction costs related to the Harmonics acquisition, and $43 related to the Pacific acquisition, during the year ended December 31, 2015 that are reflected in the Company’s statement of operations as a period expense. The Company reports Harmonics and Pacific results of operations in the T&D Solutions segment for the year ended December 31, 2015.

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