Business Acquisition and Disposition (Notes) | 6 Months Ended |
Jun. 30, 2014 |
Business Combinations [Abstract] | ' |
BUSINESS ACQUISITION & DISPOSITION | ' |
BUSINESS ACQUISITIONS |
Acquisitions |
Refusol Holding |
On April 8, 2013, we acquired all the outstanding shares of Refusol Holding GmbH pursuant to a Sale and Purchase Agreement (the "Agreement") between AEI Holdings, GmbH (formerly Blitz S13-103, GmbH) ("AEI Holdings"), an indirect wholly-owned subsidiary of Advanced Energy Industries, Inc.; Jolaos Verwaltungs GmbH ("Jolaos") and Prettl Beteilgungs Holding GmbH. Refusol Holding GmbH ("Refusol Holding") owns all of the shares of Refusol GmbH and its subsidiaries (collectively and together with Refusol Holding, "Refusol"). Refusol develops, manufactures, distributes and services photovoltaic inverters. The acquisition of Refusol is intended to broaden our portfolio and extend our geographic distribution. |
Consideration paid totaled approximately $87.2 million, consisting of a cash payment of $75.4 million, net of cash acquired and a working capital reduction and assumption of debt totaling $11.9 million. The agreement called for additional cash consideration if certain stretch financial targets were met by our Inverters business unit and Refusol, on a combined basis, at the end of the twelve (12) calendar months following April 1, 2013. These financial targets were not met. |
The preliminary base price is subject to a post-closing adjustment based on confirmation of the financial statements of Refusol effective as of the closing date. AEI Holdings and Jolaos are in disagreement on various accounting adjustments to the closing date financial statements of Refusol. After repeated unsuccessful attempts to have Jolaos submit the dispute to an independent German accounting firm as required under the Agreement, AEI Holdings petitioned the designated court in Stuttgart, Germany to review the dispute. |
The components of the fair value of the total consideration transferred for the Refusol acquisition are as follows (in thousands): |
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Cash paid to owners | $ | 79,550 | | | | | | | | | | | | | |
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Debt assumed | 11,873 | | | | | | | | | | | | | |
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Working capital adjustment | (2,340 | ) | | | | | | | | | | | | |
Cash acquired | (1,836 | ) | | | | | | | | | | | | |
Total fair value of consideration transferred | $ | 87,247 | | | | | | | | | | | | | |
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The following table summarizes estimated fair values of the assets acquired and liabilities assumed as of April 8, 2013 (in thousands): |
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Accounts receivable | $ | 8,868 | | | | | | | | | | | | | |
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Inventories | 13,610 | | | | | | | | | | | | | |
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Other current assets | 6,769 | | | | | | | | | | | | | |
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Property and equipment | 4,708 | | | | | | | | | | | | | |
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Other long-term assets | 130 | | | | | | | | | | | | | |
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Deferred tax assets | (3,156 | ) | | | | | | | | | | | | |
Current liabilities | (33,397 | ) | | | | | | | | | | | | |
Long-term liabilities | (41,646 | ) | | | | | | | | | | | | |
| (44,114 | ) | | | | | | | | | | | | |
Amortizable intangible assets: | | | | | | | | | | | | | |
Trademarks | 1,300 | | | | | | | | | | | | | |
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Technology | 5,700 | | | | | | | | | | | | | |
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Customer relationships | 3,500 | | | | | | | | | | | | | |
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Total amortizable intangible assets | 10,500 | | | | | | | | | | | | | |
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Total identifiable net assets | (33,614 | ) | | | | | | | | | | | | |
Goodwill | 120,861 | | | | | | | | | | | | | |
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Total fair value of consideration transferred | $ | 87,247 | | | | | | | | | | | | | |
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A summary of the intangible assets acquired, amortization method and estimated useful lives as of April 8, 2013 follows (in thousands, except useful life): |
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| | Amount | | Amortization Method | | Useful Life | | | | | | | |
Trademarks | | $ | 1,300 | | | Straight-line | | 1.5 | | | | | | | |
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Technology | | 5,700 | | | Straight-line | | 5 | | | | | | | |
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Customer relationships | | 3,500 | | | Straight-line | | 5 | | | | | | | |
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| | $ | 10,500 | | | | | | | | | | | | |
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During the six months ended June 30, 2014 we made purchase price accounting adjustments to Goodwill of $29.4 million, primarily consisting of adjustments to the opening balance of accrued warranty and other accrued expenses. Goodwill and intangible assets are recorded in the functional currency of the entity and are subject to changes due to translation at each balance sheet date. The goodwill associated with the acquisition is the result of expected synergies and expansion of the technology into additional markets that we already serve. |
Pro Forma Results for Refusol Acquisition |
The following unaudited pro forma financial information presents the combined results of operations of Advanced Energy and Refusol as if the acquisition had occurred as of January 1, 2013. The pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at January 1, 2013. The unaudited pro forma financial information for the three and six months ended June 30, 2013 includes the historical results of Advanced Energy for the three and six months ended June 30, 2013 and the historical results of Refusol for the same period. |
The unaudited pro forma results for all periods presented include amortization charges for acquired intangible assets and related tax effects. The unaudited pro forma results follow (in thousands, except per share data): |
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| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Sales | $ | 146,285 | | | $ | 140,154 | | | $ | 287,233 | | | $ | 271,608 | |
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Net income (loss) | 10,646 | | | (10,414 | ) | | 25,361 | | | (7,662 | ) |
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Earnings (loss) per share: | | | | | | | |
Basic | $ | 0.26 | | | $ | (0.26 | ) | | $ | 0.62 | | | $ | (0.20 | ) |
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Diluted | $ | 0.26 | | | $ | (0.26 | ) | | $ | 0.61 | | | $ | (0.19 | ) |
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Power Control Module |
On January 27, 2014, we acquired the intellectual property related to AEG Power Solutions' Power Control Modules ("PCM"). PCM is comprised of the Thyro-Family of products and accessories and serves numerous power control applications in different industries ranging from materials thermal processing through chemical processing, glass manufacturing and numerous other general industrial power applications. This acquisition is expected to broaden our product offerings and will be added to our Precision Power Products SBU. We paid total consideration of $31.1 million including contingent consideration, of which $16.4 million is included in Intangibles, $14.6 million in Goodwill, and $0.1 million in Property, plant, and equipment. Included in Goodwill is $1.0 million of contingent consideration payable if certain milestone targets are met. Goodwill and intangible assets are recorded in the functional currency of the entity and are subject to changes due to translation at each balance sheet date. The goodwill associated with the acquisition is the result of expected synergies and expansion of our product offerings into new markets. Advanced Energy is in the process of finalizing valuations of the intangibles associated with the acquisition. |
HiTek Power Group |
On April 12, 2014, Advanced Energy acquired all outstanding common stock of HiTek Power Group ("HiTek"), a privately-held provider of high voltage power solutions. Based in the United Kingdom, HiTek offers a comprehensive portfolio of high voltage and custom built power conversion products, ranging from 100V to 500kV, designed to meet the demanding requirements of OEMs worldwide. These products target applications including semiconductor wafer processing and metrology, scientific instrumentation, mass spectrometry, industrial printing, and analytical x-ray systems for industrial and analytical applications. HiTek's unique product architecture, encapsulation technology and control algorithms, combined with deep knowledge of its customer-specific applications, have made it a leading provider of critical, high-end, high voltage power solutions. We acquired HiTek to expand our product offerings in our Precision Power Products portfolio. |
The components of the fair value of the total consideration transferred for the HiTek acquisition are as follows (in thousands): |
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Cash paid to owners | $ | 3,525 | | | | | | | | | | | | | |
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Cash acquired | (6,889 | ) | | | | | | | | | | | | |
Total fair value of consideration received | $ | (3,364 | ) | | | | | | | | | | | | |
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The following table summarizes estimated fair values of the assets acquired and liabilities assumed as of April 12, 2014 (in thousands): |
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Accounts receivable | $ | 2,867 | | | | | | | | | | | | | |
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Inventories | 4,980 | | | | | | | | | | | | | |
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Other current assets | 415 | | | | | | | | | | | | | |
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Property and equipment | 1,291 | | | | | | | | | | | | | |
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Current liabilities | (3,836 | ) | | | | | | | | | | | | |
Long-term liabilities | (22,725 | ) | | | | | | | | | | | | |
| (17,008 | ) | | | | | | | | | | | | |
Amortizable intangible assets: | | | | | | | | | | | | | |
Tradename | 336 | | | | | | | | | | | | | |
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Technology | 4,029 | | | | | | | | | | | | | |
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Customer relationships | 8,225 | | | | | | | | | | | | | |
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Total amortizable intangible assets | 12,590 | | | | | | | | | | | | | |
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Total identifiable net assets | (4,418 | ) | | | | | | | | | | | | |
Goodwill | 1,054 | | | | | | | | | | | | | |
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Total fair value of consideration received | $ | (3,364 | ) | | | | | | | | | | | | |
Goodwill and intangible assets are recorded in the functional currency of the entity and are subject to changes due to translation at each balance sheet date. The goodwill associated with the acquisition is the result of expected synergies and expansion of the technology into additional markets that we already serve. Advanced Energy is in the process of finalizing the valuations of the accounts receivable, inventories, property, plant and equipment, intangibles, deferred taxes, and pension liability associated with the acquisition. |