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16. Acquisition
On February 1, 2010 (the Closing Date), the Company acquired the microturbine product line (MPL) from CPS to expand the Companys microturbine product line and to gain relationships with distributors to supply the Companys products. The Company entered into an Asset Purchase Agreement (APA), subject to an existing license retained by CPS, to purchase all of the rights and assets related to the manufacture and sale of the MPL, including intellectual property, design, tooling, drawings, patents, know-how, distribution and supply agreements.
The Company determined that the CPS transaction constitutes a business combination in accordance with ASC 805, Business Combinations. The purchase price was allocated to the tangible and intangible assets acquired based on their estimated fair values on the acquisition date. The Company incurred $0.1 million of costs during Fiscal 2010 related to the acquisition of the MPL. These costs are recorded in selling, general and administrative expenses in the accompanying statement of operations. In October 2010, General Electric Company purchased certain assets of CPS, including the 125 kW waste heat recovery generator systems product line.
The following table presents the purchase price allocation:
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Description
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Purchase
Price
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(In thousands)
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Manufacturing equipment
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$
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292
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|
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Intangible Assets:
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|
|
|
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Technology
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2,240
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|
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Parts/service customer relationships
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1,080
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TA100 customer relationships
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617
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|
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Backlog
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490
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|
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Trade name
|
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69
|
|
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Total purchase consideration
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$
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4,788
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Acquired intangible assets have estimated useful lives between one and ten years. The fair value assigned to identifiable intangible assets acquired has been determined primarily by using the income approach. Purchased identifiable intangible assets, except for backlog, are amortized on a straight-line basis over their respective useful lives and classified as a component of cost of goods sold or selling, general and administrative expenses based on the function of the underlying asset. Backlog is amortized on a per unit basis as the backlog units are sold and presented as a component of cost of goods sold.
The financial activity of the MPL acquisition is included in the Companys Statements of Operations commencing on the Closing Date.
Supply Agreement
On the Closing Date, the Company and CPS entered into a manufacturing supply agreement under which CPS would continue to manufacture the TA100 microturbines for the Company through March 31, 2011 (the Transition Period). During the Transition Period, CPS leased from the Company on a royalty-free basis the intellectual property required to manufacture TA100 microturbines.
The Company purchased for cash at the end of the Transition Period the remaining TA100 microturbine inventory that was not consumed as part of the TA100 manufacturing process and was not considered excess or obsolete and obtained title to certain TA100 manufacturing equipment. The manufacturing equipment was accounted for as a capital lease at the acquisition date under ASC 840 Leases and recorded at fair value.
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