Note 10 - Acquisitions |
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| Business Combination Disclosure [Text Block] |
Note 10. AcquisitionOn February 20, 2018, the Company completed the acquisition of a portfolio of Telcordia certified outdoor powered cabinet products from Calix, Inc. (“Calix”) upon the terms and conditions contained in an Asset Purchase Agreement entered into on February 20, 2018.
The introduction of the Clearfield powered cabinet line provides customers a single point of contact for cabinet solutions—both passive and powered. The acquisition enables Clearfield to expand its Fiber-to-Anywhere expertise to include powered electronic cabinet platforms while leveraging its supply chain. The acquisition also enables Clearfield to capitalize on and expand its reach to a broader customer base, including service providers in the Tier 1 and Tier 2 markets.Acquisition date fair value of the consideration transferred totaled $10,350,000 which was comprised of a cash payment of $10,350,000 from the Company’s cash operating account. We assumed date:no liabilities in the acquisition. As part of the acquisition, we also agreed to purchase a minimum of $3,500,000 in inventory and purchase orders from subcontractors. We expect to fulfill this commitment during the normal course of business. The allocation of purchase consideration to assets acquired is not yet finalized as we continue to evaluate the fair value of certain assets acquired. The following table summarizes the preliminary estimated fair values of the assets acquired at the acquisition
Pending finalization of the fair value of the intangible assets in the third quarter of 2018, the powered cabinet acquisition has preliminarily resulted in $2,138,000 of goodwill, which is expected to be deductible for tax purposes. Specifically, the goodwill recorded as part of the acquisition of the Calix powered cabinets includes the expected synergies and other benefits that we believe will result from combining the operations of powered cabinet lines with the operations of Clearfield, Inc.
The Company has incurred approximately $76,000 in legal, professional, and other costs related to this acquisition accounted for as selling and administrative expenses when incurred. The weighted-average useful life of intangible assets acquired is 12.9 years.As the powered cabinet business was not operated as a separate subsidiary, division or entity, Calix did not maintain separate financial statements for the powered cabinet business. As a result, we are unable to accurately determine earnings/loss for the powered cabinet business on a standalone basis since the date of acquisition. Revenue attributable to the powered cabinet products included in reported Clearfield revenue for the three -month period ended March 31, 2018 was immaterial to the financial statements.The following table below reflects our unaudited pro forma combined results of operations as if the acquisition had taken place as of October 1, 2016 and shows the net sales and net income (loss) as if the powered cabinet business were combined with the Clearfield business for the three -month and six month periods ended March 31, 2017 and March 31, 2018. The pro forma includes estimated expenses relating to the amortization of intangibles purchased, the amortization of the inventory fair value adjustment, and estimated personnel costs:
The pro forma unaudited results do
not purport to be indicative of the results which would have been obtained had the acquisition been completed as of the beginning of the earliest period presented or of results that may be obtained in the future. In addition, they do not include any benefits that may result from the acquisition due to synergies that may be derived from the elimination of any duplicative costs. |
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