Note 4: Acquisitions

Equipment Management Technology, Inc.

On August 24, 2011, pursuant to an asset purchase agreement, we completed the purchase of certain assets and the assumption of specified post-closing liabilities of Equipment Management Technology, Inc., a Nevada Corporation (“EMT”), for cash consideration of $10,673. EMT, headquartered in Las Vegas, Nevada, was a provider of electronic T&M equipment. We acquired EMT in order to facilitate growth in our test and measurement (“T&M”) business. EMT had previously filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Nevada. The sale was approved by the Bankruptcy Court on August 11, 2011, and the related sale order was issued on August 12, 2011. At closing, $500 was deposited into an escrow account for any post-closing adjustments that reduce the purchase price. We have accounted for the acquisition of EMT as a business combination in accordance with accounting guidance.

At August 31, 2011, we completed our estimates of the fair value of rental and lease equipment and deferred revenue. Due to the timing of the acquisition we are still in the process of evaluating the acquisition for possible intangible assets. We have also recorded a preliminary fair value related to accounts receivable as final settlement of net accounts receivable will occur 60 days after closing. We acquired gross accounts receivable of $972, of which an estimated $430 was not expected to be collected, resulting in a preliminary fair value of $542. Once we have completed our estimates of fair value of intangible assets and accounts receivable, we will have completed the purchase accounting for the assets and liabilities in accordance with accounting guidance.

Under accounting guidance, a bargain purchase gain results if the fair value of the purchase consideration is less than the net fair value of the assets acquired and liabilities assumed. We recorded a bargain purchase gain of $3,194, net of deferred taxes, related to our acquisition of EMT. We believe that we were able to negotiate a bargain purchase price as a result of our access to the liquidity necessary to complete the transaction and EMT’s recurring losses and recent bankruptcy filing.

The following table provides the preliminary fair values of the assets acquired and liabilities assumed as of the date of acquisition.


Total cash consideration	$	10,673


Preliminary purchase price allocation:
Accounts receivable		542
Rental and lease equipment		15,896
Deferred tax liability		(2,092	)
Deferred revenue		(479	)

Net assets acquired		13,867


Bargain purchase gain, net of deferred taxes of $2,092	$	(3,194	)

The bargain purchase gain is classified separately in our condensed consolidated statements of operations.

Acquisition-related transaction costs of $55, including $47 for the three months ended August 31, 2011, were accounted for as expenses in the periods in which the costs were incurred and are included in our selling, general and administrative expenses.

The acquisition of EMT was an asset purchase, and EMT’s operations were integrated with ours immediately after the acquisition date. Revenues and income before income taxes of $91 and $52, respectively, from the acquired customers were included in our consolidated statements of operations for the three months ended August 31, 2011.

Supplemental pro forma information reflecting the acquisition of EMT as if it occurred on June 1, 2010 is not practicable because we are not able to obtain reliable historical financial information for 2010 and 2011, primarily due to a deterioration of the organization and controls leading up to and following the February 2011 bankruptcy filing.

Telogy, LLC

During fiscal 2011 we recorded additional bargain purchase gain associated with our March 31, 2010 acquisition of Telogy LLC (“Telogy”) of $342 ($202, net of deferred tax), of which $260 ($153, net of deferred tax) was recorded during the three months ended August 31, 2010. The increase in the bargain purchase gain consisted of (i) $260 representing the final determination of assets acquired and other components of the purchase price in accordance with specific provisions of the APA, and (ii) $82 resulting from a final determination of fair value of certain assets and liabilities acquired from Telogy.