ACQUISITIONS

12 Months Ended

Feb. 28, 2017

Business Combinations [Abstract]

ACQUISITIONS

NOTE 2 – ACQUISITIONS

LoJack acquisition

In March 2016, the Company acquired all outstanding common stock of LoJack. As a result of the acquisition, LoJack became a wholly-owned subsidiary of CalAmp and is consolidated with the Company’s financial statements beginning March 15, 2016 as a component of the Company’s Wireless DataCom business segment. The Company funded the acquisition from cash on hand. The total purchase price was $131.7 million, which included the $5.5 million fair value of the 850,100 shares of LoJack common stock that CalAmp purchased in the open market in November and December 2015, prior to entering into a definitive acquisition agreement with LoJack.

The following is the final purchase price allocation for LoJack (in thousands):

Purchase price				$	131,735
Less cash acquired, net of debt assumed					(9,303	)
Net cash paid					122,432
Fair value of net assets acquired:
Current assets other than cash	$	41,214
Property and equipment		11,910
Developed technology		8,200
Tradename		35,500
Customer lists		4,650
Dealer relationships		16,850
Other non-current assets		4,208
Deferred tax liability		(5,466	)
Current liabilities		(37,647	)
Deferred revenue, non-current		(10,883	)
Other non-current liabilities		(2,576	)
Total fair value of net assets acquired					65,960
Goodwill				$	56,472

The Company paid a premium (i.e., goodwill) over the fair value of the net tangible and identified intangible assets acquired. The Company believes the acquisition aligns with its strategy to deliver innovative, next generation connected vehicle telematics technologies, thereby accelerating the Company’s strategic roadmap in this large, growing market. Furthermore, the Company believes that combining CalAmp's leading portfolio of wireless connectivity devices, software, services and applications with LoJack’s world-renowned brand, proprietary stolen vehicle recovery technology, unique relationships with U.S. law enforcement agencies, and strong relationships with auto dealers, heavy equipment providers and global licensees will create a market leader that is well-positioned to drive the broad adoption of connected vehicle telematics technologies and applications worldwide. The combined enterprise offers customers access to integrated, turnkey offerings that enable a multitude of high value applications encompassing vehicle security and enhanced driver safety. Furthermore, the combination of CalAmp’s and LoJack’s technology offerings is expected to provide global customers with connected vehicle applications to help ensure that retail auto dealers remain competitive and relevant in today’s rapidly evolving markets.

The goodwill arising from the LoJack acquisition is not deductible for income tax purposes.

The fair value of the LoJack trade receivables at March 15, 2016 was $21.2 million, comprised of a gross contractual amount of $22.3 million net of receivables of $1.1 million not expected to be collected.

In connection with the acquisition of LoJack, the Company has assumed liabilities related to quality assurance programs, warranty claims and contract obligations which are included in accrued expenses and other current liabilities in the purchase price allocation described above. The fair value of inventories acquired included a purchase accounting fair value step-up of $4.5 million. In fiscal 2017, the Company recognized $4.3 million of this markup as a component of cost of revenues that reflects the extent to which the inventory that was subject to step-up was sold to the Company’s customers in such period. Included in inventory as of February 28, 2017 was $0.2 million relating to the remaining fair value step-up associated with the LoJack acquisition.

In August 2016, the Company received an independent appraisal of LoJack’s property and equipment, which resulted in a purchase accounting fair value step-up of $2.5 million. In fiscal 2017, the Company recognized $0.7 million of this markup as a component of cost of revenues and operating expenses that reflects the extent to which the property, equipment and improvements that were subject to the step-up were depreciated.

Acquisition and integration-related costs of $4.5 million and $2.0 million were included in the Company's statements of comprehensive income (loss) for fiscal 2017 and 2016, respectively.

Revenues of LoJack included in the consolidated statements of operations for fiscal 2017 were $117.5 million. Post-acquisition earnings of LoJack on a standalone basis are impracticable to determine, because immediately following the acquisition CalAmp began to integrate LoJack into its existing operations.

The following is unaudited pro forma consolidated financial information for the Company presented as if the acquisition of LoJack had occurred on March 1, 2015, the beginning of the Company’s prior fiscal year (in thousands except per share amounts).

	Pro Forma
	Year Ended February 28,
	2017		2016
Revenues	$	356,357	$	408,464
Net income	$	1,132	$	5,069
Earnings per share:
Basic	$	0.03	$	0.14
Diluted	$	0.03	$	0.14
Shares used in computing earnings per share:
Basic		35,917		36,448
Diluted		36,397		36,950

The following adjustments were included in the unaudited pro forma financial information (in thousands):

	Year Ended February 28,
	2017			2016
LoJack standalone net income:
From March 1 to March 14, 2016	$	973		$	-
For the year ended December 31, 2015		-			3,197
Increase (decrease) in revenue for fair valuation of
deferred revenue		1,807			(1,807	)
(Increase) decrease in costs and expenses:
Amortization of inventory step-up		4,339			(4,339	)
Amortization of intangible assets and depreciation of
property, equipment and improvements acquired		(309	)		(7,402	)
Acquisition and integration expenses		4,513			(4,168	)
Net increase (decrease) in pretax income (loss)		11,323			(14,519	)
Income tax effects		(2,287	)		2,648
Change in net income (loss)		9,036			(11,871	)
Net income (loss) as reported		(7,904	)		16,940
Pro forma net income	$	1,132		$	5,069

The pro forma consolidated financial information is not necessarily indicative of what the Company's actual results of operations would have been had LoJack been included in the Company's historical consolidated financial statements for each of the fiscal years ended February 28, 2017 and 2016. In addition, the pro forma consolidated financial information does not attempt to project the future results of operations of the combined company.

CrashBoxx acquisition

On April 17, 2015, the Company acquired certain intangible assets from a company doing business as CrashBoxx to advance its insurance telematics strategy for a cash payment of $1,500,000 and future earn-out payments. The aggregate estimated fair value of the earn-out payments is $455,000 based on projected revenues over a period of 5 years of products and services incorporating the acquired technology. The Company acquired developed technology from CrashBoxx with a fair value of $930,000 and paid a premium (i.e. goodwill) over the fair value of the identified assets acquired. The goodwill of $1,025,000 is primarily attributable to the benefit of the acquired proprietary automobile accident claims process automation technology. The goodwill arising from this acquisition is deductible for income tax purposes.