Business Acquisitions (Notes)

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

Business Acquisitions

BUSINESS ACQUISITIONS

On April 30, 2014 Fuel Tech acquired 100% of the capital stock of Cleveland Roll Forming Environmental Division, Inc. d/b/a PECO (“PECO”), and FGC, Inc. ("FGC"), both Ohio corporations. Pursuant to the stock purchase agreements, PECO and FGC became wholly owned subsidiaries of Fuel Tech. Fuel Tech paid to the sellers total net cash consideration of $8,079, which consisted of the agreed upon purchase price of $8,250 plus a working capital adjustment of $391, less cash acquired of $562. The stock purchase agreements contain customary representations, warranties, and indemnities.

PECO specializes in electrostatic precipitator (ESP) rebuilds, retrofits and associated products and services. FGC specializes in flue gas conditioning to enhance electrostatic precipitator and fabric filter performance in boilers. These acquisitions broaden our APC product portfolio and grants us immediate access into the fast-growing particulate control market, creating opportunities both domestically and abroad.

The PECO and FGC acquisitions are being accounted for using the acquisition method of accounting whereby the total purchase price is allocated to tangible and intangible assets and liabilities based on their estimated fair market values on the date of acquisition. These fair value estimates are based on third party valuations.

The fair value of identifiable intangible assets was measured based upon significant inputs that were not observable in the market, and therefore are classified as Level 3. The key assumptions include: (i) management's projection of future cash flows based upon past experience and future expectations, and (ii) an assumed discount rate of 18.5% for PECO and 33.5% for FGC.

The following table summarizes the approximate fair values of the assets acquired and liabilities assumed at the date of acquisition and incorporates the measurement period adjustments since they were originally reported in our Form 10-Q for the period ended June 30, 2014. The fair value of the assets and liabilities assumed, and the related tax balances, are based on their estimated fair values as of the acquisition date.

	As Reported on June 30, 2014			Measurement Adjustments			Final Purchase Price Allocation
Current assets	$	2,365		$	26		$	2,391
Property, plant and equipment	281			(281		)	—
Identifiable intangible assets	—			5,158			5,158
Current and long-term liabilities assumed	(2,035		)	(1,900		)	(3,935		)
Total identifiable net assets acquired	611			3,003			3,614
Goodwill	7,468			(3,003		)	4,465
Total assets acquired	$	8,079		$	—		$	8,079

The goodwill recorded in connection with the above acquisition is primarily attributable to the strong cash flow expected from the acquisitions as a result of the synergies with our APC technology segment expected to arise after the Company's acquisition of the businesses. However, as a result of factors not related to these acquisitions, all goodwill related to the APC technology segment was written off during 2014, as more fully described in Note 1. The goodwill and identifiable intangibles are not deductible for tax purposes.

The fair value assigned to finite lived intangible assets as a result of the acquisitions was as follows:

Description	Amount			Useful Life (Years)
Order backlog	$	1,172		1.0
Trademarks	90			2.0
Customer relationships	870			4.0
Developed technology	3,230			7.0
Net assumed contractual obligations	(204		)	1.0
Total identifiable assets acquired	$	5,158		5.3

The following table summarizes the net sales and earnings after income taxes of PECO and FGC since the acquisition date, April 30, 2014 through December 31, 2014, which is included in the consolidated statements of operations for the years ended December 31, 2014:

	Year Ended December 31, 2014
Revenue	$	4,193
Net income (loss)	(120		)
Net loss per Common Share
Basic	$	—
Diluted	$	—

The following unaudited pro-forma information represents the Company's results of operations as if the acquisition date had occurred on January 1, 2014:

	Year Ended December 31, 2014
Revenue	$	84,713
Net income / (loss)	(15,596		)
Net income / (loss) per Common Share
Basic	$	(0.68	)
Diluted	$	(0.68	)

The pro-forma results have been prepared for informational purposes only and include adjustments to eliminate acquisition related expenses of $59 and $0, amortization of acquired intangible assets with finite lives in the amount of $1,449 and $0, inter-company transactions resulting in a decrease in pro-forma gross margin of $70 and $500, and to record the income tax consequences of the pro-forma adjustments resulting in additional pro-forma tax expense of $561 and $242 in the years ended December 31, 2014 and 2013, respectively. These pro-forma results do not purport to be indicative of the results of operations that would have occurred had the purchases been made as of the beginning of the periods presented or of the results of operations that may occur in the future.

Transaction costs incurred related to the acquisition were $59and are included in general and administrative expenses in the Consolidated Statement of Operations for the year ended December 31, 2014.