Mergers And Acquisitions

9 Months Ended

Sep. 30, 2011

Mergers And Acquisitions [Abstract]

Mergers And Acquisitions

3. Mergers and Acquisitions

Real Goods Solar (our 55.7% owned solar subsidiary)

Our subsidiary, Real Goods Solar, obtained financial control, through an Agreement and Plan of Merger, of 100% of the voting equity interests of Earth Friendly Energy Group Holdings, LLC d/b/a Alteris Renewables, Inc. ("Alteris") on June 21, 2011 (the "acquisition date"). Alteris sells, designs, installs, and supports renewable energy systems, primarily solar, for both residential and commercial customers. Alteris has more than a dozen offices across seven states.

Real Goods Solar's board of directors and the manager of Alteris each approved the Alteris transaction as of the acquisition date. On September 13, 2011, Real Goods Solar distributed an information statement to its shareholders with respect to our execution, as the holder of the majority of Real Goods Solar's equity, of a written consent approving the Alteris transaction, and the transaction is expected to close in November 2011.

The total consideration to be transferred is approximately $21.7 million and will be comprised of 8.7 million shares, or $21.6 million worth based on Real Goods Solar's Class A common stock closing market price of $2.48 per share on June 21, 2011, and $0.1 million worth of Real Goods Solar replacement share-based awards attributable to services rendered prior to the acquisition date. Of this amount, 0.7 million shares will be issued based on Alteris' completion of a financing arrangement for commercial installation jobs, which we estimated, as of the acquisition date, would be completed. The consideration excludes $0.4 million and $2.4 million of costs that are reported as subsidiary's acquisition-related costs in our condensed consolidated statements of operations for the three and nine months ended September 30, 2011, respectively. In addition, the transaction had remaining contingent equity consideration of 2.0 million shares of Real Goods Solar's Class A common stock, which was contingent upon Alteris' achievement of certain pre-tax income and cash flow performance targets for 2011, which Alteris' shareholders and Real Goods Solar have agreed will not be earned. The fair value of the contingently issuable consideration shares was based on the closing price of Real Goods Solar's Class A common stock on the acquisition date.

Real Goods Solar acquired Alteris, with its premier commercial customer experience, array of financing solutions, and strong in-house engineering expertise, to create a leading renewable energy provider with a strong presence on both coasts. Real Goods Solar plans to capitalize on Alteris' east coast presence and realize synergies from this acquisition by leveraging its existing infrastructure as well as by taking advantage of Alteris' expertise with commercial installations. These strategic benefits expected to be received were largely responsible for the goodwill resulting from the acquisition.

In connection with its acquisition of Alteris, Real Goods Solar recorded $0.6 million for customer-related intangibles (20 month weighted-average useful life). Goodwill is not expected to be deductible for tax purposes.

The following table summarizes the estimated fair values of Alteris' net assets acquired at the acquisition date.

(in thousands)	June 21, 2011
Cash	$	3,416
Restricted cash		902
Accounts receivable		4,451
Inventory		5,008
Deferred costs on uncompleted contracts		1,609
Other current assets		2,194
Property and equipment		1,427
Deferred tax asset		4,416
Goodwill		19,297
Other intangibles		600
Total assets		43,326
Line of credit		(3,119	)
Accounts payable and accrued liabilities		(11,627	)
Debt		(2,608	)
Billings in excess of costs on uncompleted contracts		(2,062	)
Deferred revenue and other current liabilities		(2,239	)
Net assets acquired	$	21,671

We included the results of operations from Alteris in our consolidated financial statements from the acquisition date. Consequentially, $14.4 million and $15.5 million of revenue and $0.5 million and $0.7 million of net loss attributable to Alteris are included in our condensed consolidated statements of operations for the three and nine months ended September 30, 2011, respectively.

The following is supplemental unaudited interim pro forma information for the Alteris acquisition as if Real Goods Solar had issued 8.7 million of its Class A common shares to acquire this business on January 1, 2010. The pro forma net revenue and cost of goods sold were decreased by $1.3 million and $0.9 million, respectively, for the nine months ended September 30, 2011 to reflect Alteris' adoption of Real Goods Solar's method, cost to cost, of measuring progress towards completion for jobs accounted for under the percentage of completion method. Additionally, the pro forma net loss was adjusted to exclude $0.4 million and $2.4 million of nonrecurring expenses incurred during the three and nine months ended September 30, 2011, respectively, related to Real Goods Solar's acquisition of Alteris. Finally, pro forma net income (loss) was adjusted by $0.2 million for the three months ended September 30, 2010 and by $0.1 million and $0.5 million for the nine months ended September 30, 2010 and 2011, respectively, to include amortization of intangible assets and share-based compensation expense related to replacement stock options, both resulting from Real Goods Solar's acquisition of Alteris. All pro forma adjustments are based on currently available information and upon assumptions that we believe are reasonable in order to reflect, on a supplemental pro forma basis, the impact of this acquisition on our historical financial information.

	Supplemental Pro Forma (Unaudited)
	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands, except per share data)	2011			2010		2011			2010
Net revenue	$	73,333		$	83,662	$	190,930		$	225,610
Net income (loss)	$	(1,056	)	$	530	$	(6,630	)	$	(1,505	)
Net income (loss) per share—basic	$	(0.05	)	$	0.02	$	(0.28	)	$	(0.06	)
Net income (loss) per share—diluted	$	(0.05	)	$	0.02	$	(0.28	)	$	(0.06	)