Note 15 - Acquisition

12 Months Ended

Jun. 30, 2012

Business Combination Disclosure [Text Block]

NOTE 15 — ACQUISITION

On March 19, 2012, the Company completed the acquisition of all issued and outstanding capital stock of Virticus Corporation, a privately owned company based in Beaverton, Oregon.  This new 100% owned subsidiary operates under the name of LSI Virticus Inc.  Consideration for the stock purchase consisted of $3,150,000 in cash and a five year contingent earn-out payment opportunity of $5.0 million, approximately 76% of which will be recorded as compensation expense over the earn-out period and 24% of which will be considered as part of the purchase price.  The earn-out is based upon achievement of targeted sales goals, and the total payout can range between zero and $5,000,000. The purchase price, which includes the $3,150,000 initial cash payment plus the $877,000 (recorded on the Company’s balance sheet as an Other Long-Term Liability) acquisition date fair value of the contingent earn-out, exceeded the fair value of the net assets being acquired, and therefore goodwill in the amount of $2,413,000 was recorded with this acquisition.  The goodwill is not deductible for tax purposes. Definite-lived intangible assets in the amounts of $1,133,000 for technology (to be amortized over seven years) and $58,000 for non-compete agreements (to be amortized over 6 years) were recorded with this acquisition.  LSI did not assume any long-term debt with the purchase of Virticus Corporation.  Acquisition transaction costs and related expenses of $585,000 (included in selling and administrative expenses) along with $25,000 of inventory adjustments related to acquisition fair value accounting are included in fiscal 2012 financial results.  The operations of LSI Virticus are included in the Company’s operating results beginning March 20, 2012, and are reported in the Electronic Components Segment.

The allocation of purchase price to the fair value of identifiable assets acquired and liabilities assumed with the acquisition of Virticus Corporation was as follows:

(In thousands)
Financial assets	$	444
Inventory		215
Property, plant and equipment		1
Identifiable intangible assets		1,191
Financial liabilities		(237	)
Total identifiable net assets		1,614
Goodwill		2,413
Total purchase consideration	$	4,027

The above fair values of the assets acquired and liabilities assumed are final and are based on the information that was available to estimate their fair values.  These measurements of fair value set forth above have been finalized and were revised slightly from preliminary amounts reported in the Company’s third quarter Form 10-Q.

The Company recorded a federal deferred tax asset of $258,000 in the opening balance sheet related primarily to the net operating loss carryover of the acquired company.

LSI Virticus Inc. designs, engineers, and manufactures automated secured network control systems and software for the management of indoor and outdoor lighting and lighting systems, including the control of solid-state LED lighting.  With the acquisition of Virticus, we expect to complement and further expand the Company’s capabilities in providing our customers with sophisticated lighting and energy management control solutions.  Coupled with our industry-leading LED lighting products, our customers will have complete solid-state solutions to their lighting needs.  The management team and substantially all employees remain with LSI Virticus.

The results of LSI Virticus included in fiscal 2012 consolidated results of the Company are net sales of approximately $71,000 and a net operating loss of $(777,000), which includes $150,000 of acquisition related expenses.

Due to the start-up nature of Virticus and with calendar 2011 net sales less than $400,000, the Company has elected to omit consolidated proforma results.