Business Acquisitions

Hirschmann

On March 14, 2012 (the "Closing Date"), Voxx, through its wholly-owned subsidiary VOXX International (Germany) GmbH ("Voxx Germany"), purchased the stock of Car Communication Holding GmbH, a recognized tier-1 supplier of communications and infotainment solutions, primarily to the automotive industry, pursuant to the Sale and Purchase Agreement for €87,571 ($114,397 based upon the rate of exchange as of the close of business on the Closing Date) subject to an adjustment for working capital plus related transaction fees and expenses. The acquisition of Hirschmann further diversifies Voxx's offerings and creates strategic opportunities for the Company to leverage Hirschmann's advanced technologies. The Company believes this will lead to more advanced and creative mobile electronics products and continued growth with car manufacturers worldwide.

On the Closing Date, the Company, certain of its directly and indirectly wholly-owned domestic subsidiaries, and Voxx Germany (collectively, the "Borrowers") entered into an Amended and Restated Credit Agreement (the "Credit Facility") with Wells Fargo Bank, National Association ("Wells Fargo"), as Agent, and the other lenders party thereto. The Company borrowed approximately $148,000 under the Credit Facility on the Closing Date and used a portion of the proceeds from such borrowing to fund Voxx Germany's acquisition of Hirschmann. On the Closing Date, the Company also repaid and terminated its existing asset-based loan facility with Wells Fargo Capital Finance, LLC.

In order to hedge the fluctuation in the exchange rate before closing, the Company entered into two forward contracts totaling $63,750, both due in March 2012. The forward contracts were not designated for hedging, and as such, were marked to market at February 29, 2012 and when they were settled in the first quarter of Fiscal 2013. A foreign currency gain of $1,581 was recorded in the fourth quarter of Fiscal 2012 when the contracts were marked to market at year-end and a foreign currency loss of $2,670 was recorded during the three months ended May 31, 2013, when the contracts were settled, reflecting the loss on settlement.

Net sales attributable to Hirschmann in the Company's consolidated statements of operations for the years ended February 28, 2014 and 2013 were approximately $173,612 and $153,310, respectively.

The following table summarizes the fair values of the assets acquired and liabilities assumed, as of the Closing Date, and the amounts assigned to goodwill and intangible asset classifications:



	March 14, 2012 (as initially reported)		Measurement Period Adjustments			March 14, 2012 (as adjusted)
Cash	$	6,769	$	31		$	6,800
Accounts receivable	25,921		(3,029		)	22,892
Inventory	20,178		—			20,178
Prepaid expenses and other current assets	2,281		(227		)	2,054
Property, plant and equipment	18,659		—			18,659
Goodwill	70,864		(10,253		)	60,611
Intangible assets	22,433		14,414			36,847
Other assets	940		—			940
Total assets acquired	168,045		936			168,981
Accounts payable and accrued expenses	26,953		(4,778		)	22,175
Income taxes payable	2,848		—			2,848
Deferred taxes, net	5,639		3,933			9,572
Bank obligations	11,430		—			11,430
Capital lease obligations	911		—			911
Other long-term liabilities	5,867		1,749			7,616
Net tangible and intangible assets acquired	$	114,397	$	32		$	114,429

During the measurement period, the Company recorded $10,701 of net deferred tax liabilities related to the basis difference between the financial reporting value and the tax value, and the adjustments to the intangible assets value in connection with our preliminary purchase price valuation.

The amounts assigned to goodwill and intangible assets for the acquisition are as follows:



	March 14, 2012 (as initially reported)		Measurement Period Adjustments			March 14, 2012 (as adjusted)		Amortization Period (Years)
Goodwill (non-deductible)	$	70,864	$	(10,253	)	$	60,611	N/A
Tradenames (non-deductible)	6,761		3,639			10,400		Indefinite
Customer relationships	9,376		10,016			19,392		15
Patents	6,296		759			7,055		10
	$	93,297	$	4,161		$	97,458

Acquisition related costs relating to this acquisition of $1,131 and $1,526 were expensed as incurred during the latter half of the year ended February 29, 2012 and during the year ended February 28, 2013, respectively, and are included in acquisition-related costs for these respective periods in the consolidated statements of operations and comprehensive income.

Klipsch

On March 1, 2011, Soundtech LLC, a Delaware limited liability company and wholly-owned subsidiary of Voxx, acquired all of the issued and outstanding shares of Klipsch Group, Inc. and its worldwide subsidiaries for a total purchase price of $169,599. The acquisition of Klipsch added world-class brand names to Voxx's offerings, increased its distribution network, both domestically and abroad, and provided the Company with entry into the high-end installation market at both the residential and commercial level. In addition to the Klipsch® brand, the Klipsch portfolio includes Jamo®, Mirage®, and Energy®.

The results of operations of this acquisition have been included in the consolidated financial statements from the date of acquisition. Net sales attributable to Klipsch in the Company's consolidated statements of operations and comprehensive income for the years ended February 28, 2014, February 28, 2013 and February 29, 2012 were $167,532, $174,026 and $169,485, respectively.

During the fourth quarter of Fiscal 2013, the Company identified an error in the consolidated financial statements for the year ended February 29, 2012, related to the Klipsch purchase price. Accounts payable acquired in the acquisition was incorrectly overstated and income taxes payable acquired was understated, which also resulted in an overstatement of goodwill from the purchase price. We evaluated the materiality of the error from a qualitative and quantitative perspective. Based on such evaluation, we concluded that the correction was not material to any individual prior period or for the year ended February 28, 2013, taking into account the requirements of the Securities and Exchange Commission Staff Accounting Bulletin No. 108, "Considering The Effects of Prior Year Misstatements in the Current Year Financial Statements," or SAB 108. As discussed in SAB108, though the error correction does require restating consolidated financial statements for prior periods, the error correction does not require the amendment of prior period filings. As a result, the accounting correction reduced accounts payable by $1,729 and goodwill by $1,297 and increased income taxes payable by $432 on the consolidated balance sheet at February 28, 2013.

The following table summarizes the final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the date of the acquisition and adjusted for the error identified in Fiscal 2013:



	March 1, 2011
Accounts receivable	$	28,614
Inventory	30,167
Prepaid expenses and other current assets	846
Property, plant and equipment, net	6,347
Goodwill	78,696
Intangible assets	82,563
Deferred tax assets	3,086
Total assets acquired	230,319
Accounts payable	14,067
Accrued expenses and other liabilities	13,096
Deferred tax liabilities	33,557
Net assets acquired	$	169,599

During the measurement period, the Company recorded approximately $30,500 of net deferred tax liabilities related to the basis difference between the financial reporting value and the tax value, and the adjustments to the intangible asset values in connection with our preliminary purchase price valuation. In addition, the original purchase price allocation was adjusted by approximately $2,200 during the quarter ended August 31, 2011 to account for contingent purchase price consideration. As a result of these changes, goodwill associated with this transaction was adjusted accordingly.

The amounts assigned to goodwill and intangible assets for the acquisition are as follows and adjusted for the error identified in Fiscal 2013:



	March 1, 2011		Amortization Period (Years)
Goodwill (non-deductible)	$	78,696	N/A
Tradenames (non-deductible)	49,316		Indefinite
Customer relationships	32,000		15
Patents	1,247		13
	$	161,259

Acquisition related costs of $374 were expensed as incurred in the year ended February 29, 2012, and are included in acquisition related costs in the accompanying consolidated statements of operations and comprehensive income.

Pro-forma Financial Information

The following unaudited pro-forma financial information for the years ended February 28, 2013 and February 29, 2012 represents the results of the Company's operations as if Hirschmann was included for the full year of Fiscal 2013 and 2012. The unaudited pro-forma financial information does not necessarily reflect the results of operations that would have occurred had the Company constituted a single entity during such periods.



	Year Ended		Year Ended
	February 28, 2013		February 29, 2012
Net Sales	$	843,091	$	860,372
Net income	26,624		22,225
Net income per share-diluted	$	1.13	$	0.96

The above pro-forma results include certain adjustments for the periods presented to adjust the financial results and give consideration to the assumption that the acquisitions of Hirschmann and Klipsch occurred on the first day of Fiscal 2012 and Fiscal 2011, respectively. These adjustments include costs such as an estimate for amortization and depreciation associated with intangible and fixed assets acquired, additional financing costs as a result of the acquisitions, and the movement of expenses specific to the acquisitions from Fiscal 2013 to Fiscal 2012, respectively. These pro-forma results of operations have been estimated for comparative purposes only and may not reflect the actual results of operations that would have been achieved had the transactions occurred on the dates presented or be indicative of results to be achieved in the future.