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Acquisitions | 12 Months Ended
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Dec. 31, 2018
Acquisitions |
3. | Acquisitions
Spectrum LifeSciences, LLC On August 1, 2017, the Company completed the acquisition of Spectrum pursuant to the terms of an Agreement and Plan of Merger and Reorganization, dated as of June 22, 2017 (such acquisition, the “Spectrum Acquisition”). Spectrum is a diversified filtration company with a differentiated portfolio of hollow fiber cartridges, benchtop to commercial scale filtration and perfusion systems and a broad portfolio of disposable and single-use solutions. Spectrum’s products are primarily used for the filtration, isolation, purification and concentration of monoclonal antibodies, vaccines, recombinant proteins, diagnostic products and cell therapies where the company offers both standard and customized solutions to its bioprocessing customers. Spectrum’s filtration products include its KrosFlo ® line of hollow fiber cartridges, tangential flow filtration (“TFF”) systems and single-use flow path consumables, as well as its Spectra/Por ® portfolio of laboratory dialysis products and its Pro-Connex ® single-use hollow fiber Module-Bag-Tubing sets. Outside of filtration, Spectrum products include Spectra/Chrom ® liquid chromatography products for research applications. These bioprocessing products account for the majority of Spectrum revenues. Spectrum also offers a line of operating room products. Consideration Transferred The Company accounted for the Spectrum Acquisition as a purchase of a business under ASC 805, “Business Combinations.” The Spectrum Acquisition was funded through payment of $122.9 million in cash, the issuance of 6,153,995 unregistered shares of the Company’s common stock totaling $247.6 million and a working capital adjustment of $0.4 million for a total purchase price of $370.9 million. Under the acquisition method of accounting, the assets of Spectrum were recorded as of the acquisition date, at their respective fair values, and consolidated with those of the Company. The fair value of the net assets acquired was $370.9 million. The consideration and purchase price information has been prepared using a valuation that required the use of significant assumptions and estimates in its preparation. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable; however, actual results may differ from these estimates. The total consideration transferred follows (amounts in thousands):
Cash consideration |  | $ | 122,932 |
Equity consideration |  |  | 247,575 |
Working capital adjustment |  |  | 425 |
Net assets acquired |  | $ | 370,932 |
Acquisition-related costs are not included as a component of consideration transferred but are expensed in the periods in which the costs are incurred. The Company has incurred $2.9 million and $7.1 million in integration costs related to the Spectrum Acquisition in 2018 and 2017, respectively. These costs are primarily included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive income. Fair Value of Net Assets Acquired The amounts recorded for the assets acquired and liabilities in the Spectrum Acquisition are final, based on the facts and circumstances that existed as of the August 1, 2017, the acquisition date. The components and allocation of the purchase price consists of the following amounts (amounts in thousands):
Cash and cash equivalents |  | $ | 10,137 |
Accounts receivable |  |  | 5,075 |
Inventory |  |  | 13,502 |
Prepaid expenses and other assets |  |  | 616 |
Fixed assets |  |  | 6,004 |
Deferred tax assets |  |  | 1,102 |
Customer relationships |  |  | 78,400 |
Developed technology |  |  | 38,560 |
Trademark and tradename |  |  | 2,160 |
Non-compete agreements |  |  | 960 |
Goodwill |  |  | 265,722 |
Accounts payable |  |  | (1,335 | )
Unrecognized tax benefit |  |  | (576 | )
Accrued liabilities |  |  | (5,787 | )
Deferred tax liabilities |  |  | (43,608 | )
Fair value of net assets acquired |  | $ | 370,932 |
Of the consideration paid, $78.4 million represents the fair value of customer relationships that will be amortized over the weighted average determined useful life of 15 years, and $38.6 million represents the fair value of developed technology that will be amortized over a determined useful life of 20 years. $1.0 million represents the fair value of non-competition agreements that will be amortized over a determined life of 3 years. $2.2 million represents the fair value of trademarks that will be amortized over a determined life of 2 to 20 years. The aforementioned intangible assets will be amortized on a straight-line basis. The goodwill of $265.7 million represents future economic benefits expected to arise from synergies from combining operations and commercial organizations to increase market presence and the extension of existing customer relationships. None of the goodwill recorded is expected to be deductible for income tax purposes. Revenue, Net Income and Pro Forma Presentation The Company recorded revenue from Spectrum of $19.4 million from August 1, 2017 through December 31, 2017. The Company has included the operating results of Spectrum in its consolidated statements of operations and comprehensive income since the August 1, 2017 acquisition date. The following table presents unaudited supplemental pro forma information as if the Spectrum Acquisition had occurred as of January 1, 2017 (amounts in thousands, except per share data) :
|  | December 31, 2017 |
Total revenue |  | $ | 162,913 |
Net income (loss) |  | $ | 17,220 |
Earnings (loss) per share: |  |  |  |
Basic |  | $ | 0.41 |
Diluted |  | $ | 0.40 |
The unaudited pro forma information for the years ended December 31, 2017 was calculated after applying the Company’s accounting policies and the impact of acquisition date fair value adjustments. Unaudited pro forma net income for year ended December 31, 2017 was adjusted to exclude acquisition-related transaction costs, nonrecurring expenses related to the fair value adjustments associated with the acquisition and income tax benefits resulting from the acquisition. In addition, the unaudited pro forma net income for the year ended December 31, 2017 was adjusted to include incremental amortization of intangible assets. These items have been factored to the unaudited pro forma net income for the year ended December 31, 2017. These pro forma condensed consolidated financial results have been prepared for comparative purposes only and include certain adjustments to reflect the pro forma results of operations as if the acquisition had occurred as of the beginning of the periods presented, such as fair value adjustments to inventory and increased amortization for the fair value of acquired intangible assets. The pro forma information does not reflect the effect of costs or synergies that would have been expected to result from the integration of the acquisition. The pro forma information does not purport to be indicative of the results of operations that actually would have resulted had the combination occurred at the beginning of each period presented, or of future results of the consolidated entities.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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