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Acquisitions | 12 Months Ended
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Dec. 31, 2019
Acquisitions |
3. | Acquisitions
C Technologies On April 25, 2019, Repligen agreed to acquire C Technologies, pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), by and among Repligen, C Technologies and Craig Harrison, an individual and sole stockholder of C Technologies (such acquisition, the “C Technologies Acquisition”). C Technologies’ business consists of two major product categories (i) biotechnology, or Biotech, and (ii) Legacy and Other. Through its Biotech category, C Technologies sells instruments, consumables and accessories that are designed to allow bioprocessing technicians to measure the protein concentration of a liquid sample using C Technologies’ Slope Spectroscopy ® method, which eliminates the need for manual sample dilution. C Technologies’ lead product, the SoloVPE instrument platform, was launched in 2008 for off-line and at-line protein concentration measurements conducted in quality control, process development and manufacturing labs in the production of biological therapeutics. C Technologies’ FlowVPE platform, an extension of the SoloVPE technology, was designed to allow end users to make in-line protein concentration measurements in filtration, chromatography and fill-finish applications, designed to allow for real-time process monitoring. Consideration Transferred The C Technologies Acquisition was accounted for as a purchase of a business under ASC 805, “Business Combinations” . The C Technologies Acquisition was funded through payment of $195.0 million in cash, $186.0 million of which is consideration transferred pursuant to ASC 805, $9.0 million of which will be compensation expense for future employment, and t he issuance of 779,221 unregistered shares of the Company’s common stock totaling $53.9 million for a total purchase price of $239.9 million. Under the acquisition method of accounting, the assets of C Technologies were recorded as of the acquisition date, at their respective fair values, and consolidated with those of Repligen. The fair value of the net tangible assets acquired was $7.1 million, the fair value of the intangible assets acquired was $90.8 million, and the residual goodwill was $142.0 million. The consideration and purchase price information has been prepared using a valuation that required the use of significant assumptions and estimates. 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 Repligen believes to be reasonable ; h owever, actual results may differ from these estimates. Total consideration transferred is as follows (amounts in thousands):
Cash consideration |  | $ | 185,949 |
Equity consideration |  |  | 53,938 |
Fair value of net assets acquired |  | $ | 239,887 |
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 incurred $4.0 million in transaction costs in 2019. The transaction costs are included in selling, general and administrative expenses in the consolidated statements of comprehensive income. In connection with the transaction, an additional $9.0 million in cash will be due to employees based on their continued employment with the Company one year after the date of the close of the C Technologies Acquisition. For the year ended December 31, 2019, the Company recognized $5.2 million of compensation expense associated with this amount due to employees. Fair Value of Net Assets Acquired The allocation of purchase price is based on the fair value of assets acquired and liabilities assumed as of the acquisition date, based on the preliminary valuation. The Company obtains this information during due diligence and through other sources. In the months after closing, the Company may obtain additional information about these assets and liabilities as it learns more about C Technologies and will refine the estimates of fair value to more accurately allocate the purchase price. Only items identified as of the acquisition date are considered for subsequent adjustment. We will make appropriate adjustments to the purchase price allocation, if any, prior to the completion of the measurement period, which is up to one year from the acquisition date. The components and allocation of the purchase price consists of the following amounts (amounts in thousands):
Cash and cash equivalents |  | $ | 3,795 |
Restricted cash |  |  | 26,933 |
Accounts receivable |  |  | 3,044 |
Inventory |  |  | 3,783 |
Prepaid expenses and other current assets |  |  | 93 |
Fixed assets |  |  | 40 |
Operating lease right of use asset |  |  | 3,836 |
Customer relationships |  |  | 59,680 |
Developed technology |  |  | 28,920 |
Trademark and tradename |  |  | 1,570 |
Non-competition agreements |  |  | 660 |
Goodwill |  |  | 142,021 |
Deferred taxes |  |  | 895 |
Accounts payable |  |  | (436 | )
Accrued liabilities |  |  | (2,474 | )
Accrued bonus |  |  | (26,928 | )
Deferred revenue |  |  | (1,709 | )
Operating lease liability |  |  | (51 | )
Operating lease liability, long-term |  |  | (3,785 | )
Fair value of net assets acquired |  | $ | 239,887 |
Acquired Goodwill The goodwill of $142.0 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. Substantially all of the goodwill recorded is expected to be deductible for income tax purposes. Pursuant to the Company’s business combination accounting policy included in Note 2, “Summary of Significant Accounting Policies – Business Combinations, Goodwill and Intangible Assets,” the Company recorded goodwill adjustments for the effects on goodwill of changes to net assets acquired during the period that such change is identified, provided that any such change is within the measurement period (up to one year from the date of the acquisition). In December 2019, the Company recorded a deferred tax asset for the C Technologies Acquisition of $0.9 million as an adjustment to goodwill. Intangible Assets The following table sets forth the components of the identified intangible assets associated with the C Technologies Acquisition and their estimated useful lives:
|  | Useful life |  |  | Fair Value |
|  |  |  |  | (Amounts in thousands) |
Customer relationships |  |  | 17 years |  |  | $ | 59,680 |
Developed technology |  |  | 18 years |  |  |  | 28,920 |
Trademark and tradename |  |  | 20 years |  |  |  | 1,570 |
Non-competition agreements |  |  | 4 years |  |  |  | 660 |
Total |  |  |  |  |  | $ | 90,830 |
Revenue, Net Income and Pro Forma Presentation The Company recorded revenue from C Technologies of $ 16.4 million and a net loss of $7.4 million from May 31, 2019, the date of acquisition, to December 31, 2019. The Company has included the operating results of C Technologies in its consolidated statements of comprehensive income since the May 31, 2019 acquisition date. The following pro forma financial information presents the combined results of operations of Repligen and C Technologies as if the acquisition had occurred on January 1, 2018 after giving effect to certain pro forma adjustments. These pro forma adjustments include amortization expense on the acquired identifiable intangible assets, adjustments to stock-based compensation expense for equity compensation issued to C Technologies employees and the income tax effect of the adjustments made. In addition, acquisition-related transaction costs and an accounting adjustment to record inventory at fair value were excluded from pro forma net income in 2019. The following pro forma financial information does not reflect any adjustments for anticipated expense savings resulting from the acquisition and is not necessarily indicative of the operating results that would have actually occurred had the transaction been consummated on January 1, 2018 or of future results:
|  | December 31, |
|  | 2019 |  |  | 2018 |
|  | (Amounts in thousands, except per share data) |
Total revenue |  | $ | 279,434 |  |  | $ | 217,739 |
Net income |  | $ | 23,394 |  |  | $ | 21,195 |
Earnings per share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.48 |  |  | $ | 0.44 |
Diluted |  | $ | 0.48 |  |  | $ | 0.43 |
Prior to the C Technologies Acquisition, C Technologies did not generate monthly or quarterly financial statements that were prepared in accordance with U.S. GAAP. 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 (“HF”) 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, TFF systems and single-use flow path consumables, as well as its Spectra/Por ® portfolio of laboratory dialysis products and its ProConnex 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 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 comprehensive income. 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 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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