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Business Combinations | 6 Months Ended
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Jun. 30, 2018
Business Combinations [Abstract] |
Business Combinations | Business Combinations Silver Spring Networks, Inc. On January 5, 2018, we completed the acquisition of SSNI by purchasing 100% of SSNI's outstanding stock. The acquisition was financed through incremental borrowings and cash on hand. Refer to Note 6 for further discussion of our debt. SSNI provided smart network and data platform solutions for electricity, gas, water and smart cities including advanced metering, distribution automation, demand-side management, and street lights. Solutions include one or several of the following: communications modules, access points, relays and bridges; network operating software, grid management, security and grid analytics managed services and SaaS; installation; implementation; and professional services including consulting and analysis. Itron is managing the SSNI business as our Networks operating segment. The purchase price of SSNI was $809.2 million, which is net of $97.8 million of acquired cash and cash equivalents. Of the total consideration $802.5 million was paid in cash. The remaining $6.7 million relates to the fair value of pre-acquisition service for replacement awards of unvested SSNI options and restricted stock unit awards with an Itron equivalent award. We made a preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on estimated fair value assessments during the first quarter. We are continuing to collect information to determine the fair values of certain intangible assets, working capital, and deferred income taxes, all of which could affect goodwill. The fair values of these assets and liabilities are provisional until we are able to complete our assessment. The following reflects our preliminary allocation of purchase price as of January 5, 2018:
| Fair Value |  | Weighted Average Useful Life
| (in thousands) |  | (in years)
Current Assets | $ | 86,783 |  |  |
Property, plant, and equipment | 27,670 |  |  |
Other long-term assets (1) | (1,578 | ) |  |
Identifiable intangible assets |  |  |
Core-developed technology | 81,900 |  |  | 5
Customer contract and relationships | 133,500 |  |  | 10
Trademark and trade names | 10,800 |  |  | 3
Total identified intangible assets subject to amortization | 226,200 |  |  | 8
In-process research and development (IPR&D) | 14,400 |  |  |
Total identified intangible assets | 240,600 |  |  |
Goodwill | 572,870 |  |  |
Current liabilities | (91,301 | ) |  |
Customer contract and relationships | (23,900 | ) |  | 5
Long-term liabilities | (1,928 | ) |  |
Total net assets acquired | $ | 809,216 |  |  |
(1) | Reflects adjustments to deferred tax assets and liabilities, net as a result of the acquisition, and is classified as part of our overall consolidated deferred tax asset. This unfavorable deferred tax asset more than offsets the fair value of other noncurrent assets acquired.
The fair values for the identified trademarks and core-developed technology intangible assets were estimated using the relief from royalty method, which values the assets by estimating the savings achieved by ownership of trademark or technology when compared with the cost of licensing it from an independent owner. The fair value of customer contracts and relationship were estimated using the income approach. Under the income approach, the fair value reflects the present value of the projected cash flows that are expected to be generated. The fair value of IPR&D was valued utilizing the replacement cost method, which measures the value of an asset based on the cost to replace the existing asset. IPR&D will be amortized using the straight-line method after the technology is fully developed and is considered a product offering of SSNI. Incremental costs to be incurred for these projects will be recognized as product development expense as incurred within the Consolidated Statements of Operations. Core-developed technology represents the fair values of SSNI products that have reached technological feasibility and were part of SSNI's product offerings at the date of the acquisition. Customer contracts and relationships represent the fair value of the relationships developed with its customers, including the backlog. The core-developed technology, trademarks, and customer contracts and relationships intangible assets valued using the income approach will be amortized using the estimated discounted cash flows assumed in the valuation models. Goodwill of $572.9 million arising from the acquisition consists largely of the synergies expected from combining the operations of Itron and SSNI, as well as certain intangible assets that do not qualify for separate recognition. All of the goodwill balance was assigned to the Networks reporting unit and operating segment. We will not be able to deduct any of the goodwill balance for income tax purposes. As a part of the business combination, we have incurred $15.6 million of acquisition related expenses for the six months ended June 30, 2018, which includes such activities as success fees, certain consulting and advisory costs, and incremental legal and accounting costs. In addition, for the three and six months ended June 30, 2018, we recognized $12.1 million and $58.9 million respectively, of integration costs, which are expenses related to integrating SSNI into Itron, and includes expenses such as accounting and process integration and the related consulting fees, severance, site closure costs, system integration, and travel associated with knowledge transfers as we consolidate redundant positions. All acquisition and integration related expenses are included within general and administrative expenses in the Consolidated Statement of Operations. The following table presents the revenues and net loss from SSNI operations that are included in our Consolidated Statements of Operations:
| April 1, 2018 - June 30, 2018 |  | January 5, 2018 - June 30, 2018
Revenues | $ | 73,643 |  |  | $ | 159,526 |
Net loss | (13,919 | ) |  | (43,672 | )
The following supplemental pro forma results are based on the individual historical results of Itron and SSNI, with adjustments to give effect to the combined operations as if the acquisition had been consummated on January 1, 2017.
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
| ( in thousands)
Revenues | $ | 585,890 |  |  | $ | 764,654 |  |  | $ | 1,193,111 |  |  | $ | 1,292,509 |
Net income (loss) | 2,657 |  |  | 20,240 |  |  | (128,309 | ) |  | (6,994 | )
The significant nonrecurring adjustments reflected in the proforma schedule above are considered material and include the following:
• | Elimination of transaction costs incurred by SSNI and Itron prior to the acquisition completion
• | Reclassification of certain expenses incurred after the acquisition to the appropriate periods assuming the acquisition closed on January 1, 2017
The supplemental pro forma results are intended for information purposes only and do not purport to represent what the combined companies' results of operations would actually have been had the transaction in fact occurred at an earlier date or project the results for any future date or period. Comverge On June 1, 2017, we completed the acquisition of Comverge by purchasing the stock of its parent, Peak Holding Corp. (Comverge). This was financed through borrowings on our multicurrency revolving line of credit and cash on hand. Comverge is a leading provider of integrated demand response and customer engagement solutions that enable electric utilities to ensure grid reliability, lower energy costs for consumers, meet regulatory demands, and enhance the customer experience. Comverge's technologies are complementary to our Electricity operating segment's growing software and services offerings, and will help optimize grid performance and reliability. The purchase price of Comverge was $100.0 million in cash, net of $18.2 million of cash and cash equivalents acquired. We allocated the purchase price to the assets acquired and liabilities assumed based on fair value assessments. The fair values of these assets and liabilities were considered final as of December 31, 2017. The following supplemental pro forma results are based on the individual historical results of Itron and Comverge, with adjustments to give effect to the combined operations as if the acquisition had been consummated on January 1, 2016.
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
| ( in thousands)
Revenues | $ | 585,890 |  |  | $ | 511,024 |  |  | $ | 1,193,111 |  |  | $ | 1,002,786 |
Net income (loss) | 2,657 |  |  | 18,954 |  |  | (143,009 | ) |  | 34,061 |
The significant nonrecurring adjustments reflected in the proforma schedule above are not considered material and include the following:
• | Elimination of transaction costs incurred by Comverge and Itron prior to the acquisition completion
• | Reclassification of certain expenses incurred after the acquisition to the appropriate periods assuming the acquisition closed on January 1, 2016
The supplemental pro forma results are intended for information purposes only and do not purport to represent what the combined companies' results of operations would actually have been had the transaction in fact occurred at an earlier date or project the results for any future date or period.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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