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Business Combinations | 12 Months Ended
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Dec. 31, 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: Debt" 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. Upon acquisition, SSNI changed its name to Itron Networked Solutions, Inc. (INS), and initially operated separately as our Networks operating segment. Subsequent to the October 1, 2018 reorganization, the prior Networks operating segment was integrated into the new Networked Solutions and Outcomes operating segments. 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 allocated the purchase price to the assets acquired and liabilities assumed based on estimated fair value assessments. The following reflects our allocation of purchase price:
| Fair Value |  | Weighted Average Useful Life
| (in thousands) |  | (in years)
Current Assets | $ | 86,701 |  |  |
Property, plant, and equipment | 27,670 |  |  | 6
Other long-term assets | 3,866 |  |  |
Identifiable intangible assets |  |  |
Core-developed technology | 81,900 |  |  | 5
Customer contracts and relationships | 134,000 |  |  | 10
Trademark and trade names | 10,800 |  |  | 3
Total identified intangible assets subject to amortization | 226,700 |  |  | 8
In-process research and development (IPR&D) | 14,400 |  |  |
Total identified intangible assets | 241,100 |  |  |
Goodwill | 575,750 |  |  |
Current liabilities | (99,406 | ) |  |
Customer contracts and relationships | (23,900 | ) |  | 5
Long-term liabilities | (2,565 | ) |  |
Total net assets acquired | $ | 809,216 |  |  |
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. We estimated it would take approximately one year to complete the in-process technology. A profit mark-up was used to account for the return that a third-party developer would require on development efforts for the asset based on expected earnings before interest and taxes, and a return of ten percent was used based on the risk of the asset relative to the overall business. IPR&D will be amortized using the straight-line method after the technology is fully developed and is considered a product offering. 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 $575.8 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 prior Networks reporting unit and operating segment. Refer to "Note 5: Goodwill". 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 year ended December 31, 2018, which includes such activities as success fees, certain consulting and advisory costs, and incremental legal and accounting costs. In addition, for the year ended December 31, 2018, we recognized $76.3 million 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 sales, general and administrative expenses in the Consolidated Statements of Operations. The following table presents the revenues and net loss from SSNI operations that are included in our Consolidated Statements of Operations:
|  | January 5, 2018 - December 31, 2018
| (in thousands)
Revenues |  | $ | 352,996 |
Net income (loss) |  | (54,409 | )
The following supplemental pro forma results (unaudited) 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.
|  | Year Ended December 31,
|  | 2018 |  | 2017
| ( in thousands)
Revenues |  | $ | 2,376,117 |  |  | $ | 2,591,211 |
Net income (loss) |  | (84,602 | ) |  | 27,289 |
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.

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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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