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Acquisition Of JOTEC | 12 Months Ended
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Dec. 31, 2017
Acquisition Of JOTEC [Abstract] |
Acquisition of JOTEC | 4. Acquisition of JOTEC ﻿ Overview ﻿ On October 10, 2017 we announced that we entered into a definitive agreement to acquire JOTEC AG (“JOTEC”), a Swiss entity (the “Acquisition”), which we converted to JOTEC GmbH, for approximately $225.0 million, subject to certain adjustments. The transaction closed on December 1, 2017 and JOTEC is being operated as a wholly owned subsidiary of CryoLife. In connection with the closing of the JOTEC acquisition, CryoLife entered into a Credit and Guaranty Agreement (“Credit Agreement”) with certain financial institutions as lenders, and Deutsche Bank AG New York Branch, as administrative and collateral agent, for a senior secured credit facility in an aggregate principal amount of $255.0 million, which includes a $225.0 million term loan and a $30.0 million revolving credit facility. See Note 13 for further discussion of the Credit Agreement. ﻿ JOTEC is a German-based, privately held developer of technologically differentiated endovascular stent grafts, and cardiac and vascular surgical grafts, focused on aortic repair. We believe our the acquisition of JOTEC will create a company with a broad and highly competitive product portfolio focused on aortic surgery, and will position us to compete strongly in the important and growing endovascular surgical markets. ﻿ Accounting for the Transaction ﻿ Based on our preliminary analysis, the purchase price of the transaction totaled approximately $221.9 million, including debt and cash acquired as determined on the date of closing, consisting of $168.8 million in cash and 2,682,754 shares of CryoLife common stock, with an estimated value of $53.1 million as determined on the date of the closing. Upon closing of the Acquisition, $22.5 million was paid into an escrow account for any amounts payable for indemnification claims or other payment obligations. Our preliminary allocation of the $221.9 million purchase consideration was allocated to JOTEC’s tangible and identifiable intangible assets acquired and liabilities assumed, based on their estimated fair values as of December 1, 2017. Goodwill was preliminarily recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired and is not deductible for tax purposes. Goodwill from this transaction has been allocated to our Medical Devices segment. The estimated allocation of assets acquired and liabilities assumed is based on the information available to us. If new information regarding these values is received that would result in a material adjustment to the values r ecorded, we will recognize the adjustment, which may include the recognition of additional expenses, impairments, or other allocation adjustments, in the period this determination is made. ﻿ The preliminary purchase consideration acquired as of December 1, 2017, is as follows (in thousands): ﻿
﻿ |  |
﻿ | Opening
﻿ | Balance Sheet
﻿Cash and cash equivalents | $ | 4,089
﻿Receivables |  | 13,204
﻿Inventories |  | 17,341
﻿Intangible assets |  | 115,820
﻿Property and equipment |  | 12,921
﻿Goodwill |  | 110,100
﻿Other assets |  | 3,893
﻿Debt acquired |  | (3,770)
﻿Liabilities assumed |  | (51,729)
﻿Total purchase consideration | $ | 221,869
﻿ We incurred transaction and integration costs of $8.9 million for the year ended December 31, 2017 primarily related to the acquisition, which included, among other costs, expenses related to the termination of international and domestic distribution agreements, severance costs, and legal, professional, and consulting costs. These costs were expensed as incurred and were primarily recorded as general, administrative, and marketing expenses on our Consolidated Statements of Operations and Comprehensive Income. ﻿ Pro Forma Results - Unaudited ﻿ JOTEC revenues were $4.1 million and the net loss was $1.5 million from the date of acquisition through December 31, 2017. Our unaudited pro forma results of operations for the years ended December 31, 2017 and 2016, assuming the JOTEC acquisition had occurred as of January 1, 2016, are presented for comparative purposes below. These amounts are based on available information from the results of operations of JOTEC prior to the acquisition date and are not necessarily indicative of what the results of operations would have been had the acquisition been completed on January 1, 2016. Differences between the preliminary and final purchase price allocation could have an impact on the pro forma financial information presented below and that impact could be material. This unaudited pro forma information does not project operating results post acquisition. ﻿ This unaudited pro forma information is as follows (in thousands, except per share amounts): ﻿ ﻿
﻿ |  |  |  |  |
﻿ | Twelve Months Ended
﻿ | December 31,
﻿ | 2017 |  | 2016
﻿Total revenues | $ | 236,209 |  | $ | 224,896
﻿Net loss |  | (736) |  |  | (1,966)
﻿ |  |  |  |  |
﻿Pro forma loss per common share - basic | $ | (0.02) |  | $ | (0.06)
﻿Pro forma loss per common share - diluted | $ | (0.02) |  | $ | (0.06)
﻿ Pro forma net loss was calculated using a normalized tax rate of approximately 38%. ﻿ The pro forma amortization of intangible assets acquired, as reported in our 8-K/A filed on February 16, 2018, was incorrect due to a clerical error. The corrected pro forma amortization is included in the determination of pro forma loss per common share for the twelve months ended December 31, 2016 presented above. The result of this correction increased the pro forma amortization adjustment by $4.3 million to a total of $5.5 million for the twelve month ended December 31, 2016. This adjustment reduced the results per common share for the twelve months ended December 31, 2016 by $0.08 per common share from $0.02 per common share originally reported in the 8-K/A, resulting in an adjusted pro forma net loss per common share of ($0.06) on a fully diluted basis. ﻿ The results for the twelve months ended December 31, 2017 presented above include pro forma amortization of intangible assets acquired of $4.9 million. ﻿ The result of this correction on pro forma results of operations, as reported in the 8-K/A referenced for the nine months ended September 30, 2017, also increased the pro forma amortization adjustment by $3.2 million for the nine months ended September to a total of $3.8 million. This adjustment reduced the pro forma net income per common share by $0.06 from $0.13 per common share to an adjusted pro forma net income per common share of $0.07 on a fully diluted basis for the nine months ended September 30, 2017.

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