XML 69 R13.htm IDEA: XBRL DOCUMENT v2.4.0.8
Business Acquisition
 9 Months Ended
Sep. 30, 2014
Business Acquisition [Abstract]  
Business Combination Disclosure [Text Block]
Business Acquisition

On August 22, 2014, we completed our acquisition of Surgichem, a wholly-owned subsidiary of Bupa Care Homes (CFG) plc ("Bupa") pursuant to an Agreement by and among Omnicell, Bupa and MTS (the "Share Purchase Agreement"), under which MTS, a wholly-owned subsidiary of Omnicell, purchased the entire issued share capital of Surgichem, with Omnicell acting as guarantor of MTS' obligations thereunder (the "Acquisition"). As a result of the Acquisition, Omnicell paid to Bupa $19.9 million in cash, subject to certain adjustments as provided for in the Share Purchase Agreement. Surgichem is in the process of being integrated with Omnicell’s existing UK business, MTS Medication Technologies Limited, a leading supplier of medication adherence packaging solutions.
The Surgichem acquisition primarily was to align Omnicell with the long term trends of the healthcare market to manage the health of patients across the continuum of care, specifically in the UK market. We acquired all outstanding shares of Surgichem.
We are accounting for the transaction under the acquisition method of accounting in accordance with the provisions of FASB Accounting Standards Codification ("ASC") Topic 805, Business Combinations. Under the acquisition method, the estimated fair value of the consideration transferred to purchase the acquired company is allocated to the assets acquired and the liabilities assumed based on their fair values. We have made significant estimates and assumptions in determining the allocation of the acquisition consideration. The acquisition consideration of $20.8 million is comprised of $19.9 million in cash at closing plus an estimated $0.9 million net working capital adjustment recorded in accrued liabilities, subject to review by Bupa and possible adjustment.
The purchase price allocation is subject to certain post-closing working capital adjustments for the acquired current assets and current liabilities of Surgichem on the acquisition date. The total consideration, and the allocation of consideration to the individual net assets is preliminary, as there are remaining uncertainties to be resolved, including the settlement of the final net working capital adjustment.
The total acquisition consideration was approximately $20.8 million and the preliminary acquisition price allocation was comprised of the following (in thousands):
 
 
Fair Value Acquired

Cash
 
$
153

Accounts receivable
 
2,462

Inventory
 
2,190

Deferred tax assets and other current assets
 
361

      Total current assets
 
$
5,166

Property and equipment
 
164

Intangibles
 
5,730

Goodwill
 
12,016

      Total assets
 
$
23,076

Current liabilities
 
1,191

Non-current deferred tax liabilities
 
1,104

Total purchase price
 
$
20,781



Acquired intangible assets. The fair value of $5.4 million for acquired customer relationships was determined based on an income approach using the discounted cash flow method. The fair value of $0.3 million for the trade name was determined using the relief-from-royalty approach. The intangible assets are being amortized over their estimated useful lives of 18 years for the customer relationships and just over one year for trade name.

Goodwill. Approximately $12.0 million has been allocated to goodwill, which represents sales of future products and services and the assembled workforce of Surgichem. In accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other, goodwill will not be amortized, but instead will be tested for impairment at least annually or more frequently if certain indicators are present. In the event our management determines that the value of goodwill has become impaired, we will incur an accounting charge for the amount of impairment during the quarter in which the determination is made. We believe the Surgichem acquisition enhances Omnicell’s offerings and diversifies its revenue mix providing a more robust product and service solution to its current customers while expanding Omnicell’s international presence. We consider these factors as supporting the amount of goodwill recorded. Note that the amortization of intangible assets, and goodwill is not deductible for tax purposes. For the three months ended September 30, 2014, we incurred approximately $0.2 million in acquisition related costs related to the Surgichem acquisition, offset by a $0.5 million expense reimbursement from Bupa. For the nine months ended September 30, 2014, we incurred approximately $1.1 million in acquisition related costs related to the Surgichem acquisition, offset by a $0.5 million expense reimbursement from Bupa.These costs are included in selling, general and administrative expenses in our Condensed Consolidated Statement of Operations.

During the three months ended September 30, 2014, the acquired Surgichem operations (consolidated since the August 22, 2014 acquisition date) generated approximately $1.4 million of revenue and impact on income from operations was $0.1 million.    
    
The total revenues of Surgichem for the nine months ended September 30, 2014 and 2013, were approximately $10.1 million (including the $1.4 million mentioned above) and $8.7 million, respectively. Results of operations for Surgichem have been included in our condensed consolidated financial statements subsequent to the date of acquisition and pro forma results of operations in accordance with authoritative guidance for prior periods have not been presented because the effect of the acquisition was not material to our prior period consolidated financial results.