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Business Acquisitions | 9 Months Ended
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Sep. 30, 2015
Business Combinations [Abstract] |
Business Acquisitions | Business Acquisitions Mach4 Acquisition On April 21, 2015, we completed the acquisition of Mach4, a privately held German limited liability company with its registered office in Bochum, Germany pursuant to a share purchase agreement (the “Mach4 Agreement”), under which Omnicell International, Inc., a wholly-owned subsidiary of Omnicell Inc., purchased the entire issued share capital of Mach4 (the “Mach4 Acquisition”). Mach4 manufactures robotic dispensing systems used by retail and hospital pharmacies and the Mach4 acquisition provides Omnicell with a more robust product offering that is intended to be leveraged to create opportunities to sell additional Omnicell medication cabinets. The robotic storage and dispensing product offering provides Omnicell with a solution to better compete for international market share. Pursuant to the terms of the Mach4 Agreement, we paid approximately $17.2 million in cash after adjustments provided for in the Mach4 Agreement, of which $2.7 million was placed in an escrow fund, which will be distributed to Mach4's former stockholders subject to claims that we may make against the escrow fund with respect to indemnification and other claims within 18 months after the closing date of this transaction. Avantec Acquisition On April 30, 2015, we completed the acquisition of Avantec, the privately-held distributor of Omnicell’s products in the United Kingdom, pursuant to a share purchase agreement (the “Avantec Agreement”). Pursuant to the Avantec Agreement, we acquired the remaining 85% of issued and outstanding ordinary shares of Avantec that was not previously owned by the Company. Avantec develops medication and supply automation products that complement our solutions for configurations suited to the United Kingdom marketplace, and had been the exclusive distributor of our medication and supply automation solutions since 2005 in the United Kingdom. Pursuant to the terms of the Avantec Agreement, we agreed to pay $12.0 million in cash (the “Purchase Consideration”) and potential earn-out payments of up to $3.0 million payable after December 31, 2015 and an additional $3.0 million payable after December 31, 2016, based on future bookings. The fair value of these potential earn-out payments as of the acquisition date was $5.6 million. Pursuant to the terms of the Avantec Agreement we retained $1.8 million of the Purchase Consideration to be held to settle any future indemnification claims within 18 months period that we may make following the closing. The fair value of the contingent consideration liability related to Avantec is revalued at each reporting date or more frequently if circumstances dictate. Changes in the fair value of this obligation are recorded as income or expense within other expense in our condensed consolidated statements of operation. The significant unobservable inputs used in the fair value measurement of the contingent consideration are the achievement of booking targets and the discount rate. Significant increases or decreases in any of those inputs in isolation would result in a significantly lower or higher fair value measurement. Prior to the Avantec Acquisition, we accounted for our 15% ownership interest in Avantec as an equity-method investment. The Avantec acquisition -date carrying book value of our previous equity interest was $1.3 million. This transaction was accounted for as a step acquisition, which required us to re-measure our previously held 15% ownership interest to fair value and record the difference between the fair value and carrying value as a gain. The fair value of the equity investment was determined to be $4.7 million which resulted in a gain of $3.4 million that was recorded in operating income in our Condensed Consolidated Statement of Operations in the three months ended June 30, 2015. Both of the above acquired companies are included in our Automation and Analytics segment. We accounted for the transactions above under the provisions of FASB Accounting Standards Codification ("ASC") Topic 805, Business Combinations. Accordingly, the estimated fair value of the consideration transferred to purchase the acquired companies is allocated to the assets acquired and the liabilities assumed based on their respective fair values. We have made significant estimates and assumptions in determining the allocation of the acquisition consideration. The purchase price allocations are subject to certain post-closing working capital adjustments for the acquired current assets and current liabilities of both acquisitions at their respective acquisition dates. 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 for each. Our preliminary allocation of the total purchase price for each transaction is summarized below:
| Mach4 |  | Avantec |  | Total
| (In thousands)
Cash | $ | 397 |  |  | $ | 3,392 |  |  | $ | 3,789 |
Accounts receivable | 3,743 |  |  | 3,607 |  |  | 7,350 |
Inventory | 3,580 |  |  | 1,428 |  |  | 5,008 |
Deferred tax assets and other current assets | 368 |  |  | 89 |  |  | 457 |
Total current assets | 8,088 |  |  | 8,516 |  |  | 16,604 |
Property and equipment | 463 |  |  | — |  |  | 463 |
Intangibles | 7,710 |  |  | 6,341 |  |  | 14,051 |
Goodwill | 10,539 |  |  | 15,606 |  |  | 26,145 |
Other non-current assets | 52 |  |  | — |  |  | 52 |
Total assets | 26,852 |  |  | 30,463 |  |  | 57,315 |
Current liabilities | 3,684 |  |  | 4,125 |  |  | 7,809 |
Non-current deferred tax liabilities | 2,564 |  |  | 1,269 |  |  | 3,833 |
Deferred service revenue and gross profit | 2,314 |  |  | 928 |  |  | 3,242 |
Other non-current liabilities | 1,056 |  |  | — |  |  | 1,056 |
Total purchase price | $ | 17,234 |  |  | $ | 24,141 |  |  | $ | 41,375 |
Total purchase price, net of cash received | $ | 16,837 |  |  | $ | 20,749 |  |  | $ | 37,586 |
Identifiable intangible assets Intangible assets acquired and their respective estimated remaining useful lives over which each asset will be amortized are as follows:
| Mach4 | Avantec
| Fair value |  | Weighted average useful life | Fair value |  | Weighted average useful life
| (In thousands) |  | (In years) | (In thousands) |  | (In years)
Developed technology | $ | 3,290 |  |  | 8 | $ | — |  |  | —
Trade name | 850 |  |  | 6 | 92 |  |  | 2
Customer relationships | 3,570 |  |  | 11-12 | 5,834 |  |  | 12
Backlog | — |  |  | — | 415 |  |  | 2
Total purchased intangible assets | $ | 7,710 |  |  |  | $ | 6,341 |  |  |
Developed technology represents completed technology that has reached the technological feasibility and/or is currently offered for sale to Mach4 customers. The fair value is determined based on the relief from royalty method under the income approach, which requires us to estimate a reasonable royalty rate, identify relevant projected revenues and expenses, and select an appropriate discount rate. A royalty rate of 5.0% was used to value the developed technology. The after-tax cash flows were discounted to present value utilizing a 17.5% discount rate, which is based on our company-wide required return for this acquisition plus a discount of 1.5% to account for the unique riskiness of the asset. The developed technology had a fair value of $3.3 million and had an estimated economic life of eight years based on estimated technological obsolescence and is being amortized on an accelerated basis. Trade name represents the fair value brand recognition that was determined using the relief-from-royalty method under the income approach. A royalty rate of 1.0% and 2.0% was used to value the trade names of Avantec and Mach4, respectively. The value of trade names of $0.1 million for Avantec is being amortized on straight-line method and $0.9 million for Mach4 is being amortized on an accelerated basis. Customer relationships represent the fair value of future projected revenues that will be derived from the sale of products to existing customers of the acquired company. The fair value of the customer relationships is determined based on the excess earnings method under the income approach that resulted in a value of $3.6 million for Mach4 and $5.8 million for Avantec and has been amortized over their useful lives on accelerated basis. Backlog represents the fair value of sales order backlog as of the valuation date and its fair value is determined based on the excess earnings method under the income approach and is being amortized on straight-line method. Goodwill The goodwill arising from these acquisitions is primarily attributed to sales of future products and services and the assembled workforce. Goodwill is not deductible for tax purposes. Goodwill is not being amortized but is reviewed annually for impairment or more frequently if impairment indicators arise, in accordance with authoritative guidance. The following table presents certain unaudited pro forma information for illustrative purposes only, for fiscal 2015 and fiscal 2014 as if Mach4 and Avantec had been acquired on January 1, 2014. The unaudited estimated pro forma information combines the historical results of Mach4 and Avantec with our consolidated historical results and includes certain adjustments reflecting the estimated impact of fair value adjustments for the respective periods. The pro forma information is not indicative of what would have occurred had the acquisitions taken place on January 1, 2014. Additionally, the pro forma financial information does not include the impact of possible business model changes between Mach4, Avantec and the Company. We expect to achieve further business synergies, as a result of the acquisitions that are not reflected in the pro forma amounts that follow. As a result, actual results will differ from the unaudited pro forma information presented (in thousands, except per share data):
| Nine months ended September 30,
| 2015 |  | 2014
| (In thousands, except per share data)
Pro forma net revenues | $ | 361,217 |  |  | $ | 340,915 |
Pro forma net income | $ | 23,742 |  |  | $ | 22,511 |
Pro forma net income per share basic | $ | 0.66 |  |  | $ | 0.63 |
Pro forma net income per share diluted | $ | 0.64 |  |  | $ | 0.61 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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