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ACQUISITIONS AND DIVESTITURES | 6 Months Ended
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Jun. 30, 2024
Mergers, Acquisitions and Dispositions [Abstract] |
ACQUISITIONS AND DIVESTITURES | ACQUISITIONS AND DIVESTITURES Acquisition of Acclarent, Inc. On April 1, 2024, the Company completed the acquisition of all of the outstanding capital stock of Acclarent, Inc. (“Acclarent”), a developer and marketer of medical devices used in ear, nose, throat (“ENT”) procedures, from Ethicon, Inc., a subsidiary of Johnson & Johnson, for approximately $282.0 million in cash, subject to customary adjustments set forth in the purchase agreement related to working capital balances transferred to the Company. The addition of Acclarent’s ENT product portfolio, including sinus balloon dilation, eustachian tube balloon dilation, and surgical navigation systems technologies, and dedicated salesforce will enhance the Company’s position in the ENT specialty device market. Acclarent’s results of operations have been reported in the Company’s Codman Specialty Surgical reportable segment from the date of acquisition. The Company recorded revenue from Acclarent of approximately $31.3 million, in the consolidated statements of operations and comprehensive income for the three months ended June 30, 2024. The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it is in the process of being integrated into the Company’s operations. Assets Acquired and Liabilities Assumed at Fair Value The Acclarent acquisition has been accounted for using the acquisition method of accounting in accordance with FASB Topic ASC 805, Business Combinations (“ASC 805”). This method requires that assets acquired and liabilities assumed in a business combination are recognized at their fair values as of the acquisition date. The Company estimated fair values at the date of acquisition for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed. The Company has not completed its analysis regarding the assets acquired and liabilities assumed. Therefore, the allocation to intangible assets, goodwill, and income taxes are preliminary and subject to finalization. During the measurement period ending no later than one year after the acquisition date, the Company will continue to obtain information to assist in finalizing the fair values of the net assets acquired, which may differ materially from these preliminary estimates. If any measurement period adjustment is material, the Company will record such adjustment, including any related impact on net income, in the reporting period in which the adjustment is determined. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date:
Dollars in thousands | Estimated Fair Value |  | Estimated Useful Life |  |  |
Current assets: |  |  |  |  |  |
Cash | $ | — |  |  |  |  |  |
Trade accounts receivable, net | 23,716 |  |  |  |  |  |
Inventories, net | 20,294 |  |  |  |  |  |
Prepaid expenses | 273 |  |  |  |  |  |
Other current assets | 476 |  |  |  |  |  |
Total current assets | $ | 44,759 |  |  |  |  |  |
Property, plant and equipment, net | 7,716 |  |  |  |  |  |
Right of use asset - operating leases | 989 |  |  |  |  |  |
Intangible assets, net |  |  |  |  |  |
Completed technology | 202,000 |  |  | 12 years |  |  |
Trademarks/brand names | 3,000 |  |  | 5 years |  |  |
All other | 17,000 |  |  | 4 years |  |  |
Goodwill | 65,579 |  |  |  |  |  |
Deferred tax assets | 6,863 |  |  |  |  |  |
Total assets acquired | $ | 347,906 |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |
Accounts payable, trade | $ | 3,989 |  |  |  |  |  |
Contract liabilities | 3,984 |  |  |  |  |  |
Accrued compensation | 1,037 |  |  |  |  |  |
Accrued expenses and other current liabilities | 2,278 |  |  |  |  |  |
Current portion of lease liability - operating leases | 365 |  |  |  |  |  |
Total current liabilities | $ | 11,653 |  |  |  |  |  |
Lease liability - operating leases | 624 |  |  |  |  |  |
Deferred tax liabilities | 53,635 |  |  |  |  |  |
Total liabilities assumed | 65,912 |  |  |  |  |  |
Net assets acquired | $ | 281,994 |  |  |  |  |  |
The carrying value of trade accounts receivable, prepaid expenses, other current assets, accounts payable, contract liabilities, accrued compensation, accrued expenses and other current liabilities, as well as certain other current and non-current assets and liabilities, generally represented the fair value at the date of acquisition. Intangible Assets The estimated fair value of the intangible assets acquired was determined using the multi-period, excess earnings method of the income approach, which estimates value based on the present value of future economic benefits attributable to the intangible assets. The significant assumptions used in developing the valuation included the estimated annual net cash flows including application of forecasted revenue, the discount rate that appropriately reflects the risk inherent in each future cash flow stream, and an assessment of the asset’s life cycle, as well as other factors. The assumptions used in the financial forecasts were based on historical data, supplemented by current and anticipated growth rates, management plans, and market-comparable information. Fair-value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. Preliminary assumptions may change and may result in significant changes to the final valuation. The intangible assets acquired have a weighted average useful life of 11 years. The Company used a discount rate of 12.2% to arrive at the present value for the acquired intangible assets to reflect the rate of return a market participant would expect to earn and incremental commercial uncertainty in the cash flow projections. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results. Goodwill Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected synergies of the combined company and assembled workforce. Goodwill has been allocated to the Codman Specialty Surgical segment, as shown in Note 5. Goodwill and Other Intangible Assets. Goodwill recognized as a result of this acquisition is non-deductible for income tax purposes. Deferred Tax Liabilities Deferred tax liabilities result from identifiable intangible assets’ fair value adjustments. These adjustments create excess book basis over tax basis which is tax-effected by the statutory tax rates of applicable jurisdictions.

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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 Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent + Details
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