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Acquisitions | 6 Months Ended
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Jun. 30, 2019
Business Combinations [Abstract] |
Acquisitions | 3. Acquisitions Acquisition of Spinal Kinetics, Inc. On April 30, 2018, the Company completed the acquisition of Spinal Kinetics Inc. (“Spinal Kinetics”), a privately held developer and manufacturer of artificial cervical and lumbar discs for $45.0 million in net cash, subject to certain adjustments, plus potential milestone payments of up to $60.0 million in cash. The acquisition date fair value of the consideration transferred was $76.6 million. The results of operations for Spinal Kinetics have been included in the Company’s financial results since the acquisition date, April 30, 2018. For additional discussion regarding the valuation of the contingent consideration, see Note 7. The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date. During the first quarter of 2019, the Company finalized its valuation of assets acquired and liabilities assumed, which resulted in an adjustment between deferred income taxes and goodwill.
(U.S. Dollars, in thousands) |  | Preliminary Acquisition Date Fair Value as Previously Reported |  |  | Adjustments |  |  | Final Acquisition Date Fair Value |  |  | Assigned Useful Life
Assets acquired |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 6,785 |  |  | $ | — |  |  | $ | 6,785 |  |  |
Restricted cash |  |  | 30 |  |  |  | — |  |  |  | 30 |  |  |
Accounts receivable |  |  | 1,705 |  |  |  | — |  |  |  | 1,705 |  |  |
Inventories |  |  | 8,175 |  |  |  | — |  |  |  | 8,175 |  |  |
Prepaid expenses and other current assets |  |  | 315 |  |  |  | — |  |  |  | 315 |  |  |
Property, plant and equipment |  |  | 2,285 |  |  |  | — |  |  |  | 2,285 |  |  |
Other long-term assets |  |  | 320 |  |  |  | — |  |  |  | 320 |  |  |
Developed technology |  |  | 12,400 |  |  |  | — |  |  |  | 12,400 |  |  | 10 years
In-process research and development ("IPR&D") |  |  | 26,800 |  |  |  | — |  |  |  | 26,800 |  |  | 10 years
Tradename |  |  | 100 |  |  |  | — |  |  |  | 100 |  |  | 2 years
Deferred income taxes |  |  | 2,374 |  |  |  | 1,220 |  |  |  | 3,594 |  |  |
Total identifiable assets acquired |  | $ | 61,289 |  |  | $ | 1,220 |  |  | $ | 62,509 |  |  |
Liabilities assumed |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 351 |  |  | $ | — |  |  | $ | 351 |  |  |
Other current liabilities |  |  | 2,873 |  |  |  | (4 | ) |  |  | 2,869 |  |  |
Other long-term liabilities |  |  | 301 |  |  |  | — |  |  |  | 301 |  |  |
Total liabilities assumed |  | $ | 3,525 |  |  | $ | (4 | ) |  | $ | 3,521 |  |  |
Goodwill |  |  | 18,836 |  |  |  | (1,224 | ) |  |  | 17,612 |  |  |
Total fair value of consideration transferred |  | $ | 76,600 |  |  | $ | — |  |  | $ | 76,600 |  |  |
On February 6, 2019, the Company obtained U.S. Food and Drug Administration (“FDA”) approval of the M6-C artificial cervical disc for patients suffering from cervical disease degeneration and started amortizing IPR&D. The $17.6 million of goodwill recognized was assigned to the Global Spine reporting segment. The Company did not recognize any acquisition related costs during the three and six months ended June 30, 2019 and recorded $1.5 million and $3.0 million of acquisition related costs during the three and six months ended June 30, 2018. These costs are included in the condensed consolidated statements of operations and comprehensive income (loss) within general and administrative expenses. The Company’s results of operations included net sales of $3.2 million and $2.3 million related to Spinal Kinetics for the three months ended June 30, 2019 and 2018, respectively, and net sales of $6.4 million and $2.3 million for the six months ended June 30, 2019 and 2018, respectively. Additionally, the Company’s results of operations included net losses of $3.4 million and $1.8 million related to Spinal Kinetics for the three months ended June 30, 2019 and 2018, respectively, and net losses of $7.4 million and $1.8 million for the six months ended June 30, 2019 and 2018, respectively. The following table presents the unaudited pro forma results for the three and six months ended June 30, 2019 and 2018, which combines the historical results of operations of Orthofix and Spinal Kinetics as though the companies had been combined as of January 1, 2018. The unaudited pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at such time.
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
(U.S. Dollars, in thousands) |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
|  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |  |  | (unaudited) |
Net sales |  | $ | 115,850 |  |  | $ | 115,129 |  |  | $ | 224,962 |  |  | $ | 227,584 |
Net income (loss) |  |  | (547 | ) |  |  | 597 |  |  |  | 350 |  |  |  | 5,457 |
Options Medical, LLC Asset Acquisition On January 31, 2019, the Company acquired certain assets of Options Medical, LLC, (“Options Medical”) a medical device distributor based in Florida. Under the terms of the acquisition, the parties agreed to terminate an existing exclusive sales representative agreement, employees of Options Medical became employees of the Company and the Company acquired all customer lists and customer information related to the sale of the Company’s products. As consideration for the assets acquired, the Company paid $6.4 million. Additionally, as an inducement to enter into employment with the Company, the Company provided 25,478 restricted stock units (“RSUs”), with a fair value of $1.4 million, to the Options Medical founder. These RSUs will vest in one-third annual increments beginning on the first anniversary of the grant date and are contingent upon continued employment. The following table summarizes the fair values of assets acquired and liabilities assumed at the acquisition date.
(U.S. Dollars, in thousands) |  | Fair Value |  |  | Balance Sheet Classification |  | Assigned Useful Life
Assets acquired |  |  |  |  |  |  |  |
Operating lease assets |  | $ | 175 |  |  | Other long-term assets |  |
Customer relationships |  |  | 5,832 |  |  | Intangible assets, net |  | 10 years
Assembled workforce |  |  | 568 |  |  | Intangible assets, net |  | 5 years
Total identifiable assets acquired |  | $ | 6,575 |  |  |  |  |
Liabilities assumed |  |  |  |  |  |  |  |
Operating lease liability - short-term |  | $ | 69 |  |  | Other current liabilities |  |
Operating lease liability - long-term |  |  | 106 |  |  | Other long-term liabilities |  |
Total liabilities assumed |  |  | 175 |  |  |  |  |
Total fair value of consideration transferred |  | $ | 6,400 |  |  |  |  |

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