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Acquisitions

12 Months Ended

Dec. 31, 2020

Note 3. Acquisitions

2020 Acquisitions – CRYOPDP and MVE

CRYOPDP Acquisition

On October 1, 2020, the Company completed its acquisition of CRYOPDP for a cash consideration of €48.3 million ($57.0 million, the “CRYOPDP Acquisition”). This acquisition was funded with existing cash on hand. CRYOPDP, based in France, is a leading global provider of innovative temperature-controlled logistics solutions to the clinical research, pharmaceutical and cell and gene therapy markets. CRYOPDP conducts its business activities in the Americas, EMEA and APAC. As a result of the CRYOPDP Acquisition, the Company has extended its solutions to include broader temperature-controlled logistics and specialty courier services and has significantly expanded its global network through CRYOPDP’s 22 facilities in 12 countries.

The CRYOPDP Acquisition was accounted for under the acquisition method of accounting in accordance with FASB ASC Topic 805, “Business Combinations,” and, therefore, the total purchase price was allocated to the identifiable tangible and intangible assets acquired and the liabilities assumed based on their respective fair values on the acquisition date. Fair values were determined by management based in part on an independent valuation performed by a third-party valuation specialist and required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable; however, actual results may differ from these estimates.

The following table summarizes the allocation of the purchase price as of the acquisition date (in thousands):


Total purchase consideration paid	$	56,971

Purchase price allocation:
Cash and cash equivalents		8,346
Accounts receivable		10,603
Inventories		644
Prepaid and other current assets		2,905
Property and equipment		2,863
Operating lease right-of-use assets		1,856
Intangible assets		28,235
Other long-term assets		569
Accounts payable and other accrued expenses		(11,110)
Accrued compensation and related expenses		(1,194)
Deferred revenue		(370)
Note payable		(4,690)
Operating lease liabilities		(1,856)
Deferred tax liability		(5,311)
Other long-term liabilities		(64)
Total identifiable net assets		31,426
Goodwill		25,545
	$	56,971

The following table summarizes the estimated fair values of CRYOPDP’s identifiable intangible assets at the date of acquisition and their estimated useful lives and amortization expense based on their respective useful lives (in thousands):


					Annual
	Estimated		Estimated	Amortization	Amortization
	Fair Value		Useful Life	Method	Expense
Software	$	3,578	7	Straight-line	$	511
Customer relationships		5,871	11.5	Straight-line		511
Agent network		8,219	4	Straight-line		2,055
Trade name/trademarks		10,567	Indefinite	—		—
Total	$	28,235			$	3,077

Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies, and other benefits that we believe will result from combining the operations of CRYOPDP with our operations. The goodwill recognized of $25.5 million is not expected to be deductible for income tax purposes.

Our estimate of the fair value of the specifically identifiable assets acquired and liabilities assumed as of the date of acquisition is subject to the finalization of management’s analysis related to certain matters, including income taxes, accounts receivable, note payable and other accounts and certain valuation balances. The final determination of these fair values will be completed as additional information becomes available but no later than one year from the acquisition date. Although the final determination may result in asset and liability fair values that are different than the preliminary estimates of these amounts included herein, it is not expected that those differences will be material to our consolidated financial position.

Acquisition-related transaction costs (included in selling, general and administrative expenses) totaled approximately $1.4 million.

MVE Acquisition

On October 1, 2020, the Company completed its acquisition of Chart Industries, Inc.’s MVE cryobiological storage business (the “MVE Acquisition”) for a cash consideration of $317.5 million, subject to customary closing working capital and other adjustments. The Company financed a portion of the closing cash payment of the MVE Acquisition with the net proceeds of the Blackstone Private Placement, as further discussed in Note 13. MVE is a global leader in manufactured vacuum insulated products and cryogenic freezer systems for the life sciences industry. MVE has manufacturing and distribution operations in the Americas, EMEA and APAC. As a result of the MVE Acquisition, the Company has extended its integrated logistics solutions to provide a broad range of cryogenic dewars and freezers to the life sciences industry.

The MVE Acquisition was accounted for under the acquisition method of accounting in accordance with FASB ASC Topic 805, “Business Combinations,” and, therefore, the total purchase price was allocated to the identifiable tangible and intangible assets acquired and the liabilities assumed based on their respective fair values on the acquisition date. Fair values were determined by management based in part on an independent valuation performed by a third-party valuation specialist and required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable; however, actual results may differ from these estimates.

The following table summarizes the allocation of the purchase price as of the acquisition date (in thousands):


Total purchase consideration paid	$	317,470

Purchase price allocation:
Cash and cash equivalents		2,955
Accounts receivable		10,645
Inventories		10,627
Prepaid and other current assets		256
Property and equipment		9,050
Operating lease right-of-use assets		2,154
Intangible assets		184,991
Other long-term assets		358
Accounts payable and other accrued expenses		(6,036)
Accrued compensation and related expenses		(1,139)
Operating lease liabilities		(2,160)
Deferred tax liability		(393)
Other long-term liabilities		(64)
Total identifiable net assets		211,244
Goodwill		106,226
	$	317,470

The following table summarizes the estimated fair values of MVE’s identifiable intangible assets and their estimated useful lives and amortization expense based on their respective useful lives (in thousands):


					Annual
	Estimated		Estimated	Amortization	Amortization
	Fair Value		Useful Life	Method	Expense
Order backlog		2,600	0.125	Straight-line	$	—
Customer relationships		118,600	14.5	Straight-line		8,179
Developed technology		28,700	12	Straight-line		2,392
Land use rights		2,291	38	Straight-line		63
Trade name/trademarks		32,800	Indefinite	—		—
Total	$	184,991			$	10,634

Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies, and other benefits that we believe will result from combining the operations of MVE with our operations. Of the $106.2 million goodwill recognized, approximately $62.5 million is allocated to the U.S. and Germany and is expected to be deductible for income tax purposes.

Our estimate of the fair value of the specifically identifiable assets acquired and liabilities assumed as of the date of acquisition is subject to the finalization of management’s analysis related to certain matters, including income taxes and certain other accounts and certain valuation balances. The final determination of these fair values will be completed as additional information becomes available but no later than one year from the acquisition date. Although the final determination may result in asset and liability fair values that are different than the preliminary estimates of these amounts included herein, it is not expected that those differences will be material to our consolidated financial position.

Acquisition-related transaction costs (included in selling, general and administrative expenses) totaled approximately $8.8 million.

Revenue, Net Income and Pro Forma Presentation – CRYOPDP and MVE Acquisitions

The operating results of the CRYOPDP and MVE acquisitions have been included in our consolidated financial statements from the acquisition date through December 31, 2020. Our results for the year ended December 31, 2020, include revenue for CRYOPDP of $12.9 million and net loss of $1.8 million and revenue for MVE of $23.0 million and net income of $1.8 million.

The following unaudited pro forma information presents our combined results as if the CRYOPDP and MVE acquisitions had occurred on January 1, 2019. The unaudited pro forma financial information was prepared to give effect to events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) expected to have a continuing impact on the combined company’s results. The 2019 period includes the elimination of revenues of $1.8 million and related cost of goods sold of $0.9 million recorded by MVE from the Company. There were no transactions between the Company and CRYOPDP during the periods presented that are required to be eliminated. The unaudited pro forma combined financial information does not reflect any cost savings, operating synergies, or revenue enhancements that the combined companies may achieve as a result of the acquisitions or the costs to integrate the operations or the costs necessary to achieve cost savings, operating synergies, or revenue enhancements.

The following table presents the unaudited, pro forma consolidated results of operations for the year ended December 31, 2020 and 2019 as if the acquisition of the assets of CRYOPDP and MVE had occurred as of January 1, 2019. The pro forma information provided below is compiled from the audited financial statements of CRYOPDP and MVE, which includes pro forma adjustments for intangible assets amortization expense and depreciation expense on the step up in fair value of property and equipment.


	Year Ended		Year Ended
(in thousands except per share data)	December 31, 2020		December 31, 2019
	(unaudited)		(unaudited)
Revenues	$	172,147	$	163,217
Net loss	$	(18,562)	$	(3,149)
Basic and diluted net loss per share	$	(2.08)	$	(0.09)

The pro forma results are not necessarily indicative of the consolidated results of operations that we would have reported had the acquisitions been completed as of January 1, 2019 and should not be taken as representative of our consolidated results of operations following the acquisitions. In addition, the unaudited proforma consolidated financial information is not intended to project the future results of operations of the Company.

Acquisition – Cryogene Partners

On May 14, 2019, Cryogene, Inc., a Texas corporation and a wholly owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) for the acquisition of the assets of Cryogene Partners, a Texas general partnership doing business as Cryogene Labs (“Cryogene”). The closing of the transaction contemplated in the Asset Purchase Agreement occurred simultaneously with the execution of the Asset Purchase Agreement on May 14, 2019.

Pursuant to the terms and subject to the conditions of the Asset Purchase Agreement, the Company acquired substantially all of the assets of Cryogene, including, without limitation, tangible personal property, intellectual property assets, and certain contracts related to Cryogene’s temperature-controlled biostorage solutions business located in Houston, Texas (the foregoing, the “Purchased Assets”), and assumed certain related liabilities.

The aggregate purchase price for the Purchased Assets was $20.3 million in cash.

As a result of this acquisition, the Company has extended its integrated logistics solutions and services to provide comprehensive temperature-controlled sample management solutions to the life sciences industry, including specimen storage, sample processing, collection, and retrieval.

Purchase Price Allocation

We funded this acquisition through available cash and accounted for it as an acquisition of a business in accordance with FASB ASC Topic 805, “Business Combinations”. Assets acquired and liabilities assumed in connection with the acquisition have been recorded at their fair values. Fair values were determined by management based in part on an independent valuation performed by a third-party valuation specialist. The Company has performed a valuation analysis of the fair value of Cryogene’s assets and liabilities. The following table summarizes the allocation of the purchase price as of the acquisition date (in thousands):


Total purchase price	$	20,317

Purchase price allocation:
Property and equipment		4,257
Intangible assets		5,280
Deferred revenue		(220)
Total identifiable net assets		9,317
Goodwill		11,000
	$	20,317

The following table summarizes the fair value of intangible assets acquired at the date of acquisition and their estimated useful lives and amortization expense based on their respective useful lives (in thousands):


					Annual
	Estimated		Estimated	Amortization	Amortization
	Fair Value		Useful Life	Method	Expense
Non-compete agreement	$	390	5	Straight-line	$	78
Technology		510	5	Straight-line		102
Customer relationships		3,900	12	Straight-line		325
Trade name/trademark		480	15	Straight-line		32
Total	$	5,280			$	537

Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, the expected synergies, and other benefits that we believe will result from combining the operations of Cryogene with our operations. The goodwill recognized of $11.0 million is expected to be deductible for income tax purposes.

Acquisition-related transaction costs (included in selling, general and administrative expenses) totaled approximately $0.3 million.

The operating results of the Cryogene acquisition have been included in our consolidated financial statements from the acquisition date through December 31, 2019. Our results for the year ended December 31, 2020 and 2019, include Cryogene sales of $3.0 million and net income of $437,100.