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Business Combinations | 6 Months Ended
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Jun. 30, 2018
Business Combinations [Abstract] |
Business Combinations | 2. BUSINESS COMBINATIONS On March 19, 2018, we acquired Sumitomo Electric Lightwave Corp.’s (SEL) North American EPON business and entered into a technology license and OEM supply agreement with Sumitomo Electric Industries, Ltd. (SEI). This acquisition establishes ADTRAN as the North American market leader for EPON solutions for the cable MSO industry and it will accelerate the MSO market’s adoption of our open, programmable and scalable architectures. This transaction was accounted for as a business combination. We have included the financial results of this acquisition in our consolidated financial statements since the date of acquisition. These revenues are included in the Access & Aggregation and Customer Devices categories within the Network Solutions reportable segment. We recorded a bargain purchase gain of $11.3 million during the first quarter of 2018, net of income taxes, which is subject to customary working capital adjustments between the parties. The bargain purchase gain of $11.3 million represents the difference between the fair value of the net assets acquired over the cash paid. SEI, an OEM supplier based in Japan, is the global market leader in EPON. SEI’s Broadband Networks Division, through its SEL subsidiary, operated a North American EPON business that included sales, marketing, support, and region-specific engineering development. The North American EPON market is primarily driven by the Tier 1 cable MSO operators and has developed more slowly than anticipated. Through the transaction, SEI divested its North American EPON assets and established a relationship with ADTRAN. The transfer of these assets to ADTRAN, which included key customer relationships and a required assumption by ADTRAN of relatively low incremental expenses, along with the value of the technology license and OEM supply agreement, resulted in the bargain purchase gain. We have assessed the recognition and measurement of the assets acquired and liabilities assumed based on historical and forecasted data for future periods and we have concluded that our valuation procedures and resulting measures were appropriate. The preliminary allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date is as follows:
(In thousands) |  |  |
Assets |  |  |
Other receivables | $ | 104 |
Inventory |  | 510 |
Property, plant and equipment |  | 392 |
Intangible assets |  | 22,100 |
Total assets acquired |  | 23,106 |
Liabilities |  |  |
Deferred income taxes |  | (3,978 | )
Total liabilities assumed |  | (3,978 | )
Total net assets |  | 19,128 |
Gain on bargain purchase of a business, net of tax |  | (11,322 | )
Total purchase price | $ | 7,806 |
The actual revenue and net loss included in our Consolidated Statements of Income for the three months ended June 30, 2018 and the period March 19, 2018 to June 30, 2018 are as follows:
| Three Months Ended |  |  | March 19, 2018 to |
(In thousands) | June 30, 2018 |  |  | June 30, 2018 |
Revenue | $ | 1,197 |  |  | $ | 1,197 |
Net loss | $ | (809 | ) |  | $ | (886 | )
The details of the acquired intangible assets are as follows:
(In thousands) | Value |  |  | Life (years) |
Customer relationships | $ | 13,400 |  |  |  | 12.0 |
Licensed technology |  | 5,900 |  |  |  | 9.0 |
Supplier relationship |  | 2,800 |  |  |  | 2.0 |
Total | $ | 22,100 |  |  |  |  |
The following unaudited supplemental pro forma information presents the financial results as if the acquisition had occurred on January 1, 2017. This unaudited supplemental pro forma information does not purport to be indicative of what would have occurred had the acquisition been completed on January 1, 2017, nor is it indicative of any future results. Aside from revising the 2017 and 2018 net income for the effect of the bargain purchase gain, there were no material, non-recurring adjustments to this unaudited pro forma information.
|  | Three Months Ended |  |  | Six Months Ended |
|  | June 30, |  |  | June 30, |
(In thousands) |  | 2017 |  |  | 2018 |  |  | 2017 |
Pro forma revenue |  | $ | 187,987 |  |  | $ | 250,114 |  |  | $ | 358,679 |
Pro forma net income (loss) |  | $ | 11,628 |  |  | $ | (31,020 | ) |  | $ | 28,829 |
Pro forma earnings per share - basic |  | $ | 0.24 |  |  | $ | (0.65 | ) |  | $ | 0.60 |
Pro forma earnings per share - diluted |  | $ | 0.24 |  |  | $ | (0.65 | ) |  | $ | 0.59 |
For the three and six months ended June 30, 2018, we incurred acquisition and integration related expenses and amortization of acquired intangibles of $0.8 million and $1.0 million, respectively, related to this acquisition.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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