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Business Combinations | 3 Months Ended
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Mar. 31, 2019
Business Combinations [Abstract] |
Business Combinations | 2. BUSINESS COMBINATIONS On November 30, 2018, we acquired SmartRG, Inc., a provider of carrier-class, open-source connected home platforms and cloud services for broadband service providers in exchange for cash consideration. 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. This revenue is included in the Subscriber Solutions & Experience category within the Network Solutions and Services & Support reportable segments. Contingent liabilities with a fair value totaling $1.2 million were recognized at the acquisition date, the payments of which are dependent upon SmartRG achieving future revenue, EBIT or customer purchase order milestones during the first half of 2019. The contingent payments are subject to arbitration and the final payouts, if applicable, are expected to occur during the third quarter of 2019. The minimum and maximum potential payment under the total of the contingent liabilities ranges from no payment to $1.5 million. As of March 31, 2019, the fair value of the contingent liability was re-assessed and was determined to be $1.2 million, based on the expected probable outcomes. No change in fair value was recognized during the three months ended March 31, 2019. An escrow in the amount of $2.8 million was set up at the acquisition date, to fund post-closing working capital settlements and to indemnify the Company from any inaccuracy or breach of representations, warranties, covenants, agreements or obligations of the sellers. The escrow is subject to arbitration with final settlement expected during the fourth quarter of 2020. The minimum and maximum potential release of funds to the seller ranges from no payment to $2.8 million. We recorded goodwill of $3.5 million as a result of this acquisition, which represents the excess of the purchase price over the fair value of net assets acquired. We assessed the recognition and measurement of the assets acquired and liabilities assumed based on historical and forecasted data for future periods and concluded that our valuation procedures and resulting measures were appropriate. 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 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. This revenue is included in the Access & Aggregation and Subscriber Solutions & Experience categories within the Network Solutions reportable segment. We recorded a bargain purchase gain, net of income taxes, of $11.3 million during the first quarter of 2018, which represents the difference between the fair value of the net assets acquired over the cash paid. We assessed the recognition and measurement of the assets acquired and liabilities assumed based on historical and forecasted data for future periods and concluded that our valuation procedures and resulting measures were appropriate. The final allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date for SmartRG and Sumitomo are as follows:
(In thousands) |  | SmartRG |  |  | Sumitomo |
Assets |  |  |  |  |  |  |  |
Tangible assets acquired |  | $ | 8,594 |  |  | $ | 1,006 |
Intangible assets |  |  | 9,960 |  |  |  | 22,100 |
Goodwill |  |  | 3,489 |  |  |  | — |
Total assets acquired |  |  | 22,043 |  |  |  | 23,106 |
Liabilities |  |  |  |  |  |  |  |
Liabilities assumed |  |  | (6,001 | ) |  |  | (3,978 | )
Total liabilities assumed |  |  | (6,001 | ) |  |  | (3,978 | )
Total net assets |  |  | 16,042 |  |  |  | 19,128 |
Gain on bargain purchase of a business, net of tax |  |  | — |  |  |  | (11,322 | )
Total purchase price |  | $ | 16,042 |  |  | $ | 7,806 |
The actual revenue and net loss included in the Consolidated Statements of Income for SmartRG and Sumitomo for the three months ended March 31, 2019 and from March 19, 2018 to March 31, 2018 are as follows:
|  | Three Months Ended |  |  | March 19 to |
(In thousands) |  | March 31, 2019 |  |  | March 31, 2018 |
Revenue |  | $ | 7,348 |  |  | $ | — |
Net loss |  | $ | (1,684 | ) |  | $ | (77 | )
The details of the acquired intangible assets from these acquisitions are as follows:
(In thousands) | Value |  |  | Life (years)
Customer relationships | $ | 15,190 |  |  | 3 – 12
Developed technology |  | 7,400 |  |  | 7
Licensed technology |  | 5,900 |  |  | 9
Supplier relationship |  | 2,800 |  |  | 2
Licensing agreements |  | 560 |  |  | 5 – 10
Trade name |  | 210 |  |  | 3
Total | $ | 32,060 |  |  |
The following unaudited supplemental pro forma information presents the financial results of the Company as if the acquisition of SmartRG and Sumitomo had occurred on January 1, 2018. 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, 2018, nor is it indicative of any future results. Aside from revising the 2018 net income for the effect of the bargain purchase gain, there were no material, non-recurring adjustments to this unaudited pro forma information.
(In thousands) |  | For the Three Months Ended March 31, 2018 |
Pro forma revenue |  | $ | 129,584 |
Pro forma net loss |  | $ | (23,400 | )
Pro forma loss per share - basic |  | $ | (0.49 | )
Pro forma loss per share - diluted |  | $ | (0.49 | )
For the three months ended March 31, 2019 and 2018, we incurred acquisition and integration related expenses and amortization of acquired intangibles of $1.3 million and $0.2 million respectively, related to these acquisitions.

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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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