Quarterly report pursuant to Section 13 or 15(d)

Business Combinations

v2.4.0.8
Business Combinations
9 Months Ended
Sep. 30, 2014
Business Combinations [Abstract]  
Business Combinations

2 - Business Combinations

Grass Technologies

On February 2, 2013, we completed an asset purchase of the Grass Technologies Product Group (“Grass”) from Astro-Med Inc. for a total cash consideration of $21.0 million. Included in the total cash consideration is an adjustment of $2.4 million made in the first quarter of 2014 for inventory purchase commitments. Grass manufactures and sells clinically differentiated neurodiagnostic and monitoring products, including a portfolio of electroencephalography (EEG) and polysomnography (PSG) systems for both clinical and research use and related accessories and proprietary electrodes. The acquisition strengthened the Company’s existing neurology portfolio and provided new product categories. A total of $0.6 million of direct costs associated with the acquisition was expensed as incurred and reported as a component of general and administrative expenses.

Approximately $7.0 million has been allocated to goodwill. Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed and represent primarily the expected synergies of combining the operations of the Company and the Grass business. The goodwill is amortizable over 15 years for tax purposes. In accordance with ASC 350-20, goodwill will not be amortized but instead will be tested for impairment at least annually (more frequently if certain indicators are present).

Pro forma financial information                                                                                      

The following unaudited pro forma information combining results of operations of the Company for the nine months ended September 30, 2013 are presented as if the acquisition of Grass had occurred on January 1, 2013:

 

 

Unaudited Pro forma Financial Information

(in thousands)

 

 

Nine Months Ended September 30, 2013

Revenue

$254,480

 

Income from operations

$20,864

 

 

 

 

 

 

The unaudited pro forma financial information is provided for comparative purposes only and is not necessarily indicative of what actual results would have been had the acquisitions occurred on the dates indicated, nor does it give effect to synergies, cost savings, and other changes expected to result from the acquisitions. Accordingly, the pro forma financial results do not purport to be indicative of results of operations as of the date hereof, for any period ended on the date hereof, or for any other future date or period.

For purposes of preparing the unaudited pro forma financial information for the period January 1, 2013 through September 30, 2013, Grass’ statement of operations for the period from January 1, 2013 to February 1, 2013 was combined with our consolidated statement of operations and comprehensive income for the nine months ended September 30, 2013.

The unaudited pro forma consolidated results for the nine month period ended September 30, 2013 reflect the historical information of Natus and Grass, adjusted for the following pre-tax amounts:

  •                         Additional amortization expense of $59,300 related to the fair value of identifiable intangible assets acquired;
  •                         Decrease of depreciation expense of $14,800 related to the fair value adjustment to property and equipment acquired;
  •                         Decrease in general and administrative expense of $624,000 related to the direct acquisition costs.

Hearing Screening as a Service

In the first quarter of 2014, the company entered into two asset purchase agreements for companies in the newborn hearing screening services market for a total consideration of $2.6 million.   Both acquisitions support the Company’s objective to enter this market that complements our newborn hearing screening device business. This new hearing screening services business operates under the name Peloton.