Business Combinations

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Business Combinations

3. Business Combinations

JADAK

On March 14, 2014, the Company acquired 100% of the outstanding equity interests of JADAK, LLC , JADAK Technologies, Inc., and Advanced Data Capture Corporation (collectively, “JADAK”), a North Syracuse, New York-based provider of optical data collection and machine vision technologies to OEM medical device manufacturers, for $93.7 million in cash, net of working capital adjustments. The Company expects that the addition of JADAK will enable the Company to offer a broader range of highly engineered enabling technologies to leading medical equipment manufacturers. JADAK contributed sales of $45.4 million and income from continuing operations before income taxes of $2.7 million for the year ended December 31, 2014.

The final purchase price allocation is as follows (in thousands):

	Amount
Cash	$	1,140
Accounts receivable		7,907
Inventory		6,865
Property and equipment		904
Intangible assets		40,250
Goodwill		44,584
Other assets		2,064
Total assets acquired		103,714
Accounts payable		3,057
Other liabilities		2,380
Deferred tax liabilities		3,481
Total liabilities assumed		8,918
Total purchase price		94,796
Less: Cash acquired		(1,140	)
Total purchase price, net of cash acquired	$	93,656

The fair value of JADAK intangible assets is comprised of the following (in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Customer relationships	$	23,570	20 years
Developed technology		10,910	10 years
Trademarks and trade names		2,130	10 years
Backlog		1,810	1 year
Non-compete covenant		1,830	5 years
Total	$	40,250

The purchase price allocation resulted in $44.6 million of goodwill and $40.3 million of identifiable intangible assets, $61.8 million of which is expected to be deductible for tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which economic benefits related to such assets are expected to be realized. The amount of goodwill recorded represents the anticipated incremental value of future cash flow potential attributable to: (i) JADAK’s ability to develop and market new products and technologies; (ii) JADAK’s ability to develop relationships with new customers; and (iii) expected sales synergies from cross-selling current and future product offerings of both JADAK and the Company to OEM customers.

The following unaudited pro forma information presents the combined financial results for the Company and JADAK as if the acquisition of JADAK had been completed as of January 1, 2013 (in thousands, except per share information):

	Year Ended December 31,
	2014			2013
Sales	$	375,737		$	370,462
Income (loss) from continuing operations	$	(16,067	)	$	11,900
Earnings per share from continuing operations - Basic	$	(0.47	)	$	0.35
Earnings per share from continuing operations - Diluted	$	(0.47	)	$	0.35

The pro forma information for all periods includes the effects of acquisition accounting, including amortization charges from acquired intangible assets, interest expense on borrowings in connection with the acquisition, and the related tax effects as though the acquisition of JADAK had been consummated as of the beginning of 2013. These pro forma results exclude the impact of transaction costs included in the historical results and the related tax effects. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisition had taken place at the beginning of 2013.

NDS

On January 15, 2013, the Company acquired 100% of the outstanding membership interests of NDS Surgical Imaging, LLC and 100% of the outstanding stock of NDS Surgical Imaging KK (collectively, “NDS”) for $80.8 million in cash consideration, net of working capital adjustments. In addition, a total of $5.4 million was held in escrow after the payment of closing working capital as indemnification for certain representations and warranty claims against the seller until the expiration of the escrow arrangement in July 2014. In September 2014, the Company received the full remaining amount held in escrow following the Company’s claims for breach of certain terms of the January 15, 2013 Securities Purchase Agreement for the acquisition of NDS. The escrow recovery was accounted for as a reduction to goodwill as the $5.4 million payment was clearly and directly related to the acquisition price. The escrow recovery resulted in a final adjusted NDS purchase price of $75.4 million.

The allocation of the purchase price is based upon a valuation of assets and liabilities acquired. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The fair values of intangible assets were based on valuations using an income approach, with estimates and assumptions provided by management of NDS and the Company. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill.

The total final purchase price allocation for the NDS acquisition was as follows (in thousands):

	Amount
Accounts receivable	$	10,327
Inventory		14,144
Property and equipment		2,426
Intangible assets		37,817
Goodwill		21,160
Other assets		1,782
Total assets acquired		87,656
Accounts payable		4,768
Other liabilities		7,149
Deferred tax liabilities		384
Total liabilities assumed		12,301
Total purchase price	$	75,355

The fair value of NDS intangible assets is comprised of the following (in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Customer relationships	$	22,294	20 years
Developed technology		6,689	10 years
Trademarks and trade names		7,565	20 years
Backlog		1,269	1 year
Total	$	37,817

NDS contributed sales of $68.4 million and loss from continuing operations before income taxes of $3.4 million for the year ended December 31, 2013.

Acquisition-related Costs

The Company recognized acquisition costs of $0.7 million, $1.5 million and $0.7 million in the years ended December 31, 2014, 2013 and 2012, respectively, related to the acquisitions of JADAK and NDS. These amounts were included in restructuring and acquisition related costs.