Acquisition of Business of GenePOC

12 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Acquisition of Business of GenePOC

(2) Acquisition of Business of GenePOC

On June 3, 2019, we acquired the business of GenePOC Inc. (“GenePOC”), a Quebec City, Quebec Province, Canada based provider of molecular diagnostic instruments and assays. The purchase agreement contemplates a maximum total consideration of up to $120,000, which based upon the current preliminary valuation is estimated at a total fair value of approximately $77,526. Pursuant to the purchase agreement, the maximum consideration is comprised of the following (noting that the current preliminary valuation values the contingent consideration identified in (ii) and (iii) below at an aggregate amount of approximately $27,200):

(i) a $50,000 cash payment on June 3, 2019, subject to a working capital adjustment and a holdback of $5,000 to secure selling party’s performance of certain post-closing obligations;

(ii) two $10,000 installments contingent upon the achievement of certain product development milestones if achieved by September 30, 2020 and March 31, 2021, respectively; and

(iii) up to $50,000 of contingent consideration payable if certain financial performance targets are achieved during the twelve-month period ending September 30, 2022.

The total of the holdback identified in (i) above and the currently estimated value of the contingent consideration identified in (ii) and (iii) above are reflected as acquisition consideration within the non-current liabilities section of the accompanying Condensed Consolidated Balance Sheets. The holdback amounts are due to be settled in December 2020, following the 18-month anniversary of the transaction.

We utilized cash and equivalents on hand and proceeds drawn from our new $125,000 revolving credit facility, which replaced our previous credit facility, to finance the acquisition. Proceeds from the new credit facility were also utilized to repay and settle the outstanding principal and interest due on our term loan (see Note 5). As a result of currently estimated total consideration exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $34,582 was recorded in connection with this acquisition, which will be deductible for U.S. tax purposes ratably over 15 years. The goodwill results largely from Meridian’s ability to market and sell GenePOC’s technology and instrument platform through its established customer base and distribution channels.

Our Consolidated Statement of Operations for the year ended September 30, 2019 includes $1,808 of acquisition-related costs related to the acquisition of the GenePOC business, which are reflected as operating expenses. Most of these costs relate to professional fees for attorneys, tax advisors and regulatory advisors during due diligence, and the preparation and negotiation of acquisition agreements.

The Company’s fiscal 2019 consolidated results include $341 of net revenues and $3,848 of net loss from the GenePOC business since the date of acquisition. These results, which are reported as part of the Diagnostics segment, include $1,204 of amortization of specific identifiable assets recorded in the opening balance sheet, including a license agreement, technology and a government grant.

Preliminary Purchase Price Allocation

The recognized preliminary amounts of identifiable assets acquired and liabilities assumed in the acquisition of the GenePOC business are as follows:

	PRELIMINARY
	June 3, 2019  (as initially reported)		Measurement Period Adjustments			June 3, 2019  (as adjusted)
Fair value of assets acquired -
Accounts receivable	$	58	$	(1	)	$	57
Inventories		1,617		(106	)		1,511
Other current assets		77		7			84
Property, plant and equipment		1,520		(96	)		1,424
Goodwill		34,482		100			34,582
Other intangible assets (estimated useful life):
License agreement (10 years)		5,990		—			5,990
Technology (15 years)		34,040		96			34,136
Government grant (1.33 years)		800		—			800
		78,584		—			78,584
Fair value of liabilities assumed -
Accounts payable and accrued expenses		1,082		(24	)		1,058
Total consideration paid (including contingent consideration currently estimated at $27,200)	$	77,502	$	24		$	77,526

The allocation of the purchase price and estimated useful lives of property, plant and equipment, and intangible assets shown above remain preliminary and subject to adjustment, pending refinement and final completion of valuations, including but not limited to valuations of accounts receivable, inventory, other current assets, property, plant and equipment, and intangibles. Any modifications to the valuation of assets acquired and liabilities assumed will result in an adjustment to goodwill.

Pro Forma Information (Unaudited)

The following table provides the unaudited consolidated pro forma results for the periods presented as if the business of GenePOC had been acquired as of the beginning of fiscal 2018. Pro forma results do not include the effect of any synergies anticipated to be achieved from the acquisition, and accordingly, are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the date indicated or that may result in the future.

Year Ended September 30,	2019		2018
Net Revenues	$	201,222	$	213,753
Net Earnings	$	16,093	$	9,407

These pro forma amounts have been calculated by including the results of GenePOC, and adjusting the combined results to give effect to the following, as if the acquisition had been consummated on October 1, 2017, together with the consequential tax effects thereon:

Year Ended September 30,	2019			2018
Adjustments to Net Revenues
GenePOC pre-acquisition revenues	$	208		$	182
Adjustments to Net Earnings
GenePOC pre-acquisition net loss	$	(9,578	)	$	(12,775	)
Pro forma adjustments:
Meridian acquisition-related costs		1,808			—
GenePOC transaction-related costs		1,245			—
Expenses related to non-continuing personnel, locations or activities		1,576			2,552
Incremental depreciation and amortization		(2,344	)		(3,499	)
Incremental interest costs		(743	)		(977	)
Tax effects of pro forma adjustments		(253	)		257
Total Adjustments to Net Earnings	$	(8,289	)	$	(14,442	)

Supplemental Cash Flow Information (Non-Cash Acquisition Consideration)

As noted above, non-cash acquisition consideration totaled $32,200 as of September 30, 2019, which is comprised of: (i) $5,000 of purchase price holdback; and (ii) $27,200 contingent upon achievement of established milestones. No such items existed in fiscal 2018 or 2017.