Business Combinations | (22) Business Combinations Fiscal year ended June 30, 2017 On May 31, 2017 , we completed the acquisition of assets in Conduit Technology, LLC (“Conduit”), a provider of documentation and workflow solutions. On June 30, 2017 , we completed the acquisition of assets in AllCall Connect, LLC (“AllCall”), a provider of a live-calling solution for CPAP patient resupply. These acquisitions have been accounted for as business combinations using purchase accounting and are included in our consolidated financial statements from their respective acquisition dates. The acquisitions, individually and collectively, are not considered a material business combination and accordingly pro forma information is not provided. The acquisitions were funded through cash on-hand. We have not yet completed the purchase price allocations associated with the Conduit and AllCall acquisitions. We expect to complete our Conduit and AllCall purchase price allocations during the quarter ending September 30, 2017. We do not believe that the completion of this work will materially modify the preliminary purchase price allocation for Conduit or AllCall. The cost of the acquisitions was allocated to the assets acquired and liabilities assumed based on estimates of their fair values at the date of acquisition. The goodwill recognized as part of these acquisitions, which is deductible for tax purposes, mainly represents the synergies that are unique to our combined businesses and the potential for new products and services to be developed in the future. The fair values of assets acquired and liabilities assumed, and the estimated useful lives of intangible assets acquired are as follows (in thousands): Preliminary Intangible assets - useful life Current assets $ - Property, plant and equipment 69 Trade names 100 3 years Non-compete 520 1 - 3 years Developed technology 1,800 5 years Customer relationships 2,160 5 years Goodwill 2,000 Assets acquired $ 6,649 Current liabilities (60) Total liabilities assumed $ (60) Net assets acquired $ 6,589 During the year ended June 30, 2017 we did no t record material acquisition-related expenses. Fiscal year ended June 30, 2016 Brightree On April 4, 2016 we completed the acquisition of Brightree LLC (“Brightree”), a provider of cloud-based clinical and business management software for the post-acute care industry, for a total purchase consideration paid of $802 million. This acquisition has been accounted for as a business combination using purchase accounting and included in our consolidated financial statements from April 4, 2016. The acquisition was funded through cash on-hand, funds available from the existing revolving credit facility, an increase in the size of our revolving credit facility from $700 million to $1 billion and we also entered into a $300 million senior unsecured one -year term loan credit facility. We completed the purchase price allocation in relation to this acquisition during the quarter ended March 31, 2017. The cost of the acquisition was allocated to the assets acquired and liabilities assumed based on estimates of their fair values at the date of acquisition. The goodwill recognized as part of these acquisitions, which is deductible for tax purposes, mainly represents the synergies that are unique to our combined businesses and the potential for new products and services to be developed in the future. The fair values of assets acquired and liabilities assumed, and the estimated useful lives of intangible assets acquired, are as follows (in thousands): Brightree Adjustments Final Intangible assets - useful life Current assets $ 13,868 1,442 15,310 Property, plant and equipment 1,045 - 1,045 Trade names 28,700 - 28,700 10 years In-process research and development 4,100 - 4,100 n/a Developed technology 114,700 - 114,700 5 to 6 years Customer relationships 51,000 - 51,000 10 to 15 years Goodwill 602,090 906 602,996 Assets acquired $ 815,503 $ 2,348 $ 817,851 Current liabilities (9,399) - (9,399) Deferred revenue (4,571) - (4,571) Deferred tax liabilities - - - Total liabilities assumed $ (13,970) $ - $ (13,970) Net assets acquired $ 801,533 $ 2,348 $ 803,881 The acquisition is considered a material business combination and accordingly unaudited pro forma information presented below for the fiscal years ended June 30, 2016 and 2015, include the effects of pro forma adjustments as if the acquisition of Brightree occurred on July 1, 2014. The pro forma results were prepared using the acquisition method of accounting and combine our historical results and Brightree’s for the fiscal years ended June 30, 2016 and 2015, including the effects of the business combination, primarily amortization expense related to the fair value of identifiable intangible assets acquired, interest expense associated with the financing obtained by us in connection with the acquisition, and the elimination of incurred acquisition-related costs. The pro forma financial information presented below is not necessarily indicative of the results of operations that would have been achieved if the acquisition occurred at the beginning of the earliest period presented, nor is it intended to be a projection of future results. Unaudited Proforma Consolidated Results Years Ended June 30, (In thousands, except per share information) 2016 2015 Revenue $ 1,931,257 $ 1,780,727 Net income attributable to stockholders $ 354,565 $ 347,563 Basic earnings per share $ 2.53 $ 2.47 Diluted earnings per share $ 2.54 $ 2.44 The unaudited pro forma consolidated results for the years ended June 30, 2016, and 2015 reflect primarily the following pro forma pre-tax adjustments: · Addition of net amortization expense related to the fair value of identifiable intangible assets acquired of $19.9 million and $26.2 million for the years ended June 30, 2016 and June 30, 2015, respectively. · Addition of net interest expense associated with debt that was issued to finance the acquisition of $16.1 million and $16.5 million for the years ended June 30, 2016 and June 30, 2015, respectively. · Elimination of pre-tax acquisition-related costs totaling $4.1 million from the results for the year ended June 30, 2016. · Addition of net income tax expense of $1.3 million for the year ended June 30, 2016 and elimination of net income tax expense of $3.1 million for the year ended June 30, 2015, respectively. Although Brightree and its U.S. subsidiaries had historically elected to be treated as a partnership for U.S. Federal and state income tax purposes, and therefore, no income tax expense or benefit was previously recognized by Brightree in the U.S., the pro forma financial information assumes that Brightree’s historical income tax expense is based on a U.S. statutory rate of 37% . Brightree’s historical income tax expense was a benefit of $1.2 million and $0.4 million for the twelve months ended June 30, 2016 and 2015, respectively. The effective tax rate of the combined company could be significantly different depending on post-acquisition activities, such as the tax treatment applicable to each entity and the geographical mix of taxable income affecting state and foreign taxes, among other factors. Other Acquisitions On October 2, 2015 , we completed the acquisition of 100% of the shares in Curative Medical Technology Inc., a leading provider of non-invasive ventilation and sleep-disordered breathing medical devices and accessories in China. Curative Medical has its manufacturing base in Suzhou, China, offices in Beijing, Germany and the United States, and a distributor network throughout China and in other select markets. On November 6, 2015 , we completed the acquisition of 100% of the shares in Maribo Medico A/S, a distributor of medical equipment for treating, diagnosing, and managing sleep-disordered breathing and other respiratory disorders in Denmark and the Nordics. On November 30, 2015 , we completed the acquisition of 100% of the shares in Bennett Precision Tooling Pty Ltd, an Australian based company that designs and manufactures tools specializing in applications for Liquid Silicon Rubber. On January 29, 2016 , we completed the acquisition of 100% of the shares in Inova Labs Inc. (“Inova Labs”), a medical device company specializing in the development and commercialization of innovative oxygen therapy products. These acquisitions have been accounted for as business combinations using purchase accounting and are included in our consolidated financial statements from their respective acquisition dates. The acquisitions, individually and collectively, are not considered a material business combination and accordingly pro forma information is not provided. The acquisitions were funded through cash on-hand and by drawing on our existing credit facility. We have completed the purchase price allocation in relation to all these acquisitions. The cost of the acquisitions was allocated to the assets acquired and liabilities assumed based on estimates of their fair values at the date of acquisition. The goodwill recognized as part of these acquisitions, which is not deductible for tax purposes, mainly represents the synergies that are unique to our combined businesses and the potential for new products and services to be developed in the future. The fair values of assets acquired and liabilities assumed, and the estimated useful lives of intangible assets acquired are as follows (in thousands): Preliminary Adjustments Final Intangible assets - useful life Current assets $ 49,370 3,184 52,554 Property, plant and equipment 5,294 - 5,294 Trade names 17,400 - 17,400 7 years Non-compete 1,400 - 1,400 5 years Developed technology 20,515 585 21,100 5 years Customer relationships 37,303 600 37,903 5 to 8 years Goodwill 194,216 (3,551) 190,665 Assets acquired $ 325,498 $ 818 $ 326,316 Current liabilities (21,147) (370) (21,517) Debt assumed (21,201) - (21,201) Deferred revenue (4,283) - (4,283) Deferred tax liabilities (19,207) (448) (19,655) Total liabilities assumed $ (65,838) $ (818) $ (66,656) Net assets acquired $ 259,660 $ - $ 259,660 During the year ended June 30, 2016 , we recorded $ 5.3 million in acquisition-related expenses. |