Annual report pursuant to Section 13 and 15(d)

Business Combinations

v3.22.0.1
Business Combinations
 12 Months Ended
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract]  
Business Combinations Business Combinations
Acquisitions Accounted for Using the Purchase Method
On January 31, 2021, the Company acquired the business and the majority of the assets of FilAMed, a privately-held biomedical services company based in Bakersfield, California. In becoming a part of the Company's Durable Medical Equipment Services ("DME Services") segment, this acquisition will supplement the Company’s existing biomedical recertification, maintenance and repair services for acute care facilities and other alternate site settings including home care and home infusion providers, skilled nursing facilities, pain centers and others.
On April 18, 2021, the Company acquired the business and substantially all of the assets of OB Healthcare Corporation (“OB Healthcare”), a privately-held biomedical services company based in Austin, Texas. OB Healthcare specializes in on-site repair, preventative maintenance, and device physical inventory management to hospitals and healthcare systems nationwide. The acquisition further develops and expands InfuSystem’s DME Services segment and complements the Company’s purchase of FilAMed.
FilAMed and OB Healthcare’s results of operations are included in the Company’s consolidated statements of operations from the respective closing dates. Revenues and earnings from these acquisitions have not been significant through December 31, 2021.
Purchase Price Allocation
Pursuant to ASC Topic 805, “Business Combinations,” the purchase price for each of the acquisitions was allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the respective acquisition dates. The purchase price allocations were primarily based upon a valuation using management’s estimates and assumptions. The purchase price allocation was completed for FilAMed and OB Healthcare as of December 31, 2021. The following table summarizes the consideration paid and the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed as of the respective acquisition dates for both FilAMed and OB Healthcare (in thousands):
  FilAMed
OB
Healthcare
Total
Consideration
Cash $ 1,400  $ 6,250  $ 7,650 
Working capital adjustment, paid in cash —  325  325 
Contingent consideration —  750  750 
Total - consideration $ 1,400  $ 7,325  $ 8,725 
 
FilAMed
OB
Healthcare
Total
Acquisition Date
Fair Value
Accounts receivable $ —  $ 725  $ 725 
Inventories 74  —  74 
Medical equipment held for sale or rental 40  —  40 
Property and equipment 102  59  161 
Intangible assets 1,015  3,000  4,015 
Goodwill 169  3,541  3,710 
Operating lease right of use assets 281  7  288 
Operating lease liabilities (281) (7) (288)
Total - purchase price $ 1,400  $ 7,325  $ 8,725 
The amount of acquisition costs for both transactions was $0.2 million and is included in general and administrative expenses for the year ended December 31, 2021.
During the three months ended December 31, 2021, the Company updated the valuation of OB Healthcare based on further analysis of the final working capital with an immaterial decrease in the consideration transferred and a corresponding decrease to accounts receivable. There was no impact to the consolidated statement of operations.
The Company fully paid all consideration for FilAMed as of December 31, 2021. On the OB Healthcare acquisition date, the Company made an initial cash payment of $6.1 million with subsequent cash payments of $0.4 million during the year and had an additional estimated amount due to the seller for contingent consideration of $0.8 million, which was recorded in the balance sheet under the heading for other current liabilities. The contingent consideration arrangement requires the Company to pay OB Healthcare $0.8 million if certain customer contracts are executed by December 31, 2021. In December 2021, the Company extended this date to February 28, 2022. The Company expects to further extend this deadline and for OB Healthcare to satisfy this requirement.
The following table shows the breakdown of the identified intangible assets acquired into major intangible asset classes for both acquisitions:
 
Acquisition Date
Fair Value
(Thousands)
Weighted-Average
Amortization Period
(Years)
Customer relationships $ 2,300  15
Unpatented technology 943  7
Non-competition agreements 472  5
Internal-use software 300  5
 
Total intangible assets (a) $ 4,015  11.2
(a) There was no residual value, renewal terms or extensions associated with any intangible assets acquired.
The goodwill acquired consists of expected synergies from combining operations of FilAMed and OB Healthcare with the DME Services segment as well as their respective assembled workforce who have specialized knowledge and experience. All of the goodwill is deductible for tax purposes.
Unaudited Pro Forma Financial Information
The unaudited pro forma financial information in the table below summarizes the combined results of operations of the Company, FilAMed and OB Healthcare as though the companies’ businesses had been combined as of January 1, 2020. The pro forma financial information for the year ended December 31, 2021 has been adjusted by $0.5 million for the tax effected amount of acquisition costs and non-recurring expenses directly attributable to the FilAMed and OB Healthcare acquisitions. The year ended December 31, 2020 also included these charges. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of each period presented nor is it indicative of future results. The following pro forma financial information presented also includes the pro forma depreciation and amortization charges from acquired tangible and intangible assets for the years ended December 31 (in thousands):
  Years Ended December 31,
  2021 2020
Revenue $ 103,152  $ 100,032 
Net income $ 1,936  $ 16,498