Quarterly report pursuant to Section 13 or 15(d)

Business Combinations

v3.21.2
Business Combinations
 9 Months Ended
Sep. 30, 2021
Business Combination and Asset Acquisition [Abstract]  
Business Combinations Business Combinations
Acquisitions Accounted for Using the Purchase Method
On January 31, 2021, the Company closed on the acquisition of substantially all of the assets of FilAMed, a privately-held biomedical services company based in Bakersfield, California. 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 Durable Medical Equipment Services (“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 September 30, 2021.
Purchase Price Allocation
Pursuant to FASB Accounting Standards Codification (“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 as of September 30, 2021. The purchase price allocation for OB Healthcare was based on a preliminary analysis and is subject to further adjustments related to the final working capital determination. Upon completion of the final purchase price allocation, the Company may need to adjust the accounts receivable. 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 (a) —  327  327 
Contingent consideration —  750  750 
Total - consideration $ 1,400  $ 7,327  $ 8,727 
 
FilAMed
OB
Healthcare
Total
Acquisition Date
Fair Value
Accounts receivable (a) $ —  $ 727  $ 727 
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 (a) $ 1,400  $ 7,327  $ 8,727 
(a) Amount based on preliminary working capital.
The amount of acquisition costs for both transactions was $0.2 million and is included in general and administrative expenses for the nine months ended September 30, 2021.
During the three months ended September 30, 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 goodwill. There was no impact to the condensed consolidated statement of operations.
The Company fully paid all consideration for FilAMed as of September 30, 2021. On the OB Healthcare acquisition date, the Company made an initial cash payment of $6.1 million with a subsequent cash payment of $0.1 million during the quarter ended September 30, 2021 and had an additional estimated amount due to the seller of $0.3 million, related to a working capital adjustment, and contingent consideration of $0.8 million, both of which were 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 written contracts are executed by December 31, 2021. The Company expects OB Healthcare to satisfy this requirement. As of September 30, 2021, the Company had a $1.1 million remaining liability relating to this acquisition.
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 three and nine months ended September 30, 2021 has been adjusted by $0.1 million and $0.2 million, respectively, for the tax effected amount of acquisition costs and non-recurring expenses directly attributable to the FilAMed and OB Healthcare acquisitions. The three and nine months ended September 30, 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 three and nine months ended September 30, 2021 and 2020 (in thousands):
  Three Months Ended
September 30,		 Nine Months Ended
September 30,
  2021 2020 2021 2020
Revenue $ 26,566  $ 25,731  $ 76,633  $ 75,270 
Net income $ (373) $ 2,691  $ 1,268  $ 6,120