Business Combinations

12 Months Ended

Dec. 31, 2012

Business Combinations [Abstract]

Business Combinations

Business Combinations

On April 29, 2011, we completed the acquisition of Cadent for an aggregate cash purchase price of approximately $187.6 million, acquiring all of Cadent's outstanding common and preferred stock.   Cadent is a 3D digital scanning solutions for orthodontics and dentistry.   We believe that the combination of Align’s and Cadent’s technologies and capabilities creates greater growth opportunities for Align by bringing innovative new Invisalign treatment tools to customers and by extending the value of intra-oral scanning in dental practices.  

The following table summarizes the allocation of the purchase price as of April 29, 2011 (in thousands):

Assets	$	15,745
Property, plant and equipment	3,624
Acquired identifiable intangible assets:
Trademarks (one to fifteen year useful lives)	7,100
Existing technology (thirteen year useful life)	12,600
Customer relationships (eleven year useful life)	33,500
Goodwill	135,349
Liabilities assumed	(20,330		)
Total	$	187,588

In 2011, we incurred direct transaction costs of approximately $6.4 million that include investment banking, legal and accounting fees, and other external costs directly related to the acquisition. These costs were expensed as incurred as part of our operating expenses.

Goodwill of $135.3 million represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets, and represents the expected synergies of the transaction and the knowledge and experience of the workforce in place. None of the goodwill is deductible for tax purposes. In connection with the acquisition, we allocated approximately $77.3 million of the goodwill from the Cadent acquisition to our Scanner and CAD/CAM Services ("SCCS") reporting unit and approximately $58.0 million to our Clear Aligner reporting unit based on the expected relative synergies generated by the acquisition. During the third quarter of 2012, we determined that goodwill for our SCCS reporting unit should be tested for impairment between annual impairment tests since an event occurred or circumstances changed that would more likely than not reduce the fair value of our SCCS reporting unit below its carrying amount. We recorded a total impairment charge of $36.6 million for the SCCS for 2012 after finalizing step two of our analysis.  See Note 5 for discussion of our goodwill impairment.

For the year ended December 31, 2012, Cadent contributed net revenues of approximately $43.5 million and gross profit of approximately $10.4 million respectively. During the period of May 2011 through December 2011, Cadent contributed net revenues of approximately $28.0 million and gross profit of approximately $6.5 million. Sales, marketing, development and administrative activities for our Clear Aligner and SCCS reporting units were integrated during the post-acquisition period, therefore the operating results below gross profit are not available.

The following table presents the results of Align and Cadent for year ended December 31, 2011 and 2010, on an unaudited pro forma basis, as though the companies had been combined as of the beginning of January 1, 2010.   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 acquisition had taken place at the beginning of January 1, 2011 and 2010 or of results that may occur in the future (in thousands):

	Year Ended December 31,
	2011		2010
Net revenues	$	492,468	$	425,025
Net income	$	62,116	$	69,952