ACQUISITIONS AND STRATEGIC INVESTMENTS

3 Months Ended

Jun. 29, 2024

Investments, All Other Investments [Abstract]

Acquisitions

Attune Medical

On March 5, 2024, the Company entered into a definitive agreement to acquire Advanced Cooling Therapy, Inc., d/b/a Attune Medical (“Attune Medical”), the manufacturer of the ensoETM® proactive esophageal cooling device, pursuant to which, among other things, the Company agreed to acquire all of the issued and outstanding common shares of Attune Medical. On April 1, 2024, the Company completed its acquisition of Attune Medical for total consideration of $186.2 million, which included an upfront cash payment of $160.7 million, or $149.2 million net of cash acquired, the fair value of contingent consideration of $25.0 million, and $0.5 million of estimated working capital adjustments. The Company’s purchase price is subject to customary working capital and certain other adjustments as of the closing of the transaction and additional contingent consideration based on sales growth over the next three years, which is uncapped, and the achievement of certain other milestones. The Company financed the acquisition through a combination of cash on hand and borrowings under its senior unsecured revolving credit facility.

Attune Medical's ensoETM technology is designed for use across a range of medical conditions involving patient cooling or warming, including treatment in electrophysiology, critical care, neurocritical care, trauma, burn surgery, spine surgery, and cancer surgery, among others. The Company’s addition of the Esophageal Protection product line through its acquisition of Attune Medical expands the Hospital business unit’s presence in electrophysiology and complements its Vascular Closure product line within Interventional Technologies, which is included in the Hospital reportable segment.

Purchase Price Allocation

The Company accounted for the acquisition as a business combination, and in accordance with FASB ASC Topic 805, Business Combinations (Topic 805), recorded the assets acquired and liabilities assumed at their fair values as of the acquisition date. The fair value of assets acquired and liabilities assumed have been recognized based on management’s estimates and assumptions using the information regarding facts and circumstances that existed at the closing date. The assessment of fair value is preliminary and is based on information that was available at the time the Condensed Consolidated Financial Statements were prepared. The most significant open items include the valuation of certain intangible assets, contingent consideration and the accounting for income taxes as the Company is awaiting additional information to complete its assessment of these matters. Measurement period adjustments will be recorded in the period in which they are determined, as if they had been completed at the acquisition date. The finalization of the Company’s purchase accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed, which could be material. The final determination of the fair value of certain assets and liabilities will be completed within the measurement period as required by Topic 805. As of June 29, 2024, the valuation studies necessary to determine the fair market value of the assets acquired and liabilities assumed are preliminary, including the projection of the underlying cash flows used to determine the fair value of the identified tangible, intangible and financial assets and liabilities.

The preliminary purchase price of $174.7 million, net of $11.5 million of cash acquired consists of the amounts presented below, which represent the preliminary determination of the fair value of the identifiable assets acquired and liabilities assumed:


(In thousands)	April 1, 2024
Accounts receivable	$	3,784
Inventories	26,300
Prepaid expenses and other current assets	906
Property, plant and equipment	200
Intangible assets	103,400
Goodwill	69,542

Total assets acquired	$	204,132
Accounts payable	2,260
Accrued payroll and related costs	2,129
Other liabilities	489
Deferred tax liability	24,593

Total liabilities assumed	$	29,471
Net assets acquired	$	174,661

The Company determined the identifiable intangible assets were developed technology, customer contracts and related relationships and trade names. The fair values of intangible assets were based on valuation techniques with estimates and assumptions developed by the Company. Developed technology was valued using the excess earnings method. Customer contracts and related relationships were valued using the distributor method. The trademark was valued using the relief from royalty method. The cash flows used in the valuation of the intangible assets were based on estimates used to price the transaction. In developing the discount rates applied to the cash flow projections, the discount rates were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital and then adjusted to reflect the relative risk of the asset. As of June 29, 2024, the valuation of the intangible assets is preliminary as the Company is still evaluating information related to the assets’ cash flow projections.

The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. As a result of the acquisition of Attune Medical, the Company recognized goodwill of $69.5 million based on

expected synergies from integration into our Hospital business. The goodwill is not deductible for tax purposes and relates entirely to the Hospital reportable segment.

Intangible assets acquired consist of the following:


(In thousands)	Amount		Weighted-Average Amortization Period	Risk-Adjusted Discount Rates used in Purchase Price Allocation
Developed technology	$	94,000	10 years	22.5	%
Customer contracts and related relationships	7,600		10 years	22.0	%
Trade names	1,800		10 years	22.0	%
Total	$	103,400

The Company recorded a long-term net deferred tax liability of $24.6 million primarily related to definite-lived intangible assets which cannot be deducted for tax purposes, partially offset by deferred tax assets primarily related to net operating losses acquired.

Acquisition-Related Costs

The Company incurred $9.8 million of acquisition-related costs for the three months ended June 29, 2024 in connection with the acquisition. These costs related to legal and other professional fees, which were recognized in selling, general and administrative on the Condensed Consolidated Statements of Income.

The Company’s condensed consolidated financial statements include the results of Attune Medical from the date the acquisition was completed. Pro forma financial information has not been presented as the acquisition is not material to the Company’s overall financial results.

OpSens Inc.

On October 10, 2023, the Company entered into an Arrangement Agreement with OpSens Inc. (“OpSens”), a medical device cardiology-focused company delivering solutions based on its proprietary optical technology, pursuant to which, among other things, the Company agreed to acquire all of the issued and outstanding common shares of OpSens. On December 12, 2023, the Company completed its acquisition of OpSens for total consideration of approximately $254.5 million, or $243.9 million, net of cash acquired. The Company financed the acquisition through a combination of cash on hand and borrowings under its senior unsecured revolving credit facility.

OpSens offers commercially and clinically validated optical technology for use primarily in interventional cardiology. OpSens’ core products include the SavvyWire®, a sensor-guided 3-in-1 guidewire for TAVR procedures, advancing the workflow of the procedure and enabling potentially shorter hospital stays for patients; and the OptoWire®, a pressure guidewire that aims to improve clinical outcomes by accurately and consistently measuring Fractional Flow Reserve (FFR) and diastolic pressure ratio (dPR) to aid clinicians in the diagnosis and treatment of patients with coronary artery disease. OpSens also manufactures a range of fiber optic sensor solutions used in medical devices and other critical industrial applications. The addition of OpSens expands the Hospital business unit portfolio in the interventional cardiology market and is included in the Hospital reportable segment.

Purchase Price Allocation

The purchase price of $243.9 million, net of $10.6 million of cash acquired consists of the amounts presented below, which represent the final determination of the fair value of the identifiable assets acquired and liabilities assumed:


(In thousands)	December 12, 2023
Accounts receivable	$	5,960
Inventories	12,075
Prepaid expenses and other current assets	2,062
Property, plant and equipment	3,028
Intangible assets	172,000
Goodwill	79,400
Other long-term assets	4,705
Total assets acquired	$	279,230
Accounts payable	3,251
Accrued payroll and related costs	1,723
Other liabilities	9,746
Deferred tax liability	14,805
Other long-term liabilities	5,853
Total liabilities assumed	$	35,378
Net assets acquired	$	243,852

The Company determined the identifiable intangible assets were developed technology, customer contracts and related relationships and trade names. The fair values of intangible assets were based on valuation techniques with estimates and assumptions developed by the Company. Developed technology and customer contracts and related relationships were valued using the excess earnings method. Trademarks were valued using the relief from royalty method. The cash flows used in the valuation of the intangible assets were based on estimates used to price the transaction. In developing the discount rates applied to the cash flow projections, the discount rates were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital and then adjusted to reflect the relative risk of the asset.

The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. As a result of the acquisition of OpSens, the Company recognized goodwill of $79.4 million based on expected synergies from integration into our Hospital business. The goodwill is not deductible for tax purposes and relates entirely to the Hospital reportable segment.

Intangible assets acquired consist of the following:


(In thousands)	Amount		Weighted-Average Amortization Period	Risk-Adjusted Discount Rates used in Purchase Price Allocation
Developed technology	$	114,900	15 years	20.5	%
Customer contracts and related relationships	52,300		15 years	18.9	%
Trade names	4,800		15 years	20.5	%
Total	$	172,000

The Company recorded a net long-term deferred tax liability of $14.8 million, primarily as a result of fair value adjustments recorded associated with intangible assets and inventory in which there is no tax basis.

Acquisition-Related Costs

The Company incurred $6.6 million of acquisition-related costs for fiscal 2024 in connection with the OpSens acquisition. These costs related to legal and other professional fees, which were recognized in selling, general and administrative on the Condensed Consolidated Statements of Income.

The Company’s condensed consolidated financial statements include the results of OpSens from the date the acquisition was completed. Pro forma financial information has not been presented as the acquisition is not material to the Company’s overall financial results.

Strategic Investments

As part of the Company’s business development activities, it holds strategic investments in certain entities. During fiscal 2024, the Company made an additional investment in Vivasure Medical LTD (“Vivasure”) of €5.0 million, resulting in total investment of €35 million. The investments include both preferred stock and a special share that allows the Company to acquire Vivasure in accordance with an agreement between the parties. In addition, the Company made other certain strategic investments totaling $7.6 million during fiscal 2024. The Company’s strategic investments are classified as other long-term assets on the Company’s Condensed Consolidated Balance Sheets and the Company has not recorded any adjustments to the carrying value of our strategic investments during three months ended June 29, 2024 and July 1, 2023.