BUSINESS ACQUISITIONS

9 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

BUSINESS ACQUISITIONS

BUSINESS ACQUISITIONS

Tekmed

On December 15, 2015, the Company acquired the assets of Tekmed Instruments S.p.A ("Tekmed") for an aggregate purchase price of $14.1 million including a minimal amount of working capital and purchase adjustment which was recorded as an adjustment to assumed liabilities. Tekmed was a distributor of the Company's and third parties' products in Italy and focused on neurosurgery and neurotrauma, along with representation in plastic and reconstructive surgery, cardiovascular surgery, image diagnostics, general surgery, anesthesia and intensive care, interventional radiology, and proton therapy. This acquisition enables the Company to sell directly into the market to support our Specialty Surgical Solutions division's growth in Italy along with other key Integra franchises.

The Company recorded revenue for Tekmed of approximately $0.9 million and $3.3 million related to third-party products in the consolidated statements of operations for the three- and nine-month ended September 30, 2016, respectively. The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it is in the process of being integrated into the Company's operations.

The following summarizes the preliminary allocation of the purchase price as of September 30, 2016 based on the fair value of the assets acquired and liabilities assumed:

	Preliminary Purchase Price Allocation
	(Dollars in thousands)
Inventory	$	1,143
Other current assets	11
Property, plant, and equipment	669
Intangible assets:			Wtd. Avg. Life:
Supplier contracts	4,981		2 -13 Years
Goodwill	9,665
Total assets acquired	16,469
Accrued expenses and other liabilities	802
Deferred tax liabilities	1,564
Net assets acquired	$	14,103

Tornier's United States Toe & Ankle Business

On October 2, 2015, the Company acquired the United States rights to Tornier's Salto Talaris® and Salto Talaris® XT ankle replacement products and Tornier's Futura^TM silastic toe replacement products (the "Salto and Futura") for $6.0 million in cash. Under the agreement, Integra acquired the U.S. rights to the Salto Talaris® Total Ankle Prosthesis, Salto Talaris® XT Revision Total Ankle Prosthesis, Futura™ Primus Flexible Great Toe system, Futura™ Classic Flexible Great Toe system, and Futura™ Lesser Metatarsal Phalangeal system. The agreement also includes an option to purchase, in the future, the rights to the Salto Talaris®, Salto Talaris® XT, Salto Mobile, and Futura™ silastic toe replacement products outside the United States. The estimated fair value of the net assets acquired exceeded the purchase price for the Salto and Futura product lines and resulted in the Company's recording a gain of $1.1 million for the year ended December 31, 2015 in Other Income. The acquired toe and ankle products enhance the Company's lower extremities product offering and accelerate its entry into the U.S. total ankle replacement market.

The Company recorded revenue for Salto and Futura of approximately $3.2 million and $10.5 million in the consolidated statements of operations for the three- and nine-month period ended September 30, 2016, respectively. The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it is in the process of being integrated into the Company's operations.

The following summarizes the allocation of the purchase price as of September 30, 2016 based on the fair value of the assets acquired and liabilities assumed:

	Purchase Price Allocation
	(Dollars in thousands)
Inventory	$	2,688
Property, plant, and equipment	1,453
Intangible assets:			Wtd. Avg. Life:
Ankle product family	3,210		11 years
Toe product family	460		10 years
Total assets acquired	7,811
Deferred tax liabilities	700
Net assets acquired	$	7,111

TEI

On July 17, 2015, the Company executed the two merger agreements (collectively, the "Agreements") under which the Company acquired TEI Biosciences, Inc., a Delaware corporation ("TEI Bio"), and TEI Medical Inc., a Delaware corporation ("TEI Med", collectively "TEI") for an aggregate purchase price of approximately $312.2 million ($210.9 million for TEI Bio and $101.3 million for TEI Med) including a working capital and purchase price adjustment of $0.2 million ($0.5 million for TEI Bio offset by $0.7 million cash received for TEI Med) which was recorded as a reduction from goodwill. The purchase price consisted of a cash payment to the former shareholders of TEI Bio and TEI Med of approximately $312.4 million upon the closing of the transaction, net of $1.2 million of acquired cash.

TEI Bio was in the business of developing and commercializing biologic devices for soft tissue repair and regenerative applications, including dura and hernia repair and plastic and reconstructive surgery. TEI Med holds a license to TEI Bio’s regenerative technology in the fields of wound healing and orthopedics.

The Company recorded revenue for TEI of approximately $12.6 million and $38.6 million in the condensed consolidated statements of operations for the three- and nine-month ended September 30, 2016, respectively, and $13.2 million for the three- and nine-month ended September 30, 2015. The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it is in the process of being integrated into the Company's operations.

The following summarizes the allocation of the purchase price as of September 30, 2016 based on the fair value of the assets acquired and liabilities assumed:

	Purchase Price Allocation
	(Dollars in thousands)
Cash	$	1,241
Accounts receivable, net	9,011
Inventory	23,223
Income tax receivable	5,135
Other current assets	2,670
Property, plant, and equipment	2,027
Intangible assets:			Wtd. Avg. Life:
Developed technology	167,400		14 -16 Years
Contractual relationships	51,345		11 -14 Years
Leasehold interest	69
Goodwill	147,704
Total assets acquired	409,825
Accrued expenses and other liabilities	9,732
Deferred tax liabilities	87,908
Net assets acquired	$	312,185

The Company recognized a contingent receivable from TEI of $0.4 million included in Other assets as of December 31, 2015. The contingent receivable is measured at fair value and classified as a Level 3 financial instrument. For the nine-month period ended September 30, 2016, the fair value of the contingent receivable increased by $1.0 million to reflect a change in estimate and time value of money. As of September 30, 2016, the $1.4 million balance of this contingent receivable is included in Prepaid expenses and other current assets and Other assets of $0.9 million and $0.5 million , respectively.

Pro Forma Results

The following unaudited pro forma financial information summarizes the results of operations for the three and nine months ended September 30, 2015 as if the acquisitions completed by the Company during 2015 had been completed as of the beginning of the prior year. The pro forma results are based upon certain assumptions and estimates, and they give effect to actual operating results prior to the acquisition and adjustments to reflect (i) the change in interest expense, depreciation expense, and intangible asset amortization, (ii) certain external expenses related to the acquisition as if they were incurred on January 1 of the year prior to the acquisition that will not be recurring in the post-acquisition periods, and (iii) income taxes on the aforementioned adjustments at the Company’s statutory rate. No effect has been given to other cost reductions or operating synergies. As a result, these pro forma results do not necessarily represent results that would have occurred if the acquisition had taken place on the basis assumed above, nor are they indicative of the results of future combined operations.

	Three Months Ended September 30,			Nine Months Ended September 30,
	2015			2015
	(In thousands, except per share amounts)
Total revenue	$	235,523		$	696,559
Net loss from continuing operations	$	(30,706	)	$	(14,493	)
Net loss from continuing operations per share:
Basic	$	(0.87	)	$	(0.43	)