Certain Transactions |
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| Certain Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain Transactions |
Note 3. Certain Transactions
Investment in Xaar 3D Ltd. ("Xaar 3D")
During the fourth quarter of 2019, the
Company entered into an agreement with Xaar plc (“Xaar”) to purchase additional
shares of Xaar 3D that was to increase its stake from 15 to 45 percent, with
Xaar retaining the remaining 55 percent. Xaar and Stratasys had announced the
formation of Xaar 3D Ltd in July 2018 for the purpose of developing Powder Bed
Fusion (“PBF”) additive manufacturing solutions that Stratasys can bring to the
market. In addition, the agreement included an option for Stratasys to
acquire the remaining shares of Xaar 3D.
Following the additional investment, the
Company considered the FASB guidance in accordance with ASC Topic 810 “Consolidation”
regarding the propriety of implementing consolidation, for both the variable
interest entity and voting model, or equity method accounting. The Company
concluded that it should continue accounting for the investment according to
the equity method, as it had retained the ability to exercise significant
influence but did not control Xaar 3D. For its additional interest in Xaar 3D,
the Company paid approximately $15.7 million.
The investment was presented under other non-current assets in the Company’s consolidated balance sheets.
On
November 1, 2021 (the “Xaar 3D transaction date”) , the Company acquired the
remaining 55% share of Xaar 3D, for an aggregate purchase price of $29.3
million. The Company paid cash upon closing and it is obligated to make
additional earn-out payments and payments of royalties on products and
services sales for up to 15 years.
The Xaar
3D transaction is reflected in accordance with ASC Topic 805, “Business
Combinations”, using the acquisition method of accounting, with the Company as
the acquirer. The Company accounted for the acquisition of the remaining
equity of Xaar 3D as a step acquisition, which required re-measurement of
the Company’s previous ownership interest to fair value prior to completing
purchase accounting. Using step acquisition accounting, the Company
increased the value of its previously-held equity investment to its fair value
of $23.8 million, which resulted in a gain of approximately
$14.4 million, recorded in the consolidated statements of operations in
the fourth quarter of 2021. The acquisition of the remaining equity interest
also resulted in the recognition of a previously unrealized foreign currency gain of $0.6 million, which was
reclassified from accumulated other comprehensive income (OCI). The fair value
of the previously held equity method investment was determined based upon a
valuation of the acquired business, as of the date of acquisition, as detailed
below.
The following table
summarizes the fair value of the consideration transferred to Xaar 3D’s
stockholders for the Xaar 3D transaction:
In
accordance with ASC Topic 805, the estimated contingent consideration as of the
Xaar 3D transaction date was included in the purchase price. The total contingent
payments could reach a maximum aggregate amount of up to $21 million. The
estimated fair value of the contingent consideration is based on management’s
assessment of whether, and at what level, the financial metrics will be
achieved, and the present value factors associated with the timing of the
payments. This fair value measurement is based on significant unobservable
inputs in the market and thus represents a Level 3 measurement within the fair
value hierarchy. Changes in the fair value of contingent consideration will be
recorded in operating expenses.
The
following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the Xaar 3D transaction date. The estimated fair values
are preliminary and based on the information that was available as of November
1, 2021. Thus, the measurements of fair value that are reflected are subject to
changes, and such changes could be significant. The preliminary allocation of
the purchase price to assets acquired and liabilities assumed is as follows:
RPS acquisition
On February 16, 2021 the Company acquired RP Support Limited (“RPS”), a provider of industrial stereolithography 3D printers and solutions. In exchange for 100% of the outstanding shares of RPS, the Company paid cash upon closing and is obligated to make additional payments (in cash), subject to performance-based criteria, via earn-out payments over two years.
Marketable equity investment
The Company recognized a loss of $1.1 million for revaluation of an equity investment in the first quarter of 2022 and a gain of $3.7 million in the first quarter of 2021. The entity in which the Company invested has become public during the first quarter of 2021 and accordingly the investment is treated as a marketable equity investment. Prior to the first quarter of 2021, the investment was treated as a non-marketable equity investment without readily determinable fair value.
MakerBot and Ultimaker transaction
On May 12, 2022, the company announced the creation of a new company (“the combined company”) comprised of MakerBot and Ultimaker. Under the terms of the agreement, Stratasys will contribute MakerBot assets, invest $47 million and own 45.6% of the combined company. While NPM Capital will contribute Ultimaker assets, invest $15.4 million, and own 54.4% of the combined company. The transaction expected to close within few months.
The Company will account for the investment, in the
combined company according to the equity method in accordance with ASC
topic 323, as it has retained the ability to exercise significant influence but
does not control the new entity.
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