Certain Transactions |
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| Certain Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Certain Transactions |
Note 2. Certain Transactions Origin acquisition On December 31, 2020 (the “Origin transaction date”) the Company acquired 3D printing start-up Origin Laboratories Inc. (“Origin”) for an aggregate purchase price of $97.1 million (“Origin transaction”), including cash and shares. The acquisition enables Stratasys to expand its leadership through innovation in the fast-growing mass production parts market with a next-generation photopolymer platform. Stratasys expects Origin’s proprietary Programmable PhotoPolymerization (P3) technology to be an important growth engine for the Company. The acquisition was aimed at fortifying the Company's leadership in polymers and production applications of 3D printing in industries such as dental, medical, tooling, and select industrial, defense, and consumer goods markets. In exchange for 100% of the outstanding shares of Origin the Company issued 1,488 thousand ordinary shares, paid cash upon closing and is obligated to pay additional payments (combination of cash and shares) subject to performance-based earnouts over 3 years. The Origin transaction is reflected in accordance with ASC Topic 805, “Business Combinations”, using the acquisition method of accounting with the Company as the acquirer. The following table summarizes the fair
value of the consideration transferred to Origin stockholders for the Origin
transaction:
The fair value of the ordinary shares issued was determined based on the closing market price of the Company’s ordinary shares on the Origin transaction date. In accordance with ASC Topic 805, the estimated contingent consideration as of the Origin transaction date was included in the purchase price. The total contingent payments could reach to a maximum aggregate amount of up to $40.0 million. Approximately 50% of the payments shall be settled in cash, and 50% shall be settled through the issuance of ordinary shares. 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 are recorded in operating expenses. Refer to note 4. An additional payment of $6.0 million, which is subject to the founders' retention over 3 years, is recorded as compensation expense over the retention period. The allocation of the purchase price to assets acquired and liabilities assumed, including measurement period adjustments (refer to note 7), is as follows:
The allocation of the purchase price to net assets acquired and liability assumed resulted in the recognition of intangible asset related to developed technology of $71.0 million. This intangible asset has a useful-life of 10 years. The fair value estimate of the developed technology is determined using a variation of the income approach known as the “Multi-Period Excess Earnings Approach”. This valuation technique estimates the fair value of an asset based on market participants’ expectations of the cash flows an asset would generate over its remaining useful life. The net cash flows were discounted to present value. Investment in Xaar 3D Ltd. ("Xaar 3D") Xaar plc (“Xaar”) and Stratasys had announced the
formation of Xaar 3D in July 2018 for the purpose of developing Powder Bed
Fusion (”PBF”) additive manufacturing solutions that Stratasys can bring to the
market. During the fourth quarter of 2019, the Company entered into an
agreement with Xaar to purchase additional shares of Xaar 3D that will increase
its stake from 15 percent to 45 percent, with Xaar retaining the remaining 55
percent. 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 has retained the ability to exercise significant influence but does 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 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 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
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 to a maximum aggregate amount of up to $21.0 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 are recorded in operating expenses. Refer to note 4.
The allocation of the purchase price to assets acquired and liabilities assumed, is as follows:
The
allocation of the purchase price ("PPA") to net assets acquired and
liability assumed resulted in the recognition of intangible asset related to
developed technology of $45.0 million. This intangible asset has a useful-life of
7 years. The fair value estimate of the developed technology is determined
using a variation of the income approach known as the “Multi-Period Excess
Earnings Approach”. This valuation technique estimates the fair value of an
asset based on market participants’ expectations of the cash flows an asset
would generate over its remaining useful life. The net cash flows were
discounted to present value. In addition, as part of the PPA, the Company assumed
a royalty liability to a third party in respect of the developed technology.
Such liability amounting to $14.2 million was recorded based on a fair value
estimate, which was determined using the valuation model used to value the
developed technology and is recorded under other non-current liabilities.
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 paid earn-out payments.
MakerBot and Ultimaker transaction ("Ultimaker")
On August 31, 2022, Stratasys completed the merger of MakerBot (previously, a fully owned subsidiary) with Ultimaker, which together formed a new entity under the name Ultimaker. The Company recorded a net gain of $39.1 million from deconsolidation of MakerBot, representing the difference between the book value of MakerBot's net assets and the fair value allocated to such net assets in the transaction as follows:
The Company accounts for its investment in the combined company Ultimaker 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.
the Company recognized an equity method investment in a total amount of $105.6
million comprised of the assumed fair value of the MakerBot shares and
additional amount invested in cash by the Company, representing a share of
46.5% in the new entity.
The preliminary allocation of
the purchase price ("PPA") to net assets acquired and liability
assumed resulted in the recognition of intangible asset of $57.8 million
and goodwill of $22.3 million and other net assets of $25.5 million. The value assigned to intangible assets is amortized over a period of 5 to 10 years and the related amortization is included under share in net losses (profits) from associated companies. The
estimated fair values are preliminary and based on the information that was
available as of August 31, 2022. Thus, the measurements of fair value reflected
are subject to changes and such changes could be significant.
As of December 31, 2022 the equity investment in Ultimaker amounts to $100.2 million which represents the original investment in Ultimaker, net of share in net losses for the period at the amount of $5.4 million. Following the acquisition, the Company will act as an agent to Ultimaker and will distribute products of Ultimaker. Transactions with Ultimaker for the period from the acquisition date through December 31, 2022 were immaterial.
Covestro acquisition
On August 8, 2022, the Company announced it has signed a definitive agreement to acquire the additive manufacturing materials business of Covestro AG. The acquisition is expected to close during the second quarter of 2023. The purchase price is approximately $42.3 million (43 million euros), plus additional inventory, less certain liabilities. In addition, there is a potential earnout payment of up to $36.4 million (37 million euros), subject to the achievement of various performance metrics.
In addition to the investment in Ultimaker, other investments included
under Long-term investments represents mainly investments in non-marketable
equity securities of several companies without readily determinable fair value
in which the Company does not have a controlling interest or significant
influence. One entity from this group
became public during the first quarter of 2021 and accordingly the investment
is now treated as a marketable equity investment. During 2022 and
2021, the Company invested a total of $14.8 million and $11.8 million in
non-marketable equity securities of several companies. In addition, in 2022, the
Company invested $1.9 million in convertible notes of another entity.
Restructuring plan On June 2, 2020, the Company announced a restructuring plan to reduce operating expenses as part of a cost realignment program to focus on profitable growth (the “Plan”). The Plan’s cost-cutting measures included workforce reductions affecting approximately 10% of employees, as well as other cost-mitigation measures. The Company recorded $6.4 million and $3.9 million of employee-related charges and other related charges, respectively, during 2020. The plan was substantially completed in 2020. |