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Coherent Acquisition | 12 Months Ended
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Jun. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
Coherent Acquisition | Coherent Acquisition On July 1, 2022 (the “Closing Date”), the Company completed its acquisition of Coherent, Inc. (the “Merger”), a global provider of lasers and laser-based technology for scientific, commercial, and industrial customers, in a combined cash and stock transaction in accordance with the Agreement and Plan of Merger dated March 25, 2021 (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein, each share of common stock of legacy Coherent, Inc. (“Legacy Coherent”), par value $0.01 per share (the “Legacy Coherent Common Stock”), issued and outstanding immediately prior to July 1, 2022, was canceled and extinguished and automatically converted into the right to receive $220.00 in cash and 0.91 of a share of Coherent’s common stock, no par value (“Coherent Common Stock”). Following the completion of the Legacy Coherent acquisition, the Company announced a new brand identity, including a corporate name change to Coherent Corp. (NYSE: COHR) on September 8, 2022. On the Closing Date, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a new term loan A credit facility (the “Term A Facility”) in an aggregate principal amount of $850 million a new term loan B credit facility (the “Term B Facility”) (and, together with the Term A Facility, the “Term Facilities”) in an aggregate principal amount of $3 billion, and a new revolving credit facility (the “Revolving Credit Facility”) in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million. For further information on the credit facility refer to Note 8. Debt. In order to complete the funding of the Merger, we had a net cash outflow of $2.1 billion on July 1, 2022. We recorded $94 million of acquisition related costs in the year ended June 30, 2023 representing professional and other direct acquisition costs. These costs are recorded within SG&A expense in our Consolidated Statement of Earnings (Loss). Approximately 23 million shares of Coherent Common Stock in the aggregate were issued in conjunction with the closing of the Merger. Total Merger consideration was $7.1 billion, including replacement equity awards attributable to pre-combination service for certain Legacy Coherent restricted stock units. The total fair value of consideration paid in connection with the acquisition of Coherent, Inc. consisted of the following (in $000):
| Shares |  | Per Share |  | Total Consideration
Cash paid for merger consideration | — |  | — |  | $ | 5,460,808 |
Shares of COHR common stock issued to Legacy Coherent stockholders | 22,587,885 |  | $49.83 |  | 1,125,554 |
Converted Legacy Coherent RSUs attributable to pre-combination service | — |  | — |  | 82,037 |
Payment of Legacy Coherent debt | — |  | — |  | 364,544 |
Payment of Legacy Coherent transaction expenses | — |  | — |  | 62,840 |
|  |  |  |  | $ | 7,095,783 |
The purchase price allocation set forth herein is final. We allocated the fair value of the purchase price consideration to the tangible assets, liabilities, and intangible assets acquired, generally based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. Our valuation assumptions of acquired assets and assumed liabilities require estimates, especially with respect to intangible assets, inventories, property, plant & equipment and deferred income taxes. In determining the fair value of intangible assets acquired, we must make assumptions about the future performance of the acquired business, including among other things, the forecasted revenue growth attributable to the asset group and projected operating expenses inclusive of expected synergies, future cost savings, and other benefits expected to be achieved by combining the Company and Legacy Coherent. Our intangible assets are comprised of trade names and trademarks, customer relationships, developed technology and backlog. We utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the purchase price allocation. The estimated fair value of the customer relationships and backlog are determined using the multi-period excess earnings method and the estimated fair value of the trade names and trademarks and developed technology are determined using the relief from royalty method. Both methods require forward looking estimates that are discounted to determine the fair value of the intangible asset using a risk-adjusted discount rate that is reflective of the level of risk associated with future estimates associated with the asset group that could be affected by future economic and market conditions. Our final allocation of the purchase price of Legacy Coherent, based on the estimated fair value of the assets acquired and liabilities assumed as of the Closing Date, is as follows (in $000):
|  | Final Purchase Price Allocation
|  | Previously Reported September 30, 2022 |  |  |  | Measurement Period Adjustments (i) |  | As Adjusted
Assets |  |  |  |  |  |  |  |
Current Assets |  |  |  |  |  |  |  |
Cash, cash equivalents, and restricted cash |  | $ | 393,324 |  |  |  |  | $ | — |  |  | $ | 393,324 |
Accounts receivable |  | 270,928 |  |  |  |  | — |  |  | 270,928 |
Inventories (ii) |  | 497,345 |  |  |  |  | 65,539 |  |  | 562,884 |
Prepaid and refundable income taxes (iii) |  | 8,869 |  |  |  |  | (4,037) |  |  | 4,832 |
Prepaid and other current assets (iv) |  | 41,467 |  |  |  |  | (3,662) |  |  | 37,805 |
Total Current Assets |  | 1,211,933 |  |  |  |  | 57,840 |  |  | 1,269,773 |
Property, plant & equipment, net (v) |  | 424,228 |  |  |  |  | 16,704 |  |  | 440,932 |
Deferred income taxes (iii) |  | 1,115 |  |  |  |  | (879) |  |  | 236 |
Other assets (iv) |  | 102,726 |  |  |  |  | 3,662 |  |  | 106,388 |
Other intangible assets, net (vi) |  | 2,425,454 |  |  |  |  | 1,079,546 |  |  | 3,505,000 |
Goodwill |  | 4,005,727 |  |  |  |  | (830,743) |  |  | 3,174,984 |
Total Assets |  | $ | 8,171,183 |  |  |  |  | $ | 326,130 |  |  | $ | 8,497,313 |
Liabilities |  |  |  |  |  |  |  |
Current Liabilities |  |  |  |  |  |  |  |
Current portion of long-term debt |  | $ | 4,504 |  |  |  |  | $ | — |  |  | $ | 4,504 |
Accounts payable |  | 116,754 |  |  |  |  | — |  |  | 116,754 |
Accrued compensation and benefits (vii) |  | 60,596 |  |  |  |  | (1,965) |  |  | 58,631 |
Operating lease current liabilities |  | 13,002 |  |  |  |  | — |  |  | 13,002 |
Accrued income taxes payable (iii) |  | 16,936 |  |  |  |  | 8,116 |  |  | 25,052 |
Other accrued liabilities (vii) |  | 136,042 |  |  |  |  | 2,882 |  |  | 138,924 |
Total Current Liabilities |  | 347,834 |  |  |  |  | 9,033 |  |  | 356,867 |
Long-term debt |  | 22,991 |  |  |  |  | — |  |  | 22,991 |
Deferred income taxes (iii) |  | 563,824 |  |  |  |  | 313,774 |  |  | 877,598 |
Operating lease liabilities |  | 43,313 |  |  |  |  | — |  |  | 43,313 |
Other liabilities (vii) |  | 97,438 |  |  |  |  | 3,323 |  |  | 100,761 |
Total Liabilities |  | $ | 1,075,400 |  |  |  |  | $ | 326,130 |  |  | $ | 1,401,530 |
Final aggregate acquisition consideration |  | $ | 7,095,783 |  |  |  |  | $ | — |  |  | $ | 7,095,783 |
(i) We recorded measurement period adjustments to our preliminary acquisition date fair values due to the refinement of our valuation models, assumptions and inputs. The following measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date. (ii) The Consolidated Balance Sheet has been adjusted to record Legacy Coherent’s inventories at a fair value of approximately $563 million, an increase of $66 million from the preliminary fair value reported at September 30, 2022 with a corresponding decrease to goodwill. The Consolidated Statement of Earnings (Loss) for the year ended June 30, 2023 includes cost of goods sold of approximately $158 million related to the increased basis in the fair value compared to the carrying value. The costs are being amortized over the expected period during which the acquired inventory is sold and thus are not anticipated to affect the Consolidated Statements of Earnings (Loss) beyond twelve months after the Closing Date. (iii) We have adjusted our prepaid and refundable income taxes, deferred tax asset, income taxes payable and deferred tax liability positions as of June 30, 2023, to $5 million, $0 million, $25 million and $878 million, respectively, as a result of measurement period adjustments. (iv) We recorded approximately $4 million of decreases in prepaid and other current assets and $4 million of increases in other assets as measurement period adjustments. (v) The Consolidated Balance Sheet has been adjusted to record Legacy Coherent’s property, plant and equipment (consisting of land, buildings and improvements, equipment, furniture and fixtures, and leasehold improvements) at a fair value of approximately $441 million, an increase of $17 million from the preliminary fair value reported at September 30, 2022 with a corresponding decrease to goodwill. The Consolidated Statements of Earnings (Loss) have been adjusted to recognize additional depreciation expense related to the increased basis. The additional depreciation expense is computed with the assumption that the various categories of assets will be depreciated over their remaining useful lives on a straight-line basis. (vi) Identifiable intangible assets in the Consolidated Balance Sheet increased $1.1 billion from the preliminary fair value reported at September 30, 2022 with a corresponding decrease to goodwill. Intangibles amortization recorded in cost of goods sold for the year ended June 30, 2023 was $87 million. Intangibles amortization recorded in SG&A expenses for the year ended June 30, 2023 was $209 million. Identifiable intangible assets consist of the following and are being amortized over their estimated useful lives in the Consolidated Statements of Earnings (Loss) (in $000):
|  | Fair Value | Estimated Useful Life
Trade names and trademarks |  | $ | 430,000 |  | N/A
Customer relationships |  | 1,830,000 |  | 15 years
Developed technology |  | 1,157,500 |  | 13.5 years
Backlog |  | 87,500 |  | 1.0 year
Intangible assets acquired |  | $ | 3,505,000 |  |
(vii) We recorded approximately $3 million of increases in other accrued liabilities, $2 million of decreases in accrued compensation and benefits and $3 million of increases in other liabilities as measurement period adjustments. Operating results, including goodwill and intangibles, of Legacy Coherent are reflected in the Company’s consolidated financial statements from the Closing Date, within the Lasers segment. Revenues and net loss for the Lasers segment for the year ended June 30, 2023 were $1,469 million and $412 million, respectively. Goodwill in the amount of $3.2 billion arising from the acquisition is attributed to the expected synergies, including future cost savings, and other benefits expected to be generated by combining Coherent and Legacy Coherent. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes. Supplemental Pro Forma Information The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that we believe are reasonable under the circumstances. The following supplemental pro forma information presents the combined results of operations for the years ended June 30, 2023 and June 30, 2022, as if Legacy Coherent had been acquired as of July 1, 2021. The supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets, property, plant and equipment, adjustments to share-based compensation expense, fair value adjustments on the inventories acquired, transaction costs, interest expense and amortization of debt issuance costs related to the Senior Credit Facilities (as defined in Note 8. Debt). The unaudited supplemental pro forma financial information for the periods presented is as follows (in $000):
| Year Ended June 30, 2023 |  | Year Ended June 30, 2022
Revenue | $ | 5,160,100 |  |  | $ | 4,837,103 |
Net Earnings (Loss) | 105,849 |  |  | (289,615) |

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