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Acquisitions and Dispositions | 9 Months Ended
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Sep. 30, 2017
Business Combinations [Abstract] |
Acquisitions and Dispositions |
7) | Acquisitions and Dispositions
Newport Corporation On April 29, 2016, the Company completed its acquisition of Newport Corporation (“Newport”) pursuant to an Agreement and Plan of Merger, dated as of February 22, 2016 (the “Merger Agreement”), by and among the Company, PSI Equipment, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), and Newport (the “Newport Merger”). At the effective time of the Newport Merger and pursuant to the terms and conditions of the Merger Agreement, each share of Newport’s common stock that was issued and outstanding immediately prior to the effective time of the Newport Merger was converted into the right to receive $23.00 in cash, without interest and subject to deduction for any required withholding tax. Newport’s innovative solutions leverage its expertise in advanced technologies, including lasers, photonics and precision motion equipment, and optical components and sub-systems, to enhance the capabilities and productivity of its customers’ manufacturing, engineering and research applications. Newport is a global supplier of advanced-technology products and systems to customers in the scientific research and defense/security, microelectronics, life and health sciences and industrial manufacturing markets. The purchase price of Newport consisted of the following:
Cash paid for outstanding shares(1) |  | $ | 905,254 |
Settlement of share-based compensation awards(2) |  |  | 8,824 |
Cash paid for Newport debt(3) |  |  | 93,200 |
Total purchase price |  |  | 1,007,278 |
Less: Cash and cash equivalents acquired |  |  | (61,463 | )
Total purchase price, net of cash and cash equivalents acquired |  | $ | 945,815 |
(1) | Represents cash paid of $23.00 per share for approximately 39,359,000 shares of Newport common stock, without interest and subject to a deduction for any required withholding tax.
(2) | Represents the vested but not issued portion of Newport share-based compensation awards as of the acquisition date of April 29, 2016.
(3) | Represents the cash paid for the outstanding balance of Newport’s senior secured revolving credit agreement.
The Company funded the payment of the aggregate consideration with a combination of the Company’s available cash on hand and the proceeds from the Company’s senior secured Term Loan Facility, as described in Note 9. Under the acquisition method of accounting, the total acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of Newport based on their fair values as of the acquisition date. Any excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed is allocated to goodwill. The Company concluded that all such goodwill and intangible assets will not be deductible for tax purposes. The following table summarizes the allocation of the purchase price to the fair values assigned to assets acquired and liabilities assumed at the date of the Newport Merger:
Current assets (including cash) |  | $ | 186,137 |
Inventory |  |  | 142,714 |
Intangible assets |  |  | 404,506 |
Goodwill |  |  | 396,027 |
Property, plant and equipment |  |  | 119,932 |
Long-term assets |  |  | 22,725 |
Total assets acquired |  |  | 1,272,041 |
Current liabilities |  |  | 95,156 |
Intangible liability |  |  | 4,302 |
Other long-term liabilities |  |  | 165,305 |
Total liabilities assumed |  |  | 264,763 |
Fair value of assets acquired and liabilities assumed |  |  | 1,007,278 |
Less: Cash and cash equivalents acquired |  |  | (61,463 | )
Total purchase price, net of cash and cash equivalents acquired |  | $ | 945,815 |
The fair value write-up of acquired finished goods inventory was $15,090, the amount of which will be amortized over the expected period during which the acquired inventory is sold. Accordingly, the Company recorded incremental costs of sales charges associated with the fair value write-up of inventory acquired in the merger with Newport of $4,971 and $15,090 for the three and nine months ended September 30, 2016, respectively. The fair value write-up of acquired property, plant and equipment of $36,242 will be amortized over the useful life of the assets. Property, plant and equipment is valued at its value-in-use, unless there was a known plan to dispose of the asset. The acquired intangible assets are being amortized on a straight-line basis, which approximates the economic use of the asset. The following table reflects the allocation of the acquired intangible assets and liabilities and related estimate of useful lives:
Order backlog |  | $ | 12,100 |  |  |  | 1 year |
Customer relationships |  |  | 247,793 |  |  |  | 6-18 years |
Trademarks and trade names |  |  | 55,900 |  |  |  | Indefinite |
Developed technology |  |  | 75,386 |  |  |  | 4-8 years |
In-process research and development |  |  | 6,899 |  |  |  | Undefined(1) |
Leasehold interest (favorable) |  |  | 6,428 |  |  |  | 4-5 years |
Total intangible assets |  | $ | 404,506 |  |  |  |  |
Leasehold interest (unfavorable) |  | $ | 4,302 |  |  |  |  |
(1) | The useful lives of in-process research and development will be defined in the future upon further evaluation of the status of these programs.
The fair value of the acquired intangibles was determined using the income approach. In performing these valuations, the key underlying probability-adjusted assumptions of the discounted cash flows were projected revenues, gross margin expectations and operating cost estimates. The valuations were based on the information that was available as of the acquisition date and the expectations and assumptions that have been deemed reasonable by the Company’s management. There are inherent uncertainties and management judgment required in these determinations. This acquisition resulted in a purchase price that exceeded the estimated fair value of tangible and intangible assets, the excess amount of which was allocated to goodwill. The Company believes the amount of goodwill relative to identifiable intangible assets relates to several factors including: (1) potential buyer-specific synergies related to market opportunities for a combined product offering; and (2) potential to leverage the Company’s sales force to attract new customers and revenue and cross sell to existing customers. The results of this acquisition were included in the Company’s consolidated operations beginning on April 29, 2016. Newport constitutes the Company’s Light & Motion reportable segment (Note 16). Certain executives from Newport had severance provisions in their respective Newport employment agreements. The agreements included terms that were accounted for as dual-trigger arrangements. Through the Company’s acquisition accounting, the expense relating to these benefits was recognized in the combined entity’s financial statements, however, the benefit itself will not be distributed until the final provision is met by each eligible executive. The Company recorded costs of $6,631 and $3,334 as compensation expense and stock-based compensation expense, respectively, for the three and nine months ended September 30, 2016, respectively, in connection with these severance provisions. The shares underlying the restricted stock units and stock appreciation rights that are eligible for accelerated vesting if the executive exercises his rights are not issued as of each reporting period-end and are excluded from the computation of basic earnings per share and included in the computation of diluted earnings per share for each reporting period. Pro-Forma Results The following unaudited pro-forma financial information presents the combined results of operations of the Company as if the acquisition of Newport had occurred on January 1, 2015. The unaudited pro-forma financial information is not necessarily indicative of what the Company’s consolidated results of operations actually would have been had the acquisition occurred at the beginning of each year. In addition, the unaudited pro-forma financial information does not attempt to project the future results of operations of the combined company.
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2016 |  |  | 2016 |
Total net revenues |  | $ | 380,660 |  |  | $ | 1,070,471 |
Net income |  |  | 35,915 |  |  |  | 65,313 |
Net income per share: |  |  |  |  |  |  |  |
Basic |  | $ | 0.67 |  |  | $ | 1.22 |
Diluted |  | $ | 0.66 |  |  | $ | 1.21 |
The unaudited pro-forma financial information above gives effect primarily to the following:
| (1) | Incremental amortization and depreciation expense related to the estimated fair value of identifiable intangible assets and property, plant and equipment form the purchase price allocation.
| (2) | Revenue adjustments as a result of the reduction in deferred revenue related to its estimated fair value.
| (3) | Incremental interest expense related to the Company’s term loan credit agreement.
| (4) | Excluding acquisition costs and inventory step-up amortization from the three and nine month periods ended September 30, 2016.
| (5) | The tax impact of the above adjustments.
Cost Method Investment in a Private Company In April 2016, the Company invested $9,300 for a minority interest in a private company, which operates in the field of semiconductor process equipment instrumentation. The Company accounted for this investment using the cost method of accounting. During the fourth quarter of 2016, the Company recognized an impairment loss on this investment of $5,000 based upon financial information of this private company. In July 2017, the Company invested an additional $100 in this private company. Sale of Data Analytics Solutions In April 2017, the Company completed the sale of its Data Analytics Solutions business for total proceeds of $72,509, net of cash sold and recorded a gain of $74,856. This business, which had revenues in 2016 of $12,700 and was included in the Vacuum & Analysis segment, was no longer a part of the Company’s long-term strategic objectives. The business did not qualify as a discontinued operation as this sale did not represent a strategic shift in the Company’s business, nor did the sale have a major effect on the Company’s operations. Therefore, the results of operations for all periods are included in the Company’s income from operations. The assets and liabilities of this business have not been reclassified or segregated in the consolidated balance sheet or consolidated statements of cash flows as the amounts were immaterial.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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