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Acquisition | 12 Months Ended
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Dec. 31, 2021
Business Combinations [Abstract] |
Acquisition |
5) | Acquisitions
Photon Control On July 15, 2021, the Company completed its acquisition of Photon Control Inc. (“Photon Control”), a Canadian corporation (the “Photon Control Acquisition”), pursuant to a definitive agreement (the “Arrangement Agreement”). Photon Control designs, manufactures and distributes a wide range of optical sensors and systems to measure temperature and position used in semiconductor wafer fabrication. At the effective time of the Photon Control Acquisition and pursuant to the terms and conditions of the Arrangement Agreement, each share of Photon Control’s common stock issued and outstanding as of immediately prior to the effective time of the Photon Control Acquisition, was converted into the right to receive CAD 3.60 per share in cash, without interest and subject to deduction for any required withholding tax. The Company funded the payment of the aggregate consideration with available cash on hand. Photon Control is included in the Company’s Light & Motion segment. The Photon Control Acquisition has helped the Company deliver on one of its long-term strategic objectives, which is to broaden its portfolio of key technologies to better serve its customers. The Photon Control Acquisition further advances the Company’s strategy to enhance its Surround the Chamber® offering by adding optical sensors for temperature control for critical etch and deposition applications in semiconductor wafer fabrication. The purchase price of Photon Control consisted of the following:
Cash paid for outstanding shares (1) |  | $ | 302.7 |
Less: Cash and cash equivalents acquired |  |  | (34.3 | )
Total purchase price, net of cash and cash equivalents acquired |  | $ | 268.4 |
(1) | Represents cash paid of CAD 3.60 per share for approximately 105.2 shares of Photon Control common stock, without interest and subject to deduction for any required withholding tax.
Under the acquisition method of accounting, the total estimated acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of Photon Control 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 expects that none of such goodwill or intangible assets will be deductible for tax purposes. The Company believes the amount of goodwill relative to identifiable intangible assets relates to enhancing the Company’s Surround the Chamber® offering by adding optical sensors for temperature control for critical etch and deposition applications in semiconductor wafer fabrication. 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 Photon Control Acquisition:
Current assets |  | $ | 51.4 |
Intangible assets |  |  | 121.2 |
Goodwill |  |  | 168.0 |
Other non-current assets |  |  | 8.6 |
Total assets acquired |  |  | 349.2 |
Current liabilities |  |  | 13.7 |
Non-current deferred taxes |  |  | 32.1 |
Other long-term liabilities |  |  | 0.7 |
Total liabilities assumed |  |  | 46.5 |
Fair value of assets acquired and liabilities assumed |  |  | 302.7 |
Less: Cash and cash equivalents acquired |  |  | (34.3 | )
Total purchase price, net of cash and cash equivalents acquired |  | $ | 268.4 |
The acquired intangible assets are being amortized on a straight-line basis, which approximates the economic use of the assets over their estimated useful lives. The following table reflects the allocation of the acquired intangible assets and related estimate of useful lives:
Completed technology |  | $ | 110.0 |  |  | 9 years
Customer relationships |  |  | 9.4 |  |  | 10 years
Trade names |  |  | 0.2 |  |  | 0.5 years
Backlog |  |  | 1.6 |  |  | 1.5 years
|  | $ | 121.2 |  |  |
The fair value of the acquired intangible assets was determined using the income approach. In performing these valuations, the key underlying assumptions used included the appropriate discount rates as well as forecasted revenue growth rates, gross profit and operating margins. Fair value estimates are based on complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. 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 results of operations of the Photon Control business from the Photon Control Acquisition closing date of July 15, 2021 through December 31, 2021, were not material to the Company's results of operations. The acquisition was also not material to the Company’s results of operations, for the periods presented, on a pro forma basis. Electro Scientific Industries, Inc. On February 1, 2019, the Company completed its acquisition of Electro Scientific Industries, Inc. (“ESI”) pursuant to an Agreement and Plan of Merger, dated as of October 29, 2018 (the “Merger Agreement”), by and among the Company, EAS Equipment, Inc., formerly a Delaware corporation and a wholly-owned subsidiary of the Company, and ESI (the “ESI Merger”). At the effective time of the ESI Merger and pursuant to the terms and conditions of the Merger Agreement, each share of ESI’s common stock that was issued and outstanding immediately prior to the effective time of the ESI Merger was converted into the right to receive $30.00 in cash, without interest and subject to deduction of any required withholding tax. 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 Term Loan Facility, as defined and as described further in Note 15. ESI provides laser-based manufacturing systems solutions for the micro-machining industry that enable customers to optimize production. Its market is composed primarily of flexible and rigid printed circuit board (“PCB”) processing/fabrication and passive component manufacturing and testing. ESI solutions incorporate specialized laser technology and proprietary control software to efficiently process the materials and components that are an integral part of electronic devices and systems. The purchase price of ESI consisted of the following:
Cash paid for outstanding shares (1) |  | $ | 1,032.7 |
Settlement of share-based compensation awards (2) |  |  | 30.6 |
Total purchase price |  |  | 1,063.3 |
Less: cash and cash equivalents acquired |  |  | (44.1 | )
Total purchase price, net of cash and cash equivalents acquired |  | $ | 1,019.2 |
(1) | Represents cash paid of $30.00 per share for approximately 34.4 shares of ESI common stock, without interest and subject to a deduction for any required withholding tax.
(2) | Represents the vested but unissued portion of ESI share-based compensation awards as of the acquisition date of February 1, 2019.
Under the acquisition method of accounting, the total acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of ESI 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 expects that none of such goodwill and intangible assets will 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 ESI Merger:
Current assets (excluding inventory) |  | $ | 208.0 |
Inventory |  |  | 81.7 |
Intangible assets |  |  | 316.2 |
Goodwill |  |  | 474.0 |
Property, plant and equipment |  |  | 65.5 |
Long-term assets |  |  | 9.6 |
Total assets acquired |  |  | 1,155.0 |
Current liabilities |  |  | 51.5 |
Non-current deferred taxes |  |  | 33.0 |
Other long-term liabilities |  |  | 7.2 |
Total liabilities assumed |  |  | 91.7 |
Fair value of assets acquired and liabilities assumed |  |  | 1,063.3 |
Less: Cash and cash equivalents acquired |  |  | (44.1 | )
Total purchase price, net of cash and cash equivalents acquired |  | $ | 1,019.2 |
The fair value write-up of acquired finished goods inventory was $7.6, the amount of which was expensed over the period during which the acquired inventory was sold. For the year ended December 31, 2019, the Company recorded $7.6 of incremental cost of sales charges associated with the fair value write-up of inventory acquired in the ESI Merger. The fair value write-up of acquired property, plant and equipment of $39.2 will be amortized over the estimated useful life of the applicable assets, excluding the fair value write-up in the value of land. Property, plant and equipment was 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 related useful lives:
Completed technology - Laser |  | $ | 255.7 |  |  | 12 years
Completed technology - Non-Laser |  |  | 18.3 |  |  | 10 years
Trademarks and trade names |  |  | 14.4 |  |  | 7 years
Customer relationships |  |  | 25.4 |  |  | 10 years
Backlog |  |  | 2.4 |  |  | 1 year
|  | $ | 316.2 |  |  |
The fair value of the acquired intangible assets was determined using the income approach. In performing these valuations, the key underlying assumptions used included the appropriate discount rates as well as forecasted revenue growth rates, gross profit and operating margins. Fair value estimates are based on complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. 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 broadening its position in key industrial markets to complementary solutions, and leveraging component and systems expertise to provide robust solutions to meet customer evolving technology needs. The results of this acquisition were included in the Company’s consolidated statement of operations beginning on February 1, 2019. The Company’s Equipment & Solutions reportable segment was created in conjunction with the ESI Merger. Certain executives from ESI had severance provisions in their respective ESI 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. The Company recorded costs of $2.7 and $14.0 in acquisition and integration costs as compensation expense and stock-based compensation expense, respectively, for the year ended December 31, 2019 associated with these severance provisions. The restricted stock units and stock appreciation rights that were eligible for accelerated vesting if the executive exercised his or her rights but were not issued as of each reporting period-end, were excluded from the computation of basic earnings per share and included in the computation of diluted earnings per share for such reporting period. The Company’s consolidated net revenue and earnings for the year ended December 31, 2019 include the following amounts of revenue and earnings of ESI since the acquisition date:
|  | Year Ended December 31, |
|  | 2019 |
Total net revenues |  | $ | 183.7 |
Net loss |  | $ | (33.5 | )
Net loss per share: |  |  |  |
Basic |  | $ | (0.61 | )
Diluted |  | $ | (0.61 | )
Pro Forma Results The following unaudited pro forma financial information presents the combined results of operations of the Company as if the ESI Merger had occurred on January 1, 2018. The unaudited pro forma financial information is not necessarily indicative of what the Company’s condensed consolidated results of operations actually would have been had the acquisition occurred at the beginning of the year. In addition, the unaudited pro forma financial information does not attempt to project the future results of operations of the combined Company.
|  | Year Ended December 31, |
|  | 2019 |
Total net revenues |  | $ | 1,914.6 |
Net income |  | $ | 171.5 |
Net income per share: |  |  |  |
Basic |  | $ | 3.14 |
Diluted |  | $ | 3.11 |
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 from the purchase price allocation.
| (2) | Revenue and cost of goods sold adjustments as a result of the reduction in deferred revenue and the cost related to their estimated fair value.
| (3) | Incremental interest expense related to the Term Loan Facility, as defined in Note 15.
| (4) | The exclusion of acquisition costs and inventory step-up amortization.
| (5) | The exclusion of debt issuance costs due to the modification of the Term Loan Facility.
| (6) | The estimated tax impact of the above adjustments.

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