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Acquisitions | 6 Months Ended
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Mar. 27, 2015
Business Combinations [Abstract] |
Acquisitions | Acquisitions Doremi Labs. On October 31, 2014 ("acquisition date"), we completed our acquisition of all outstanding interests of Doremi Labs ("Doremi"), a privately held company. Doremi is a leading developer and manufacturer of digital cinema servers and the acquisition is expected to accelerate the delivery and deployment of innovative solutions to exhibitors. Doremi's operating results from the acquisition date through March 27, 2015 are included in our consolidated financial statements for the second quarter of fiscal 2015, however these results did not have a material impact on our total consolidated revenues or net income for the period. We acquired Doremi for cash consideration of $98.4 million, and up to an additional $20.0 million in contingent consideration that may be earned over a four-year period following the closing of the acquisition. W e estimated the fair value of contingent consideration by applying a discounted and probability-weighted approach to potential shipments of specified products during the four years following the acquisition date. As of March 27, 2015, we have recorded $0.7 million as a contingent consideration liability that, along with cash paid to the sellers of $98.4 million in the first quarter of fiscal 2015, comprise the purchase price of $99.1 million. We have accounted for the transaction under the acquisition method of accounting for business combinations. During the first quarter of fiscal 2015, we estimated the fair values of the net tangible and intangible assets acquired, and liabilities assumed as of the acquisition date. During the second quarter of fiscal 2015, and in connection with completing the purchase accounting, we recorded changes to the valuation of intangible assets of $4.6 million, reversed a receivable of $4.2 million related to the preliminary working capital adjustment to the purchase price, and recorded minor additional adjustments that collectively resulted in an increase to goodwill of $0.5 million. The measurement period associated with the acquisition is now closed. We have recorded any amounts paid in excess of the net assets recorded as goodwill. Goodwill is representative of our expectation of the benefits and synergies from the integration of Doremi technology with our existing technology and the assembled workforce of Doremi, which does not qualify for separate recognition as an intangible asset. The following table summarizes the acquisition date fair values allocated to the net assets acquired including cash of $8.4 million, and liabilities assumed.
Purchase Price Allocation |
Current assets | $ | 17,231 |
Inventories | 16,372 |
Intangible assets | 45,600 |
Goodwill | 39,672 |
Current liabilities | (11,653 | )
Non-current liabilities | (8,820 | )
Cash consideration paid to sellers | 98,402 |
Add: contingent consideration | 740 |
Total purchase consideration | $ | 99,142 |
The following table summarizes the fair values allocated to the various intangible assets acquired (in thousands), the weighted-average useful lives over which they will be amortized using the straight-line method, and the classification of their amortized expense in our consolidated statements of operations:
Intangible Assets Acquired | Purchase Price Allocation | Weighted-Average Useful Life (Years) | Income Statement Classification: Amortization Expense
Customer relationships | $25,600 | 10 | Sales & Marketing
Developed technology | 17,500 | 7.5 | Cost of Sales
Trade name | 1,300 | 1 | Sales & Marketing
Backlog | 1,200 | 1 | Cost of Sales
Total | $45,600 |  |
The fair values of the intangible assets at the acquisition date were measured primarily based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in ASC 820. The value of acquired intangibles was determined based on the present value of estimated future cash flows using the following valuation techniques and inputs:
• | Customer relationships and backlog - Primarily the excess earnings method using inputs such as probability-weighted revenue attributable to existing customer relationships, customer attrition, estimated expenses, effective income tax rate, and discount rate.
• | Developed technology and Trade name - Primarily the relief-from-royalty method using inputs such as estimated revenues attributable to the digital cinema server technology, estimated net royalty rate, maintenance R&D expenses, effective income tax rate, and discount rate.
We incurred acquisition-related costs of $0.4 million during the fiscal quarter ended December 26, 2014 and none thereafter, and $2.8 million and $3.5 million during the fiscal quarter and year-to-date period ended March 28, 2014, respectively. These costs were included in G&A expenses in our consolidated statements of operations. Total acquisition-related costs of $5.9 million were incurred during fiscal 2014. We have not provided pro forma information since these results following the acquisition are not deemed significant.

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