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Acquisition | 12 Months Ended
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Dec. 29, 2018
Business Combinations [Abstract] |
Acquisition | Note 3. Acquisition On November 15, 2018, the Company acquired 4D Technology Corporation (“4D”), a supplier of high-performance interferometric measurement inspection systems. Pursuant to the Stock Purchase Agreement (“SPA”) entered into between 4D, each of 4D’s stockholders and the Company, the Company acquired all the outstanding stock of 4D for total consideration of (a) cash of $38.7 million ($37.2 million net of cash acquired); (b) 125,117 shares of the Company’s common stock, par value $0.001 per share, valued at approximately $4 million, subject to adjustment based on the amount of cash, working capital, indebtedness, and transaction expenses of 4D (collectively, the “Purchase Price”). 4D’s Dynamic Interferometry® solutions are used in a variety of industries to provide accurate shape and surface measurement data, which provides feedback to customers of optical quality, machine finish, and surface defectivity, to improve manufacturing yield and performance. The addition of 4D’s technology will add unique technology to the Company’s portfolio, expanding its served markets with new applications in the scientific research, aerospace, industrial and optics manufacturing markets. The following table summarizes the allocation of the total purchase consideration to the initial estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):
| November 15, 2018 |
Cash and cash equivalents | $ | 1,414 |
Accounts receivable, net |  | 4,156 |
Inventories |  | 4,563 |
Prepaid and other current assets |  | 104 |
Property and equipment |  | 145 |
Accounts payable |  | (702 | )
Accrued liabilities |  | (760 | )
Deferred revenue |  | (197 | )
Deferred tax liabilities |  | (5,408 | )
Total assets acquired/liabilities assumed |  | 3,315 |
Developed technology |  | 15,500 |
In-process research and development |  | 1,400 |
Customer relationships |  | 4,600 |
Order backlog |  | 500 |
Trade name |  | 1,500 |
Total identified intangible assets |  | 23,500 |
Total identifiable net assets |  | 26,815 |
Goodwill |  | 15,762 |
Total purchase consideration | $ | 42,577 |
The fair value of accounts receivable, net, consisted of gross contractual accounts receivable reduced by approximately $161 thousand for receivables not expected to be collected as of the acquisition date. The inventory acquired consisted primarily of work in process, for which fair value was measured based on determining its net realizable value as such value represents an exit price in an orderly transaction between market participants. Factors that required a significant amount of judgment in determining the net realizable value for the inventory included determining estimated selling prices, cost to complete, costs to dispose, operating profit, and discount rates, among others. Goodwill represents the excess of the consideration transferred over the preliminary estimated fair values of the assets acquired and liabilities assumed and is primarily attributable to intangible assets which are not separately recognizable, such as an assembled workforce, and anticipated synergies such as certain costs savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the 4D acquisition. Goodwill is not deductible for tax purposes. Developed technology relates to 4D’s product family and was valued using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The average estimated useful life of developed technologies was determined to be 9 years and was based on the technology cycle related to each developed technology, as well as the cash flows over the respective forecast period. The fair value of the in-process research and development (“IPRD”) was determined using the multi-period excess earnings method under the income approach. Such method reflects the present value of the projected cash flows that are expected to be generated by the IPRD, less costs to complete the development and charges representing the contribution of other assets to those cash flows. Customer relationships represent the fair value of future projected revenue that will be derived from sales of products to new and existing customers and was valued using the incremental cash flow method. This method reflects the present value of projected revenues to be derived from such customers less charges representing the contribution of other assets to those cash flows. The estimated useful life of the customer relationships was determined to be 9 years and was based on historical customer turnover rates. Order backlog represents the fair value of future projected revenue that will be derived from outstanding orders from customers that have not yet been shipped and was valued using the incremental cash flow method, which reflects the present value of such outstanding orders less charges representing the contribution of other assets to those cash flows. The estimated useful life of the order backlog was determined to be less than one year and was based on historical order fulfilment rates. Trade name relates to the “4D Technology” trade name and was fair valued by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue under the trade name. The estimated useful life of the tradename was determined to be 15 years and was based on the expected life of the trade name and the cash flows anticipated over the forecast period. Factors that required a significant amount of judgment in determining the fair value for the acquired intangible assets included estimating future cash flows, revenue and gross margin assumptions, technology lives, future operating expenses, and discount rates, among others. Finite-lived intangible assets totaled $22.1 million and have a weighted average estimated useful life of 9.25 years. The Company has determined that the estimated useful life of the acquired in-process research and development is currently indeterminant; thus, it has been categorized as indefinite and will be reviewed annually for impairment, along with the Company’s other long-lived assets with indefinite lives, unless its estimated useful life is known. The Company believes the amounts of purchased intangible assets recorded above represent the fair values of and approximate the amounts a market participant would pay for such assets as of the 4D acquisition date. The results of operations of 4D are reported in the Company’s consolidated financial statements from the date of acquisition and include $2.1 million of total net sales and $0.4 million of operating loss for the year ended December 29, 2018. The following unaudited pro forma financial information presents the combined results of operations as if the 4D acquisition had occurred at the beginning of fiscal year 2017 and is presented for informational purposes only. These results may not necessarily reflect the actual results of operations that would have been achieved, nor are they necessarily reflective of future results of operations (in thousands, except per share data).
| (Unaudited) |
| Years Ended |
| December 29, 2018 |  | December 30, 2017 |
Pro forma net revenue | $ | 338,919 |  | $ | 271,966 |
Pro forma net income |  | 57,672 |  |  | 29,302 |
Pro forma net income per share - basic | $ | 2.39 |  | $ | 1.16 |
Pro forma net income per share - diluted |  | 2.34 |  |  | 1.13 |
The pro forma results include adjustments for depreciation and amortization, income taxes, and the incremental shares issued in connection with the acquisition. For the years ended December 29, 2018 and December 30, 2017, the pro forma results also include material nonrecurring adjustments of $3.5 million and $1.7 million, respectively, in net revenue and net income, related to sales to the Company and costs associated with those sales. The Company incurred $0.9 million of acquisition-related costs that were expensed as incurred during fiscal 2018.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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