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Business Combinations | 9 Months Ended
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Mar. 31, 2017
Business Combinations |
Business Combinations | 2. Business Combinations Under ASU 805, the acquisition method of accounting requires the Company to record assets acquired and liabilities assumed in an acquisition at their estimated fair values at the date of acquisition. Any excess of the total estimated purchase price over the estimated fair value of the net assets acquired should be recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired technology, trade names, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with corresponding adjustments to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. AS&E Acquisition On September 9, 2016, the Company acquired by merger 100 percent ownership interest of American Science and Engineering, Inc. (“AS&E”), a leading provider of detection solutions for advanced cargo, parcel and personnel inspection. AS&E’s operations are included in the Company’s Security division. The Company financed the total estimated purchase price of $266 million with a combination of cash on hand and borrowings under its existing revolving bank line of credit and also issued Company restricted stock units (“RSUs”) to replace RSUs previously issued by AS&E. The Company has estimated that $1.4 million of the fair value of these replacement Company RSU awards pertain to the precombination service period and, therefore, this amount has been included in the total estimated purchase price. Immediately following the close of the acquisition, the Company used $69 million of AS&E’s existing cash on hand to pay down the revolving bank line of credit. The Company is in the process of finalizing its valuation of all the assets acquired and liabilities assumed in the AS&E transaction. As the amounts recorded for certain assets and liabilities are preliminary in nature, they are subject to adjustment as additional information is obtained about the facts and circumstances that existed at the acquisition date. The final determination of fair values of certain assets and liabilities will be completed within the measurement period of up to one year from the acquisition date as permitted under GAAP. The AS&E acquisition could necessitate the use of the full one year measurement period to adequately analyze and assess a number of factors used in establishing fair values of the assets and liabilities as of the acquisition date, including values for intangible assets, other accrued expenses and current liabilities, other long-term liabilities, income tax obligations and certain reserves. Any potential adjustments made could be material in relation to preliminary values that have been recorded. The following is a preliminary estimate of the assets acquired and the liabilities assumed by the Company in the acquisition, reconciled to total estimated purchase consideration (in thousands):
Cash and cash equivalents |  | $ | 79,195 |
Accounts receivable |  | 25,048 |
Inventories |  | 29,725 |
Other current assets |  | 7,283 |
Property and equipment |  | 5,722 |
Intangible assets |  | 74,800 |
Other long-term assets |  | 201 |
Accounts payable |  | (5,273 | )
Accrued payroll and related expenses |  | (4,723 | )
Deferred revenues — current |  | (11,281 | )
Advances from customers |  | (13,785 | )
Other accrued expenses and current liabilities |  | (7,416 | )
Deferred revenues — long term |  | (3,225 | )
Deferred income tax liability |  | (9,067 | )
Other long-term liabilities |  | (17,966 | )
Net assets acquired |  | 149,238 |
Goodwill |  | 116,765 |
Total consideration |  | $ | 266,003 |
The goodwill is largely attributable to expected synergies to be realized from the AS&E transaction, including in relation to the AS&E workforce. Intangible assets are recorded at estimated fair value, as determined by management based on available information, which includes a preliminary valuation prepared by an independent third party. The fair value attributed to the intangible assets acquired was based on preliminary estimates, assumptions and other information compiled by management, including independent valuations that utilized established valuation techniques. The value attributed to goodwill and intangible assets is not deductible for income tax purposes. The following table summarizes the fair value of acquired identifiable intangible assets as of the acquisition date (dollar amounts in thousands):
|  | Weighted |  | Gross |
|  | Average |  | Carrying |
|  | Lives |  | Value |
Amortizable assets: |  |  |  |  |
Developed technology |  | 10 years |  | $ | 31,750 |
Customer relationships/backlog |  | 7 years |  | 27,550 |
Total amortizable assets |  |  |  | 59,300 |
Non-amortizable assets: |  |  |  |  |
Trademarks and trade names |  |  |  | 12,300 |
In-process research and development (“IPR&D”) |  |  |  | 3,200 |
Total intangible assets |  |  |  | $ | 74,800 |
The Company’s condensed consolidated statements of operations include $70.9 million of revenue and $4.7 million of pre-tax income from AS&E for the period from September 10, 2016 to March 31, 2017 and $27.7 million of revenue and $4.9 million of pre-tax income from AS&E for the three months ended March 31, 2017. The following unaudited pro forma results of operations are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisition occurred at the beginning of the earliest period presented or the results which may occur in the future. The following unaudited pro forma results of operations assume the AS&E acquisition had occurred on July 1, 2015 (in thousands):
|  | Three Months Ended March 31, |  | Nine Months Ended March 31, |
|  | 2016 |  | 2017 |  | 2016 |  | 2017 |
Revenues |  | $ | 235,038 |  | $ | 245,146 |  | $ | 607,645 |  | $ | 726,304 |
Income before taxes |  | $ | 5,161 |  | $ | 19,593 |  | $ | 2,455 |  | $ | 6,707 |
Significant pro forma adjustments incorporated into the pro forma results above for the AS&E acquisition include the recognition of additional amortization expense related to acquired intangible assets and additional interest expense related to debt incurred to finance the acquisition. In addition, significant non-recurring adjustments include the elimination and shift to comparable prior-year periods of non-recurring acquisition-related expenses and employee termination costs related to the integration of AS&E into the Company’s Security division. Total eliminations for these items during the three and nine months ended March 31, 2017 were $0.4 million and $13.6 million, respectively, and these have been added to the comparable prior-year periods. Other Acquisitions During the nine months ended March 31, 2017, the Company completed another acquisition in the Security division that was determined by management to be immaterial. During the nine months ended March 31, 2016, the Company acquired all of the outstanding shares of capital stock of a distributor and manufacturer of electronic components in the United Kingdom, a distributor and manufacturer of flex circuit and touch panel design products in California and a security equipment service company in Brazil. The combined purchase prices consisted of cash payments of $19.6 million and $13.8 million for contingent consideration. Divestitures During the three months ended March 31, 2017, the Company’s Healthcare division completed a divestiture of a business that was determined by management to be immaterial. The sales price of $12.8 million was settled in cash and resulted in a gain of $2.1 million, which is included in Other income in the condensed consolidated statements of operations.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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