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ACQUISITION ACTIVITY | 12 Months Ended
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Jun. 30, 2018
ACQUISITION ACTIVITY |
ACQUISITION ACTIVITY | 2. ACQUISITION ACTIVITY Acquisition of Explosive Trace Detection Business On July 7, 2017, we acquired the global explosive trace detection business ("ETD") from Smiths Group plc. This acquisition was a carve out from a larger entity. We financed the total purchase price of $80.5 million with a combination of cash on hand and borrowings under our existing revolving bank line of credit. The valuation of certain assets and liabilities of ETD were performed by a third party valuation specialist. Changes in the fair values of assets and liabilities from what was previously reported in our condensed consolidated financial statements are primarily a result of additional information that impacted our estimates of fair value and conformance to our accounting policies. The major classes of assets and liabilities to which we allocated the purchase price as of June 30, 2018 were as follows (in thousands):
Cash and cash equivalents |  | $ | 4 |
Accounts receivable, net |  |  | 15,517 |
Inventories |  |  | 11,678 |
Property and equipment |  |  | 1,599 |
Intangible assets |  |  | 30,370 |
Deferred tax asset |  |  | 2,738 |
Other long-term assets |  |  | 297 |
Accounts payable |  |  | (4,784 | )
Accrued payroll and related expenses |  |  | (2,116 | )
Deferred revenues—current |  |  | (924 | )
Accrued warranties |  |  | (2,068 | )
Advances from customers |  |  | (670 | )
Other accrued expenses and current liabilities |  |  | (1,074 | )
Deferred revenues—long term |  |  | (232 | )
​ | ​ | ​ | ​ | ​
Net assets acquired |  |  | 50,335 |
Goodwill |  |  | 30,132 |
​ | ​ | ​ | ​ | ​
Total consideration |  | $ | 80,467 |
​ | ​ | ​ | ​ | ​
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The goodwill is largely attributable to expected growth, intellectual capital and the assembled workforce of the ETD business. Intangible assets are recorded at estimated fair value, as determined by management based on available information, with assistance from a third party. The fair value attributed to the intangible assets acquired was based on estimates, assumptions and other information compiled by management, and valuations that utilized established valuation techniques. The value attributed to goodwill and intangible assets is partially non-deductible for income tax purposes. The following table summarizes the fair value of acquired identifiable intangible assets as of the acquisition date (amounts in thousands):
|  | Weighted Average Lives |  | Fair Value |
Amortizable assets: |  |  |  |  |  |
Developed technology |  | 10 years |  | $ | 14,210 |
Customer relationships/backlog |  | 7 years |  |  | 16,070 |
In-process research and development (“IPR&D”) |  |  |  |  | 90 |
​ | ​ | ​ | ​ | ​ | ​ | ​
Total intangible assets |  |  |  | $ | 30,370 |
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Our condensed consolidated statements of operations include $76.5 million of revenue and $10.7 million of income from operations from ETD for the period from July 7, 2017 to June 30, 2018. The following unaudited pro forma results of operations assume the ETD acquisition had occurred on July 1, 2016 (in thousands):
|  | 2016 |  | 2017 |
Revenues |  | $ | 909,171 |  | $ | 1,036,814 |
Income from operations |  | $ | 60,550 |  | $ | 46,725 |
Significant pro forma adjustments incorporated into the pro forma results above include the recognition of additional amortization expense related to acquired intangible assets. The pro forma results for the years ended June 30, 2016 and June 30, 2017 were carved out from the operations of the business when it was owned by its former parent. These carve-out results have been prepared from the historical accounts of its former parent, and include revenues and expenses specifically identified to ETD, and allocations of certain overhead expenses. These pro forma results were based on estimates and assumptions, which we believe are reasonable. They are prepared for comparative purposes only and do not necessarily reflect the results that would have been realized had the ETD acquisition occurred at the beginning of the periods presented and are not necessarily indicative of our consolidated results of operations in future periods. Acquisition of American Science and Engineering On September 9, 2016, we acquired by merger 100% ownership 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 our Security division. We financed the total cash merger consideration of $266 million with a combination of cash on hand and borrowings under our existing revolving bank line of credit, and also issued restricted stock units ("RSUs") of the Company to replace RSUs previously issued by AS&E. Immediately following the close of the acquisition, we used $69 million of AS&E's existing cash on hand to pay down the revolving bank line of credit. The valuation of the estimated fair value of the assets acquired and liabilities assumed as a result of this business combination has been finalized. The major classes of assets and liabilities, reconciled to total purchase consideration (in thousands):
Cash and cash equivalents |  | $ | 79,195 |
Accounts receivable |  |  | 24,607 |
Inventories |  |  | 27,495 |
Other current assets |  |  | 7,450 |
Property and equipment |  |  | 5,337 |
Intangible assets |  |  | 74,800 |
Other long-term assets |  |  | 201 |
Accounts payable |  |  | (5,044 | )
Accrued payroll and related expenses |  |  | (4,723 | )
Deferred revenues—current |  |  | (11,281 | )
Advances from customers |  |  | (13,784 | )
Other accrued expenses and current liabilities |  |  | (7,279 | )
Deferred revenues—long term |  |  | (3,225 | )
Deferred income tax liability |  |  | (9,580 | )
Other long-term liabilities |  |  | (14,004 | )
​ | ​ | ​ | ​ | ​
Net assets acquired |  |  | 150,165 |
Goodwill |  |  | 115,838 |
​ | ​ | ​ | ​ | ​
Total consideration |  | $ | 266,003 |
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​ | ​ | ​ | ​ | ​
The goodwill is largely attributable to expected synergies between us and AS&E and the assembled workforce of AS&E. Intangible assets are recorded at estimated fair value, as determined by management based on available information, which includes a valuation prepared by an independent third party. The fair value attributed to the intangible assets acquired was based on 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 (amounts in thousands):
|  | Weighted Lives Average |  | Gross Carrying Value |
Amortizable assets: |  |  |  |  |  |
Developed technology |  | 10 years |  | $ | 31,750 |
Customer relationships/backlog |  | 7 years |  |  | 27,550 |
In-process research and development ("IPR&D") |  | 5 years |  |  | 3,200 |
​ | ​ | ​ | ​ | ​ | ​ | ​
Total amortizable assets |  |  |  |  | 62,500 |
Non-amortizable assets: |  |  |  |  |  |
Trademarks and trade names |  |  |  |  | 12,300 |
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Total intangible assets |  |  |  | $ | 74,800 |
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The condensed consolidated statements of operations include $94.0 million of revenue and $8.7 million of pre-tax income from AS&E® for the period from September 10, 2016 to June 30, 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):
|  | 2016 |  | 2017 |
Revenues |  | $ | 928,679 |  | $ | 978,706 |
Income before taxes |  | $ | 2,223 |  | $ | 5,856 |
Significant pro forma adjustments incorporated into the unaudited pro forma results above 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 the comparable periods in the prior year of non-recurring acquisition-related expenses and employee termination costs related to the integration of AS&E® into the operations of our Security division. Total eliminations for these items during fiscal year ending 2016 and 2017, were $28.6 million and $13.9 million, respectively, and these have been added to the comparable periods in the prior year. Other Acquisitions In July 2017, we (through our Security division) completed an acquisition of a privately held technology company. The acquisition purchase price was financed with cash on hand and was in an amount including potential earnout consideration determined to be insignificant by management. On January 12, 2018, we (through our Optoelectronics and Manufacturing division) acquired an electronics component designer and manufacturer for approximately $22 million, plus up to $6 million in potential earnout consideration. In aggregate, $12.6 million was attributed to intangible assets, $14.0 million was attributed to goodwill, and $3.3 million was attributed to net assets acquired. The acquisition was financed with cash on hand and borrowings under our existing revolving bank line of credit.

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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 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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