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.

The major classes of assets and liabilities, reconciled to total purchase consideration (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

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 resulting from 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

Our 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):


	2017
Revenues	$	1,036,814
Income from operations	$	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 year ended 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 period 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 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

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	Gross
	Average	Value
	Lives	Carrying
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
Total intangible assets		$	74,800

The 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, 2016 (in thousands):


	2017
Revenues	$	978,706
Income before taxes	$	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 the fiscal year ending 2017 was $13.9 million.

Other Business Acquisitions

In January 2019, we (through our Security division) completed an acquisition of a privately held sales and services company. The acquisition was financed with cash on hand and was in an amount determined to be insignificant by management.

In August 2018, we (through our Security division) completed an acquisition of a privately held services company for approximately $0.8 million, plus up to approximately $5 million in contingent consideration, which may be earned over a five-year period. The acquisition was financed with cash on hand. The goodwill recognized for this business is not expected to be deductible for income tax purposes.

In July 2018, we (through our Optoelectronics and Manufacturing division) acquired an optoelectronics solutions business for $17.5 million, plus up to $1 million in potential contingent consideration, which may be earned over an 18-month period. The acquisition was financed with cash on hand and borrowings under our existing revolving bank line of credit. The goodwill recognized for this business is expected to be deductible for income tax purposes.

In January 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.

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.

These business acquisitions, individually and in the aggregate, were not material to our consolidated financial statements. Accordingly, pro-forma historical results of operations related to these businesses have not been presented.