Business Combination, Goodwill and Purchased Intangible Assets, Net
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 02, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination, Goodwill and Purchased Intangible Assets, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination, Goodwill and Purchased Intangible Assets, Net |
5. Business Combination, Goodwill and Purchased Intangible Assets, Net
On November 19, 2010, Intevac acquired the outstanding shares of Solar Implant Technologies,
Inc. (“SIT”), a privately-owned, development stage company, creating an ion implant module to be
used in the manufacturing of photovoltaic cells. Intevac’s primary reasons for this acquisition
were to complement its existing product offerings and to provide opportunities for future growth.
The preliminary aggregate purchase price was $12.4 million, which consisted of an initial cash
payment totaling $2.7 million and a contingent consideration obligation with a fair value of $9.7
million payable in cash. In connection with the acquisition, Intevac acquired $4.0 million of
IPR&D, $43,000 of tangible assets, and $10.5 million of goodwill and assumed $703,000 of tangible
liabilities. Intevac also recorded an $827,000 net deferred tax liability to reflect the tax impact
of the identified intangible assets that will not generate tax deductible amortization expense net
of the future tax benefit of acquired net operating loss carryforwards. The value attributable to
IPR&D has been capitalized as an indefinite-lived intangible asset. Goodwill is attributable to
estimated synergies arising from the acquisition and other intangible assets that do not qualify
for separate recognition. Goodwill is not deductible for tax purposes.
In connection with the acquisition of SIT, Intevac agreed to pay up to an aggregate of $7.0
million in cash to the selling shareholders if certain milestones are achieved over a specified
period. Intevac estimated the fair value of this contingent consideration to be in the amount of
$5.6 million based on the probability that certain milestones would be met and the payments would
be made on the targeted dates outlined in the acquisition agreement. On July 21, 2011, Intevac made
$2.4 million in payments to the selling shareholders for achievement of the first milestone.
In connection with the acquisition of SIT, Intevac also agreed to pay a revenue earnout on
Intevac’s net revenue from commercial sales of certain products over a specified period up to an
aggregate of $9.0 million in cash to the selling shareholders. Intevac estimated the fair value of
this contingent consideration to be in the amount of $4.1 million based on probability-based
forecasted revenues reflecting Intevac’s own assumptions concerning future revenue of SIT. A change
in the estimated probabilities of revenue achievement could have a material effect on the statement
of operations and balance sheets in the period of change.
Any change in fair value of the contingent consideration subsequent to the acquisition date is
recognized in operating income within the statement of operations. The fair value of the contingent
consideration increased $273,000 and $573,000 respectively for the three and six months ended July
2, 2011.
Prior to the acquisition, Intevac had an equity interest in SIT with a cost basis of $94,000
that was accounted for under the cost method. As a result of revaluing Intevac’s equity interest in
SIT on the acquisition date, the Company recognized a gain of $481,000, which was included in other
income, net, in the Consolidated Statement of Operations during the fourth quarter of fiscal 2010.
Intevac accounted for the acquisition of SIT as a business combination. Under business
combination accounting, the assets and liabilities of SIT were recorded as of the acquisition date,
at their respective fair values, and consolidated with the Company. The preliminary purchase price
allocation is based on estimates of the fair value of assets acquired and liabilities assumed.
Subsequent to the acquisition in the fourth quarter of fiscal 2010, Intevac paid in full $177,000
in notes payable to certain selling shareholders assumed upon the acquisition. The purchase price
was allocated as follows:
The results of operations for SIT for periods prior to the acquisition were not material to
Intevac’s Consolidated Statements of Operations and, accordingly, pro forma financial information
has not been presented.
Goodwill and indefinite-life intangible assets are tested for impairment on an annual basis or
more frequently upon the occurrence of circumstances that indicate that goodwill and
indefinite-life intangible assets may be impaired. In the fourth quarter of fiscal 2010, Intevac
performed its annual impairment analysis and the results of the
analysis indicated that Intevac’s goodwill and purchased intangible assets with an indefinite
useful life were not impaired. At July 2, 2011, Intevac had a total of $18.4 million of goodwill
and $4.1 million of indefinite-life intangible assets. At July 2, 2011, $10.5 million of goodwill
is attributed to the Equipment segment and $7.9 million of goodwill is attributed to the Intevac
Photonics segment.
Total amortization expense of finite-lived intangibles for the three and six months ended July
2, 2011 was $136,000, and $271,000 respectively. As of July 2, 2011, future amortization expense is
expected to be $271,000 for the remainder of 2011, $541,000 for 2012, $541,000 for 2013, $363,000
for 2014, $284,000 for 2015 and $592,000 thereafter. Intangible assets by segment are as follows:
Equipment: $5.8 million and Intevac Photonics: $919,000.
|