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Acquisitions
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Acquisitions Acquisitions
The Company completed one business acquisition in 2019 and two business acquisitions in 2017. All of these transactions were accounted for as business combinations. Pro-forma information for these acquisitions is not presented because they are not significant, either individually or in the aggregate. Revenue and earnings since the dates of the acquisitions included in the Company's Consolidated Statements of Operations are also not presented because they are not material. Transaction costs were immaterial and were expensed as incurred.
Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. Contingent consideration is remeasured each reporting period with changes in fair value recorded in "Other income (expense)" on the Consolidated Statements of Operations.
Sualab Co., Ltd.
On October 16, 2019, the Company acquired all the outstanding shares of Sualab Co., Ltd. (Sualab), a provider of deep learning-based vision software for industrial image analysis based in Korea. The total consideration of $194,642,000 included cash payments of $170,602,000 upon closing. The remaining consideration consists of deferred payments of $24,040,000 that may become payable on the fourth anniversary date of the closing, contingent upon continued employment of key talent, and will be recorded as compensation expense over this four year period.
Sualab's intellectual property, engineering expertise, and market coverage are expected to increase the Company's existing deep learning capabilities. Combined with intellectual property acquired from ViDi Systems S.A. in 2017, the Company is now a leading provider of deep learning-based industrial vision software.
The purchase price that was not related to employment was allocated as follows (in thousands):
Cash and cash equivalents
$
3,691

Current investments
9,487

Accounts receivable
1,200

Inventories
115

Prepaid expenses and other current assets
252

Property, plant, and equipment
726

Operating lease assets
2,792

Deferred income tax asset
3,087

Other assets
513

Accounts payable
(28
)
Accrued expenses
(2,633
)
Deferred revenue and customer deposits
(764
)
Operating lease liabilities
(448
)
Non-current operating lease liabilities
(2,344
)
Deferred income tax liabilities
(7,926
)
Other liabilities
(10
)
Completed technologies
18,300

In-process technologies
8,200

Customer relationships
5,800

Non-compete agreements
340

Trademarks
110

Goodwill
130,142

Purchase price
$
170,602



The completed technologies, in-process technologies, customer relationships, trademarks, and non-compete agreements are included in "Intangible assets" on the Consolidated Balance Sheet. The completed technologies are being amortized to cost of revenue over eight years, the customer relationships are being amortized to SG&A expenses over seven years, the trademarks are being amortized to SG&A expenses over two years, and the non-compete agreements are being amortized to RD&E expenses over six to seven years. The in-process technology will be amortized to cost of revenue over its estimated useful life once the technology is finalized. The portion of the acquired goodwill deductible for tax purposes is $104,609,000.
GVi Ventures, Inc.
On April 12, 2017, the Company acquired selected assets and assumed selected liabilities of GVi Ventures, Inc., a privately-held maker of pre-configured vision solutions for common automotive applications based in the United States. The total purchase price of $5,368,000 included cash payment of $4,069,000 and contingent consideration valued at $1,299,000 as of the acquisition date. In addition, the Company entered into special incentive payments tied to employment, none of which are material, that are being recorded as compensation expense.
The Company recorded fair value adjustments in non-operating expense totaling $282,000 in 2017 and $1,065,000 in 2018, and paid out $1,000,000 in 2018 of the contingent consideration. In 2019, the remaining contingent consideration liability was reduced to zero as a result of a lower level of revenue in the America's automotive industry. The undiscounted potential outcomes related to future contingent consideration range from $0 to $2,500,000 based upon certain revenue levels over the next three years.
Under this transaction, in addition to customer relationships and completed technologies, the Company acquired a team of software engineers that are expected to develop new products and increase the Company's ability to serve large customers in the automotive industry.
The purchase price was allocated as follows (in thousands):
Accounts receivable
$
423

Inventories
120

Prepaid expenses and other current assets
1

Accounts payable
(152
)
Accrued expenses
(10
)
Completed technologies
910

Customer relationships
2,600

Goodwill
1,476

Purchase price
$
5,368


The customer relationships and completed technologies are included in "Intangible assets" on the Consolidated Balance Sheet. The customer relationships are being amortized to selling, general, and administrative expenses over eight years, and the completed technologies are being amortized to cost of revenue over five years, both on a straight-line basis. The portion of the acquired goodwill deductible for tax purposes is $443,000.
ViDi Systems S.A.
On April 4, 2017, the Company acquired all of the outstanding shares of ViDi Systems, S.A. (ViDi), a privately-held vision software company based in Switzerland. The total purchase price of $23,015,000 included cash payment of $20,019,000, with the remaining $2,996,000 recorded as a holdback to secure potential claims under the agreement that was paid in 2018. In addition, the Company entered into a special incentive payment tied to employment, which is not material, that is being recorded as compensation expense.
Under this transaction, in addition to completed technologies, the Company acquired a team of software engineers that are expected to help the Company broaden the scope of applications that can be addressed with Cognex vision. ViDi's deep learning software solves complex applications that are too complicated and time-consuming to program and maintain with traditional machine vision rules-based algorithms. Using feedback, ViDi's software trains the system to distinguish between acceptable variations and defects.
The purchase price was allocated as follows (in thousands):
Cash
$
146

Accounts receivable
425

Prepaid expenses and other current assets
129

Property, plant, and equipment
40

Deferred income tax asset
620

Accounts payable
(98
)
Accrued expenses
(716
)
Deferred income tax liability
(1,008
)
Non-compete agreement
370

Completed technologies
4,774

Goodwill
18,333

Purchase price
$
23,015


The non-compete agreement and completed technology are included in "Intangible assets" on the Consolidated Balance Sheet. The non-compete agreement are being amortized to research, development and engineering expenses over three years, and the completed technology are being amortized to cost of revenue over six years, both on a straight-line basis. The portion of the acquired goodwill deductible for tax purposes is $5,112,000.