|12 Months Ended|
Jun. 30, 2020
|Business Combinations [Abstract]|
|BUSINESS COMBINATIONS||BUSINESS COMBINATIONS
Fiscal 2020 Acquisitions
On April 24, 2020, we acquired a product line from a public company for total purchase consideration of $11.4 million, of which $2.2 million was allocated to goodwill. Goodwill recognized was assigned to the Wafer Inspection and Patterning reporting unit, and was deductible for income tax purposes.
On August 22, 2019, we acquired the outstanding shares of a privately held company, primarily to expand our products and services offerings, for a total purchase consideration of $94.0 million inclusive of measurement period adjustments of $0.2 million as well as the fair value of the promise to pay an additional consideration up to $60.0 million contingent on the achievement of certain revenue milestones. As of June 30, 2020, the estimated fair value of the additional consideration was $8.9 million, which was classified as a non-current liability on the Consolidated Balance Sheet.
The purchase price of this acquisition was allocated as follows:
The $54.2 million of goodwill was assigned to the Wafer Inspection and Patterning reporting unit and was not deductible for income tax purposes.
We have included the financial results of the fiscal 2020 acquisitions in our Consolidated Financial Statements from their respective acquisition dates, and these results were not material to our Consolidated Financial Statements.
Fiscal 2019 Acquisitions
On February 20, 2019, we completed the acquisition of Orbotech, a global supplier of yield-enhancing and process-enabling solutions for the manufacture of electronics products. We acquired Orbotech to extend and enhance its portfolio of products to address market opportunities in the printed circuit board, flat panel display, advanced packaging and semiconductor manufacturing areas.
The total purchase price for Orbotech was approximately $3.26 billion, which consisted of (1) approximately $1.7 billion in cash net of $215.6 million cash acquired; (2) 12.3 billion shares of KLA’s common stock valued at approximately $1.3 billion and (3) $13.3 million for the fair values of stock options and RSUs assumed. The Orbotech Acquisition was accounted for as a business combination and we have included the financial results of Orbotech in our Consolidated Financial Statements since the Acquisition Date. Our Consolidated Statements of Operations include revenue of $388.9 million and a net loss of $61.6 million from Orbotech for the year ended June 30, 2019.
During the quarter ended December 31, 2019, we finalized the allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed. Since the Acquisition, we have recorded measurement period adjustments to reflect facts and circumstances in existence as of the Acquisition Date. These adjustments primarily related to the valuation of acquired intangible assets of $75.5 million, trade accounts receivable of $21.5 million, non-controlling interest of $17.4 million, other immaterial adjustments of $6.1 million, and related impacts on the deferred income tax liabilities of $47.5 million recorded during the fourth quarter of the fiscal year ended June 30, 2019; the valuation of individually insignificant net tangible assets of $2.1 million recorded during the first quarter of the fiscal year ended June 30, 2020; and the additional reserves for uncertain tax positions of $16.9 million and other individually insignificant items of $10.4 million with related impacts on the deferred income tax liabilities of $8.8 million recorded in the second quarter of the fiscal year ended June 30, 2020. These adjustments resulted in the corresponding increase to goodwill of $34.0 million and $38.2 million in the fiscal years ended June 30, 2020 and 2019, respectively. The purchase price was allocated to tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values, which were determined using generally accepted valuation techniques on the basis of inputs and assumptions made by management at the time of the Orbotech Acquisition.
The allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the Acquisition date, including all measurement period adjustments, is as follows:
On December 24, 2018, Orbotech acquired the remaining 50% of the shares of Frontline for $85.0 million in cash and agreed to pay an additional $10.0 million in cash over four years plus a cash earn-out of not less than $5.0 million and up to $20.0 million. As of June 30, 2020, the estimated fair market values of the four-year cash payment and the earn-out were $6.7 million and $3.3 million, respectively, and these amounts have been included in current and non-current liabilities at $2.5 million and $7.5 million, respectively.
The goodwill was primarily attributable to the assembled workforce of Orbotech, planned growth in new markets and synergies expected to be achieved from the combined operations of KLA and Orbotech. None of the goodwill is deductible for income tax purposes. Goodwill arising from the acquisition of Orbotech has been allocated to the Specialty Semiconductor Process and the PCB and Display reporting units during the fiscal year ended June 30, 2019. For additional details, refer to Note 7 “Goodwill and Purchased Intangible Assets”.
We believe the amounts of purchased intangible assets represent the fair values of and approximate the amounts a market participant would pay for these intangible assets as of the Acquisition Date.
Other Fiscal 2019 Acquisitions
During the fiscal year ended June 30, 2019, we acquired five privately held companies primarily to expand our products and services offerings. These acquisitions were not individually significant. We have included the financial results of the acquired companies in our Consolidated Financial Statements from their respective acquisition dates, and the results from each of these companies were not individually material to our consolidated financial statements.
In the aggregate, the total purchase price for these acquisitions was approximately $133.7 million, including a post-closing working capital adjustment, and the fair value of the promise to pay additional consideration of up to $19.0 million contingent on the achievement of certain milestones. As of June 30, 2020, the estimated fair value of the additional consideration was $3.2 million, which was classified as a non-current liability on the Consolidated Balance Sheets.
Based on their estimated fair values, we recorded $13.2 million of net tangible assets, $75.1 million of identifiable intangible assets and $45.4 million of goodwill related to our other fiscal 2019 acquisitions, $26.3 million of which was allocated to Wafer Inspection and Patterning reporting unit, $17.9 million was allocated to GSS reporting unit and $1.2 million was allocated to Component Inspection reporting unit.
The goodwill was primarily attributable to the assembled workforce and planned growth in new markets. A portion of the goodwill is deductible for income tax purposes.
Fiscal 2018 Acquisitions
In the fiscal year ended June 30, 2018, we acquired a product line from Keysight Technologies, Inc., a related party, for a total purchase consideration of $12.1 million, of which $5.2 million was allocated to goodwill based on the fair value at the acquisition date. Goodwill recognized was deductible for income tax purposes. See Note 18 “Related Party Transactions” for additional details.
KLA, in the aggregate for the Orbotech and other fiscal 2019 acquisitions, incurred approximately $40.2 million of acquisition-related costs which are primarily included within selling, general and administrative expenses in our Consolidated Statements of Operations. KLA incurred insignificant acquisition-related costs for the fiscal 2020 and fiscal 2018 acquisitions.
Supplemental Unaudited Pro Forma Information:
The following unaudited pro forma financial information summarizes the combined results of operations for KLA, Orbotech, and the three acquisitions completed in the third quarter of fiscal 2019 as if the companies were combined as of the beginning of fiscal 2018. The unaudited pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment acquired, adjustments to stock-based compensation expense, the purchase accounting effect on inventory acquired, the purchase accounting effect on deferred revenue, interest expense and amortization of debt issuance costs associated with the Senior Notes financing, and transaction costs. Two of the fiscal 2019 acquisitions and the fiscal 2020 acquisitions do not have material impact on our consolidated financial statements; therefore, the pro forma financial information has not been presented for these acquisitions.
The table below reflects the impact of material and nonrecurring adjustments to the unaudited pro forma results for the indicated periods that are directly attributable to the acquisitions:
The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisitions actually occurred at the beginning of fiscal year 2018 or of the results of our future operations of the combined businesses.
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).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef