Annual report pursuant to Section 13 and 15(d)

Note 5. Business Combination

 v2.3.0.11
Note 5. Business Combination
 12 Months Ended
Jun. 30, 2011
Business Combination, Description [Abstract]  
Business Combination
BUSINESS COMBINATION
The Company accounts for business combinations using the purchase method of accounting. Consideration includes the cash paid and the value of options assumed, less any cash acquired, and excludes contingent employee compensation payable in cash.
During the fiscal year ended June 30, 2009, the Company completed its acquisition of the Microelectronic Inspection Equipment business unit (“MIE business unit”) of Vistec Semiconductor Systems for net cash consideration of $141.4 million. The acquired MIE business unit is a provider of mask registration measurement tools, scanning electron microscopy (“SEM”) based tools for mask critical dimension measurement and macro defect inspection systems.
The following table represents the final purchase price allocation and summarizes the aggregate estimated fair values of the net assets acquired on the closing date of the acquisition of the MIE business unit:
 
(In thousands)
Final
Purchase
Price Allocation
Cash
$
14,219

Current assets
60,094

Intangibles:
 
Existing technology
39,800

Patents
18,200

Trade name/Trademarks
4,800

Customer relationships
19,300

In-process R&D (“IPR&D”)
8,600

Backlog
6,750

Other intangible assets
9,950

Non-current assets
2,749

Goodwill
33,071

Liabilities assumed
(61,915
)
 
$
155,618

Cash consideration – paid
$
155,618


 
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired. The $33.1 million of goodwill is assigned to the defect inspection reporting unit, which is not expected to be deductible for tax purposes. This acquisition provided the Company with a line of mask registration measurement tools to complement the Company’s previously existing mask inspection products. In addition, through the acquisition, the Company acquired a provider of SEM-based tools for mask critical dimension measurement. Other technologies of the MIE business unit acquired by the Company in the transaction included macro defect inspection systems, overlay measurement systems for microelectromechanical systems (“MEMS”) applications and software packages for defect classification and data analysis.
The fair value of the purchased IPR&D and identified intangibles was determined using the income approach, which discounts expected future cash flows from projects to their net present value. Each project was analyzed to determine the technological innovations included; the utilization of core technology; the complexity, cost and time to complete development; any alternative future use or current technological feasibility; and the stage of completion. Future cash flows were estimated, taking into account the expected life cycles of the products and the underlying technology, relevant market sizes and industry trends. The Company determined a discount rate for each project based on the relative risks inherent in the project’s development horizon, the estimated costs of development, and the level of technological change in the project and the industry, among other factors.
The Company expensed IPR&D of $8.6 million upon the completion of the acquisition in the fiscal year ended June 30, 2009 in connection with acquired intellectual property for which technological feasibility had not been established and no future alternative uses existed.
The results of operations of the acquired MIE business unit are included in the accompanying Consolidated Statement of Operations from the closing date of the acquisition on September 30, 2008. Pro forma earnings information had not been presented because the effect of the acquisition of the MIE business unit was not material to the Company’s results of operations, balance sheet or statement of cash flows.