|12 Months Ended|
Jun. 30, 2019
|Business Combinations [Abstract]|
NOTE 6 - BUSINESS COMBINATIONS
On February 20, 2019, we completed the acquisition of Orbotech for total purchase consideration of approximately $3.26 billion which was paid in part by cash of $1.90 billion, in part by KLA common stock with a fair value of $1.32 billion and the balance by the assumption of stock options and RSUs. Orbotech is a global supplier of yield-enhancing and process-enabling solutions for the manufacture of electronics products. KLA 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.
Preliminary Purchase Price Allocation
The aggregate purchase consideration has been preliminarily allocated as follows (in thousands):
During the fourth quarter of the fiscal year ended June 30, 2019, we 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 with resulting to corresponding increase to goodwill of $38.2 million.
KLA allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the preliminary estimates of their estimated fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management at the time of the Orbotech Acquisition and are subject to change during the measurement period which is not expected to exceed one year. The primary tasks that are required to be completed include discovery and the remeasurement of unknown uncertain tax positions that existed at the acquisition date, adjustments to the deferred tax liabilities for unremitted earnings, validation of synergies expected to be derived from the acquisition of Orbotech, recoverability of certain acquired assets and reallocation of certain acquired intangible assets between jurisdictions based on the outcome of ongoing tax audits, including any related tax impacts. Any adjustments to our preliminary purchase price allocation identified during the measurement period will be recognized in the period in which the adjustments are determined and recorded against goodwill.
The operating results of Orbotech have been included in our Consolidated Financial Statements for the fiscal year ended June 30, 2019 from the Acquisition Date. 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 Orbotech Acquisition 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.”
The estimated fair value and weighted average useful life of the Orbotech intangible assets are as follows:
We believe the amounts of purchased intangible assets recorded above represent the fair values of and approximate the amounts a market participant would pay for, these intangible assets as of the acquisition date.
Our Consolidated Statements of Operations for the fiscal year ended June 30, 2019 included revenue of $388.9 million and a net loss of $61.6 million from Orbotech.
Other Fiscal 2019 Acquisitions
During the three months ended March 31, 2019, we acquired three privately-held companies primarily to expand our products and services offerings for an aggregate purchase price of $118.3 million, including a post-closing working capital adjustment, and the fair value of the promise to pay additional consideration of up to $13.0 million contingent on the achievement of certain milestones. As of June 30, 2019, the estimated fair value of the additional consideration was $5.1 million, which is classified as a current liability on the Consolidated Balance Sheets.
During the three months ended September 30, 2018 we acquired two privately-held companies for an aggregate purchase price of $15.4 million, including the fair value of the promise to pay total additional consideration of up to $6.0 million contingent on the achievement of certain milestones. As of June 30, 2019, the estimated fair value of the additional consideration was $1.8 million, which is classified as a current liability on the Consolidated Balance Sheets.
None of these acquisitions were individually material to our Consolidated Financial Statements.
The aggregate purchase price of the other fiscal 2019 acquisitions was allocated on a preliminary basis as follows:
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. Our Consolidated Statements of Operations for the fiscal year ended June 30, 2019 included revenues of $9.7 million, respectively, and net losses of $3.5 million from these privately-held companies.
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.
Fiscal 2018 Acquisition
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.
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.
The table below reflects the impact of material and nonrecurring adjustments to the unaudited pro forma results for the fiscal year ended June 30, 2019 and 2018 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.
We have not included pro forma results of operations for the acquisition of privately-held companies completed in the first quarter of fiscal 2019 herein as they were not material to us on either an individual or in aggregate. We included the results of operations of each acquisition in our Consolidated Statements of Operations from the date of each acquisition.
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