3. Business Combinations

Skyetek

On December 18, 2015, the Company acquired all assets and certain liabilities of Skyetek Inc. (“Skyetek”), a Denver, Colorado-based provider of embedded and standalone RFID solutions for medical OEM’s, for a total purchase price of $2.8 million, subject to customary working capital adjustments. The purchase price includes $2.6 million in cash paid for the acquisition and $0.2 million in estimated fair value of future contingent consideration payable upon the achievement of certain sales order commitment targets from October 2015 through June 2017. The undiscounted range of possible contingent consideration is zero to $0.3 million. Skyetek specializes in high-performing HF and UHF RFID technologies that maximize efficiency and visibility for OEM’s serving the medical and advanced industrial markets. The acquisition creates an expanded range of highly competitive RFID solutions that significantly enhances our value proposition to OEM customers in various industries, but especially within the healthcare industry where there is an ever-growing need for improvements in workflow solutions, patient safety, anti-counterfeiting, and asset tracking throughout the hospital environment.

Lincoln Laser

On November 9, 2015, the Company acquired certain assets and liabilities of Lincoln Laser Company (“Lincoln Laser”), a Phoenix, Arizona-based provider of ultrafast precision polygon scanners and other optical scanning solutions for the medical, food processing, and advanced industrial markets, for a total purchase price of $12.6 million, subject to customary working capital adjustments. This total purchase price includes $10.3 million in cash paid for the acquisition and $2.3 million in estimated fair value of future contingent consideration payable upon the achievement of certain revenue targets for fiscal year 2016. The undiscounted range of contingent consideration is zero to $6.0 million. Lincoln Laser specializes in ultrafast scanning, leveraging their expertise in polygon motor design and electro-optic subsystems. The acquisition creates an expanded range of highly competitive beam delivery technologies. Lincoln Laser contributed revenues of $1.9 million and a loss from continuing operations before income taxes of $0.3 million for the year ended December 31, 2015.

Applimotion

On February 19, 2015, the Company acquired 100% of the outstanding stock of Applimotion Inc. (“Applimotion”), a Loomis, California based provider of advanced precision motor and motion control technology to OEM customers in the medical and advanced industrial markets, for a total purchase price of $14.0 million, net of working capital adjustments. This total purchase price includes $13.0 million in cash paid for the acquisition and $1.0 million in estimated fair value of future contingent considerations payable upon the achievement of certain revenue targets for the fiscal years 2015 to 2017. The undiscounted range of contingent considerations is zero to $4.0 million. Applimotion specializes in motor applications that require highly precise and dynamic motion control. The acquisition enhances our strategic position in precision motion control by enabling us to offer a broader range of motion control technologies and integrated solutions. Applimotion contributed revenues of $14.0 million and income from continuing operations before income taxes of $1.0 million for the year ended December 31, 2015.

The purchase price for Skyetek, Lincoln Laser and Applimotion was allocated as follows (in thousands):

	Amount
Cash	$	331
Accounts receivable		3,166
Inventory		3,544
Prepaid expenses and other current assets		148
Property and equipment		3,220
Intangible assets		11,370
Goodwill		12,710
Other assets		10
Total assets acquired		34,499

Accounts payable		1,681
Other liabilities		1,197
Deferred tax liabilities		2,308
Total liabilities assumed		5,186
Total assets acquired, net of liabilities assumed		29,313
Less: cash acquired		331
Plus: working capital adjustments		464
Total purchase price, net of cash acquired		29,446
Less: contingent consideration		3,459
Net cash used for acquisition of businesses	$	25,987

As of December 31, 2015, the working capital adjustments for Skyetek and Lincoln Laser had not yet been finalized and were estimated to be an additional payment of less than $0.1 million to Skyetek and an additional cash receipt of $0.5 million from Lincoln Laser. These have been included in accrued expenses and other current liabilities and prepaid expenses and other current assets, respectively, in the consolidated balance sheet.

The fair value of intangible assets for Skyetek, Lincoln Laser and Applimotion is comprised of the following (dollar amounts in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Customer relationships	$	4,266	12 years
Developed technology		4,993	10 years
Trademarks and trade names		593	9 years
Non-compete covenant		684	4 years
Backlog		834	1 year
Total	$	11,370

The purchase price allocation resulted in $12.7 million of goodwill and $11.4 million of identifiable intangible assets, $10.3 million of which is expected to be deductible for tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which anticipated economic benefits from such assets are expected to be realized. The goodwill recorded represents the anticipated incremental value of future cash flow potential attributable to: (i) the ability to develop and market new products and technologies; (ii) the ability to develop relationships with new customers; and (iii) expected sales synergies from cross-selling current and future product offerings of Skyetek, Lincoln Laser, Applimotion and the Company to OEM customers.

The results of the SkyeTek, Lincoln Laser and Applimotion acquisitions were included in the Company’s results of operations beginning on the respective acquisition dates. The pro forma financial information reflecting the operating results of Skyetek, Lincoln Laser and Applimotion as if they had been acquired on January 1, 2014 is not presented herein as it would not differ materially from the operating results of the Company as reported for 2014. Skyetek, Lincoln Laser and Applimotion are included in the Company’s Vision Technologies, Laser Products and Precision Motion reportable segments, respectively.

JADAK

On March 14, 2014, the Company acquired 100% of the outstanding equity interests of JADAK, LLC , JADAK Technologies, Inc., and Advanced Data Capture Corporation (collectively, “JADAK”), a North Syracuse, New York-based provider of optical data collection and machine vision technologies to OEM medical device manufacturers, for $93.7 million in cash, net of working capital adjustments. The addition of JADAK has enabled the Company to offer a broader range of highly engineered enabling technologies to leading medical equipment manufacturers. JADAK contributed revenues of $45.4 million and loss from continuing operations before income taxes of $2.7 million for the year ended December 31, 2014.

The final purchase price allocation is as follows (in thousands):


	Amount
Cash	$	1,140
Accounts receivable		7,907
Inventory		6,865
Property and equipment		904
Intangible assets		40,250
Goodwill		44,584
Other assets		2,064
Total assets acquired		103,714

Accounts payable		3,057
Other liabilities		2,380
Deferred tax liabilities		3,481
Total liabilities assumed		8,918
Total assets acquired and liabilities assumed		94,796
Less: cash acquired		1,140
Total purchase price, net of cash acquired	$	93,656

The fair value of JADAK intangible assets is comprised of the following (in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Customer relationships	$	23,570	20 years
Developed technology		10,910	10 years
Trademarks and trade names		2,130	10 years
Backlog		1,810	1 year
Non-compete covenant		1,830	5 years
Total	$	40,250

The purchase price allocation resulted in $44.6 million of goodwill and $40.3 million of identifiable intangible assets, $61.8 million of which is expected to be deductible for tax purposes. Intangible assets are being amortized over their weighted average useful lives primarily based upon the pattern in which economic benefits related to such assets are expected to be realized. The amount of goodwill recorded represents the anticipated incremental value of future cash flow potential attributable to: (i) JADAK’s ability to develop and market new products and technologies; (ii) JADAK’s ability to develop relationships with new customers; and (iii) expected sales synergies from cross-selling current and future product offerings of both JADAK and the Company to OEM customers.

The following unaudited pro forma information presents the combined financial results for the Company and JADAK as if the acquisition of JADAK had been completed as of January 1, 2013 (in thousands, except per share information):


	Year Ended December 31,
	2014			2013
Revenue	$	375,737		$	370,462
Income (loss) from continuing operations	$	(16,067	)	$	11,900
Earnings per share from continuing operations - Basic	$	(0.47	)	$	0.35
Earnings per share from continuing operations - Diluted	$	(0.47	)	$	0.35

The pro forma information for all periods includes the effects of acquisition accounting, including amortization charges from acquired intangible assets, interest expense on borrowings in connection with the acquisition, and the related tax effects as though the acquisition of JADAK had been consummated as of the beginning of 2013. These pro forma results exclude the impact of transaction costs included in the historical results and the related tax effects. The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisition had taken place at the beginning of 2013.

NDS

On January 15, 2013, the Company acquired 100% of the outstanding membership interests of NDS Surgical Imaging, LLC and 100% of the outstanding stock of NDS Surgical Imaging KK (collectively, “NDS”) for $80.8 million in cash consideration, net of working capital adjustments. After the payment of closing working capital, a total of $5.4 million was held in escrow as indemnification for certain representations and warranty claims against the seller until the expiration of the escrow arrangement. In September 2014, the Company received the full remaining amount of $5.4 million held in escrow following the Company’s claims for breach of certain terms of the January 15, 2013 Securities Purchase Agreement for the acquisition of NDS. The escrow recovery was accounted for as a reduction to goodwill as the $5.4 million payment was clearly and directly related to the acquisition price. The escrow recovery resulted in a final adjusted NDS purchase price of $75.4 million.

The allocation of the purchase price is based upon a valuation of assets and liabilities acquired. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The fair values of intangible assets were based on valuations using an income approach, with estimates and assumptions provided by management of NDS and the Company. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill.

The total final purchase price allocation for the NDS acquisition was as follows (in thousands):


	Amount
Accounts receivable	$	10,327
Inventory		14,144
Property and equipment		2,426
Intangible assets		37,817
Goodwill		21,160
Other assets		1,782
Total assets acquired		87,656

Accounts payable		4,768
Other liabilities		7,149
Deferred tax liabilities		384
Total liabilities assumed		12,301
Total purchase price	$	75,355

The fair value of NDS intangible assets is comprised of the following (in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Customer relationships	$	22,294	20 years
Developed technology		6,689	10 years
Trademarks and trade names		7,565	20 years
Backlog		1,269	1 year
Total	$	37,817

NDS contributed revenues of $68.4 million and loss from continuing operations before income taxes of $3.4 million for the year ended December 31, 2013.

Acquisition Costs

The Company recognized acquisition costs of $0.9 million, $0.7 million and $1.5 million in the years ended December 31, 2015, 2014 and 2013, respectively, primarily related to the acquisitions of Skyetek, Lincoln Laser, Applimotion, JADAK and NDS. These amounts were included in restructuring, acquisition and divestiture related costs in the consolidated statements of operations.