3. Business Combinations

2016 Acquisitions

Reach

On May 24, 2016, the Company acquired 100% of the outstanding stock of Reach Technology Inc. (“Reach”), a Fremont, California-based provider of embedded touch screen technology solutions for OEMs in the medical and advanced industrial markets, for a total purchase price of $9.4 million, net of working capital adjustments. The Company expects that the addition of Reach will enable the Company to enhance its value proposition with medical OEM customers by adding Reach’s high-performance touch screen solutions to its product offerings.

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

	Amount
Cash	$	238
Accounts receivable		991
Inventory		1,611
Prepaid expenses and other current assets		12
Intangible assets		3,953
Goodwill		4,715
Total assets acquired		11,520

Accounts payable		280
Other liabilities		148
Deferred tax liabilities		1,474
Total liabilities assumed		1,902
Total assets acquired, net of liabilities assumed		9,618
Less: cash acquired		238
Total purchase price, net of cash acquired	$	9,380

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

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Customer relationships	$	2,770	15 years
Developed technology		500	7 years
Trademarks and trade names		258	10 years
Backlog		425	1 year
Total	$	3,953

The purchase price allocation resulted in $4.7 million of goodwill and $4.0 million of identifiable intangible assets, none 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) Reach’s ability to grow their business with existing and new customers, including leveraging the Company’s customer base, and (ii) cost improvements due to scale and more efficient operations.

The operating results of Reach were included in the Company’s results of operations beginning on May 24, 2016. Reach contributed revenues of $5.6 million and a loss from continuing operations before income taxes of $0.6 million for the year ended December 31, 2016. Operating loss from continuing operations before income taxes for the year ended December 31, 2016 included transition costs of $1.2 million recognized under earn-out agreements. The pro forma financial information reflecting the operating results of Reach, as if it had been acquired as of January 1, 2015, would not differ materially from the operating results of the Company as reported for the year ended December 31, 2015. Reach is included in the Company’s Vision reportable segment.

2015 Acquisitions

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 radio frequency identification (“RFID”) solutions for medical OEMs, for a total purchase price of $2.8 million, net of 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 frequency (“HF”) and ultra high frequency (“UHF”) RFID technologies that maximize efficiency and visibility for OEMs 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 $12.1 million, net of working capital adjustments. This total purchase price includes $9.8 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 the contingent consideration under the purchase and sale agreement was zero to $6.0 million. The actual contingent consideration payment was $1.4 million, which was paid during the first quarter of 2017. Lincoln Laser specializes in ultrafast scanning solutions, leveraging their expertise in polygon scanner 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 final 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		12,668
Other assets		10
Total assets acquired		34,457

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		29,271
Less: cash acquired		331
Total purchase price, net of cash acquired		28,940
Less: contingent consideration		3,459
Net cash used for acquisition of businesses	$	25,481

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, Photonics and Precision Motion reportable segments, respectively.

2014 Acquisitions

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.

Acquisition Costs

The Company recognized acquisition costs of $0.2 million, $0.9 million and $0.7 million in the years ended December 31, 2016, 2015 and 2014, respectively, related to the acquisitions of Reach, Skyetek, Lincoln Laser, Applimotion and JADAK. These amounts were included in restructuring, acquisition and divestiture related costs in the consolidated statements of operations.