On August 27, 2018, the Company acquired all of the outstanding preferred and common units of QGT, a provider of ultra-high purity parts cleaning, process tool part recoating, surface treatment and analytical services to the semiconductor and related industries, for total purchase consideration of $340.8 million, including an estimated $4.2 million in contingent consideration related to $15.0 million of potential cash earn-out payments if the Company achieves certain specified revenue levels through December 27, 2019. For the three and six months ended June 28, 2019, the Company incurred approximately $2.3 million of costs related to the acquisition, which were expensed as incurred and recorded as general and administrative operating expense. The Company completed this acquisition primarily in order to diversify the Company’s customer base, to create a wafer-starts-based recurring revenue stream, and to expand the Company’s addressable market. The Company borrowed $350.0 million to finance the acquisition and to refinance its existing indebtedness. See further discussion of the new borrowing arrangements in Note 7 to the Notes to Condensed Consolidated Financial Statements.

The fair value of the earn-out at the acquisition date was determined using the Monte Carlo Simulation, which incorporated risk adjusted revenue projections. These inputs are not observable in the market and thus represent a Level 3 measurement as discussed in Note 1 of the Company’s Condensed Consolidated Financial Statements.

The Company has preliminarily allocated the purchase price of QGT to the tangible assets, liabilities and identifiable intangible assets acquired, based on their estimated fair values. The excess of purchase price over the aggregate fair value was recorded as goodwill. Goodwill associated with the acquisition is primarily attributable to the future technology, market presence and knowledgeable and experienced workforce. Although goodwill is not amortized for financial accounting purposes, it is amortized in its entirely for tax purposes over fifteen years. The fair value assigned to identifiable intangible assets acquired was determined using the income approach taking into account the Company’s consideration of a number of inputs, including an independent third-party analysis that was based upon estimates and assumptions provided by the Company. These estimates and assumptions were determined through established and generally accepted valuation techniques. The estimated fair value of the tangible and intangible assets acquired was allocated at QGT’s acquisition date.

The Merger Agreement contains customary representations and warranties between the Company and QGT, who agreed to indemnify each other for certain breaches of representations, warranties, covenants and other specified matters. Approximately $2.3 million of the purchase price was placed in escrow as security for post-closing working capital adjustments. In addition, approximately $3.4 million of the purchase price was placed in escrow as security for the QGT’s indemnification obligations during the escrow period. The Company also obtained representation and warranty insurance, which expires on August 27, 2024, as an additional source of recourse for certain losses in excess of the amount of funds in the indemnity escrow account.

The allocation of the purchase price is preliminary pending the completion of various analyses and the finalization of estimates. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible assets and liabilities, primarily property and equipment, taxes, intangible assets, and residual goodwill. During the measurement period, which can be no more than one year from the date of acquisition, we expect to continue to obtain information to assist us in determining the final fair value of the net assets acquired at the acquisition date. Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. Thus, the provisional measurements of fair value discussed above are subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill.

Subsequent to the filing of the Company’s March 29, 2019 financial statements, the Company continued its analysis of the fair value of the property and equipment acquired and the impact on depreciation expense from the acquisition date through the end of the second quarter of 2019. As a result of its analysis, the Company recorded a reduction in depreciation expense of approximately $1.5 million during the second quarter of 2019. In addition, as part of the Company’s continued analysis of the impact of the intangible assets acquired on its worldwide tax position, the Company recorded deferred tax liabilities that resulted in an increase to goodwill of $5.6 million during the second quarter of 2019.

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Fair Market Values (in thousands)
Cash and cash equivalents	$	18,991
Accounts receivable		24,239
Inventories		475
Prepaid expenses and other		12,258
Property and equipment		101,057
Goodwill		70,593
Purchased intangible assets		171,500
Total assets acquired		399,113
Accounts payable		(8,996	)
Accrued compensation and related benefits		(7,910	)
Other current liabilities		(7,361	)
Deferred tax liability		(6,514	)
Other liabilities		(13,162	)
Total liabilities assumed		(43,943	)
Noncontrolling interest		(14,337	)
Purchase price allocated	$	340,833

			Purchased
	Useful Life		Intangible Assets
	(In years)		(In thousands)
Customer relationships		10	$	74,800
Trade name		4		14,900
Recipes		20		73,200
Standard operating procedures		20		8,600
Total purchased intangible assets			$	171,500

For the three and six months ended June 28, 2019, amortization of purchased intangible assets of $3.8 million and $7.6 million, respectively, are presented in cost of goods sold and general and administrative expenses in the condensed consolidated statements of operations. In addition, the Company’s condensed consolidated statements of operations for the six months ended June 28, 2019 include $2.3 million of acquisition related costs presented in general and administrative expenses.

On April 15, 2019, the Company purchased substantially all of the assets of DMS, a semiconductor weldment and solutions provider. Pursuant to the purchase agreement, the former owners of DMS are entitled up to $12.5 million of potential cash earn-out if the combined weldment business achieves certain gross profit and gross margin targets for the twelve months ending June 26, 2020. The fair value of the earn-out at the acquisition date was $1.4 million and was determined using a risk adjusted earnings projection utilizing the Monte Carlo Simulation. These inputs are not observable in the market and thus represent a Level 3 measurement as discussed in Note 1 of the Company’s Consolidated Financial Statements. The total purchase consideration of DMS for purposes of the Company’s purchase price allocation was determined to be $31.4 million, which includes the cash payment of $29.9 million and the fair value of the potential earn-out payments of approximately $1.4 million.

The allocation of the purchase price is preliminary pending the completion of various analyses and the finalization of estimates. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible assets, primarily property and equipment, inventories, intangible assets, taxes, and residual goodwill. During the measurement period, which can be no more than one year from the date of acquisition, we expect to continue to obtain information to assist us in determining the final fair value of the net assets acquired at the acquisition date during the measurement period. Assets acquired and liabilities assumed are recorded based on valuations derived from estimated fair value assessments and assumptions used by the Company. Thus, the provisional measurements of fair value discussed above are subject to change. The Company expects to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. While the Company believes that its estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed at the date of acquisition (in thousands):

Fair Market Values (in thousands)
Accounts receivable	$	1,460
Inventories		10,422
Equipment and leasehold improvements		5,375
Goodwill		10,813
Purchased intangible assets		6,900
Other non-current assets		282
Total assets acquired		35,252
Accounts payable		(3,794	)
Other liabilities		(86	)
Total liabilities assumed		(3,880	)
Purchase price allocated	$	31,372

			Purchased
	Useful Life		Intangible Assets
	(In years)		(In thousands)
Customer relationships		6	$	6,900

In conjunction with the acquisition of DMS, the results of operations for the three and six months ended June 28, 2019, included charges of $0.2 million attributable to amortization of purchased intangible assets and $1.2 million of acquisition related costs which are included in general and administrative expenses in the Company’s condensed consolidated statements of operations.

Goodwill is not amortized but is reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

The following unaudited pro forma consolidated results of operations assume the QGT and DMS acquisitions were completed as of the beginning of the year of the reporting periods presented. The unaudited pro forma consolidated results of operations for the three and six months ended June 28, 2019 (in thousands, except per share amounts) are as follows:

	Three Months Ended					Six Months Ended
	June 28,			June 29,		June 28,		June 29,
	2019			2018		2019		2018
Revenues	$	266,498		$	362,729	$	534,657	$	751,220
Net income (loss)	$	(202	)	$	14,645	$	1,683	$	40,821
Basic earnings per share	$	(0.01	)	$	0.38	$	0.04	$	1.08
Diluted earnings per share	$	(0.01	)	$	0.37	$	0.04	$	1.06

The unaudited pro forma results above include adjustments related to the purchase price allocation and financing of the acquisition, primarily to increase amortization for the identifiable intangible assets, to increase interest expense for the additional debt incurred to complete the acquisition and to reflect the related income tax effect. The unaudited pro forma condensed combined financial information has been prepared by management for illustrative purposes only and are not necessarily indicative of the condensed consolidated financial position or results of income in future periods or the results that would have been realized had UCT, DMS and QGT been a combined company during the specified periods. The unaudited pro forma condensed combined financial information does not reflect any operating efficiencies and/or cost savings that the Company may achieve with respect to the combined companies, or any liabilities that may result from integration activities.