RELATED-PARTY TRANSACTIONS

Intercompany Transactions

During the three months ended December 30, 2016 and January 1, 2016, the Company recorded sales to Varian of $5.4 million and $5.4 million, respectively, and recorded purchases of products from Varian of $0.4 million and $0.1 million, respectively.

Allocated Costs

The condensed combined financial statements include allocations of corporate expenses from Varian to the Company. These allocated expenses include costs of information technology, human resources, accounting, legal, facilities, insurance, treasury and other corporate and infrastructure services. Allocated costs also include research and development expenses from Varian’s scientific research facility. These costs have been allocated to the Company on the basis of direct usage when identifiable, with the remainder allocated on a pro-rata basis of revenue, headcount or other systematic measures that reflect utilization of services provided to or benefits received by the Company. In addition, interest expense relating to Varian’s corporate borrowings and interest income have been allocated based on total assets of the Company as a percentage of total assets of Varian. The Company considers the expense allocation methodology and results to be reasonable for all periods presented.

Allocated costs included in the accompanying Condensed Combined Statements of Earnings are as follows:



	Three Months Ended
(In millions)	December 30, 2016		January 1, 2016
Selling, general and administrative	$	11.9	$	11.2
Research and development	$	—	$	0.3
Interest expense, net of interest income	$	0.5	$	0.2

Net Parent Investment

Parent company investment in the Condensed Combined Balance Sheets represents Varian’s historical investment in the Company, the net effect of transactions with and allocations from Varian and the Company’s accumulated earnings.

Equity Method Investment

The Company has a 40% ownership interest in dpiX Holding LLC ("dPix Holding"), a four-member consortium that has a 100% ownership interest in dpiX LLC (“dpiX”), a supplier of amorphous silicon based thin film transistor arrays for digital flat panel image detectors. In accordance with the dpiX Holding Agreement, net profits or losses are allocated to the members, in accordance with their ownership interests.

The equity investment in dpiX Holding is accounted for under the equity method of accounting. When the Company recognizes its share of net profits or losses of dpiX Holding, profits or losses in inventory purchased from dpiX are eliminated until realized by the Company. The Company recorded income and (loss) on the equity investment in dpiX Holding of $0.3 million and $(0.7) million during the three months ended December 30, 2016 and January 1, 2016, respectively. Income and loss on the equity investment in dpiX Holding is included in other income (expense), net in the Condensed Combined Statements of Earnings. The carrying value of the equity investment in dpiX Holding, which was included in investments in privately-held companies on the Condensed Combined Balance Sheets, was $47.6 million and $47.2 million at December 30, 2016 and September 30, 2016, respectively.

During the three months ended December 30, 2016 and January 1, 2016, the Company purchased glass transistor arrays from dpiX totaling $8.4 million and $5.0 million, respectively. These purchases of glass transistor arrays are included as a component of inventories on the Condensed Combined Balance Sheets or cost of revenues—product in the Condensed Combined Statements of Earnings for these fiscal years.

As of December 30, 2016 and September 30, 2016, the Company had accounts payable to dpiX totaling $2.8 million and $4.2 million, respectively.

In October 2013, the Company entered into an amended agreement with dpiX and other parties that, among other things, provides the Company with the right to 50% of dpiX’s total manufacturing capacity produced after January 1, 2014. The amended agreement requires the Company to pay for 50% of the fixed costs (as defined in the amended agreement), as determined at the beginning of each calendar year. As of December 30, 2016, the Company estimated it has fixed cost commitments of $12.2 million related to this amended agreement through December 30, 2017. The fixed cost commitment for future periods will be determined and approved by the dpiX board of directors at the beginning of each calendar year. The amended agreement will continue unless the ownership structure of dpiX changes (as defined in the amended agreement).

The Company has determined that dpiX is a variable interest entity because at-risk equity holders, as a group, lack the characteristics of a controlling financial interest. Majority votes are required to direct the manufacturing activities, legal operations and other activities that most significantly affect dpiX’s economic performance. The Company does not have majority voting rights and no power to direct the activities of dpiX and therefore is not the primary beneficiary of dpiX. The Company’s exposure to loss as a result of its involvement with dpiX is limited to the carrying value of the Company’s investment and fixed cost commitments.

Summarized financial information for dpiX is as follows:



(In millions)	December 30, 2016		September 30, 2016
Current assets	$	40.4	$	40.1
Noncurrent assets	102.4		102.1
Current liabilities	$	16.2	$	17.1



	Three Months Ended
(In millions)	December 30, 2016		January 1, 2016
Revenues	$	14.8	$	11.5
Gross profit	2.6		2.4
Income from operations	1.5		0.5
Net income	$	1.5	$	0.4