RELATED-PARTY TRANSACTIONS

Transactions with Varian Medical Systems, Inc.

During the three months ended December 29, 2017 and December 30, 2016, the Company recorded sales to Varian of $3.0 million and $5.4 million, respectively, and recorded purchases of products from Varian of $0.4 million and $0.4 million, respectively.

Allocated Costs

Prior to the separation on January 28, 2017, the condensed consolidated financial statements included allocations of corporate expenses from Varian to the Company. These allocated expenses included costs of information technology, human resources, accounting, legal, facilities, insurance, treasury and other corporate and infrastructure services. These costs were allocated to the Company on the basis of direct usage when identifiable or other systematic measures that reflect utilization of services provided to or benefits received by the Company.

Allocated costs included in the accompanying condensed consolidated statements of earnings are as follows:



	Three Months Ended
(In millions)	December 30, 2016
Selling, general and administrative	$	11.9
Interest expense, net of interest income	0.5

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. During the three months ended December 29, 2017 and December 30, 2016, the Company recorded (loss) and income on the equity investment in dpiX Holding of $(0.7) million and $0.3 million, respectively. Income and loss on the equity investment in dpiX Holding is included in other income (expense), net in the condensed consolidated 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 consolidated balance sheets, was $47.8 million and $50.0 million at December 29, 2017 and September 29, 2017, respectively.

During the three months ended December 29, 2017 and December 30, 2016, the Company purchased glass transistor arrays from dpiX totaling $6.6 million and $8.4 million, respectively. These purchases of glass transistor arrays are included as a component of inventories on the condensed consolidated balance sheets or cost of revenues—product in the condensed consolidated statements of earnings for these fiscal years.

As of December 29, 2017 and September 29, 2017, the Company had accounts payable to dpiX totaling $3.3 million and $3.4 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 29, 2017, the Company did not yet have a fixed cost commitment related to this credit agreement. In January 2018, the fixed cost commitment was determined and approved by the dpiX board of directors to be $16.3 million for calendar year 2018. 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.