Business Combinations (Tables)

12 Months Ended

Dec. 31, 2017

The acquisition was accounted for under the acquisition method of accounting. Based upon the fair values acquired, the purchase price allocation is as follows (in thousands):



	Estimated Useful Life (years)		Preliminary Fair Value			Measurement Period Adjustments (1)					Final Fair Value


Cash and cash equivalents			$	53,377		$	—				$	53,377
Accounts receivable			27,114								27,114
Unbilled contracts receivable, short-term			52,845			(3,964		)	(2	)	48,881
Other current assets			5,269								5,269
Prepaid income taxes			3,278								3,278
Property and equipment			33,573								33,573
Goodwill			372,827			2,611			(3	)	375,438
Identifiable intangible assets:
Customer contracts and related relationships	3-7	281,569
Developed technology	5-6	143,639
Trademarks and tradenames	8	38,483
Noncompete agreements	1	2,231
In-process research and development (IPR&D)		3,156
Total identifiable intangible assets			469,078								469,078
Long-term deferred tax assets			637								637
Unbilled contracts receivable, long-term			12,464								12,464
Other assets			4,423								4,423
Accounts payable			(4,006		)						(4,006		)
Accrued liabilities			(19,727		)	(179		)	(4	)	(19,906		)
Deferred revenue			(561		)						(561		)
Income taxes payable			(727		)						(727		)
Long-term deferred tax liabilities			(39,822		)	1,532			(5	)	(38,290		)
Other long-term liabilities			(15,337		)						(15,337		)
Aggregate purchase price			$	954,705		$	—				$	954,705

______________________________________

(1) All adjustments were recorded within the Company's consolidated balance sheet in 2017.

(2) Primarily consists of adjustment to estimates relating to products licensed by DTS prior to the acquisition date of December 1, 2016, which were reported to the Company subsequent to the acquisition date.

(3) Represents the net impact to goodwill of all measurement period adjustments recorded.

(4) Consists of miscellaneous working capital and other immaterial adjustments.

(5) Consists primarily of adjustments for the related tax impact of the measurement period adjustments noted above, and for the finalization of the analysis relating to certain acquired tax attributes and related uncertain income tax positions.

Pro forma revenue and earnings

The following table presents the pro forma operating results as if DTS had been included in the Company's consolidated statements of operations as of January 1, 2015 (unaudited, in thousands):



	Revenue				Earnings
Actual for the year ended December 31, 2015		$	273,300			$	117,016
Actual for the year ended December 31, 2016		$	259,565	(1)		$	56,089		(1)
Supplemental pro forma for the year ended December 31, 2015 (unaudited)		$	358,911	(2)		$	(38,139	)	(2)(3)(4)
Supplemental pro forma for the year ended December 31, 2016 (unaudited)		$	434,971	(2)		$	17		(2)(3)(4)

(1) Unless otherwise stated, the Company's financial results for 2016 include DTS from December 1, 2016 to December 31, 2016. Revenue recognized from licensing agreements acquired from DTS amounted to $0.2 million for the year ended December 31, 2016. Earnings of DTS included in the consolidated statement of operations for the year ended December 31, 2016 was a loss of $22.7 million.

(2) Reflects estimated reduction to historical combined revenue of $52.6 million and $12.6 million for 2015 and 2016, respectively, primarily relating to the estimated impact of purchase accounting on acquired minimum guarantee arrangements and per-unit royalties associated with licensee products manufactured or sold prior to January 1, 2015.

Pro forma adjustments to historical combined expenses

Reflects the following pro forma adjustments to historical combined expenses (unaudited, in thousands):



	2015			2016
Estimated increase in combined amortization and depreciation expense due to acquired intangible assets and property and equipment measured at fair value		$	75,975		$	59,092
Estimated increase in combined stock-based compensation expense due to assumed DTS equity awards measured at fair value		$	6,888		$	4,781
Estimated increase in combined interest and other expense, net due to estimated increase in interest expense (and amortization of debt issuance costs) from new debt obtained to finance the Transaction and estimated lower interest income from lower investment holdings		$	28,964		$	24,806
Elimination of Tessera and DTS non-recurring transaction costs reflected in historical results		$	—		$	(27,900	)
Estimated increase (decrease) to combined expense for non-recurring employee-related costs resulting from the acquisition, including severance and retention bonus expense		$	21,100		$	(3,436	)