Related Party Transactions

9 Months Ended

Jul. 01, 2011

Related Party Transactions

Related Party Transactions

6. RELATED PARTY TRANSACTIONS

VMS has a 40% ownership interest in dpiX Holding LLC ("dpiX Holding"), a two-member consortium which has a 100% ownership interest in dpiX LLC ("dpiX"), a supplier of amorphous silicon based thin-film transistor arrays ("flat panels") for the Company's X-ray Products' digital image detectors and for its Oncology Systems' On-Board Imager^®, and PortalVision^TM imaging products. In accordance with the dpiX Holding agreement, net losses were to be allocated to the members, in succession, until their capital accounts equaled zero, then to the members in accordance with their ownership interests. The dpiX Holding agreement also provided that net profits were to be allocated to the members, in succession, until their capital accounts equaled the net losses previously allocated, then to the members in accordance with their ownership interests.

The investment in dpiX Holding is accounted for under the equity method of accounting. When VMS recognizes its share of net profits or losses of dpiX Holding, profits in inventory purchased from dpiX are eliminated until realized by VMS. VMS recorded income on the equity investment in dpiX Holding of $0.3 million in the three months ended July 1, 2011 and a loss of $1.7 million in the three months ended July 2, 2010. VMS recorded income from the equity investment in dpiX Holding of $4.5 million for the nine months ended July 1, 2011 and a loss of $0.4 million in the nine months ended July 2, 2010. Income and loss on the equity investment in dpiX Holding are included in "Selling, general and administrative" expenses in the Condensed Consolidated Statements of Earnings. The carrying value of the investment in dpiX Holding, which was included in "Other assets" in the Condensed Consolidated Balance Sheets, was $46.5 million at July 1, 2011 and $45.1 million at October 1, 2010.

In February 2009, VMS agreed to loan $14 million to dpiX in four separate installments. The loan bears interest at prime plus 1% per annum. The principal balance is due and payable to VMS in four installments beginning in December 2011; interest is payable in full according to a quarterly schedule that began in April 2009; and the entire principal balance, together with accrued and unpaid interest thereon and all other related amounts payable thereunder, is due and payable on September 10, 2012. As of July 1, 2011, VMS had loaned $8.8 million to dpiX under this loan agreement, which was included in "Prepaid expenses and other current assets" in the Condensed Consolidated Balance Sheets. As of October 1, 2010, VMS had loaned $8.8 million to dpiX under this loan agreement, with the current portion included in "Prepaid expenses and other current assets" and the long-term portion included in "Other assets" in the Condensed Consolidated Balance Sheets. The Company evaluates the collectability of its note receivable with dpiX at least on a quarterly basis, considering the timeliness of recurring payments as well as its financial position and cash flows, and would recognize an impairment loss for any amount the Company deemed uncollectible.

During the three months ended July 1, 2011 and July 2, 2010, the Company purchased glass transistor arrays from dpiX totaling approximately $6.4 million and $7.7 million, respectively. Glass transistor arrays purchased from dpiX totaled $18.7 million for the nine months ended July 1, 2011 and $27.2 million for the nine months ended July 2, 2010. These purchases of glass transistor arrays are included as a component of "Inventory" in the Condensed Consolidated Balance Sheets and "Cost of revenues - product" in the Condensed Consolidated Statements of Earnings for these periods.