Related Party Transactions

12 Months Ended

Sep. 26, 2014

Related Party Transactions [Abstract]

Related Party Transactions

6. RELATED PARTY TRANSACTIONS

Dpix Holding

VMS has a 40% ownership interest in 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 Imaging Components’ digital image detectors and for its Oncology Systems’ On-Board Imager^® and PortalVision^TM imaging products. 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 VMS recognizes its share of net profits or losses of dpiX Holding, profits or losses in inventory purchased from dpiX are eliminated until realized by VMS. VMS recorded a loss on the equity investment in dpiX Holding of $0.8 million in fiscal year 2014 and recorded income on the equity investment in dpiX Holding of $2.5million and $0.2 million in fiscal years 2013 and 2012, respectively. Income and loss on the equity investment in dpiX Holding is included in selling, general and administrative expenses in the Consolidated Statements of Earnings. The carrying value of the equity investment in dpiX Holding, which was included in other assets in the Consolidated Balance Sheets, was $49.7 million at both September 26, 2014 and September 27, 2013.

During fiscal years 2014, 2013 and 2012, the Company purchased glass transistor arrays from dpiX totaling $20.9 million, $25.9 million and $14.5 million, respectively. These purchases of glass transistor arrays are included as a component of inventories in the Consolidated Balance Sheets or cost of revenues – product in the Consolidated Statements of Earnings for these fiscal years.

In October 2013, VMS 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 September 26, 2014, the Company estimated it has fixed cost commitments of $4.3 million related to this amended agreement for the first quarter of fiscal year 2015. 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.