XML 24 R12.htm IDEA: XBRL DOCUMENT v3.23.1
Coherent Acquisition
 9 Months Ended
Mar. 31, 2023
Business Combination and Asset Acquisition [Abstract]  
Coherent Acquisition Coherent AcquisitionOn July 1, 2022 (the “Closing Date”), the Company completed its acquisition of Coherent, Inc. (the “Merger”), a global provider of lasers and laser-based technology for scientific, commercial, and industrial customers, in a combined cash and stock transaction in accordance with the Agreement and Plan of Merger dated March 25, 2021 (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, and subject to the conditions set forth therein, each share of common stock of legacy Coherent, Inc. (“Legacy Coherent”), par value $0.01 per share (the “Legacy Coherent Common Stock”), issued and outstanding immediately prior to July 1, 2022, was canceled and extinguished and automatically converted into the right to receive $220.00 in cash and 0.91 of a share of Coherent Common Stock.
Following the completion of the Legacy Coherent acquisition, the Company announced a new brand identity, including a corporate name change to Coherent Corp. (NYSE: COHR) on September 8, 2022.
On the Closing Date, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a new term loan A credit facility (the “Term A Facility”) in an aggregate principal amount of $850 million, a new term loan B credit facility (the “Term B Facility”) (and, together with the Term A Facility, the “Term Facilities”) in an aggregate principal amount of $2.8 billion, and a new revolving credit facility (the “Revolving Credit Facility”) in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million. For further on the credit facility refer to Note 8. Debt.
In order to complete the funding of the Merger, the Company had a net cash outflow of $2.1 billion on July 1, 2022. The Company recorded $11 million and $83 million of acquisition related costs in the three and nine months ended March 31, 2023, respectively, representing professional and other direct acquisition costs. These costs are recorded within Selling, general and administrative expense in our Condensed Consolidated Statement of Earnings (Loss). Approximately 23 million shares of Coherent Common Stock in the aggregate were issued in conjunction with the closing of the Merger. Total preliminary Merger consideration was $7.1 billion, including replacement equity awards attributable to pre-combination service for certain Legacy Coherent restricted stock units.
The preliminary total fair value of consideration paid in connection with the acquisition of Coherent, Inc. consisted of the following (in $000):
SharesPer ShareTotal Consideration
Cash paid for merger consideration——$5,460,808 
Shares of COHR common stock issued to Legacy Coherent stockholders22,587,885$49.831,125,554 
Converted Legacy Coherent RSUs attributable to pre-combination service——82,037 
Payment of Legacy Coherent debt——364,544 
Payment of Legacy Coherent transaction expenses——62,840 
$7,095,783 
The Company allocated the fair value of the preliminary purchase price consideration to the tangible assets, liabilities, and intangible assets acquired, generally based on estimated fair values. The excess preliminary purchase price over those fair values is recorded as goodwill. Our valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets, inventories, property, plant & equipment and deferred income taxes. In determining the fair value of intangible assets acquired, the Company must make assumptions about the future performance of the acquired business, including among other things, the forecasted revenue growth attributable to the asset group and projected operating expenses inclusive of expected synergies, future cost savings, and other benefits expected to be achieved by combining the Company and Legacy Coherent. The Company’s intangible assets are comprised of trade names and trademarks, customer relationships, developed technology and backlog. The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the preliminary purchase price allocation. The estimated fair value of the customer relationships and backlog are determined using the multi-period excess earnings method and the estimated fair value of the trade names and trademarks and developed technology are determined using the relief from royalty method. Both methods require forward looking estimates that are discounted to determine the fair value of the intangible asset using a risk-adjusted discount rate that is reflective of the level of risk associated with future estimates associated with the asset group that could be affected by future economic and market conditions.
The purchase price allocation set forth is preliminary and will be revised as third party valuations are finalized or additional information becomes available during the measurement period, which could be up to 12 months from the Closing Date. Any such revisions or changes may be material.
Our preliminary allocation of the $7.1 billion purchase price of Legacy Coherent, based on the estimated fair value of the assets acquired and liabilities assumed as of the Closing Date, is as follows (in $000):
Preliminary Allocation as of 7/1/2022 as adjusted through 3/31/23
Previously Reported September 30, 2022Measurement Period Adjustments (i)As Adjusted (preliminary)
Assets
Current Assets
Cash, cash equivalents, and restricted cash$393,324 $— $393,324 
Accounts receivable270,928 — 270,928 
Inventories (ii)497,345 66,540 563,885 
Prepaid and refundable income taxes (iii)8,869 (1,592)7,277 
Prepaid and other current assets41,467 — 41,467 
Total Current Assets1,211,933 64,948 1,276,881 
Property, plant & equipment, net (iv)424,228 16,704 440,932 
Deferred income taxes (iii)1,115 (793)322 
Other assets102,726 — 102,726 
Other intangible assets, net (v)2,425,454 1,079,546 3,505,000 
Goodwill4,005,727 (862,497)3,143,230 
Total Assets$8,171,183 $297,908 $8,469,091 
Liabilities
Current Liabilities
Current portion of long-term debt$4,504 $— $4,504 
Accounts payable116,754 — 116,754 
Accrued compensation and benefits60,596 — 60,596 
Operating lease current liabilities13,002 — 13,002 
Accrued income taxes payable16,936 — 16,936 
Other accrued liabilities (vi)136,042 702 136,744 
Total Current Liabilities347,834 702 348,536 
Long-term debt22,991 — 22,991 
Deferred income taxes (iii)563,824 292,168 855,992 
Operating lease liabilities43,313 — 43,313 
Other liabilities (vi)97,438 5,038 102,476 
Total Liabilities$1,075,400 $297,908 $1,373,308 
Preliminary aggregate acquisition consideration$7,095,783 $— $7,095,783 
(i) The Company recorded measurement period adjustments to its preliminary acquisition date fair values due to the refinement of its valuation models, assumptions and inputs. The following measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date.
(ii) The Condensed Combined Balance Sheet has been adjusted to record Legacy Coherent’s inventories at a preliminary fair value of approximately $564 million, an increase of $67 million from the preliminary fair value reported at September 30, 2022 with a corresponding decrease to goodwill. The Condensed Combined Statement of Earnings (Loss) for the three and nine months ended March 31, 2023 includes cost of goods sold of approximately zero and $158 million, respectively, related to the increased basis in the preliminary fair value compared to the carrying value. The costs are being amortized over the expected period during which the acquired inventory is sold, and thus are not anticipated to affect the Condensed Consolidated Statements of Earnings (Loss) beyond twelve months after the Closing Date.
(iii) The Company has adjusted its prepaid and refundable income taxes, deferred tax asset and deferred tax liability positions as of March 31, 2023, to $7 million, zero and $856 million, respectively, as a result of measurement period adjustments.
(iv) The Condensed Consolidated Balance Sheet has been adjusted to record Legacy Coherent’s property, plant and equipment (consisting of land, buildings and improvements, equipment, furniture and fixtures, and leasehold improvements) at a preliminary fair value of approximately $441 million, an increase of $17 million from the preliminary fair value reported at September 30, 2022 with a corresponding decrease to goodwill. The Condensed Consolidated Statements of Earnings (Loss) have been adjusted to recognize additional depreciation expense related to the increased basis. The additional depreciation expense is computed with the assumption that the various categories of assets will be depreciated over their remaining useful lives on a straight-line basis.
(v) Preliminary identifiable intangible assets in the Condensed Combined Balance Sheet increased $1.1 billion from the preliminary fair value reported at September 30, 2022 with a corresponding decrease to goodwill. Intangibles amortization recorded in cost of goods sold for the three and nine months ended March 31, 2023 was $21 million and $64 million, respectively. Intangibles amortization recorded in selling, general and administrative expenses for the three and nine months ended March 31, 2023 was $51 million and $156 million, respectively.
Preliminary identifiable intangible assets consist of the following and are being amortized over their estimated useful lives in the Condensed Consolidated Statements of Earnings (Loss) (in $000):
Preliminary
Fair Value		Estimated Useful Life
Trade names and trademarks$430,000 N/A
Customer relationships1,830,000 15 years
Developed technology1,157,500 13.5 years
Backlog87,500 1.0 year
Intangible assets acquired$3,505,000 
(vi) The Company recorded approximately $1 million of increases in other current liabilities and $5 million of increases in other liabilities as measurement period adjustments.
Operating results, including goodwill and intangibles, of Legacy Coherent are reflected in the Company’s consolidated financial statements from the Closing Date, within the Lasers segment. Revenues and net loss for the Lasers segment for the three months ended March 31, 2023 were $365 million and $65 million, respectively. Revenues and net loss for the Lasers segment for the nine months ended March 31, 2023 were $1,137 million and $364 million, respectively. Goodwill in the amount of $3.1 billion arising from the acquisition is attributed to the expected synergies, including future cost savings, and other benefits expected to be generated by combining Coherent and Legacy Coherent. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes.
Supplemental Pro Forma Information
The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisition had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that we believe are reasonable under the circumstances.
The supplemental pro forma information presents the combined results of operations for the three and nine months ended March 31, 2023 and March 31, 2022, as if Legacy Coherent had been acquired as of July 1, 2021. The supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets, property, plant and equipment, adjustments to share-based compensation expense, fair value adjustments on the inventories acquired, transaction costs, interest expense and amortization of debt issuance costs related to the Senior Credit Facilities (as defined in Note 8. Debt).
The unaudited supplemental pro forma financial information for the periods presented is as follows (in $000):
Three Months Ended March 31, 2023Three Months Ended March 31, 2022
Revenue$1,240,194 $1,197,928 
Net Earnings36,294 6,482 
Nine Months Ended March 31, 2023Nine Months Ended March 31, 2022
Revenue$3,955,049 $3,576,039 
Net Earnings (Loss)247,715 (234,815)