ALOG Analogic Corp. (delisted)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, in millions, except share and per share data)

1. Basis of presentation

Throughout this Quarterly Report on Form 10-Q, unless the context states otherwise, the words “we,” “us,” “our”, “the Company” and “Analogic” refer to Analogic Corporation and all of its subsidiaries taken as a whole, and “our board of directors” refers to the board of directors of Analogic Corporation.

Our unaudited consolidated financial statements presented herein have been prepared pursuant to the rules of the United States Securities and Exchange Commission, or SEC, for quarterly reports on Form 10-Q. Preparing financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. We report our financial condition and results of operations on a fiscal year basis ending on July 31st of each year. The three months ended April 30, 2018 and 2017 represent the third quarters of fiscal years 2018 and 2017, respectively.

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair statement of the results for all interim periods presented. The results of operations for the three months ended April 30, 2018 are not necessarily indicative of the operating results for the full year. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended July 31, 2017, or fiscal year 2017, included in our Annual Report on Form 10-K as filed with the SEC on September 26, 2017. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles, or GAAP, in the United States of America.

Consolidation

The unaudited consolidated financial statements presented herein include our accounts and those of our subsidiaries, all of which are wholly owned. All intercompany accounts and transactions have been eliminated in consolidation.

In determining whether we are the primary beneficiary of an entity and therefore required to consolidate, we apply a qualitative approach that determines whether we have both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. We have not been required to consolidate the activity of any entity due to these considerations.

2. Recent accounting pronouncements

Accounting pronouncements issued and recently adopted

None .  

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Accounting pronouncements issued and not yet effective

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU No. 2018-02, “ Income Statement—Reporting Comprehensive Income (Topic 220) ”. The standard allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from the Tax Cuts and Jobs Act (the “Act”). The new guidance (revised in March 2018), also requires certain disclosures about stranded tax effects. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. Early adoption is permitted. The standard will be effective for us in the first quarter of our fiscal year beginning August 1, 2019. We are currently evaluating the impact of the adoption of this update on our consolidated financial statements.

Targeted Improvements to Accounting for Hedging Activities

In August 2017, the FASB issued ASU No. 2017-12, “ Derivatives and Hedging (Topic 815)”. The standard better aligns hedge accounting with an entity’s risk management activities and simplifies the requirement to qualify for hedge accounting. ASU 2017-12 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The standard will be effective for us in the first quarter of our fiscal year ending beginning August 1, 2019. We are currently evaluating the impact of the adoption of this update on our consolidated financial statements.

Scope of Modification Accounting

In May 2017, the FASB issued ASU No. 2017-09, “ Compensation – Stock Compensation (Topic 718)”. The standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted. The standard will be effective for us in the first quarter of our fiscal year ending Beginning August 1, 2018 . We are currently evaluating the impact of the adoption of this update on our consolidated financial statements.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB issued ASU No. 2017-07, “ Compensation — Retirement Benefits (Topic 715)” . The standard improves the presentation of net periodic pension cost and net periodic postretirement benefit cost by requiring that an employer that offers to its employees defined benefit pension or other postretirement benefit plans report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted.  The standard will be effective for us in the fiscal year beginning August 1, 2018. We are currently evaluating the impact of the adoption of this update on our consolidated financial statements.

Clarifying the Definition of a Business

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The amendments provide the requirements needed for a set of transferred assets and activities to be a business and establish a practical way to determine when a set of transferred assets and activities is not a business. To be considered a business, an acquisition would have to include an input and a substantive process that together significantly contribute to the ability to create outputs. An output is the result of inputs and substantive processes that provide goods or services to customers, other revenue, or investment income, such as dividends and interest. The amendments narrow the definition of outputs and align it with how outputs are described in Topic 606 “Revenue from Contracts with Customers”. The amendments are effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The standard will be effective for us in the fiscal year beginning August 1, 2018. We are currently evaluating the impact of the adoption of this update on our consolidated financial statements.

Intra-Entity Transfers of Assets Other than Inventory

In October 2016, the FASB issued ASU No. 2016-16, “ Income Taxes (Topic 740) ”. The standard requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. Two common examples of assets included in the scope of this amendment are intellectual property and property, plant, and equipment. The amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual

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reporting periods. Ear ly adoption is permitted. The standard will be effective for us in the fiscal year beginning August 1, 2018. We are currently evaluating the impact of the adoption of this update on our consolidated financial statements.

Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU No. 2016-15, “ Statement of Cash Flows (Topic 230).”  The amendments provide guidance on the eight specific cash flow statement presentation and classification issues as follows: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The standard will be effective for us in the first quarter of our fiscal year ending beginning August 1, 2018 . We are currently evaluating the impact of the adoption of this update on our consolidated financial statements.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments – Credit Losses (Topic 326) ” The amendment modifies the measurement of expected credit losses of certain financial instruments. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. Available-for-sale accounting recognizes that value may be realized either through collection of contractual cash flows or through sale of the security. Therefore, the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment could be sold at fair value, if cash collection would result in the realization of an amount less than fair value. The allowance for credit losses for purchased available-for-sale securities with a more-than-insignificant amount of credit deterioration since origination is determined in a similar manner to other available-for-sale debt securities; however, the initial allowance for credit losses is added to the purchase price rather than reported as a credit loss expense. Only subsequent changes in the allowance for credit losses are recorded in credit loss expense. Interest income should be recognized based on the effective interest rate, excluding the discount embedded in the purchase price that is attributable to the acquirer’s assessment of credit losses at acquisition. The amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The standard will be effective for us in the fiscal year beginning after August 1, 2020. We are currently evaluating the impact of the adoption of this update on our consolidated financial statements.

Leases

In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842) ”. The standard requires lessees to recognize assets and liabilities for most leases on the balance sheet. For income statement purposes, the standard requires leases to be classified as either operating or finance. The standard is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The standard will be effective for us in the first quarter of our fiscal year beginning August 1, 2019. Adoption requires application of the new guidance for all periods presented. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements.

Revenue from contracts with customers

In May 2014, the FASB issued ASU No. 2014-09, “ Revenue from Contracts with Customers (Topic 606) ”. This update affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. This update will supersede existing revenue recognition requirements and most industry-specific guidance. This update also supersedes some cost guidance, including revenue recognition guidance for construction-type and production-type contracts. The update’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under today’s guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. This update should be applied either on a retrospective or modified retrospective basis. This update was originally effective for us in the first quarter of our fiscal year ending July 31, 2018. Early adoption was not permitted. In August 2015, the FASB approved a one year delay of the effective date of the new revenue standard for public entities. Therefore, this update would be effective for us in the first quarter of our fiscal year ending July 31, 2019. The standard permits entities to early adopt, but only as of the original effective date (i.e. one year earlier). We are expected to adopt the new standard in the first quarter of our fiscal year 2019 effective August 1, 2018, and anticipate using the modified retrospective method, which would result in a cumulative effect adjustment as of August 1, 2018.  The comparative information would not be restated and continues to be reported under the accounting standards in effect for those periods. The

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Company has substantially completed the impact assessment phase of its evaluation of ASU No. 2014-09.  Two areas the Comp any expects to be impacted are engineering revenues and commissions expense, though not in a manner material to the consolidated financial statements.  Under the new guidance, there are specific criteria to determine if a performance obligation should be r ecognized over time or at a point in time.  Accordingly, the Company has identified certain engineering projects for which the timing of when the Company recognizes revenue may be impacted.  Due to the complexity of these engineering projects, revenue reco gnition under the new stand ard is highly depend ent on the specific contract terms.  Additionally, the new standard will require certain costs, primarily sales-related commissions on contracts greater than one year in duration, to be capitalized and amortiz ed over the term of the contract rather than expensed when paid .  The Company continues to assess the impact of the new standard, but based on preliminary analysis does not expect the adoption to be material to the consolidated financial statements.  The C ompany also expects to implement additional processes and controls, as well as additional disclosures to comply with the new standard.

3. Agreement and Plan of Merger

On April 10, 2018, Analogic entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ANLG Holding Company, Inc., a Delaware corporation (the “Parent”), and AC Merger Sub, Inc., a Massachusetts corporation and a wholly owned subsidiary of the Parent (the “Merger Sub”).  The Merger Agreement provides, subject to its terms and conditions, for the acquisition of the Company by the Parent at a price of $84.00 per share of the Company’s common stock, par value $0.05 (each, a “Share”), in cash, without interest and subject to deduction for any required withholding tax (the “Merger Consideration”), through the merger of the Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of the Parent. The Parent and the Merger Sub are owned by funds affiliated with Altaris Capital Partners, LLC (collectively, the “Sponsor”). 

Completion of the Merger is subject to the Company obtaining stockholder approval and other customary closing conditions. The Company will hold a stockholders meeting on June 21, 2018 to submit the Merger Agreement to its stockholders for their consideration. On April 27, 2018, the U.S. Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) with respect to the pending Merger. The termination of the waiting period satisfies one of the conditions to the closing, which remains subject to other customary closing conditions.

Effective as of immediately prior to the effective time of the Merger, each then-outstanding and unexercised Company stock option with an exercise price less than the per share Merger Consideration will automatically be canceled and converted into the right to receive from the surviving corporation an amount of cash equal to the product of (i) the total number of shares of Company common stock then underlying such Company stock option multiplied by (ii) the excess of the Merger Consideration over the exercise price per share of such Company stock option, on the terms set forth in the Merger Agreement. All Company stock options are fully vested. In the event that the exercise price of any Company stock option is equal to or greater than the Merger Consideration, such Company stock option will be canceled, without any consideration being payable in respect thereof, and have no further force or effect.  Effective as of immediately prior to the effective time of the Merger, each Company restricted stock unit award that is then outstanding and unvested will vest in full and automatically be canceled and converted into the right to receive an amount of cash equal to the product of the total number of shares of Company common stock then underlying such Company restricted stock unit award multiplied by the Merger Consideration, on the terms set forth in the Merger Agreement.  Effective as of immediately prior to the effective time of the Merger, each Company performance-based share unit award that is then outstanding and unvested will vest with respect to the number of shares of Company common stock that would have been earned in accordance with the methodology set forth in the applicable award agreement (as in effect on the date of the Merger Agreement) or previously established by the Compensation Committee of the Board and will automatically be canceled and converted into the right to receive from the Company an amount of cash equal to the product of the total number of shares of Company common stock that vest under such performance-based share unit award multiplied by the Merger Consideration, on the terms set forth in the Merger Agreement.  See Note 12 – Share-based compensation for more information.

   The Merger Agreement includes customary termination provisions. If the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement, the Company will be required to pay the Parent a termination fee of $34.8 million (including under specified circumstances in connection with the Company’s entry into an agreement with respect to a superior proposal). The Merger Agreement also provides that the Parent will be required to pay the Company a reverse termination fee of $64.2 million or reimburse certain Company expenses under certain specified circumstances set forth in the Merger Agreement. The Sponsor has provided the Company with a limited guarantee in favor of the Company guaranteeing the Parent’s obligation to pay the reverse termination fee and certain other payment obligations of the Parent and the Merger Sub pursuant to the Merger Agreement.

In connection with the pending transaction, the Company has agreed to suspend the payment of its regular quarterly dividend. Also in connection with the pending transaction, if the effective time of the Merger occurs on or before the last business day of the offering period currently in effect under the Company’s employee stock purchase plan (“ESPP” ) and there are purchase options then outstanding with respect to such offering period, then each such outstanding option will be exercised in full on the closing date of the

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Merger (or,if not practicable, on the business day immedi a tely preceding the closing date of the Merger) to the  extent of payroll deductions credited to the purchase option holder’s account as of the d ate that is 10 days  before the closing date of the Merger. Each share of Company common stock received upon exercise of a purchase option granted under the ESPP will be converted into the right to receive the per share Merger Consideration. If the effecti ve time of the Merger occurs a fter the last business day of the offering period currently in effect under the Employee Stock Purchase Plan (“ESPP”), the Board will terminate the ESPP as of the date immediately prior to the closing date and, as promptly as reasonably practicable following such termination, all outstanding payroll deductions pursuant to the ESPP will be refunded to the participating employees under the ESPP. In all events, the ESPP will be terminated as of immediately prior to the effective t ime of the M erger.

In the third quarter of 2018, in connection with the Merger the Company incurred pre-tax expenses of approximately $4.1 million related to professional fees. O ther than the expenses incurred noted above, no effect has been given in the financial statements to the proposed Merger.

For additional information, see the Proxy Statement filed by the Company with the SEC on May 16,2018

The Parent expects to fund the purchase price through a combination of unrestricted cash-on-hand held by the Company as of the closing of the merger, cash equity contributions and debt financing. The Parent has obtained commitments for $575 million of debt financing consisting of a combination of a senior secured first lien term loan facility and a senior secured first lien revolving credit facility. The proceeds of the debt financing are expected to be used to finance, in part, the Merger, pay related fees and expenses, and for ongoing working capital requirements, capital expenditures and other general corporate purposes. The debt financing is conditioned upon consummation of the Merger, as well as other customary conditions.

4. Accounts receivable, net

Our accounts receivable arise primarily from products sold and services provided in North America, Europe and Asia. The balance in accounts receivable represents the amount due from our domestic and foreign original equipment manufacturers, or OEM, customers, distributors and end users. We perform ongoing credit evaluations of our customers’ financial condition and continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon specific customer collection issues that have been identified. We accrue reserves against trade receivables for estimated losses that may result from a customer’s inability to pay. Amounts determined to be uncollectible are charged or written off against the reserve. To date, our historical bad debts charged against the reserve have been minimal.

Our top ten customers combined accounted for approximately 54% and 61% of our total net revenue for each of the three months ended April 30, 2018 and 2017, respectively and 53% and 63% of our total net revenue for the nine months ended April 30, 2018 and 2017, respectively.  Set forth in the table below are customers that individually accounted for 10% or more of our net revenue.  

Note (*): Total net accounts receivable balance was less than 10% in this period.

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5 . Inventory

The components of inventory, net of allowance for obsolete, unmarketable or slow-moving inventories, are summarized as follows:  

6. Intangible assets and goodwill

Intangible assets

Intangible assets include the value assigned to intellectual property and other technology, patents, customer contracts and relationships, and trade names. The estimated useful lives for all of these intangible assets, excluding a trade name determined to have an indefinite life, range between 1 to 14 years. Indefinite-lived intangible assets consist of trade names acquired in business combinations. The carrying values of our indefinite-lived intangible assets were $7.6 million at both April 30, 2018 and July 31, 2017.

Finite-lived intangible assets are summarized as follows:

Amortization expense related to acquired intangible assets was $1.3 million and $3.9 million for the three and nine months ended April 30, 2018, respectively. Amortization expense related to acquired intangible assets was $1.9 million and $5.9 million for the three and nine months ended April 30, 2017, respectively.

Goodwill

We had goodwill balances of $2.3 million at April 30, 2018 and July 31, 2017. We review periodically or more frequently if indicators are present or changes in circumstances suggest that it is more likely than not that impairment may exist and we perform a formal goodwill impairment test in the second quarter of each fiscal year.

The goodwill balance by reportable segments and reporting units for the nine months ended April 30, 2018 are as follows:

The following is a roll forward of accumulated goodwill impairment losses by reportable segment and reporting unit:

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We have two reporting units with goodwill—Medical Imaging and Security and Detection and three reportable segments—Medical Imaging, Ultrasound, and Security and Detection. We performed the annual impairment test for our goodwill and other intangible assets with indefinite lives as of December 31, 2017. We first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value and as a basis for determining whether it is necessary to perform the quantitative impairment test. Alternatively, we may elect to bypass the qualitative assessment and proceed to the two-step quantitative impairment test. If we choose to perform a qualitative assessment and determine it is more likely than not that the carrying value of the net assets is more than the fair value of the related operations, the two-step impairment process is then performed; otherwise, no further testing is required. We performed a qualitative assessment on our Medical Imaging and Security and Detection reporting units, and concluded that there was no impairment.

We compared the fair value of a tradename that has an indefinite life using the relief from royalty approach to its carrying value as of December 31, 2017. The relief from royalty approach utilized an after-tax royalty rate and a discount rate. The after-tax royalty rate was determined based on royalty research and margin analysis, while the discount rate was determined after consideration of market rates of return on debt and equity capital, the weighted average return on invested capital, and the risk associated with achieving forecasted sales for the tradename. We determined that the fair value of the tradename was in excess of its carrying value.

The current economic environment and the uncertainties regarding its impact on our business and our estimates for forecasted revenue and spending levels made for purposes of our goodwill and trade name impairment testing may not be accurate predictions of the future. If our assumptions regarding forecasted revenue or margin growth rates of each reporting unit and trade name are not achieved, we may be required to record an impairment charge for the goodwill and trade name in future periods, whether in connection with our next annual impairment testing in the second quarter of the fiscal year ending July 31, 2019, or prior to that if any such change constitutes a triggering event outside of the quarter from when the annual goodwill and trade name impairment test is performed.  Changes in our forecasts, or decreases in the value of our common stock could cause book values of certain operations to exceed their fair values which may result in goodwill impairment charges in future periods. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

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7. Fair value measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:

The following tables provide the assets and liabilities carried at fair value and measured on a recurring basis at April 30, 2018 and July 31, 2017:  

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Assets held in the deferred compensation plan will be used to pay benefits under our non-qualified deferred compensation plan. The investments primarily consist of mutual funds that are publicly traded on stock exchanges. Accordingly, the fair value of these assets is categorized as Level 1 within the fair value hierarchy.

The fair value of the liabilities arising from our foreign currency forward contracts is determined by valuation models based on market observable inputs, including forward and spot prices for currencies. Accordingly, the fair value of these liabilities is categorized as Level 2 within the fair value hierarchy.

8. Derivative instruments

Certain of our foreign operations have revenue and expenses transacted in currencies other than the U.S. dollar. In order to mitigate foreign currency exchange risk, we use forward contracts to lock in exchange rates associated with a portion of our forecasted international expenses.

As of April 30, 2018, we have forward contracts outstanding with notional amounts totaling $12.1 million. These contracts are designated as cash flow hedges, and the unrealized gain of $0.1 million, net of tax, on these contracts are reported in Accumulated other comprehensive income as of April 30, 2018. Assets and liability derivatives designated as hedging instruments are presented in other current assets and other current liabilities, respectively, on our Consolidated Balance Sheets. At April 30, 2018 we had a derivative liability of $0.1 million included in other current liabilities on our Consolidated Balance Sheet.

As of July 31, 2017, we had forward contracts outstanding with notional amounts totaling $10.9 million. These contracts are designated as cash flow hedges, and the unrealized gain of $0.5 million, net of tax, on these contracts are reported in Accumulated other comprehensive income as of July 31, 2017. At July 31, 2017 we had a derivative asset of $0.6 million included in other current assets on our Consolidated Balance Sheet.

Realized gains and (losses) on the cash flow hedges are recognized in income in the period when the payment of expenses is recognized. During the three and nine months ended April 30, 2018, we recorded approximately $0.1 million and $0.4 million of realized gain, respectively, included in our Consolidated Statements of Operations. During the three and nine months ended April 30, 2017 we recorded ($0.2) million and ($0.5) million of realized loss, respectively.  

9. Common stock repurchases

On May 26, 2016, our board of directors authorized the repurchase of up to $15.0 million of our common stock. Purchases under this repurchase program will be made from time to time depending on market conditions and other factors. The repurchase program has no expiration date. The Board's authorization does not obligate the Company to acquire any particular amount of common stock, and the programs may be suspended or discontinued at any time at the Company's discretion.

During the three months ended April 30, 2018, no shares of common stock were repurchased and retired. During the nine months ended April 30, 2018, we repurchased and retired 13,489 shares of common stock under this repurchase program for $1.0 million, at an average purchase price of $70.52 per share. The cumulative shares that were repurchased and retired under the program were 61,197 shares of common stock for $4.4 million at an average purchase price of $71.07 per share.

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10. Accumulated o ther comprehensive income

Components of comprehensive (loss) income include net income and certain transactions that have generally been reported in the Consolidated Statements of Changes in Stockholders’ Equity. Other comprehensive (loss) income consists of reported foreign currency translation gains and losses (net of taxes), actuarial gains and losses on pension plan assets (net of taxes), changes in the unrealized value on foreign currency forward contracts (net of taxes), and changes in the unrealized value on available-for-sale securities (net of taxes). Deferred taxes are not provided on cumulative translation adjustments where we expect earnings of a foreign subsidiary to be indefinitely reinvested. The income tax effect of currency translation adjustments related to foreign subsidiaries that are not considered indefinitely reinvested is recorded as a component of deferred taxes with an offset to other comprehensive (loss) income.

The following table summarizes components of Accumulated other comprehensive (loss) income for the nine months ended April 30, 2018:

The ineffective portion of the unrealized losses on foreign currency forward contracts and unrealized gains or losses on currency translation adjustment are included in other expense, net on our Consolidated Statements of Operations.

11. Share-based compensation

The following table presents share-based compensation expense included in our Consolidated Statements of Operations:

Stock options

We estimate the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, the expected option term, the expected volatility of our stock over the option’s expected term, the risk-free interest rate over the option’s expected term, and our expected annual dividend yield. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

No stock options were granted during the three and nine months ended April 30, 2018 and April 30, 2017, respectively.  

The total intrinsic value of options exercised during the three and nine months ended April 30, 2018 was $0.0 million and $0.1 million, respectively.

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Restricted stock and restricted stock units

We estimate the fair value of time based restricted stock units, or RSU’s, that vest based on service conditions using the quoted closing price of our common stock on the date of grant. Share-based compensation expense is amortized over each award’s vesting period on a straight-line basis for all awards with service and performance conditions that vest at the end of the performance cycle, while the accelerated method applies to other awards with both service and performance conditions.

For our non-GAAP earnings per share, or EPS, awards, the compensation cost is amortized over the performance period on a straight-line basis, net of forfeitures as they occur, because such awards vest only at the end of the performance period. The compensation cost is based on the number of shares that are deemed probable of vesting at the end of the three-year performance cycle. This probability assessment is done each quarter and changes in estimates can result in significant expense fluctuations due to the cumulative catch-up adjustment. We estimate the fair value of the non-GAAP EPS awards using the quoted closing price of our common stock on the date of grant.

For our total shareholder return, or TSR, awards, the compensation cost is amortized over the performance period on a straight-line basis net of forfeitures as they occur, because the awards vest only at the end of the measurement period and the probability of actual shares expected to be earned is considered in the grant date valuation. As a result, the expense is not adjusted to reflect the actual shares earned. We estimate the fair value of the TSR awards using the Monte-Carlo simulation model.

We granted  0 and 22,080 TSR awards and 0 and 21,896 non-GAAP EPS awards during the three and nine months ended April 30, 2018, respectively. We granted 601 and 28,749 TSR awards and 594 and 62,626 non-GAAP EPS awards during the three and nine months ended April 30, 2017, respectively. The fair value of our TSR performance-based awards at the date of grant was estimated using the Monte-Carlo simulation model with the following assumptions:  

The total fair value of RSUs that vested during the three and nine months ended April 30, 2018 was $0.8 million and $4.0 million, respectively.

The total fair value of RSUs that vested during the three and nine months ended April 30, 2017 was $0.9 million and $4.1 million, respectively.

As of April 30, 2018, the unrecognized compensation cost, related to unvested stock options and restricted stock was $10.1 million. This cost will be recognized over an estimated weighted average amortization period of 1.4 years and assumes target performance for the non-GAAP EPS awards.

12. Restructuring charges

Fiscal Year 2017 Restructuring Plan

On March 6, 2017, the Company announced the 2017 Restructuring Plan, which primarily focused on the restructuring of the Ultrasound business, designed to improve profitability and provide consistent long-term growth. As part of the 2017 Restructuring Plan, the Company consolidated the activities conducted in Vancouver, British Columbia with the existing operations in Copenhagen, Denmark and Peabody, Massachusetts and the Company substantially exited the Vancouver facility at the end fiscal 2017. The Company re-sized its U.S. sales, global marketing as well as general and administration organizations in-line with its objectives within primarily its Ultrasound business, but also its Medical Imaging and Security and Detection businesses. We incurred pre-tax charges of

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$0.0 million and $0.7 million during the three and nine months ended April 30, 2018. These costs consisted of facility exit costs and adjustments to the severance and personnel related costs, whic h are recognized in our Consolidated Statement of Operations under restructuring.  We expect that the 2017 Restructuring Plan will be substantially completed during fiscal year 2018.