Acquisitions | ACQUISITIONS Acquisition of FiBest Limited— On December 9, 2015, we completed the acquisition of FiBest Limited (“FiBest”) a Japan-based merchant market component supplier of optical sub-assemblies ("FiBest Acquisition"). We acquired FiBest to expand our position in optical networking components. In connection with the FiBest Acquisition, all of the outstanding equity interests (including outstanding options) of FiBest were exchanged for aggregate consideration of $59.1 million including cash of $47.5 million and assumed debt of $11.6 million . We funded the FiBest Acquisition with cash on hand. For the nine months ended July 1, 2016 , we recorded transaction costs of $2.7 million as selling, general and administrative expense related to this acquisition. There were no transaction costs were recorded in the three months ended July 1, 2016 . The FiBest Acquisition was accounted for as a stock purchase and the operations of FiBest have been included in our consolidated financial statements since the date of acquisition. We recognized the FiBest assets acquired and liabilities assumed based upon the fair value of such assets and liabilities measured as of the date of acquisition. The aggregate purchase price for FiBest is being allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, none of which will be tax deductible. During the quarter ended July 1, 2016, we recorded an adjustment of $1.1 million primarily related to an adjustment of the deferred tax liability associated with the acquisition of FiBest. The purchase accounting is preliminary and subject to completion of certain areas such as the valuation of acquired inventory, and therefore the purchase price allocation remains preliminary. The adjustments arising from the completion of the outstanding matters may materially affect the preliminary purchase accounting. We expect to finalize our allocation of purchase price during calendar year 2016. The adjusted preliminary allocation of purchase price as of July 1, 2016 , is as follows (in thousands): Preliminary Allocation Allocation Adjustments Adjusted Allocation Current assets $ 10,850 $ — 10,850 Intangible assets 45,650 — 45,650 Other assets 3,334 — 3,334 Total assets acquired 59,834 — 59,834 Liabilities assumed: Debt 11,627 — 11,627 Deferred income taxes 12,932 (1,131 ) 11,801 Other liabilities 3,968 — 3,968 Total liabilities assumed 28,527 (1,131 ) 27,396 Net assets acquired 31,307 1,131 32,438 Consideration: Cash paid upon closing, net of cash acquired 47,517 — 47,517 Goodwill $ 16,210 $ (1,131 ) $ 15,079 The components of the acquired intangible assets on a preliminary basis were as follows (in thousands): Amount Useful Lives (Years) Developed technology $ 9,400 7 Customer relationships 36,250 10 $ 45,650 The overall weighted-average life of the identified intangible assets acquired in the FiBest Acquisition is estimated to be 9.4 years and the assets are being amortized over their estimated useful lives based upon the pattern over which we expect to receive the economic benefit from these assets. The following is a summary of FiBest revenue and earnings included in MACOM's accompanying condensed consolidated statements of operations for the three and nine months ended months ended July 1, 2016 (in thousands): Three Months Ended Nine Months Ended Revenue $ 10,191 $ 21,296 Loss before income taxes (1,150 ) (3,717 ) Unaudited Supplemental Pro Forma Data— The pro forma statements of operations data for the three and nine months ended July 1, 2016 and July 3, 2015 , below, give effect to the FiBest Acquisition, described above, as if it had occurred at October 4, 2014. These amounts have been calculated after applying our accounting policies and adjusting the results of FiBest to reflect; transaction costs, retention compensation expense, the impact of the step-up to the value of acquired inventory, as well as the additional intangible amortization that would have been charged assuming the fair value adjustments had been applied and incurred since October 4, 2014. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations. Three Months Ended Nine Months Ended July 1, 2016 July 3, 2015 July 1, 2016 July 3, 2015 Revenue $ 142,288 $ 112,938 $ 399,267 $ 323,262 Net income (loss) 24,276 5,440 (2,509 ) (14,724 ) Acquisition of Aeroflex/Metelics Inc.— On December 14, 2015, we acquired Aeroflex/Metelics, Inc. ("Metelics”), a diode supplier for aggregate cash consideration of $38.0 million , subject to customary working capital and other adjustments ("Metelics Acquisition"). We acquired Metelics to expand our diode business. We funded the acquisition with cash on hand. The Metelics Acquisition was accounted for as a stock purchase and the operations of Metelics have been included in our consolidated financial statements since the date of acquisition. For the nine months ended July 1, 2016 , we recorded transaction costs of $0.5 million as selling, general and administrative expenses related to this acquisition. For the three months ended July 1, 2016 , no material transaction costs were recorded. We recognized the Metelics assets acquired and liabilities assumed based upon the fair value of such assets and liabilities measured as of the date of acquisition. The aggregate purchase price for Metelics is being allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, which will be tax deductible due to a 338(h)(10) election. During the quarter ended April 1, 2016, we recorded an adjustment of $1.8 million primarily associated with inventory which reduced current assets acquired. The purchase accounting is preliminary and subject to completion including certain fair value measurements, particularly the finalization of the valuation of acquired inventory and fixed assets, as well as, the finalization of the working capital adjustment with the seller. The adjustments arising from the completion of the outstanding matters may materially affect the preliminary purchase accounting.We expect to finalize our allocation of purchase price during calendar year 2016. The adjusted preliminary allocation of purchase price as of July 1, 2016 , is as follows (in thousands): Preliminary Allocation Allocation Adjustments Adjusted Allocation Current assets $ 15,250 $ (1,835 ) $ 13,415 Intangible assets 19,700 — 19,700 Other assets 6,249 — 6,249 Total assets acquired 41,199 (1,835 ) 39,364 Liabilities assumed: Other liabilities 7,401 — 7,401 Total liabilities assumed 7,401 — 7,401 Net assets acquired 33,798 (1,835 ) 31,963 Consideration: Cash paid upon closing, net of cash acquired 38,000 — 38,000 Goodwill $ 4,202 $ 1,835 $ 6,037 The components of the acquired intangible assets on a preliminary basis were as follows (in thousands): Amount Useful Lives (Years) Developed technology $ 1,000 7 Customer relationships 18,700 10 $ 19,700 The overall weighted-average life of the identified intangible assets acquired in the Metelics Acquisition is estimated to be 9.8 years and the assets are being amortized over their estimated useful lives based upon the pattern over which we expect to receive the economic benefit from these assets. The following is a summary of Metelics revenue and earnings included in our accompanying condensed consolidated statements of operations (in thousands): Three Months Ended Nine Months Ended July 1, 2016 July 1, 2016 Revenue $ 9,861 $ 22,113 Income before income taxes 596 422 Unaudited Supplemental Pro Forma Data— The pro forma statements of operations data for the three and nine months ended July 1, 2016 and July 3, 2015 , below, give effect to the Metelics Acquisition, described above, as if it had occurred at October 4, 2014. These amounts have been calculated after applying our accounting policies and adjusting the results of Metelics to reflect the transaction costs, the impact of the step-up to the value of acquired inventory, as well as, the additional intangible amortization that would have been charged assuming the fair value adjustments had been applied and incurred since October 4, 2014. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations. Three Months Ended Nine Months Ended July 1, 2016 July 3, 2015 July 1, 2016 July 3, 2015 Revenue $ 142,288 $ 118,000 $ 400,477 $ 337,392 Net income (loss) 22,182 7,616 (3,521 ) (8,132 ) Acquisition of BinOptics Corporation— On December 15, 2014, we completed the acquisition of BinOptics Corporation (“BinOptics”) a supplier of high-performance photonic semiconductor products ("BinOptics Acquisition"). In accordance with the related agreement and plan of merger, all of the outstanding equity interests (including outstanding warrants) of BinOptics were exchanged for aggregate consideration of approximately $208.4 million in cash. In addition we paid $14.6 million as part of a related retention escrow agreement designed to retain certain BinOptics employees. This $14.6 million was included in the terms of the purchase agreement and has been accounted for as a post-closing prepaid expense. We funded the BinOptics Acquisition with a combination of cash on hand and the incurrence of $100.0 million of additional borrowings under our existing Revolving Facility. For the nine months ended July 3, 2015 , we recorded transaction costs of $4.1 million related to the BinOptics Acquisition. The BinOptics Acquisition was accounted for as a stock purchase and the operations of BinOptics have been included in our consolidated financial statements since the date of acquisition. We have recognized BinOptics' assets acquired and liabilities assumed based upon the fair value of such assets and liabilities measured as of the date of acquisition. The aggregate purchase price for BinOptics has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, none of which is tax deductible. We finalized our allocation of purchase price during the first quarter of fiscal year 2016. The final allocation of purchase price as of January 1, 2016, is as follows (in thousands): October 2, 2015 Allocation Allocation Adjustments January 1, 2016 Adjusted Allocation Current assets $ 23,674 $ (1,100 ) $ 22,574 Intangible assets 136,900 400 137,300 Other assets 9,194 — 9,194 Total assets acquired 169,768 (700 ) 169,068 Liabilities assumed: Debt 2,535 — 2,535 Deferred income taxes 33,345 99 33,444 Other liabilities 13,106 — 13,106 Total liabilities assumed 48,986 99 49,085 Net assets acquired 120,782 (799 ) 119,983 Consideration: Cash paid upon closing, net of cash acquired 208,352 — 208,352 Goodwill $ 87,570 $ 799 $ 88,369 The components of the acquired intangible assets were as follows (in thousands): Amount Useful Lives (Years) Developed technology $ 17,500 7 Customer relationships 119,800 10 $ 137,300 The overall weighted-average life of the identified intangible assets acquired in the BinOptics Acquisition is estimated to be 9.6 years and the assets are being amortized over their estimated useful lives based upon the pattern over which we expect to receive the economic benefit from these assets. Unaudited Supplemental Pro Forma Data— The pro forma statements of operations data for the three and nine months ended July 3, 2015 , below, give effect to the BinOptics Acquisition, described above, as if it had occurred at September 28, 2013. These amounts have been calculated after applying our accounting policies and adjusting the results of BinOptics to reflect the transaction costs, retention compensation expense, the impact of the step-up to the value of the acquired inventory, as well as additional intangible amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied and incurred since September 28, 2013. This pro forma data is presented as of July 3, 2015 for informational purposes only and does not purport to be indicative of our future results of operations. Three Months Ended Nine Months Ended July 3, 2015 July 3, 2015 Revenue $ 130,663 $ 382,279 Net income 13,178 2,317 |