Acquisitions | ACQUISITIONS Acquisition of Applied Micro Circuits Corporation— On January 26, 2017 we completed the acquisition of Applied Micro Circuits Corporation (“AppliedMicro”), a global provider of silicon solutions for next-generation cloud infrastructure and cloud data centers, as well as connectivity products for edge, metro and long-haul communications equipment (the “AppliedMicro Acquisition”). We acquired AppliedMicro in order to expand our business in enterprise and cloud data center applications. In connection with the AppliedMicro Acquisition, we acquired all of the outstanding common stock of AppliedMicro for total consideration of $695.4 million , which included cash paid of $287.1 million , less $56.8 million of cash acquired, and equity issued at a fair value of $465.1 million . In conjunction with the equity issued, we granted vested out-of-money stock options and unvested restricted stock units to replace outstanding vested out-of-money stock options and unvested restricted stock units of AppliedMicro. The total fair value of granted vested out-of-money stock options and unvested restricted stock units was $14.5 million , of which $9.3 million was attributable to pre-combination service and was included in the total consideration transferred. We funded the AppliedMicro Acquisition with cash on hand and short term investments. For the three and six months ended March 31, 2017 , we recorded transaction costs of $8.3 million and $11.8 million , respectively. We recorded transaction costs related to the acquisition in selling, general and administrative expense, except for $ 1.0 million related to equity issuance costs which was recorded to additional paid in capital. The AppliedMicro Acquisition was accounted for as a stock purchase and the operations of AppliedMicro have been included in our consolidated financial statements since the date of acquisition. We recognized the AppliedMicro 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 AppliedMicro has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair value 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. The purchase accounting is preliminary and subject to completion including certain fair value measurements, particularly the finalization of the valuation assessment of the acquired tangible and intangible assets. The adjustments arising from the completion of the outstanding matters may materially affect the preliminary purchase accounting. In connection with the acquisition of AppliedMicro, we entered into a plan to divest a portion of AppliedMicro's business specifically related to its compute business (the "Compute business"). Accordingly these assets and liabilities are accounted for as discontinued operations and classified as assets and liabilities held for sale. The following table summarizes the total estimated acquisition consideration (in thousands): Cash consideration paid to AppliedMicro common stockholders $ 287,060 Common stock issued (9,544,125 shares of our common stock at $47.53 per share) 453,632 Equity consideration for vested "in the money" stock options and unvested restricted stock units 2,143 Fair value of the replacement equity awards attributable to pre-acquisition service 9,307 Total consideration paid, excluding cash acquired $ 752,142 The preliminary allocation of purchase price as of March 31, 2017 is as follows (in thousands): Preliminary Allocation Current assets $ 70,338 Intangible assets 410,348 Assets held for sale 32,458 Other assets 13,504 Total assets acquired 526,648 Liabilities assumed: Liabilities held for sale 4,444 Other liabilities 17,890 Total liabilities assumed 22,334 Net assets acquired 504,314 Consideration: Cash paid upon closing 230,298 Common stock issued 455,775 Equity instruments issued 9,307 Total consideration $ 695,380 Goodwill $ 191,066 The components of the acquired intangible assets were as follows (in thousands): Included in assets held for sale Included in retained business Useful Lives (Years) Developed technology $ 9,600 $ 78,448 7 years Customer relationships — 331,900 10 years $ 9,600 $ 410,348 The overall weighted-average life of the identified intangible assets acquired in the AppliedMicro 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 AppliedMicro revenue and earnings included in our accompanying condensed consolidated statements of operations for the three months ended March 31, 2017 (in thousands): Three Months Ended March 31, 2017 Revenue $ 36,445 Loss from continuing operations (30,304 ) Loss from discontinued operations (16,430 ) The pro forma statements of operations data for the six months ended March 31, 2017 and April 1, 2016 , below, give effect to the AppliedMicro Acquisition, described above, as if it had occurred at October 2, 2015. These amounts have been calculated after applying our accounting policies and adjusting the results of AppliedMicro 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 2, 2015. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations. Six Months Ended March 31, 2017 April 1, 2016 Revenue $ 394,792 $ 329,923 Loss from continuing operations (84,543 ) (62,937 ) Loss from discontinued operations (19,316 ) (35,764 ) 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. There were no transaction costs recorded in the six months ended March 31, 2017 . For the six months ended April 1, 2016 we recorded transaction costs of $2.7 million as selling, general and administrative expenses related to this acquisition. 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 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. During the quarter ended December 30, 2016, we recorded an adjustment of $0.2 million primarily related to other liabilities and an adjustment of the deferred tax liability associated with the FiBest Acquisition. We finalized our allocation of purchase price during the quarter ended December 30, 2016. The final allocation of purchase price as of December 30, 2016, is as follows (in thousands): Preliminary Allocation as of September 30, 2016 Allocation Adjustments Final Allocation Current assets $ 10,445 $ — $ 10,445 Intangible assets 45,650 — 45,650 Other assets 3,317 — 3,317 Total assets acquired 59,412 — 59,412 Liabilities assumed: Debt 11,627 — 11,627 Deferred income taxes 11,658 (106 ) 11,552 Other liabilities 3,968 326 4,294 Total liabilities assumed 27,253 220 27,473 Net assets acquired 32,159 (220 ) 31,939 Consideration: Cash paid upon closing, net of cash acquired 47,517 — 47,517 Goodwill $ 15,358 $ 220 $ 15,578 The components of the acquired intangible assets 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 our accompanying condensed consolidated statements of operations for the three and six months ended April 1, 2016 (in thousands): Three Months Ended Six Months Ended April 1, 2016 April 1, 2016 Revenue $ 8,435 $ 11,105 Loss before income taxes (1,747 ) (2,558 ) The pro forma statements of operations data for the three and six months ended April 1, 2016 , 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 Six Months Ended April 1, 2016 April 1, 2016 Revenue $ 133,579 $ 256,979 Net loss (11,531 ) (26,785 ) 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 six months ended March 31, 2017 , no material transaction costs were recorded. For the six months ended April 1, 2016 , we recorded transaction costs of $0.5 million as selling, general and administrative expenses related to this acquisition. 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 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, which is tax deductible due to a 338(h)(10) election. We finalized our allocation of purchase price during the quarter ended December 30, 2016. The final allocation of purchase price as of December 30, 2016, is as follows (in thousands): Preliminary Allocation as of September 30, 2016 Allocation Adjustments Final Allocation Current assets $ 12,614 $ — $ 12,614 Intangible assets 20,900 — 20,900 Other assets 3,089 — 3,089 Total assets acquired 36,603 — 36,603 Liabilities assumed: Other liabilities 7,201 — 7,201 Total liabilities assumed 7,201 — 7,201 Net assets acquired 29,402 — 29,402 Consideration: Cash paid upon closing, net of cash acquired 37,125 — 37,125 Goodwill $ 7,723 $ — $ 7,723 The components of the acquired intangible assets were as follows (in thousands): Amount Useful Lives (Years) Developed technology $ 1,000 7 Customer relationships 19,900 10 $ 20,900 The overall weighted-average life of the identified intangible assets acquired in the Metelics Acquisition is estimated to be 9.9 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 for the three and six months ended April 1, 2016 (in thousands): Three Months Ended Six Months Ended April 1, 2016 April 1, 2016 Revenue $ 10,345 $ 12,252 Income before income taxes (220 ) (174 ) The pro forma statements of operations data for the three and six months ended April 1, 2016 , 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 Six Months Ended April 1, 2016 April 1, 2016 Revenue $ 133,579 $ 258,189 Net loss (10,119 ) (25,703 ) |