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-the-money stock options and unvested restricted stock units to replace outstanding vested out-of-the-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 fiscal year ended September 29, 2017 , we recorded transaction costs of $11.9 million . We recorded transaction costs related to the acquisition in selling, general and administrative expense, except for $1.0 million related to equity issuance costs that were 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 announced a plan to divest a portion of AppliedMicro's business specifically related to its 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, less cash acquired $ 752,142 The preliminary allocation of purchase price as of September 29, 2017 is as follows (in thousands): Preliminary Allocation Allocation Adjustments Adjusted Allocation March 31, 2017 September 29, 2017 Current assets $ 70,338 $ 96 $ 70,434 Intangible assets 410,348 2,500 412,848 Assets held for sale 32,458 8,486 40,944 Other assets 13,504 (3,704 ) 9,800 Total assets acquired 526,648 7,378 534,026 Liabilities held for sale 4,444 — 4,444 Other liabilities 17,890 (263 ) 17,627 Total liabilities assumed 22,334 (263 ) 22,071 Net assets acquired 504,314 7,641 511,955 Consideration: Cash paid upon closing 230,298 — 230,298 Common stock issued 455,775 — 455,775 Equity instruments issued 9,307 — 9,307 Total consideration $ 695,380 $ — $ 695,380 Goodwill $ 191,066 $ (7,641 ) $ 183,425 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 — 334,400 14 years $ 9,600 $ 412,848 The overall weighted-average life of the identified intangible assets acquired in the AppliedMicro Acquisition is estimated to be 12.7 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 consolidated statements of operations for the fiscal year ended September 29, 2017 (in thousands): Amount Revenue $ 110,117 Loss from continuing operations (27,222 ) Loss from discontinued operations (44,599 ) The pro forma statements of operations data for the fiscal years ended September 29, 2017 and September 30, 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. Fiscal Year Ended September 29, 2017 September 30, 2016 Revenue $ 755,728 $ 707,299 Loss from continuing operations (104,828 ) (53,613 ) Loss from discontinued operations (43,734 ) (72,730 ) Acquisition of Assets of Picometrix LLC— On August 9, 2017, we completed the acquisition of certain assets of Picometrix LLC (Picometrix), a supplier of optical-to-electrical converters for Cloud Data Center infrastructure (the Picometrix Acquisition). We acquired Picometrix in order to expand our business in enterprise and Cloud Data Center applications. The purchase consideration was $33.5 million , comprised of an upfront cash payment of $29.5 million , and $4.0 million placed in escrow for potential satisfaction of certain indemnification obligations that may arise from the closing date through December 15, 2018. For the fiscal year ended September 29, 2017 , we recorded transaction costs of $0.2 million in selling, general and administrative expense. The Picometrix Acquisition was accounted for as an asset purchase, and the operations of Picometrix have been included in our consolidated financial statements since the date of acquisition. We recognized the Picometrix assets acquired based upon the fair value of such assets measured as of the date of acquisition. The aggregate purchase price for the Picometrix assets has been allocated to the tangible and identifiable intangible assets acquired based on their estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the acquired 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, all 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. The preliminary allocation of purchase price as of September 29, 2017 is as follows (in thousands): Preliminary Allocation September 29, 2017 Current assets $ 7,375 Intangible assets 19,000 Other assets 3,301 Total assets acquired 29,676 Current liabilities 2,169 Other liabilities 190 Total liabilities assumed 2,359 Net assets acquired 27,317 Consideration: Cash paid upon closing, net of cash acquired 33,500 Goodwill $ 6,183 The pro forma financial information for fiscal year 2017 , including revenue and net income, is immaterial, and has not been separately presented. Other Acquisitions — On July 31, 2017, we completed the acquisition of certain assets of Antario Technologies, Inc. (Antario) a privately-held company based in Taiwan and in California. The total cash consideration was approximately $5.8 million , of which $4.8 million was paid upon closing, and approximately $1.0 million was withheld for potential satisfaction of certain indemnification obligations that may arise from the closing date through July 31, 2018. We have recorded a preliminary allocation of the purchase price for the assets of Antario, which resulted in goodwill of $1.6 million and intangible assets, including acquired technology and customer relationships, of $4.1 million . The Antario transaction was accounted for as an asset purchase and the operations have been included in our consolidated financial statements since the acquisition date. Pro forma financial disclosures are not presented herein as the financial results of Antario are considered immaterial. On May 26, 2017, we completed the acquisition of Triple Play Communications Corporation (TPC) a privately-held company based in Melbourne, Florida. The total cash consideration was approximately $2.6 million , of which $2.2 million was paid upon closing, and approximately $0.4 million was withheld for potential satisfaction of certain indemnification obligations from the closing date through November 23, 2018. We have recorded a preliminary allocation of the purchase price for TPC, which resulted in goodwill of $3.9 million and intangible assets, including customer relationships, of $0.2 million . TPC was accounted for as a stock purchase and the operations have been included in our consolidated financial statements since the acquisition date. Pro forma financial disclosures are not presented herein as the financial results of TPC are considered immaterial. 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 for the fiscal year ended September 29, 2017. For the fiscal year ended September 30, 2016, we recorded transaction costs of $2.7 million as selling, general and administrative expense 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 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 fiscal 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 fiscal 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 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 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 our accompanying consolidated statements of operations for the fiscal year ended September 30, 2016 (in thousands): Amount Revenue $ 30,540 Loss before income taxes (4,616 ) Unaudited Supplemental Pro Forma Data— The pro forma statements of operations data for the fiscal year ended September 30, 2016 and October 2, 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. Fiscal Year Ended September 30, 2016 October 2, 2015 Revenue $ 551,964 $ 444,991 Net (loss) income (3,324 ) 36,715 Acquisition of Aeroflex/Metelics Inc. — On December 14, 2015, we acquired Aeroflex/Metelics, Inc. (Metelics), a diode supplier for aggregate cash consideration of $37.1 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 fiscal year ended September 29, 2017 , we recorded no transaction costs related to this acquisition. For the fiscal year ended September 30, 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 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. We finalized our allocation of purchase price during the fiscal 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 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 on a preliminary basis 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 consolidated statements of operations for the fiscal year ended September 30, 2016 (in thousands): Amount Revenue $ 33,552 Income before income taxes 3,372 Unaudited Supplemental Pro Forma Data— The pro forma statements of operations data for the fiscal year ended September 30, 2016 and October 2, 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. Fiscal Year Ended September 30, 2016 October 2, 2015 Revenue $ 553,174 $ 459,048 Net income 1,183 45,107 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 fiscal year ended October 2, 2015, we recorded transaction costs of approximately $4.2 million related to the BinOptics Acquisition in selling, general and administrative expense in the accompanying consolidated statements of operations. The BinOptics Acquisition was accounted for as a 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, was as follows (in thousands): Preliminary Allocation as of October 2, 2015 Allocation Adjustments Final 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 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. The following is a summary of BinOptics revenue and earnings included in our consolidated statements of operations for the fiscal year ended October 2, 2015 (in thousands): Fiscal Year Ended October 2, 2015 Revenue $ 61,549 Income before income taxes 354 Unaudited Supplemental Pro Forma Data— The pro forma statements of operations data for the fiscal year ended October 2, 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 additional depreciation and amortization that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets and additional interest expense on acquisition-related borrowings had been applied and incurred since September 28, 2013. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations. October 2, 2015 Revenue $ 428,440 Net income from continuing operations (3,489 ) |