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. There were no transaction costs for the fiscal year ended September 28, 2018, and during 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. 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"). The divestiture of the Compute business was completed on October 27, 2017. See Note 21 - Divested Business and Discontinued Operations for further details of the divestiture. 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 We finalized the purchase accounting during the fiscal quarter ended December 29, 2017. The final purchase price allocation is as follows (in thousands): As Reported Allocation Adjustments Final Allocation September 29, 2017 Current assets $ 70,434 $ (553 ) $ 69,881 Intangible assets 412,848 — 412,848 Assets held for sale 40,944 — 40,944 Other assets 9,800 — 9,800 Total assets acquired 534,026 (553 ) 533,473 Liabilities held for sale 4,444 — 4,444 Other liabilities 17,627 651 18,278 Total liabilities assumed 22,071 651 22,722 Net assets acquired 511,955 (1,204 ) 510,751 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 $ 183,425 $ 1,204 $ 184,629 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 year ended September 29, 2017, below, gives 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 28, 2018, we recorded no transaction costs. 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 business acquisition, 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. We finalized the purchase accounting during the fiscal quarter ended June 29, 2018. The final purchase price allocation is as follows (in thousands): As Reported Allocation Adjustments Final Allocation September 29, 2017 Current assets $ 7,375 $ (1,088 ) $ 6,287 Intangible assets 19,000 — 19,000 Other assets 3,301 (81 ) 3,220 Total assets acquired 29,676 (1,169 ) 28,507 Current liabilities 2,169 142 2,311 Other liabilities 190 275 465 Total liabilities assumed 2,359 417 2,776 Net assets acquired 27,317 (1,586 ) 25,731 Consideration: Cash paid upon closing, net of cash acquired 33,500 — 33,500 Goodwill $ 6,183 $ 1,586 $ 7,769 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 finalized the purchase accounting during the fiscal quarter ended December 29, 2017, 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 business combination 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 finalized the purchase accounting during the fiscal quarter ended December 29, 2017, which resulted in goodwill of $3.7 million and intangible assets, including customer relationships, of $0.2 million . TPC was accounted for as a stock purchase business combination 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 business combination 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. The final allocation of purchase price as of December 30, 2016, is as follows (in thousands): Final Allocation Current assets $ 10,445 Intangible assets 45,650 Other assets 3,317 Total assets acquired 59,412 Debt 11,627 Deferred income taxes 11,552 Other liabilities 4,294 Total liabilities assumed 27,473 Net assets acquired 31,939 Consideration: Cash paid upon closing, net of cash acquired 47,517 Goodwill $ 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 Revenue $ 551,964 Net (loss) income (3,324 ) 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 business combination 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, there were no transaction costs recorded 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): Final Allocation Current assets $ 12,614 Intangible assets 20,900 Other assets 3,089 Total assets acquired 36,603 Other liabilities 7,201 Total liabilities assumed 7,201 Net assets acquired 29,402 Consideration: Cash paid upon closing, net of cash acquired 37,125 Goodwill $ 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, 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 Revenue $ 553,174 Net income 1,183 |