NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
1.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Unaudited Interim Financial Information
—The accompanying unaudited, condensed consolidated financial statements have been prepared according to the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission (“SEC”) and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statement of comprehensive loss and condensed consolidated statements of cash flows of MACOM Technology Solutions Holdings, Inc. (“MACOM”, the “Company”, “us”, “we” or “our”) for the periods presented. We prepare our interim financial information using the same accounting principles we use for our annual audited consolidated financial statements. Certain information and note disclosures normally included in the annual audited consolidated financial statements have been condensed or omitted in accordance with prescribed SEC rules. We believe that the disclosures made in our condensed consolidated financial statements and the accompanying notes are adequate to make the information presented not misleading.
The consolidated balance sheet at
September 30, 2016
is as reported in our audited consolidated financial statements as of that date. Our accounting policies are described in the notes to our
September 30, 2016
consolidated financial statements, which were included in our Annual Report on Form 10-K for our fiscal year ended
September 30, 2016
filed with the SEC on
November 17, 2016
. We recommend that the financial statements included in this Quarterly Report on Form 10-Q be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for our fiscal year ended
September 30, 2016
.
Principles of Consolidation—
We have
one
reportable segment, semiconductors and modules. The accompanying consolidated financial statements include our accounts and the accounts of our majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
We have a 52 or 53-week fiscal year ending on the Friday closest to the last day of September. The fiscal years 2017 and 2016 include 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we include the extra week arising in our fiscal years in the first quarter.
Use of Estimates
—The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities during the reporting periods, the reported amounts of revenue and expenses during the reporting periods, and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we base estimates and assumptions on historical experience, currently available information and various other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates and assumptions.
Recent Accounting Pronouncements
—Our Recent Accounting Pronouncements are described in the notes to our
September 30, 2016
consolidated financial statements, which were included in our Annual Report on Form 10-K for fiscal year ended
September 30, 2016
.
In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-16,
Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments
, which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Acquirers will now recognize measurement-period adjustments during the period in which they determine the amount of the adjustment. This ASU is effective for annual and interim reporting periods beginning after December 15, 2015, and should be applied prospectively to adjustments for provisional amounts that occur after the effective date. The adoption of this guidance did not have a material impact on our consolidated financial statements.
2. 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. There were
no
transaction costs recorded in the
three
months ended
December 30, 2016
. For the
three
months ended
January 1, 2016
we recorded transaction costs of
$2.6 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 months ended
January 1, 2016
(in thousands):
|
|
|
|
|
|
|
Amount
|
Revenue
|
$
|
2,670
|
|
Loss before income taxes
|
|
(811
|
)
|
Unaudited Supplemental Pro Forma Data—
The pro forma statements of operations data for the
three months ended
January 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.
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|
|
|
|
|
January 1, 2016
|
Revenue
|
$
|
123,400
|
|
Net loss
|
(15,127
|
)
|
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
three
months ended
December 30, 2016
,
no
material transaction costs were recorded. For the
three
months ended
January 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 months ended
January 1, 2016
(in thousands):
|
|
|
|
|
|
|
|
Amount
|
Revenue
|
|
$
|
1,907
|
|
Income before income taxes
|
|
(46
|
)
|
Unaudited Supplemental Pro Forma Data—
The pro forma statements of operations data for the
three months ended
January 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.
|
|
|
|
|
|
|
|
January 1, 2016
|
Revenue
|
|
$
|
124,610
|
|
Net loss
|
|
(15,583
|
)
|
3. DISCONTINUED OPERATIONS
In August 2015, we sold our Automotive business to Autoliv ASP Inc. (“Autoliv”), as the Automotive business was not consistent with our long-term strategic vision from both a growth and profitability perspective. The agreed consideration included
$82.1 million
in cash paid at closing and
$18.0 million
payable in
eighteen months
pending resolution of any contingencies as part of an indemnification agreement, plus the opportunity to receive up to an additional
$30.0 million
in cash based on achievement of revenue-based earnout targets through fiscal year 2019. Additionally, we entered into a consulting agreement pursuant to which we may provide Autoliv with certain non-design advisory services for a period of
two years
following the closing of the transaction for up to
$15.0 million
in cash (the "Consulting Agreement").
The remainder of the consideration to be received from Autoliv, if any, including any amounts related to the Consulting Agreement, will be accounted for in discontinued operations when the contingencies are finalized and the proceeds, if any, become realizable over the next several years.
The accompanying consolidated statements of operations includes the following operating results related to this divested business (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
December 30, 2016
|
|
January 1, 2016
|
Income from operations
|
|
—
|
|
|
—
|
|
Other income
|
|
1,875
|
|
|
1,875
|
|
Gain on sale
|
|
—
|
|
|
—
|
|
Income before income taxes
|
|
1,875
|
|
|
1,875
|
|
Income tax provision
|
|
669
|
|
|
676
|
|
Income from discontinued operations
|
|
$
|
1,206
|
|
|
$
|
1,199
|
|
|
|
|
|
|
Cash flow from operating activities
|
|
—
|
|
|
—
|
|
Other income recorded during the
three months ended
December 30, 2016
and
January 1, 2016
related to the consulting agreement.
4. SHORT TERM INVESTMENTS
All investments are classified as available-for-sale. The amortized cost, gross unrealized holding gains or losses, and fair value of our available-for-sale investments by major investments type as of
December 30, 2016
and
September 30, 2016
are summarized in the tables below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2016
|
|
Amortized
Cost
|
|
Gross
Unrealized
Holding Gains
|
|
Gross
Unrealized
Holding Losses
|
|
Aggregate Fair
Value
|
|
|
|
|
|
|
|
|
Corporate bonds
|
$
|
14,948
|
|
|
$
|
—
|
|
|
$
|
(160
|
)
|
|
$
|
14,788
|
|
Commercial Paper
|
5,970
|
|
|
—
|
|
|
(6
|
)
|
|
5,964
|
|
Agency bonds
|
3,002
|
|
|
—
|
|
|
(4
|
)
|
|
2,998
|
|
Total investments
|
$
|
23,920
|
|
|
$
|
—
|
|
|
$
|
(170
|
)
|
|
$
|
23,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
Amortized
Cost
|
|
Gross
Unrealized
Holding Gains
|
|
Gross
Unrealized
Holding Losses
|
|
Aggregate Fair
Value
|
|
|
|
|
|
|
|
|
Corporate bonds
|
$
|
14,894
|
|
|
$
|
9
|
|
|
$
|
(103
|
)
|
|
$
|
14,800
|
|
Commercial Paper
|
2,978
|
|
|
—
|
|
|
(4
|
)
|
|
2,974
|
|
Agency bonds
|
6,004
|
|
|
1
|
|
|
(3
|
)
|
|
6,002
|
|
Total investments
|
$
|
23,876
|
|
|
$
|
10
|
|
|
$
|
(110
|
)
|
|
$
|
23,776
|
|
The contractual maturities of available-for-sale investments were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
December 30, 2016
|
|
September 30, 2016
|
Less than 1 year
|
$
|
8,961
|
|
|
$
|
8,976
|
|
Over 1 year
|
14,789
|
|
|
14,800
|
|
Total investments
|
$
|
23,750
|
|
|
$
|
23,776
|
|
Available-for-sale investments are reported at fair value and as such, their associated unrealized gains and losses are reported as a separate component of stockholders’ equity within accumulated other comprehensive (loss) income.
5. FAIR VALUE
We group our financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
|
|
Level 1
- Quoted prices in active markets for identical assets or liabilities.
|
Level 2
- Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.
|
Level 3
- Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by us.
|
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
We measure certain assets and liabilities at fair value on a recurring basis such as our financial instruments and derivatives. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the
three months ended
December 30, 2016
.
Money market funds are actively traded and consist of highly liquid investments with original maturities of
90 days or less
. They are measured at their net asset value and classified as Level 1 assets. Corporate and agency bonds and commercial paper are categorized as Level 2 assets except where sufficient quoted prices exist in active markets, in which case such securities are
categorized as Level 1 assets. These securities are valued using third-party pricing services. These services may use, for example, model-based pricing methods that utilize observable market data as inputs. We generally use quoted prices for recent trading activity of assets with similar characteristics to the debt security or bond being valued. The securities and bonds priced using such methods are generally classified as Level 2 assets. Broker dealer bids or quotes on securities with similar characteristics may also be used.
Assets and liabilities measured at fair value on a recurring basis consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2016
|
|
Fair Value
|
|
Active Markets for Identical Assets (Level 1)
|
|
Observable Inputs (Level 2)
|
|
Unobservable Inputs (Level 3)
|
Assets
|
|
|
|
|
|
|
|
Money market funds
|
$
|
1,182
|
|
|
$
|
1,182
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Paper
|
106,086
|
|
|
—
|
|
|
106,086
|
|
|
—
|
|
Agency bonds
|
2,998
|
|
|
—
|
|
|
2,998
|
|
|
—
|
|
Corporate bonds
|
14,788
|
|
|
—
|
|
|
14,788
|
|
|
—
|
|
Total assets measured at fair value
|
$
|
125,054
|
|
|
$
|
1,182
|
|
|
$
|
123,872
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
Contingent consideration
|
$
|
866
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
866
|
|
Common stock warrant liability
|
43,076
|
|
|
—
|
|
|
—
|
|
|
43,076
|
|
Total liabilities measured at fair value
|
$
|
43,942
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
Fair Value
|
|
Active Markets for Identical Assets (Level 1)
|
|
Observable Inputs (Level 2)
|
|
Unobservable Inputs (Level 3)
|
Assets
|
|
|
|
|
|
|
|
Money market funds
|
$
|
1,172
|
|
|
$
|
1,172
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Paper
|
102,928
|
|
|
—
|
|
|
102,928
|
|
|
—
|
|
US treasuries and agency bonds
|
6,002
|
|
|
—
|
|
|
6,002
|
|
|
—
|
|
Corporate bonds
|
14,799
|
|
|
—
|
|
|
14,799
|
|
|
—
|
|
Total assets measured at fair value
|
$
|
124,901
|
|
|
$
|
1,172
|
|
|
$
|
123,729
|
|
|
$
|
—
|
|
Liabilities
|
|
|
|
|
|
|
|
Contingent consideration
|
$
|
848
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
848
|
|
Common stock warrant liability
|
38,253
|
|
|
—
|
|
|
—
|
|
|
38,253
|
|
Total liabilities measured at fair value
|
$
|
39,101
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
39,101
|
|
As of
December 30, 2016
and
September 30, 2016
the fair value of the common stock warrants has been estimated using a Black-Scholes option pricing model.
The quantitative information utilized in the fair value calculation of our Level 3 liabilities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inputs
|
Liabilities
|
Valuation Technique
|
|
Unobservable Input
|
|
December 30, 2016
|
|
September 30, 2016
|
Contingent consideration
|
Discounted cash flow
|
|
Discount rate
|
|
12.9%
|
|
12.9%
|
|
|
|
Probability of achievement
|
|
75% - 100%
|
|
75%
|
|
|
|
Timing of cash flows
|
|
8 months
|
|
1 year
|
|
|
|
|
|
|
|
|
Warrant liability
|
Black-scholes model
|
|
Volatility
|
|
40.4%
|
|
43.2%
|
|
|
|
Discount rate
|
|
1.70%
|
|
1.14%
|
|
|
|
Expected life
|
|
3.98 years
|
|
4.23 years
|
|
|
|
Exercise price
|
|
$14.05
|
|
$14.05
|
The fair values of the contingent consideration liabilities were estimated based upon a risk-adjusted present value of the probability-weighted expected payments by us. Specifically, we considered base, upside and downside scenarios for the operating metrics upon which the contingent payments are to be based. Probabilities were assigned to each scenario and the probability weighted payments were discounted to present value using risk-adjusted discount rates. The maximum possible payment of contingent consideration is
$1.5 million
.
The changes in assets and liabilities with inputs classified within Level 3 of the fair value hierarchy consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
Net Realized/Unrealized Losses Included in Earnings
|
|
Purchases
and
Issuances
|
|
Sales and
Settlements
|
|
Transfers in
and/or (out)
of Level 3
|
|
December 30,
2016
|
Contingent consideration
|
$
|
848
|
|
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
866
|
|
Common stock warrant liability
|
$
|
38,253
|
|
|
$
|
4,823
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
43,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2015
|
|
Net Realized/Unrealized Losses Included in Earnings
|
|
Purchases
and
Issuances
|
|
Sales and
Settlements
|
|
Transfers in
and/or (out)
of Level 3
|
|
January 1,
2016
|
Contingent consideration
|
$
|
1,150
|
|
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,170
|
|
Common stock warrant liability
|
$
|
21,822
|
|
|
$
|
14,878
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
36,700
|
|
6. INVENTORIES
Inventories consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
December 30,
2016
|
|
September 30,
2016
|
Raw materials
|
$
|
64,120
|
|
|
$
|
67,378
|
|
Work-in-process
|
8,864
|
|
|
9,157
|
|
Finished goods
|
42,235
|
|
|
38,400
|
|
Total
|
$
|
115,219
|
|
|
$
|
114,935
|
|
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
December 30,
2016
|
|
September 30,
2016
|
Land, buildings and improvements
|
$
|
16,618
|
|
|
$
|
12,572
|
|
Construction in process
|
10,341
|
|
|
9,415
|
|
Machinery and equipment
|
132,928
|
|
|
129,639
|
|
Leasehold improvements
|
12,177
|
|
|
12,152
|
|
Furniture and fixtures
|
1,529
|
|
|
1,469
|
|
Computer equipment and software
|
13,042
|
|
|
12,954
|
|
Total property and equipment
|
$
|
186,635
|
|
|
$
|
178,201
|
|
Less accumulated depreciation and amortization
|
(84,790
|
)
|
|
(79,034
|
)
|
Property and equipment, net
|
$
|
101,845
|
|
|
$
|
99,167
|
|
Depreciation and amortization expense related to property, plant and equipment for the
three months ended
December 30, 2016
was
$6.0 million
. Depreciation and amortization expense related to property, plant and equipment for the
three months ended
January 1, 2016
was
$4.3 million
.
8. DEBT
On May 8, 2014, we entered into a credit agreement (“Credit Agreement”) with a syndicate of lenders that provided for term loans in an aggregate principal amount of
$350.0 million
, which mature in May 2021 (“Initial Term Loans”) and a revolving credit facility of
$100.0 million
initially, which matures in May 2019 (“Revolving Facility”). In February 2015, we executed an amendment to the Credit Agreement that increased our aggregate borrowing capacity under the Revolving Facility to
$130 million
. The Initial Term Loans were issued with an original issue discount of
0.75%
, which is being amortized over the term of the Initial Term Loans using the straight-line method, which approximates the effective interest rate method.
On August 31, 2016 we entered into an amendment (“Incremental Term Loan Amendment”) to our Credit Agreement which provided for incremental term loans in an aggregate principal amount of
$250 million
, which mature in May 2021 (“Incremental Term Loans”, together with the Initial Term Loans, “Term Loans”). The terms of the Incremental Term Loans are identical to the terms of the Initial Term Loans, other than with respect to upfront fees, original issue discount and arrangement, structuring or similar fees payable in connection therewith. The Incremental Term Loans were issued with an original issue discount of
0.95%
, which is being amortized over the term of the Incremental Term Loans using the straight-line method, which approximates the effective interest rate method.
We incurred
$8.7 million
in fees for the issuance of the Credit Agreement and
$3.2 million
in fees for the issuance of the Incremental Term Loan Amendment, which were recorded as deferred financing costs and are being amortized over the life of the Credit Agreement as interest expense. As of
December 30, 2016
, approximately
$8.3 million
of deferred financing costs remain unamortized, of which
$7.1 million
related to the Incremental Term Loans is recorded as a direct reduction of the recognized debt liabilities in our accompanying consolidated balance sheet, and
$1.2 million
related to the Revolving Facility is recorded in other assets in our accompanying consolidated balance sheet.
The Term Loans and Incremental Term Loans are secured by a first priority lien on substantially all of our assets and provide that we must comply with certain financial and non-financial covenants. As of
December 30, 2016
, we were in compliance with all financial and non-financial covenants under the Credit Agreement and we had
$590.0 million
of outstanding Term Loan borrowings under the Credit Agreement and
$130.0 million
of borrowing capacity under our Revolving Facility.
As of
December 30, 2016
, the following remained outstanding on the Term Loans (in thousands):
|
|
|
|
|
Principal balance
|
$
|
589,974
|
|
Unamortized discount
|
(3,830
|
)
|
Total term loans
|
$
|
586,144
|
|
Current portion
|
6,051
|
|
Long-term, less current portion
|
$
|
580,093
|
|
As of
December 30, 2016
, the minimum principal payments under the Term Loans in future fiscal years were as follows (in thousands):
|
|
|
|
|
2017 (rest of fiscal year)
|
$
|
4,538
|
|
2018
|
6,051
|
|
2019
|
6,051
|
|
2020
|
6,051
|
|
2021
|
567,283
|
|
Total
|
$
|
589,974
|
|
The fair value of the Term Loans was estimated to be approximately
$593.7 million
as of
December 30, 2016
and was determined using Level 2 inputs, including a quoted rate from a bank.
9. CAPITAL LEASE AND FINANCING OBLIGATIONS
Corporate Facility Financing Obligation
On May 26, 2016, we entered into a Purchase and Sale Agreement (“Purchase Agreement”) with Calare Properties, Inc., a Delaware corporation (together with its affiliates, the “Buyer”) for the sale and subsequent leaseback of our corporate headquarters, located at 100 Chelmsford Street, Lowell, Massachusetts. The transactions contemplated by the Purchase Agreement closed on December 28, 2016, at which time we also entered into three lease agreements with the Buyer including: (1) a
20
-year leaseback of the facility located at 100 Chelmsford Street (the “100 Chelmsford Lease”), (2) a
20
-year build-to-suit lease arrangement for the construction and subsequent lease back of a new facility to be located at 144 Chelmsford Street (the “144 Chelmsford Lease”), and (3) a
14
-year building lease renewal of an adjacent facility at 121 Hale Street (the “121 Hale Lease”), together with the 100 Chelmsford Lease and the 144 Chelmsford Lease, the “Leases”.
Because the transactions contemplated by the Purchase Agreement and the related Leases were negotiated and consummated at the same time and in contemplation of one another to achieve the same commercial objective, the transactions are accounted for by us as a single unit of accounting. In addition, the Leases were determined to represent a failed sale-leaseback due to our continuing involvement in the properties in the form of non-recourse financing. As a result, the Leases are accounted for under the financing method and we will be the deemed accounting owner under the arrangement, including the assets to be constructed under the 144 Chelmsford Lease. We will continue to recognize the existing building and improvements sold under the Purchase Agreement, capitalize the 121 Hale Street building as well as the assets constructed under the Leases, and depreciate the assets over the shorter of their estimated useful lives or the lease terms. The sale proceeds from the Purchase Agreement of
$8.2 million
(which includes
$4.2 million
in cash and
$4.0 million
in construction allowances) and the fair value of the 121 Hale Street building of
$4.0 million
were recognized as a financing obligation on our balance sheet and are being amortized over the
20
-year lease term based on the minimum lease payments required under the Leases and our incremental borrowing rate. Future construction costs funded by the Buyer under the 144 Chelmsford Lease will be recognized as additional financing obligations on our balance sheet as incurred and will be amortized over the
20
-year lease term based on the minimum lease payments required under the Leases and our incremental borrowing rate.
As a result of the failed sale-leaseback accounting, we calculated a financing obligation as of the December 28, 2016 inception of the lease based on the future minimum lease payments discounted at
8.5%
. The discount rate represents the estimated incremental borrowing rate over the lease term of
20
-years. The minimum lease payments are recorded as interest expense and in part as a payment of principal reducing the financing obligation. The real property assets in the transaction remain on the consolidated balance sheets and continue to be depreciated over the remaining useful lives. As of
December 30, 2016
, approximately
$12.2 million
of the financing obligation was outstanding associated with these Leases.
Acquired Capital Leases
In connection with the FiBest Acquisition in December 2015 and the acquisition of BinOptics Corporation (“BinOptics Acquisition”) in December 2014 we assumed certain capital lease obligations, of which approximately
$3.0 million
was outstanding as of
December 30, 2016
.
As of
December 30, 2016
, future minimum payments under capital lease obligations and financing obligations related to the Leases were as follows (in thousands):
|
|
|
|
|
|
Fiscal year ending:
|
|
Amount
|
2017
|
|
$
|
1,694
|
|
2018
|
|
1,900
|
|
2019
|
|
1,795
|
|
2020
|
|
1,622
|
|
2021
|
|
1,487
|
|
Thereafter
|
|
20,541
|
|
Total minimum capital lease obligation payments
|
|
$
|
29,039
|
|
10. INTANGIBLE ASSETS
Amortization expense related to intangible assets is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
December 30,
2016
|
|
January 1,
2016
|
Cost of revenue
|
$
|
6,001
|
|
|
$
|
7,167
|
|
Selling, general and administrative
|
6,467
|
|
|
4,423
|
|
Total
|
$
|
12,468
|
|
|
$
|
11,590
|
|
Intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
December 30,
2016
|
|
September 30,
2016
|
Acquired technology
|
$
|
164,173
|
|
|
$
|
165,397
|
|
Customer relationships
|
202,697
|
|
|
207,674
|
|
In-process research and development
|
8,000
|
|
|
8,000
|
|
Trade name
|
3,400
|
|
|
3,400
|
|
Total
|
$
|
378,270
|
|
|
$
|
384,471
|
|
Less accumulated amortization
|
(137,337
|
)
|
|
(124,869
|
)
|
Intangible assets — net
|
$
|
240,933
|
|
|
$
|
259,602
|
|
A summary of the activity in intangible assets and goodwill follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
Acquired
Technology
|
|
Customer
Relationships
|
|
In-Process Research and Development
|
|
Trade Name
|
|
Goodwill
|
Balance at September 30, 2016
|
$
|
504,495
|
|
|
$
|
165,397
|
|
|
$
|
207,674
|
|
|
$
|
8,000
|
|
|
$
|
3,400
|
|
|
$
|
120,024
|
|
Fair value adjustment
|
220
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
220
|
|
Currency translation adjustment
|
(8,363
|
)
|
|
(1,224
|
)
|
|
(4,977
|
)
|
|
—
|
|
|
—
|
|
|
(2,162
|
)
|
Balance at December 30, 2016
|
$
|
496,352
|
|
|
$
|
164,173
|
|
|
$
|
202,697
|
|
|
$
|
8,000
|
|
|
$
|
3,400
|
|
|
$
|
118,082
|
|
As of
December 30, 2016
, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Remaining
|
2018
|
2019
|
2020
|
2021
|
Thereafter
|
Total
|
Amortization expense
|
$
|
38,413
|
|
47,499
|
|
40,891
|
|
32,997
|
|
26,900
|
|
42,833
|
|
$
|
229,533
|
|
Our trade name is an indefinite-lived intangible assets. During development, in-process research and development (“IPR&D”) is not subject to amortization and is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test consists of a comparison of the fair value to its carrying amount. If
the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Once an IPR&D project is complete, it becomes a definite long-lived intangible asset and is evaluated for impairment in accordance with our policy for long-lived assets.
Accumulated amortization for acquired technology and customer relationships were
$82.6 million
and
$54.7 million
, respectively, as of
December 30, 2016
, and
$58.1 million
and
$27.9 million
, respectively, as of
January 1, 2016
.
11. STOCKHOLDERS' EQUITY
We have authorized
10 million
shares of
$0.001
par value preferred stock and
300 million
shares of
$0.001
par value common stock as of
December 30, 2016
and
September 30, 2016
. The outstanding shares of our common stock as of
December 30, 2016
and
September 30, 2016
, presented in the accompanying consolidated statements of stockholders’ equity exclude
3,300
and
3,300
unvested shares of restricted stock awards, respectively, issued as compensation to employees and directors that remained subject to forfeiture.
Common Stock Warrants
—In March 2012, we issued warrants to purchase
1,281,358
shares of common stock for
$14.05
per share. The warrants expire
December 21, 2020
, or earlier as per the terms of the agreement, including immediately following consummation of a sale of all or substantially all assets or capital stock or other equity securities, including by merger, consolidation, recapitalization, or similar transactions. We do not currently have sufficient registered and available shares to immediately satisfy a request for registration, if such a request were made. As of
December 30, 2016
, no exercise of the warrants had occurred and no request had been made to register the warrants or any underlying securities for resale by the holders.
We are recording the estimated fair values of the warrants as a long-term liability in the accompanying consolidated financial statements with changes in the estimated fair value being recorded in the accompanying statements of operations. The following is a summary of the activity of the warrant liability (in thousands):
|
|
|
|
|
Balance at September 30, 2016
|
$
|
38,253
|
|
Change in estimated fair value
|
4,823
|
|
Balance at December 30, 2016
|
$
|
43,076
|
|
12. EARNINGS (LOSS) PER SHARE
The following table sets forth the computation for basic and diluted net loss per share of common stock (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
December 30, 2016
|
|
January 1, 2016
|
Numerator:
|
|
|
|
Loss from continuing operations
|
$
|
(2,171
|
)
|
|
$
|
(16,770
|
)
|
Income from discontinued operations
|
1,206
|
|
|
1,199
|
|
Net loss
|
$
|
(965
|
)
|
|
$
|
(15,571
|
)
|
Net loss attributable to common stockholders
|
$
|
(965
|
)
|
|
$
|
(15,571
|
)
|
Denominator:
|
|
|
|
Weighted average common shares outstanding-basic
|
53,737
|
|
|
53,015
|
|
Dilutive effect of options and warrants
|
—
|
|
|
—
|
|
Weighted average common shares outstanding-diluted
|
$
|
53,737
|
|
|
$
|
53,015
|
|
Common stock (loss) earnings per share-basic:
|
|
|
|
Continuing operations
|
$
|
(0.04
|
)
|
|
$
|
(0.32
|
)
|
Discontinued operations
|
0.02
|
|
|
0.02
|
|
Net common stock loss per share-basic
|
$
|
(0.02
|
)
|
|
$
|
(0.29
|
)
|
Common stock (loss) earnings per share-diluted:
|
|
|
|
Continuing operations
|
$
|
(0.04
|
)
|
|
$
|
(0.32
|
)
|
Discontinued operations
|
0.02
|
|
|
0.02
|
|
Net common stock loss per share-diluted
|
$
|
(0.02
|
)
|
|
$
|
(0.29
|
)
|
The table above excludes the effects of
1,875
and
1,996
shares for the
three months ended
December 30, 2016
and
January 1, 2016
, respectively, of potential shares of common stock issuable upon exercise of stock options, restricted stock and stock units, and warrants as the inclusion would be antidilutive.
13. COMMITMENTS AND CONTINGENCIES
Litigation—
From time to time we may be subject to commercial disputes, employment issues, claims by other companies in the industry that we have infringed their intellectual property rights and other similar claims and litigations. Any such claims may lead to future litigation and material damages and defense costs. Other than as set forth below, we were not involved in any material pending legal proceedings during the quarter ended
December 30, 2016
.
GaN Lawsuit Against Infineon.
On April 26, 2016, we and our wholly-owned subsidiary Nitronex, LLC brought suit against Infineon Technologies Americas Corporation (“Infineon Americas”) and Infineon Technologies AG (“Infineon AG” and collectively, with Infineon Americas, “Infineon”) in the Federal District Court for the Central District of California, seeking injunctive relief, monetary damages, and specific performance of certain contractual obligations. On July 19, 2016, we filed a first amended complaint, and, on November 21, 2016, we filed a second amended complaint.
The suit arises out of agreements relating to GaN patents that were executed in 2010 by Nitronex Corporation (acquired by us in 2014) and International Rectifier Corporation (“International Rectifier”) (acquired by Infineon AG in 2015). We assert claims for breach of contract, breach of the covenant of good faith and fair dealing, declaratory judgment of contractual rights, declaratory judgment of non-infringement of patents, and, against Infineon AG only, intentional interference with contract. If successful, the relief sought in our first amended complaint would, among other remedies, require Infineon to assign back to us certain GaN-related Nitronex patents that were previously assigned to International Rectifier and enjoin Infineon from proceeding with its marketing and sales of certain types of GaN-on-Si products. In an order dated October 31, 2016, the Court granted us a preliminary injunction against Infineon, which then issued on December 8, 2016. The preliminary injunction declares that an exclusive licensing arrangement between us and Infineon that Infineon had purported to terminate is still in effect and prohibits Infineon Americas and others acting in concert with it from engaging in certain activities in our exclusive field, which includes RF power amplifiers for cellular base stations. Infineon filed: (a) a motion to stay or modify a portion of the preliminary injunction on December 30, 2016; and (b) notice of appeal of the preliminary injunction decision to the Federal Circuit on January 3, 2017. Infineon’s opening appeal brief is currently due on March 6, 2017. Additionally, Infineon has moved to dismiss some of the claims of the second amended complaint. Those motions to dismiss are currently set for a hearing on February 27, 2017.
With respect to the above legal proceeding, we are not able to reasonably estimate the amount or range of any possible loss, and accordingly have not accrued or disclosed any related amounts of possible loss in the accompanying consolidated financial statements.
14. RESTRUCTURINGS
We have periodically implemented restructuring actions in connection with broader plans to reduce staffing, reduce our internal manufacturing footprint and, generally, reduce operating costs. The restructuring expenses are primarily comprised of direct and incremental costs related to headcount reductions including severance and outplacement fees for the terminated employees, as well as facility closure costs.
The following is a summary of the costs incurred and remaining balances included in accrued expenses for the
three months ended
December 30, 2016
(in thousands):
|
|
|
|
|
Balance as of September 30, 2016
|
$
|
3,104
|
|
Current period adjustments
|
1,287
|
|
Payments
|
(2,346
|
)
|
Balance as of December 30, 2016
|
$
|
2,045
|
|
The restructuring expenses recorded to date are expected to be paid through the remainder of fiscal year
2017
. Our restructuring charges incurred to date are primarily employee related with non-employee related charges determined to be immaterial. We expect to incur additional restructuring costs of approximately
$1.0 million
to
$2.0 million
during the remainder of calendar year 2017 as we complete restructuring actions primarily associated with the Metelics Acquisition and other actions.
15. SHARE-BASED COMPENSATION
Stock Plans
As of
December 30, 2016
, we had
15.7 million
shares available for future issuance under our 2012 Omnibus Incentive Plan (as Amended and Restated) (the “2012 Plan”), and
3.1 million
shares available for issuance under our Employee Stock Purchase Plan (“ESPP”). Under the 2012 Plan, we have the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), performance based non-statutory stock options, stock appreciation rights, restricted stock (“RSAs”), restricted stock units (“RSUs”), performance-based stock units (“PRSUs”), performance shares and other equity-based awards to employees, directors and outside consultants. The ISOs and NSOs must be granted at a price per share not less than the fair value of our common stock on the date of grant. Options granted to date primarily vest based on certain market-based and performance-based criteria as described below. Options granted generally have a term of
seven
to
ten
years. Certain of the share-based awards granted and outstanding as of
December 30, 2016
are subject to accelerated vesting upon a change in control. There were no modifications to share-based awards during the periods presented. As of
December 30, 2016
, total unrecognized compensation cost related to the employee stock purchase plan was not material.
Share-Based Compensation
The following table shows a summary of share-based compensation expense included in the Condensed Consolidated Statement of Operations for the
three
months ended
December 30, 2016
and
January 1, 2016
(in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
December 30,
2016
|
|
January 1,
2016
|
Cost of revenue
|
$
|
720
|
|
|
$
|
457
|
|
Research and development
|
1,945
|
|
|
1,837
|
|
Selling, general and administrative
|
5,518
|
|
|
5,088
|
|
Total share-based compensation expense
|
$
|
8,183
|
|
|
$
|
7,382
|
|
As of
December 30, 2016
, the total unrecognized compensation costs, adjusted for estimated forfeitures, related to outstanding stock options, restricted stock awards and units including awards with time-based and performance based vesting was
$58.6 million
, which we expect to recognize over a weighted-average period of
2.7
years.
Stock Options
We had
1.3 million
stock options outstanding as of
December 30, 2016
, with a weighted-average exercise price per share of
$27.68
and weighted-average remaining contractual term of
5.9 years
. The aggregate intrinsic value of the stock options outstanding
as of
December 30, 2016
was
$24.6 million
which represents our closing stock price value on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options outstanding.
During the
three months ended
December 30, 2016
, we granted
310,000
non-qualified stock options with a grant date fair value of
$4.1 million
that are subject to vesting only upon the market price of the Company’s underlying public stock closing above a certain price target within
seven years
of the date of grant. These non-qualified stock options with market related vesting conditions are valued using a Monte Carlo simulation model, using a volatility rate of
32.2%
, a risk-free rate of
1.84%
, a strike price of
$40.25
and a term of
seven years
. Share-based compensation expense is recognized regardless of the number of awards that are earned based on the market condition and is recognized on a straight-line basis over the estimated service period of approximately
three years
. If the required service period is not met for these options then the share-based compensation expense would be reversed. In the event that the Company’s common stock achieves the target price of
$66.96
per share based on a 30 day trailing average prior to the end of the estimated service period, any remaining unamortized compensation cost will be recognized.
The total intrinsic value of options exercised was
$1.5 million
for the
three months ended
December 30, 2016
and was
$2.2 million
for the
three months ended
January 1, 2016
.
Restricted Stock, Restricted Stock Units and Performance-Based Restricted Stock Units
A summary of restricted stock, restricted stock unit and performance-based restricted stock unit activity for the
three
months ended
December 30, 2016
, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of RSUs
|
|
Weighted-
Average
Grate Date Fair Value
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
Balance at September 30, 2016
|
1,707,695
|
|
|
$
|
32.76
|
|
|
$
|
72,165
|
|
Granted
|
208,505
|
|
|
41.38
|
|
|
|
Vested and released
|
(27
|
)
|
|
15.14
|
|
|
|
Forfeited, canceled or expired
|
(13,927
|
)
|
|
37.02
|
|
|
|
Balance at December 30, 2016
|
1,902,246
|
|
|
$
|
33.68
|
|
|
$
|
87,884
|
|
Restricted stock, restricted stock units and performance-based restricted stock units that vested during the
three months ended
January 1, 2016
had fair value of
$0.9 million
as of the vesting date. There were
no
material vestings of restricted stock during the
three months ended
December 30, 2016
.
16. INCOME TAXES
We are subject to income tax in the United States as well as other tax jurisdictions in which we conduct business. Earnings from non-U.S. activities are subject to local country income tax and may also be subject to current U.S. income tax. For interim periods, we record a tax provision or benefit based upon the estimated effective tax rate expected for the full fiscal year, adjusted for material discrete taxation matters arising during the interim periods.
The difference between the U.S. federal statutory income tax rate of
35%
and our effective income tax rates for the
three
months ended
December 30, 2016
and
January 1, 2016
, was primarily impacted in all periods by changes in fair values of the common stock warrant liability which is neither deductible nor taxable for tax purposes, income taxed in foreign jurisdictions at generally lower tax rates, non-deductible compensation, research and development tax credits and non-deductible merger expenses, offset by U.S. state income taxes.
The balance of the unrecognized tax benefit as of
December 30, 2016
and
September 30, 2016
did not change and remained at
$1.7 million
. The unrecognized tax benefits primarily relate to positions taken by us in our 2014 U.S. tax filings. The entire balance of unrecognized tax benefits, if recognized, will reduce income tax expense. It is our policy to recognize any interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the quarter ending
December 30, 2016
, we did not make any payment of interest and penalties.
As disclosed in
Note 2 - Acquisitions
, our purchase accounting for the FiBest Acquisition, including income taxes, has been finalized during the three months ended December 30, 2016. Related to the FiBest Acquisition, we recorded an aggregate net deferred income tax liability acquired in the FiBest Acquisition which is estimated to be
$11.6 million
and includes a net deferred income tax asset of
$2.5 million
relating to net operating loss ("NOL") carryforwards and a net deferred income tax liability of
$14.1 million
related to the difference between the book and tax basis of the intangible and other assets acquired. Related to the Metelics Acquisition we do not anticipate the recording of any deferred taxes due to a Section 338(h) (10) election which will permit us to have tax basis equal to the purchase price.
17. RELATED PARTY TRANSACTIONS
GaAs Labs, LLC (“GaAs Labs”), a former stockholder and an affiliate of directors John and Susan Ocampo, continues to engage us to provide administrative and business development services to GaAs Labs on a time and materials basis. There are no minimum service requirements or payment obligations and the agreement may be terminated by either party with
30 days
notice.
In the
three months ended
December 30, 2016
and
January 1, 2016
, we recorded
no
material billings to GaAs Labs.
In the
three
months ended
December 30, 2016
and
January 1, 2016
we recorded
no
material revenue associated with product sales to a public company with a common director.
18. SUPPLEMENTAL CASH FLOW INFORMATION
As of
December 30, 2016
and
January 1, 2016
, we had
$1.4 million
and
$1.7 million
in unpaid amounts related to purchases of property and equipment included in accounts payable and accrued liabilities during each period, respectively. These amounts have been excluded from the payments for purchases of property and equipment in the accompanying condensed consolidated statements of cash flows until paid.
The following is supplemental cash flow information regarding non-cash investing and financing activities (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
December 30,
2016
|
|
January 1,
2016
|
Cash paid for interest
|
$
|
5,426
|
|
|
$
|
4,120
|
|
Cash (refunded) paid for income taxes
|
$
|
(712
|
)
|
|
$
|
611
|
|
19. GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION
We have
one
reportable operating segment that designs, develops, manufactures and markets semiconductors and modules. The determination of the number of reportable operating segments is based on the chief operating decision maker’s use of financial information for the purposes of assessing performance and making operating decisions. In evaluating financial performance and making operating decisions, the chief operating decision maker primarily uses consolidated revenue, gross profit and operating income (loss).
Information about our operations in different geographic regions, based upon customer locations, is presented below (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Revenue by Geographic Region
|
December 30,
2016
|
|
January 1,
2016
|
United States
|
$
|
43,961
|
|
|
$
|
34,482
|
|
China
|
47,477
|
|
|
30,719
|
|
Asia Pacific, excluding China (1)
|
49,753
|
|
|
41,733
|
|
Other Countries (2)
|
10,561
|
|
|
8,840
|
|
Total
|
$
|
151,752
|
|
|
$
|
115,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
Long-Lived Assets by Geographic Region
|
|
December 30,
2016
|
|
September 30,
2016
|
United States
|
|
$
|
83,085
|
|
|
$
|
79,832
|
|
Asia Pacific (1)
|
|
15,895
|
|
|
16,614
|
|
Other Countries (2)
|
|
2,865
|
|
|
2,721
|
|
Total
|
|
$
|
101,845
|
|
|
$
|
99,167
|
|
|
|
(1)
|
Asia Pacific represents Taiwan, Hong Kong, Japan, Singapore, India, Thailand, South Korea, Australia, Malaysia and the Philippines.
|
|
|
(2)
|
No international country or region represented greater than 10% of the total net long-lived assets or revenue as of the dates presented, other than the Asia-Pacific region as presented above.
|
The following is a summary of customer concentrations as a percentage of revenue and accounts receivable as of and for the periods presented:
|
|
|
|
|
|
|
|
Three Months Ended
|
Revenue
|
December 30,
2016
|
|
January 1,
2016
|
Customer A
|
22
|
%
|
|
15
|
%
|
Customer B
|
12
|
%
|
|
13
|
%
|
Customer C
|
7
|
%
|
|
12
|
%
|
Customer D
|
5
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
Accounts Receivable
|
December 30,
2016
|
|
September 30,
2016
|
Customer A
|
19
|
%
|
|
11
|
%
|
Customer B
|
15
|
%
|
|
11
|
%
|
Customer C
|
14
|
%
|
|
16
|
%
|
No other customer represented more than
10%
of revenue or accounts receivable in the periods presented in the accompanying consolidated financial statements. For the
three
months ended
December 30, 2016
and
January 1, 2016
, our top
ten
customers
represented 63% and 64%
of total revenue, respectively.
20. SUBSEQUENT EVENTS
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 data centers, as well as connectivity products for edge, metro and long-haul communications equipment (“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 approximately
$761.1 million
of consideration, which included the payment of
$286.2 million
of cash and the issuance of
9.9 million
shares of our common stock valued at approximately
$474.9 million
. We have incurred
$12.3 million
of transaction related costs of which
$3.5 million
was incurred during the three months ended December 30, 2016 and recorded within selling, general and administrative expenses. The AppliedMicro Acquisition will be accounted for as a stock purchase. Any 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 will be allocated to goodwill, none of which will be tax deductible. As of the date of this Quarterly Report on Form 10-Q the initial accounting for the assets, liabilities and equity interests related to the AppliedMicro Acquisition have not yet been completed, accordingly, it was impracticable to compile a preliminary purchase price allocation or proforma financial information prior to our filing of this Quarterly Report on Form 10-Q. For additional information related to the AppliedMicro Acquisition see our Current Report on Form 8-K filed on November 21, 2016, our Form S-4 Registration Statement filed on December 21, 2016, as amended on January 18, 2017 and our Current Report on Form 8-K filed on
January 26, 2017
.