XML 25 R14.htm IDEA: XBRL DOCUMENT
v3.22.2.2

Business Combinations | 9 Months Ended
--- | ---
Oct. 29, 2022
Business Combination and Asset Acquisition [Abstract] |
Business Combinations | Business Combinations Innovium On October 5, 2021, the Company completed the acquisition of Innovium, Inc. (“Innovium”), a leading provider of networking solutions for cloud and edge data centers, in an all-stock transaction for total purchase consideration of $1.0 billion attributable to stock consideration of $994.2 million and the fair value of a previously held equity interest of $10.0 million. The Innovium acquisition was primarily intended to allow the Company to immediately participate in the fastest growing segment of the switch market with a cloud-optimized solution. In accordance with the terms of the Agreement and Plan of Merger dated August 2, 2021 (the “Innovium merger agreement”), the Company’s common stock was issued in exchange for all outstanding equity of Innovium, including shares of Innovium’s preferred and common stock, employee equity awards and warrants. The factors contributing to the recognition of goodwill were based upon the Company’s conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. Goodwill recorded for the Innovium acquisition is not expected to be deductible for tax purposes. The following table summarized the total merger consideration (in millions):
Common stock issued | $ | 971.0 |
Stock consideration for replacement equity awards attributable to pre-combination service | 33.2 |
Total merger consideration | $ | 1,004.2 |
In accordance with U.S. GAAP requirements for business combinations, the Company allocated the fair value of the purchase consideration to the tangible assets, liabilities and intangible assets acquired, including in-process research and development (“IPR&D”), generally based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified as an amortizable purchased intangible asset and amortized over the asset’s estimated useful life. The Company’s valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets. Acquisition-related costs are expensed in the periods in which such costs are incurred. See “Note 7 – Goodwill and Acquired Intangible Assets, Net” for additional information. The purchase price allocation is as follows (in millions):
Cash and cash equivalents | $ | 60.4 |  |  |  |  |
Inventories | 70.0 |  |  |  |  |
Goodwill | 462.4 |  |  |  |  |
Acquired intangible assets, net | 433.0 |  |  |  |  |
Other, net | (21.6) |  |  |  |  |
Total merger consideration | $ | 1,004.2 |  |  |  |  |
The Company incurred total acquisition related costs of $11.9 million which were recorded in selling, general and administrative expense in the unaudited condensed consolidated statements of operations. Inphi On April 20, 2021, the Company completed the acquisition of Inphi (the “Inphi acquisition”). Inphi is a global leader in high-speed data movement enabled by optical interconnects. The Inphi acquisition was primarily intended to create an opportunity for the combined company to be uniquely positioned to serve the data-driven world, addressing high growth, attractive end markets such as cloud data center and 5G. In accordance with the terms of the Agreement and Plan of Merger dated as of October 29, 2020, by and among the Company and Inphi (the “Inphi merger agreement”), the Company acquired all outstanding shares of common stock of Inphi for $66 per share in cash and 2.323 shares of the Company’s common stock exchanged for each share of Inphi common stock. The merger consideration paid in cash was funded with a combination of cash on hand and funds from the Company’s debt financing. See “Note 4 – Debt” for additional information. The factors contributing to the recognition of goodwill were based upon the Company’s conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. Goodwill recorded for the Inphi acquisition is not expected to be deductible for tax purposes. The following table summarized the total merger consideration (in millions):
Cash consideration | $ | 3,673.2 |
Common stock issued | 5,917.8 |
Stock consideration for replacement equity awards attributable to pre-combination service | 82.3 |
Equity component of convertible debt | 244.2 |
Total merger consideration | $ | 9,917.5 |
In accordance with U.S. GAAP requirements for business combinations, the Company allocated the fair value of the purchase consideration to the tangible assets, liabilities and intangible assets acquired, including IPR&D, generally based on their estimated fair values. The excess purchase price over those fair values is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified as an amortizable purchased intangible asset and amortized over the asset’s estimated useful life. The Company’s valuation assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets. Acquisition-related costs are expensed in the periods in which such costs are incurred. See “Note 7 – Goodwill and Acquired Intangible Assets, Net” for additional information. The purchase price allocation is as follows (in millions):
| Previously Reported January 29, 2022 (Provisional) |  | Measurement Period Adjustment |  | October 29, 2022
Cash and cash equivalents | $ | 72.3 |  |  | $ | — |  |  | $ | 72.3 |
Accounts receivable, net | 99.7 |  |  | — |  |  | 99.7 |
Inventories | 270.4 |  |  | — |  |  | 270.4 |
Prepaid expenses and other current assets | 213.3 |  |  | — |  |  | 213.3 |
Property and equipment, net | 98.5 |  |  | — |  |  | 98.5 |
Acquired intangible assets, net | 4,420.0 |  |  | — |  |  | 4,420.0 |
Other non-current assets | 98.8 |  |  | (2.2) |  |  | 96.6 |
Goodwill | 5,686.2 |  |  | 2.2 |  |  | 5,688.4 |
Accounts payable and accrued liabilities | (189.8) |  |  | — |  |  | (189.8) |
Convertible debt – short-term | (313.7) |  |  | — |  |  | (313.7) |
Convertible debt – long-term | (240.3) |  |  | — |  |  | (240.3) |
Other non-current liabilities | (297.9) |  |  | — |  |  | (297.9) |
Total merger consideration | $ | 9,917.5 |  |  | $ | — |  |  | $ | 9,917.5 |
The provisional amounts presented in the table above pertained to the preliminary purchase price allocation reported in the Company’s Form 10-K for the year ended January 29, 2022. The measurement period adjustments were associated with change in deferred tax assets as a result of changes in estimates related to finalizing Inphi’s short period 2021 U.S. tax return. The Company does not believe that the measurement period adjustment had a material impact on its consolidated statements of operations, balance sheets, or cash flows in any periods previously reported. The Company incurred $50.8 million in acquisition related costs which were recorded in selling, general and administrative expense. The Company also incurred $39.8 million of aggregate debt financing costs. As of October 29, 2022, $3.4 million is included in short-term debt, and $24.7 million is included in long-term debt on the accompanying unaudited condensed consolidated balance sheets. See “Note 4 – Debt” for additional information. Additionally, the Company incurred $8.2 million of equity issuance costs, which were recorded in additional paid-in capital in the unaudited condensed consolidated balance sheets. Unaudited Supplemental Pro Forma Information The unaudited supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the acquisitions had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions the Company believes are reasonable under the circumstances. The following unaudited supplemental pro forma information presents the combined results of operations for each of the periods presented, as if Innovium and Inphi had been acquired as of the beginning of fiscal 2021. The unaudited supplemental pro forma information includes adjustments to amortization and depreciation for acquired intangible assets and property and equipment, adjustments to stock-based compensation expense, the purchase accounting effect on inventories acquired, interest expense, and transaction costs. The unaudited supplemental pro forma information presented below is for informational purposes only and is not necessarily indicative of our unaudited condensed consolidated results of operations of the combined business had the Innovium and Inphi acquisitions actually occurred at the beginning of fiscal 2021 or of the results of our future operations of the combined business. The unaudited supplemental pro forma financial information for the periods presented is as follows (in millions):
|  | Nine Months Ended
|  | October 30, 2021 |  |
Pro forma net revenue |  | $ | 3,295.5 |  |  |
Pro forma net loss |  | $ | (262.2) |  |  |

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationAndAssetAcquisitionAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration