Discontinued Operations

12 Months Ended

Sep. 27, 2019

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

Divested Business

On May 10, 2018, we completed the sale and transfer of certain assets associated with our Japan-based long-range optical subassembly business (the "LR4 business"), pursuant to an Asset Purchase and Intellectual Property License Agreement, dated April 30, 2018 (the "LR4 Agreement"). The LR4 Agreement provided that the buyer would pay us $5.0 million within 30 days following the closing of the transactions contemplated by the LR4 Agreement, provide us with the opportunity to supply components, and would pay us further amounts to be determined for inventory and fixed assets within 60 days of receipt of required Chinese government approvals. As of September 28, 2018, $7.4 million had been recorded as Prepaid and other current assets and $4.8 million had been recorded as Assets held for sale, as the assets had not been transferred to the buyer as of September 28, 2018.

As a result of the transaction, during fiscal year 2018 we recorded a loss on disposal of $34.3 million associated with LR4 business as other expense, comprised of expected proceeds of $17.2 million, subject to receipt of required Chinese government approvals, less the carrying value of assets sold, primarily including customer relationship intangible assets of $27.7 million, inventory of $13.7 million, fixed assets of $7.6 million and goodwill of $2.6 million. The transaction did not meet the criteria of discontinued operations. We also entered into a Transition Services Agreement (the "LR4 TSA") with the buyer, pursuant to which we agreed to incur up to $2.0 million of operating expenses for certain ongoing administrative services to support the buyer for up to six months after the closing of the transaction. During fiscal year 2019, we incurred no expenses associated with the LR4 TSA. During fiscal year 2018, we incurred $2.0 million of expenses associated with the LR4 TSA which were recorded as general and administrative expenses.

As of September 27, 2019, we have $14.0 million of receivables, net of a $0.3 million reserve, associated with the LR4 Agreement recorded as Prepaid and other current assets, which includes $11.9 million of additional consideration, net of tax, and $1.5 million associated with the LR4 TSA.

Discontinued Operations

On October 27, 2017, we entered into a purchase agreement to sell the Compute business. In consideration for the transfer and sale of the Compute business, we received an equity interest in the buyer valued at approximately $36.5 million, representing the carrying value of the assets divested and representing less than 20.0% of the buyer's total outstanding equity. The operations of the Compute business were accounted for as discontinued operations through the date of divestiture.

We also entered into a transition services agreement (the "Compute TSA"), pursuant to which we agreed to perform certain primarily general and administrative functions on the buyer's behalf during a migration period and for which we are reimbursed for costs incurred. During the fiscal year 2019, we received $0.1 million of reimbursements under the Compute TSA, which was recorded as a reduction of our general and administrative expenses. During the fiscal year 2018, we received $3.6 million of reimbursements under the Compute TSA, which was recorded as a reduction of our general and administrative expenses.

In August of fiscal year 2015, we sold our Automotive business, as the Automotive business was not consistent with our long-term strategic vision from both a growth and profitability perspective. Additionally, we entered into a Consulting Agreement with the buyer pursuant to which we were to provide the buyer with certain non-design advisory services for a period of two years following the closing of the transaction for up to $15.0 million, from which we have recorded $7.5 million as other income during both fiscal years 2017 and 2016. No income was recognized during fiscal years 2019 or 2018. During fiscal year 2017, we received $18.0 million, the full amount of the indemnification escrow.

The accompanying Consolidated Statements of Operations includes the following operating results related to these discontinued operations (in thousands):



	Fiscal Years
	2018			2017
Revenue (1)	$	—		$	660
Cost of revenue (1)	(596		)	2,252
Gross profit (loss)	596			(1,592		)
Operating expenses:
Research and development (1)	5,251			29,167
Selling, general and administrative (1)	1,560			13,840
Total operating expenses	6,811			43,007
Loss from discontinued operations (1)	(6,215		)	(44,599		)
Other income (2)	—			7,500
Gain on sale (2)	—			18,022
Loss income before income taxes	(6,215		)	(19,077		)
Income tax provision (benefit)	—			—
Loss income from discontinued operations	(6,215		)	(19,077		)

Cash flow used in Operating Activities (1)	(10,734		)	(42,776		)
Cash flow from Investing Activities (2)	—			25,522

(1) Amounts are associated with the Compute business.

(2) Amounts are associated with the Automotive business.