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Business combinations | 9 Months Ended
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Mar. 31, 2014
Business Combinations [Abstract] |
Business combinations | Business combinations On October 31, 2013 (the “Acquisition Date”), the Company completed the acquisition of Enterasys, a privately held provider of wired and wireless network infrastructure and security solutions, for $180.0 million, net of cash acquired. The purchase price consideration was finalized in the quarter ended March 31, 2014. The Company also assumed outstanding options and restricted stock units of Enterasys at the Acquisition Date, all of which were unvested. The acquisition has been accounted for using the acquisition method of accounting. The purchase price has been allocated on a preliminary basis to tangible and intangible assets acquired and liabilities assumed. The final purchase price allocation is pending the finalization of valuations, which may result in an adjustment to the preliminary purchase price allocation. Also, additional information which existed as of the acquisition date but was unknown to the Company at that time, may become known to the Company during the remainder of the measurement period, a period not to exceed 12 months from the acquisition date, and may result in a change in the purchase price allocation. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill. The Company is in the process of finalizing the purchase price allocation and may make adjustments to the allocation during the period up to the date the allocation is finalized ("measurement period"). The following table below summarizes the preliminary allocation of the tangible and identifiable intangible assets acquired and liabilities assumed as of October 31, 2013, as well as the adjustments made in the quarter ended March 31, 2014 (in thousands):
|  | Preliminary Allocation as of December 31, 2013 |  | Change during three months ended March 31, 2014 |  | Preliminary Allocation as of March 31, 2014
Cash |  | $ | 4,969 |  |  | $ | 2,428 |  | a | $ | 7,397 |
Receivables |  | 25,699 |  |  | (2,428 | ) | a | 23,271 |
Inventory |  | 33,662 |  |  | — |  |  | 33,662 |
Other current assets |  | 8,888 |  |  | — |  |  | 8,888 |
Property and equipment |  | 23,122 |  |  | (1,829 | ) | b | 21,293 |
Identifiable intangible assets |  | 108,900 |  |  | — |  | c | 108,900 |
In-process research and development |  | 3,000 |  |  | — |  |  | 3,000 |
Deferred tax assets |  | 9 |  |  | — |  |  | 9 |
Other assets |  | 7,343 |  |  | — |  |  | 7,343 |
Goodwill |  | 57,922 |  |  | 6,615 |  |  | 64,537 |
Current liabilities |  | (75,394 | ) |  | (1,315 | ) | b,d,e | (76,709 | )
Other long-term liabilities |  | (13,151 | ) |  | (1,043 | ) | b | (14,194 | )
Total purchase price allocation |  | $ | 184,969 |  |  | $ | 2,428 |  |  | $ | 187,397 |
Less: Cash acquired from acquisition |  | (4,969 | ) |  | (2,428 | ) | a | (7,397 | )
Total purchase price consideration, net of cash acquired |  | $ | 180,000 |  |  | $ | — |  |  | $ | 180,000 |
a. The Company finalized the working capital adjustment during the three months ended March 31, 2014, which led to a decrease of $2.4 million in receivables and a corresponding increase in cash. As a result of this adjustment, the total cash acquired from the acquisition also increased by the same amount. The net effect of this adjustment is an increase in goodwill of $2.4 million. b. The Company updated its preliminary estimate of the fair value of property and equipment which led to a decrease of $3.0 million in property and equipment with a corresponding increase in goodwill. The Company also updated the fair values of the asset retirement obligations and the related asset retirement assets which led to an increase in the fair value of property and equipment of $1.2 million and a corresponding increase in current liabilities and other long-term liabilities of $0.2 million and $1.0 million, respectively. The decrease in depreciation expense due to the change in fair value of property and equipment was immaterial for the quarter ended December 31, 2013. c. During the three months ended March 31, 2014, there were no changes to the fair value of the identifiable intangible assets acquired. However, the Company revised the estimated useful life of Order backlog from 1.5 years to 1 year, which would have increased the amortization expense for the three months ended December 31, 2013 by $0.8 million to a total of $4.6 million amortization expense upon retrospective adjustment for such change in estimate. d. The Company obtained new information regarding accruals for litigation and statutory tax assessment as of the acquisition date which led to an increase in the fair value of current liabilities of $0.7 million and a corresponding increase in goodwill. e. The Company obtained new information regarding the existence of accrued liabilities as of the acquisition date which led to an increase in the fair value of accrued liabilities by $0.5 million with a corresponding increase in goodwill. The change in the fair value measurement for such accrued liabilities would have decreased operating expenses for three months ended December 31, 2013 by $0.5 million. The measurement period adjustments above would have increased the reported net loss for the three month ended and six months ended December 31, 2013 by $0.4 million to $16.4 million. The Company does not believe that the measurement period adjustments have a significant impact on the condensed consolidated statement of operations, balance sheet or cash flows in any period and, therefore, we have not retrospectively adjusted our financial statements. The purchase price has been allocated based on the preliminary estimates of the fair value of assets acquired and liabilities assumed as of the acquisition date. The Company also continues to analyze accounts receivables, inventory, other assets, current and long term liabilities and the tax implications of the acquisition of Enterasys which may ultimately impact the overall level of goodwill associated with the acquisition. The following table presents details of the preliminary identifiable intangible assets acquired as part of the acquisition (in thousands):
Intangible Assets |  | Estimated Useful Life (in years) |  | Amount
Developed technology |  | 3 |  | $ | 45,000 |
Customer relationships |  | 3 |  | 37,000 |
Maintenance contracts |  | 5 |  | 17,000 |
Trademarks |  | 3 |  | 2,500 |
Order backlog |  | 1 |  | 7,400 |
Total identifiable intangible assets |  | 3 |  | $ | 108,900 |
The amortization for the developed technology is recorded in “Cost of revenues” for product and the amortization for the remaining intangibles is recorded in “Amortization of intangibles” on the condensed consolidated statement of operations. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Enterasys. The Company anticipates both the goodwill and intangible assets to be fully deductible for tax purposes. The Company also has an indefinite-lived asset of $3.0 million which represents the fair value of in-process research and development activities. The Company expects to complete such research and development efforts in the fourth quarter of fiscal 2014. Once the related research and development efforts are completed, the Company will determine whether the asset will continue to be an indefinite lived asset or it has become a finite lived asset and apply the appropriate accounting accordingly. The results of operations of Enterasys are included in the consolidated results of operations beginning October 31, 2013. For the nine months ended March 31, 2014, $148.3 million of revenue and $27.5 million of operating income from Enterasys are included in the condensed consolidated statement of operations. The Company incurred $5.9 million of acquisition-related expenses for the nine months ended March 31, 2014. Such acquisition-related costs are included in "Acquisition-integration expenses" on the condensed consolidated statement of operations. The costs, which the Company expensed as incurred, consist primarily of professional fees payable to financial and legal advisors. Pro forma financial information The following unaudited pro forma results of operations are presented as though the acquisition of Enterasys had occurred as of the beginning of the earliest period presented after giving effect to purchase accounting adjustments relating to inventories, deferred revenue, stock-based compensation for the options and restricted stock units assumed, depreciation and amortization on acquired property and equipment and intangibles, interest income and expense and related tax effects. The pro forma results of operations do not reflect the impact of non-recurring charges that have resulted from or in connection with the acquisition including acquisition and integration expenses incurred in connection with the acquisition. The pro forma results of operations are not necessarily indicative of the combined results that would have occurred had the acquisition been consummated as of the earliest period presented, nor are they necessarily indicative of future operating results. The unaudited pro forma financial information for the nine months ended March 31, 2014 combines the results for Extreme for the nine months ended March 31, 2014, which include the results of Enterasys subsequent to the acquisition date, and the historical results for Enterasys for the three months ended September 30, 2013 and the month ended October 31, 2013. The unaudited pro forma financial information for the three and nine months ended March 31, 2013 combines the historical results for Extreme for those periods, with the historical results for Enterasys for the three and nine months ended March 31, 2013. The following table summarizes the pro forma financial information (in thousands, except per share amounts):
|  | Three Months Ended |  | Nine Months Ended
|  | March 31, 2013 |  | March 31, 2014 |  |  | March 31, 2013 |
Net revenues |  | $ | 137,936 |  |  | $ | 463,600 |  |  | $ | 465,535 |
Net loss |  | $ | (21,166 | ) |  | $ | (63,410 | ) |  | $ | (35,999 | )
Net loss per share – basic and diluted |  | $ | (0.23 | ) |  | $ | (0.66 | ) |  | $ | (0.38 | )

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- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e6996-128479 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4922-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4934-128472 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4926-128472 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e7000-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e6927-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7488404&loc=d3e7008-128479 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6910749&loc=d3e4845-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463 + Details
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