XML 33 R18.htm IDEA: XBRL DOCUMENT
v3.19.2

Business Combinations | 12 Months Ended
--- | ---
Jun. 30, 2019
Business Combinations [Abstract] |
Business Combinations | 11. Business Combinations The Company completed three acquisitions during the year ended June 30, 2018 and an acquisition during the year ended June 30, 2017. The acquisitions have been accounted for using the acquisition method of accounting. The purchase price of each acquisition has been allocated to tangible and identifiable intangible assets acquired and liabilities assumed. The fair value of working capital related items, such as other current assets and accrued liabilities, approximated their book values at the date of acquisition. Inventories were valued at fair value using the net realizable value approach. The fair value of property and equipment was determined using a cost approach. The fair value of the acquired deferred revenue was estimated using the cost build-up approach. The cost build-up approach determines fair value using estimates of the costs required to provide the contracted deliverables plus an assumed profit. The total costs including the assumed profit were adjusted to present value using a discount rate considered appropriate. The resulting fair value approximates the amount the Company would be required to pay to a third party to assume the obligation. Valuations of the intangible assets were valued using income approaches based on management projections, which the Company considers to be Level 3 inputs. The Company also continues to analyze the tax implications of the acquisition of the intangible assets which may ultimately impact the overall level of goodwill associated with the acquisition. Results of operations of the acquired entities are included in the Company’s operations beginning with the closing date of each acquisition. On August 9, 2019 the Company completed its acquisition of Aerohive Networks Inc. for approximately $264 million in cash consideration and acquired all Aerohive common shares at a price of $4.45 per share plus the assumption of certain employee equity awards. See Note 17 – Subsequent Events. Fiscal 2018 Acquisitions Data Center Business The Company completed its acquisition of the data center business (the “Data Center Business”) of Brocade Communication Systems, Inc.’s (“Brocade”) on October 27, 2017 (the “Data Center Closing Date”), pursuant to an Asset Purchase Agreement (the “Data Center Business APA”) dated as of October 3, 2017, by and between the Company and Brocade for an aggregate purchase consideration of $84.3 million. Under the terms and conditions of the Data Center Business APA, the Company acquired customers, employees, technology and other assets of the Data Center Business as well as assumed certain contracts and other liabilities of the Data Center Business. The following table below summarizes the final allocation of the tangible and identifiable intangible assets acquired and liabilities assumed (in thousands):
|  | Final Allocation |
Accounts receivables |  | $ | 33,488 |
Inventories |  |  | 19,934 |
Prepaid expenses and other current assets |  |  | 988 |
Property and equipment | (a) |  | 19,442 |
Other assets |  |  | 4,734 |
Accounts payable and accrued expenses |  |  | (16,494 | )
Deferred revenue |  |  | (33,025 | )
Net tangible assets acquired |  |  | 29,067 |
Identifiable intangible assets |  |  | 32,800 |
Goodwill | (a) |  | 22,470 |
Total intangible assets acquired |  |  | 55,270 |
Total net assets acquired |  | $ | 84,337 |
| (a) | Includes an adjustment after the measurement period to record $0.5 million of additional property and equipment acquired at an international location.
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” in the accompanying consolidated statements of operations. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the Data Center Business. The Company anticipates both the goodwill and intangible assets to be fully deductible for income tax purposes. Pursuant to negotiations regarding various contractual arrangements with Broadcom, in August 2018, the Company resolved its contingent consideration obligation related to the Data Center Business acquisition. The outstanding balance was revalued to its final fair value as of June 30, 2018 resulting in a charge of $1.5 million which is included in “General and administrative” expense in the accompanying consolidated statements of operations. Campus Fabric Business The Company completed its acquisition of Avaya Inc.’s (“Avaya”) fabric-based secure networking solutions and network security solutions business (the “Campus Fabric Business”) on July 14, 2017, (the “Campus Fabric Business Closing Date”) pursuant to an Asset Purchase Agreement (the “Campus Fabric Business APA”) dated March 7, 2017. Under the terms and conditions of the Campus Fabric Business APA, the Company acquired the customers, employees, technology and other assets of the Campus Fabric Business, as well as assumed certain contracts and other liabilities of the Campus Fabric Business, for total consideration of $79.4 million. The following table below summarizes the final allocation of the tangible and identifiable intangible assets acquired and liabilities assumed (in thousands):
| Final Allocation |
Accounts receivables | $ | 19,527 |
Inventories |  | 14,165 |
Prepaid expenses and other current assets |  | 240 |
Property and equipment |  | 5,406 |
Other assets |  | 7,009 |
Accounts payable and accrued expenses |  | (31,670 | )
Deferred revenue |  | (8,994 | )
Other long-term liabilities |  | (5,849 | )
Net tangible assets acquired |  | (166 | )
Identifiable intangible assets |  | 41,300 |
In-process research and development |  | 2,400 |
Goodwill |  | 35,892 |
Total intangible assets acquired |  | 79,592 |
Total net assets acquired | $ | 79,426 |
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” in the accompanying consolidated statement of operations. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the Campus Fabric Business. The Company anticipates both the goodwill and intangible assets to be fully deductible for income tax purposes. The Company also acquired an indefinite lived asset of $2.4 million which represents the fair value of in-process research and development activities. During the three months ended March 31, 2018, the related research and development efforts were completed and the Company reclassified the in-process research and development of $2.4 million to developed technology and began recognizing amortization expense over its estimated useful life. Capital Financing Business On December 1, 2017, Company completed its acquisition of a capital financing business (the “CF Business”), pursuant to a Bill of Sale and Assignment and Assumption Agreement (the “Assumption Agreement”) between the Company and Broadcom. Under the terms and conditions of the Assumption Agreement, the Company acquired customers, employees, contracts and lease equipment of the CF Business equal to the earn out payments to Broadcom of 90% of acquired financing receivables to be collected commencing at the closing date. Net assets acquired included financing receivables of $13.7 million, lease equipment of $3.5 million and identifiable intangible assets of $0.8 million, and the fair value of the contingent consideration was $13.0 million. As the preliminary fair value of the net assets acquired exceeded the fair value of the purchase consideration, the Company recorded a bargain purchase gain of $5.0 million. Fiscal 2017 Acquisition On October 28, 2016, the Company completed its acquisition of the wireless local area network business (“WLAN Business”) from Zebra Technologies Corporation. Under the terms of the WLAN Asset Purchase Agreement, the Company acquired customers, employees, technology and other assets as well as assumed certain contracts and other liabilities of the WLAN Business, for a net cash consideration of $49.5 million. The following table below summarizes the final allocation of the tangible and identifiable intangible assets acquired and liabilities assumed (in thousands):
| Final Allocation |
Accounts receivables, net | $ | 14,636 |
Inventories |  | 13,593 |
Other current assets |  | 808 |
Property and equipment |  | 3,159 |
Other assets |  | 7,634 |
Deferred revenue |  | (14,159 | )
Other liabilities |  | (7,201 | )
Total tangible assets acquired and liabilities assumed |  | 18,470 |
Identifiable intangible assets |  | 20,300 |
In-process research and development |  | 1,400 |
Goodwill |  | 9,339 |
Total intangible assets acquired |  | 31,039 |
Total net assets acquired | $ | 49,509 |
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 consolidated statements of operations. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of the WLAN Business. The Company anticipates both the goodwill and intangible assets to be fully deductible for tax purposes. The Company also acquired an indefinite lived asset of $1.4 million which represents the fair value of in-process research and development activities. The in-process research and development was reclassified to developed technology upon completion of the project as of June 30, 2018 and is being amortized over its estimated useful life. Pro forma financial information The following unaudited pro forma results of operations are presented as though the acquisitions of the Data Center Business, CF Business and Campus Fabric Business had occurred as of the beginning of fiscal 2017, after giving effect to purchase accounting adjustments relating to inventories, deferred revenue, depreciation and amortization on acquired property and equipment and intangibles, acquisition costs, interest income and expense and related tax effects. 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 beginning of fiscal 2017, nor are they necessarily indicative of future operating results. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the unaudited pro forma results. The unaudited pro forma financial information for the year ended June 30, 2018, combines the results for Extreme for the year ended June 30, 2018, which include the results of the Data Center Business, Campus Fabric Business and CF Business subsequent to their acquisition dates and their historical results up to the acquisition date. The unaudited pro forma financial information for the year ended June 30, 2017, combines the historical results for Extreme for those periods, as adjusted for the adoption of Topic 606, with the historical results of the Data Center Business, Campus Fabric Business, CF Business for the year ended June 30, 2017, as well as the historical results of the WLAN Business prior to the WLAN Business acquisition date. Pro forma results of operations from the Data Center Business, CF Business, Campus Fabric Business and WLAN Business acquisitions included in the pro forma results of operations have not been adjusted for the adoption of Topic 606 because the Company determined that it is impractical to estimate the impact of the adoption. The following table summarizes the unaudited pro forma financial information (in thousands, except per share amounts):
|  | Year Ended |
|  | June 30, 2018 |  |  | June 30, 2017 |
Net revenues |  | $ | 1,076,988 |  |  | $ | 1,205,696 |
Net loss |  | $ | (27,007 | ) |  | $ | (143,835 | )
Net loss per share - basic and diluted |  | $ | (0.24 | ) |  | $ | (1.33 | )
Shares used in per share calculation - basic and diluted |  |  | 114,221 |  |  |  | 108,275 |

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 http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

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