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Acquisitions | 12 Months Ended
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Jun. 30, 2018
Business Combinations [Abstract] |
Acquisitions |
4. | Acquisitions
Conexant On June 11, 2017, we entered into a securities purchase agreement to acquire all of the outstanding limited liability company interests of Conexant Systems, LLC, or Conexant, a technology leader in voice and audio processing solutions for the smart home, or the Conexant Acquisition. The Conexant Acquisition is intended to increase our presence in the smart home market and increase opportunities to grow revenue. Effective July 25, 2017, or the Conexant Closing Date, we completed the Conexant Acquisition for an initial purchase price of (i) $305.4 million in cash and (ii) 726,666 shares of our common stock, or the Stock Consideration, valued at $39.1 million, and (iii) the assumption of a $3.5 million stock appreciation rights liability, with $16.8 million of the purchase price held in escrow to secure the seller’s indemnification obligations under the purchase agreement and $7.0 million of the purchase price held in escrow to secure the seller’s adjustment escrow obligations under the purchase agreement. Subsequently, we determined that $1.9 million of net adjustments to the purchase price were required, reducing the acquisition date fair value of the consideration transferred to a total of $346.2 million. The Stock Consideration was issued at closing in an exempt private placement. The acquisition has been accounted for using the purchase method of accounting in accordance with the business acquisition guidance. Under the purchase accounting method, the total estimated purchase consideration of the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired and liabilities has been recorded as goodwill. Our estimate of the fair values of the acquired intangible assets at June 30, 2018, is based on established and accepted valuation techniques performed with the assistance of our third-party valuation specialists. The following table summarizes the amounts recorded for the estimated fair values of the assets acquired and liabilities assumed as of the Conexant Closing Date (in millions):
Cash |  | $ | 4.3 |
Accounts receivable |  |  | 11.7 |
Inventory |  |  | 51.0 |
Other current assets |  |  | 3.5 |
Property and equipment |  |  | 3.2 |
Acquired intangible assets |  |  | 145.7 |
Other assets |  |  | 0.9 |
Total identifiable assets acquired |  |  | 220.3 |
Accounts payable |  |  | 14.2 |
Accrued compensation |  |  | 1.3 |
Other accrued liabilities |  |  | 9.3 |
Other long-term liabilities |  |  | 3.0 |
Net identifiable assets acquired |  |  | 192.5 |
Goodwill |  |  | 153.7 |
Net assets acquired |  | $ | 346.2 |
The estimate of the intangible assets as of June 30, 2018, totaling $145.7 million included the following: $104.9 million was allocated to developed technology and will amortize over an estimated weighted average useful life of 6 years; 38.4 million was allocated to customer relationships and will be amortized over an estimated useful life of 5 years; 1.8 million was allocated to trademarks and will be amortized over an estimated useful life of 7 years; $0.4 million was allocated to backlog and will be amortized over an estimated useful life of less than 1 year; and $0.2 million was allocated to in-process research and development which we will begin to amortize when the work is determined to be substantively complete and will be amortized over an estimated useful life to be determined at such time. Developed technology consists of semiconductor system solutions for audio and imaging applications. We estimated the fair value of the identified intangible assets using a discounted cash flow model for each of the underlying identified intangible assets. These fair value measurements were based on significant inputs not observable in the market and thus represent a Level 3 measurement. Key assumptions include the level and timing of expected future cash flows, conditions and demands specific to each intangible asset over its remaining useful life, and discount rates we believe to be consistent with the inherent risks associated with each type of asset, which range from 9% to 14%. The fair value of these intangible assets is primarily affected by the projected income and the anticipated timing of the projected income associated with each intangible asset coupled with the discount rates used to derive their estimated present values. We believe the level and timing of expected future cash flows appropriately reflects market participant assumptions. The value of goodwill reflects the anticipated synergies of the combined operations and workforce of Conexant as of the Conexant Closing Date. As of June 30, 2018, all of the goodwill is expected to be deductible for income tax purposes. Prior to the Conexant Acquisition, we did not have an existing relationship or transactions with Conexant. The condensed consolidated financial statements include approximately $116.5 million of revenue and approximately $37.0 million of operating loss from Conexant from the Conexant Closing Date through June 30, 2018. The following unaudited pro forma financial information (in millions, except per share data) presents the combined results of operations for us and Conexant as if the Conexant Acquisition had occurred on June 30, 2016. The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be indicative of the actual operating results that would have been recorded had the Conexant Acquisition actually taken place on June 30, 2016 and should not be taken as indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other expected benefits from the Conexant Acquisition.
|  | 2018 |  |  | 2017 |  |
Revenue |  | $ | 1,638.4 |  |  | $ | 1,829.0 |  |
Net income/(loss) |  |  | (124.4 | ) |  |  | 34.9 |  |
Net income/(loss) per share |  |  | (3.64 | ) |  |  | 1.01 |  |
Pro forma adjustments used to arrive at pro forma net income for fiscal year 2018 and 2017 were as follows (in millions):
|  | 2018 |  |  | 2017 |
Buyer transaction costs |  | $ | 0.9 |  |  | $ | - |
Interest expense |  |  | - |  |  |  | (18.1 | )
Intangible amortization |  |  | (1.8 | ) |  |  | (23.7 | )
Depreciation |  |  | (0.5 | ) |  |  | (0.9 | )
Income tax adjustment |  |  | 0.4 |  |  |  | 15.0 |
Total |  | $ | (1.0 | ) |  | $ | (27.7 | )
Marvell Multimedia Solutions Business On June 11, 2017, the Company entered into an asset purchase agreement to acquire the assets of the multimedia solutions business of Marvell Technology Group Ltd., or Marvell, a leading provider of advanced video and audio processing applications for the smart home, or the Marvell Business Acquisition. The Marvell Business Acquisition is also intended to increase our presence in the smart home market and increase opportunities to grow revenue. Effective September 8, 2017, or the Marvell Closing Date, we completed the Marvell Business Acquisition for a purchase price of $93.7 million in cash. The acquisition has been accounted for using the purchase method of accounting in accordance with the business acquisition guidance. Under the purchase accounting method, the total estimated purchase consideration of the acquisition was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired and liabilities has been recorded as goodwill. Our estimate of the fair values of the acquired intangible assets at June 30, 2018, is based on established and accepted valuation techniques performed with the assistance of our third-party valuation specialists. The following table summarizes the amounts recorded for the estimated fair values of the assets acquired and liabilities assumed as of the Marvell Business Acquisition date (in millions):
Inventory |  | $ | 28.4 |
Property and equipment |  |  | 5.0 |
Acquired intangible assets |  |  | 48.7 |
Total identifiable assets acquired |  |  | 82.1 |
Accrued liabilities |  |  | 0.7 |
Net identifiable assets acquired |  |  | 81.4 |
Goodwill |  |  | 12.3 |
Net assets acquired |  | $ | 93.7 |
Of the $48.7 million of acquired intangible assets, $29.0 million was allocated to developed technology and will be amortized over an estimated weighted average useful life of 3.6 years; $15.1 million was allocated to customer relationships and will be amortized over an estimated useful life of 4 years, $0.1 million was allocated to backlog and will be amortized over an estimated useful life of less than 1 year; and $4.5 million was allocated to in-process research and development and will be amortized over an estimated useful life to be determined at the date the underlying projects are deemed to be substantively complete. Developed technology consists of semiconductor system solutions for advanced video and audio processing applications. We estimated the fair value of the identified intangible assets using a discounted cash flow model for each of the underlying identified intangible assets. These fair value measurements were based on significant inputs not observable in the market and thus represent a Level 3 measurement. Key assumptions include the level and timing of expected future cash flows, conditions and demands specific to each intangible asset over its remaining useful life, and discount rates we believe to be consistent with the inherent risks associated with each type of asset, which range from 14% to 32%. The fair value of these intangible assets is primarily affected by the projected income and the anticipated timing of the projected income associated with each intangible asset, coupled with the discount rates used to derive their estimated present values. We believe the level and timing of expected future cash flows appropriately reflects market participant assumptions. The value of goodwill reflects the anticipated synergies of the combined operations and workforce of the transferred Marvell Business assets as of the Marvell Closing Date. As of June 30, 2018, all of the goodwill is expected to be deductible for income tax purposes. Prior to the Marvell Business Acquisition, we did not have an existing relationship or transactions with Marvell. The condensed consolidated financial statements include approximately $138.0 million of revenue and approximately $14.1 million of operating loss from Marvell from the Marvell Closing Date through June 30, 2018. The following unaudited pro forma financial information (in millions, except per share data) presents the combined results of operations for us and Marvell as if the Marvell Business Acquisition had occurred on June 30, 2016. The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be indicative of the actual operating results that would have been recorded had the Marvell Business Acquisition actually taken place on June 30, 2016 and should not be taken as indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other expected benefits from the Marvell Business Acquisition. As the Marvell Business Acquisition was an asset acquisition and only a portion of Marvell’s multimedia solutions business was acquired, the unaudited pro forma financial information has been prepared using certain estimates.
|  | 2018 |  |  | 2017 |  |
Revenue |  | $ | 1,670.7 |  |  | $ | 1,793.6 |  |
Net income/(loss) |  |  | (123.6 | ) |  |  | 27.7 |  |
Net income/(loss) per share |  |  | (3.61 | ) |  |  | 0.82 |  |
Pro forma adjustments used to arrive at pro forma net loss for fiscal 2018 and 2017 were as follows (in millions):
|  | 2018 |  |  | 2017 |
Buyer transaction costs |  | $ | 1.1 |  |  | $ | - |
Interest expense |  |  | - |  |  |  | (19.6 | )
Intangible amortization |  |  | (2.3 | ) |  |  | (17.6 | )
Income tax adjustment |  |  | 0.3 |  |  |  | 13.0 |
Total |  | $ | (0.9 | ) |  | $ | (24.2 | )

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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