Note 7. Acquisitions

AvComm and Wireless Test and Measurement Acquisition

On March 15, 2018 (“AW Close Date”), the Company completed the acquisition of the AW Business of Cobham plc. (“AW”) for $469.8 million in cash, subject to working capital adjustment. The acquisition further strengthens the Company’s competitive position in 5G deployment and diversifies the Company into military, public safety and avionics test markets. The acquired business is being integrated into our NE segment.

The Company accounted for the transaction in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed are recorded at fair value on the acquisition date. The acquisition-related costs totaling $2.0 million and $11.8 million were included in SG&A expenses in the Company’s Consolidated Statements of Operations for the three months and year ended June 30, 2018, respectively.

The preliminary identified intangible assets acquired, as of the AW Close Date, were as follows (in millions):



Tangible assets acquired:	$	65.5
Intangible assets acquired:
Developed technology	113.5
Customer relationships	75.0
Trade names	28.0
In-process research and development	9.0
Customer backlog	6.5
Goodwill	172.3
Total consideration transferred	$	469.8

The preliminary allocation of the purchase price to tangible assets, based on the estimated fair values of assets acquired and liabilities assumed on the AW Close Date, were as follows (in millions):



Cash	$	16.1
Accounts receivable	43.0
Inventory	33.5
Property and equipment	33.5
Other assets	7.6
Accounts payable	(10.9		)
Other liabilities	(23.3		)
Deferred revenue	(10.2		)
Deferred tax liabilities	(23.8		)
Net tangible assets acquired	$	65.5

The allocation of the purchase price was based upon a preliminary valuation, and our estimates and assumptions are subject to refinement, final cash and working capital adjustments, within the measurement period (up to one year from the AW Close Date). Adjustments to the purchase price allocation may require adjustments to goodwill prospectively.

During the quarter ending ended June 30, 2018, the Company recorded measurement period adjustment of $1.2 million to deferred revenue, $0.4 million to accounts receivable and $0.4 million to deferred tax liabilities, which resulted in $0.4 million reduction in goodwill.

Acquired intangible assets are classified as Level 3 assets for which fair value is derived from valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair value of acquired developed technology, customer relationships, trade names, acquired IPR&D and order backlog was determined based on the income approach, discounted cash flow method. The intangible assets, except IPR&D, are being amortized over their estimated useful lives that range from three to six years. Order backlog will be fully amortized within one year.

In accordance with authoritative guidance, IPR&D has been recorded at estimated fair value as of March 15, 2018. The IPR&D is accounted for as an indefinite-lived intangible asset until project completion or abandonment of the research and development efforts and is tested for impairment in each period it is considered an indefinite lived asset.

Goodwill arising from this acquisition is primarily attributed to sales of future products and services and the assembled workforce of AW. Goodwill has been assigned to the NE segment and is partially deductible for tax purposes.

The amount of AW business’ net revenue and net loss, included in the Company's Consolidated Statements of Operations for the year ended June 30, 2018 since the AW close date were $77.6 million and $9.9 million, respectively. AW business’s net revenue and net loss disclosed above reflect Management’s best estimate, based on information available at the reporting date.

The following table presents certain unaudited proforma information, for illustrative purposes only, for the years ended June 30, 2018 and July 1, 2017 as if the AW had been acquired at the beginning of our 2017 fiscal year. The unaudited estimated proforma information combines the historical results of AW with the Company's consolidated historical results and includes certain adjustments reflecting the estimated impact of fair value adjustments for the respective periods. The proforma information is not indicative of what would have occurred had the acquisition taken place at the beginning of our 2017 fiscal year and actual results may differ from the information presented below (unaudited, in millions):



	Year Ended
	June 30, 2018			July 1, 2017
Proforma revenue, net	$	1,032.3		$	1,031.8
Proforma net (loss) income, net	(57.1		)	119.0

Trilithic, Inc. Acquisition

On August 9, 2017 (“Trilithic Close Date”), the Company completed the acquisition of Trilithic Inc. (“Trilithic”), a privately-held provider of electronic test and measurement equipment for telecommunications service providers. The Company acquired all of the outstanding shares of Trilithic for $56.4 million in cash. The acquisition has been integrated into our NE segment.

The Company accounted for the transaction in accordance with the authoritative guidance on business combinations. Therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date, and acquisition-related costs totaling $0.9 million were included in SG&A expenses in the Company’s Consolidated Statement of Operations during the year ended June 30, 2018.

The preliminary identified intangible assets acquired, as of the Trilithic Close Date were as follows (in millions):



Net tangible assets acquired	$	11.8
Intangible assets acquired:
Developed technology	15.5
Customer relationships	11.0
Other	0.3
Goodwill	17.8
Total purchase price	$	56.4

The preliminary allocation of the purchase price, based on the estimated fair values of assets acquired and liabilities assumed on the Trilithic Close Date, were as follows (in millions):



Cash	$	0.2
Accounts receivable	3.2
Inventory	10.1
Property and equipment	1.2
Accounts payable	(1.7		)
Other liabilities, net of other assets	(1.2		)
Net tangible assets acquired	$	11.8

The allocation of the purchase price was based upon a preliminary valuation, and our estimates and assumptions are subject to refinement, final cash and working capital adjustments, within the measurement period (up to one year from the Trilithic Close Date). Adjustments to the purchase price allocation may require adjustments to goodwill prospectively.

Acquired intangible assets are classified as Level 3 assets for which fair value is derived from valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair value of acquired developed technology, customer relationships, and other intangible assets was determined based on an income approach, discounted cash flow method. The intangible assets are being amortized over their estimated useful lives that range from three to five years for the acquired developed technology and customer relationships.

The goodwill arising from this acquisition is primarily attributed to sales of future products and services and the assembled workforce of Trilithic. Goodwill has been assigned to the NE segment and is not deductible for tax purposes.

Trilithic’s results of operations have been included in the Company’s Consolidated Financial Statements subsequent to the date of acquisition. Proforma results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements.