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Acquisitions | 12 Months Ended
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Jul. 03, 2021
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Note 5. Acquisitions 3Z Telecom, Inc. Acquisition On May 31, 2019, the Company acquired all of the equity of 3Z Telecom, Inc. (3Z) for approximately $23.2 million in cash and contingent consideration (earn-out) liability of up to $7.0 million in cash based on the achievement of certain net revenue targets over approximately a two year period. The $23.2 million cash consideration is subject to final cash and net working capital adjustments and includes escrow payments of $4.3 million, which are reserved for potential breaches of representations and warranties. The acquisition of 3Z expands the Company’s Field Instrument offerings. The 3Z acquisition meets the definition of a business and has been accounted for 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. Acquisition related costs incurred were not material. The fair value of consideration transferred for the 3Z acquisition consists of the following (in millions):
Cash consideration paid at closing |  | $ | 18.9 |
Escrow payments |  | 4.3 |
Fair value of contingent consideration |  | 5.5 |
Total purchase consideration |  | $ | 28.7 |
The fair value of the earn-out payments on the 3Z acquisition date was determined by applying a risk-neutral framework using a Monte Carlo Simulation. The identified tangible and intangible assets acquired, on the acquisition date, were as follows (in millions):
Tangible assets acquired |  | $ | 4.1 |
Intangible assets acquired: |  |
Developed technology |  | 4.4 |
Customer relationships |  | 7.9 |
Customer backlog |  | 0.1 |
Goodwill |  | 12.2 |
Total consideration transferred |  | $ | 28.7 |
The allocation of the purchase price to tangible assets, based on the estimated fair values of assets acquired and liabilities assumed, was as follows (in millions):
Cash |  | $ | 2.2 |
Total other assets |  | 3.6 |
Total liabilities |  | (1.7) |
Net tangible assets acquired |  | $ | 4.1 |
Acquired intangible assets fair value is derived from a valuation based on inputs that are unobservable and significant to the overall fair value measurement. The fair values of acquired customer relationships and developed technology were determined based on the excess earnings method and relief from royalty method, respectively, variations of the income approach. The intangible assets are being amortized over their estimated useful lives, which range from five to six years. Customer backlog will be fully amortized within one year. Goodwill arising from this acquisition is primarily attributed to sales of future products and services of 3Z. Goodwill has been assigned to the NE segment and is not deductible for tax purposes. Results of operations of 3Z have been included in the Company’s Consolidated Financial Statements subsequent to the date of acquisition. Proforma or historical post-acquisition results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements. RPC Photonics, Inc. Acquisition On October 30, 2018, the Company acquired all of the equity interest of RPC Photonics, Inc. (RPC) for approximately $33.4 million in cash and an additional earn-out of up to $53.0 million in cash based on the achievement of certain gross profit targets over an approximate four year period. The $33.4 million cash consideration includes escrow payments of $3.5 million, which are reserved for potential breaches of representations and warranties. The acquisition of RPC expands the Company’s 3D Sensing offerings. The RPC acquisition met the definition of a business and the acquisition has been accounted for 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. Acquisition related costs incurred were not material. The fair value of consideration transferred for the RPC acquisition consists of the following (in millions):
Cash consideration paid at closing |  | $ | 29.9 |
Escrow payments |  | 3.5 |
Fair value of contingent consideration |  | 36.2 |
Total purchase consideration |  | $ | 69.6 |
The fair value of the earn-out payments on the RPC acquisition date was determined by applying a risk-neutral framework using a Monte Carlo Simulation. The identified tangible and intangible assets, on the acquisition date, were as follows (in millions):
Tangible assets acquired: |  | $ | 5.7 |
Intangible assets acquired: |  |
Developed technology |  | 15.7 |
Customer relationships |  | 14.0 |
Customer backlog |  | 0.3 |
Goodwill |  | 33.9 |
Total consideration transferred |  | $ | 69.6 |
The allocation of the purchase price to tangible assets, based on the estimated fair values of assets acquired and liabilities assumed, was as follows (in millions):
Cash |  | $ | 1.8 |
Other current assets |  | 1.8 |
Property and equipment |  | 2.6 |
Total liabilities |  | (0.5) |
Net tangible assets acquired |  | $ | 5.7 |
The fair values of acquired customer relationships and developed technology were determined based on the excess earnings method and relief from royalty method, respectively, variations of the income approach. The intangible assets are being amortized over their estimated useful lives that range from six to seven years. Customer backlog will be fully amortized within one year. Goodwill arising from this acquisition is primarily attributed to sales of future products and services of RPC. Goodwill has been assigned to the OSP segment and is not deductible for tax purposes. Results of operations of RPC have been included in the Company’s Consolidated Financial Statements subsequent to the date of acquisition. Proforma or historical post-acquisition results of operations have not been presented because the effect of the acquisition was not material to prior period financial statements. Other Acquisitions: During the twelve months ended June 27, 2020, the Company completed an asset acquisition for total consideration of approximately $5.2 million in cash paid at close and an earn-out liability of up to $5.5 million cash to be paid based on the occurrence or achievement of certain agreed upon targets. In connection with this acquisition, the Company recorded $6.2 million of developed technology and customer relationships and $1.4 million of deferred tax liability resulting from the acquisitions. The acquired developed technology and customer relationship assets are being amortized over their estimated useful lives of six years. The following table provides a reconciliation of changes in fair value of the Company’s earn-out liabilities for the years ended July 3, 2021 and June 27, 2020, as follows (in millions):
| RPC |  | Other (1) |  | Total
Balance: June 29, 2019 | $ | 30.3 |  |  | $ | 8.1 |  |  | $ | 38.4 |
Additions to Contingent Consideration | — |  |  | 3.7 |  |  | 3.7 |
Change in Fair Value measurement | (29.6) |  |  | (1.9) |  |  | (31.5) |
Payments of Contingent Consideration | (0.7) |  |  | — |  |  | (0.7) |
Balance: June 27, 2020 | $ | — |  |  | $ | 9.9 |  |  | $ | 9.9 |
Change in Fair Value measurement | — |  |  | (4.7) |  |  | (4.7) |
Payments of Contingent Consideration | — |  |  | (1.2) |  |  | (1.2) |
Balance July 3, 2021 | $ | — |  |  | $ | 4.0 |  |  | $ | 4.0 |
(1)See Note 5. Acquisitions and of the Notes to the Company’s Consolidated Financial Statements for more detail.

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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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