Business Combination

12 Months Ended

Dec. 28, 2019

On the Acquisition Date, the Company acquired 100% ownership of Coriant. The Acquisition positions the Company as one of the largest providers of vertically integrated transport networking solutions in the world, enhances the Company's ability to serve a global customer base and accelerates delivery of the innovative solutions its customers demand. This Acquisition also positions the Company to expand the breadth of customer applications it can address, including metro aggregation and switching, disaggregated transport and routing, and software-enabled multi-layer network management and control. The Acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, “Business Combinations” and consisted of the following (in thousands, except shares):



Cash	$	154,192
Equity consideration⁽¹⁾	129,628
Total	$	283,820


⁽¹⁾	Based on the closing price of the Company's common stock of $6.18 on October 1, 2018, the $129.6 million equity consideration represents the fair value of 21 million shares of the Company's common stock issued to Coriant shareholders in accordance with the Purchase Agreement.

The Company financed the cash portion of the purchase price of the Acquisition with the net proceeds from its offering of the $402.5 million of 2.125% convertible senior notes due September 1, 2024 (the “2024 Notes”). See Note 13, “Debt” to the Notes to Consolidated Financial Statements for more information.

In 2018, the Company expensed acquisition-related costs in the amount of $8.3 million in operating expenses.

The Company allocated the fair value of the purchase price of the acquisition to the tangible and intangible

assets acquired as well as liabilities assumed, based on their estimated fair values. The excess of the purchase

price over the fair values of these identifiable assets and liabilities was recorded as goodwill.

The Company prepared an initial determination of the fair value of assets acquired and liabilities assumed as of the Acquisition Date using preliminary information. In accordance with Topic 805, during the measurement period an acquirer retrospectively adjusts the provisional amounts recognized at the Acquisition Date to reflect information obtained about facts and circumstances that existed as of the Acquisition Date that, if known, would have affected the measurement of the amounts recognized as of the Acquisition Date. The Company has recognized measurement period adjustments during the fiscal year 2019 to the fair value of certain assets acquired and liabilities assumed with the acquisition of Coriant, which resulted in a $30.9 million increase to goodwill. The adjustments were recorded as a result of additional information obtained during the year ended December 28, 2019 about facts and circumstances that existed as of the date of acquisition. The measurement period adjustments were primarily related to adjustments to income taxes, inventory, acquired liabilities, deferred revenue, accounts receivable and others. The measurement period adjustments included tax adjustments related to uncertain tax positions, realization of certain income taxes receivable, tax attributes and deferred tax asset valuation allowances. This resulted from additional information collected and analysis performed including preparation, filing and assessment of tax returns in certain jurisdictions. The Company also recorded adjustments to fair value of inventory as the Company received additional information and performed analysis to finalize the estimated values.

The Company does not believe that the measurement period adjustments had a material impact on its consolidated statements of operations, balance sheets or cash flows in any periods previously reported.

The following table summarizes the Company’s allocation of the purchase consideration based on the fair value of assets acquired and liabilities assumed at the Acquisition Date (in thousands):



	Amounts Recognized as of Acquisition Date			Measurement Period Adjustments			Total
Cash and cash equivalents	$	15,549		$	—		$	15,549
Restricted cash	25,743			—			25,743
Accounts receivable	170,466			(2,153		)	168,313
Inventory	96,067			(10,433		)	85,634
Property, plant and equipment, net	217,991			—			217,991
Other assets	39,145			(5,083		)	34,062
Intangible assets, net	200,700			—			200,700
Goodwill	48,235			30,916			79,151
Financing lease obligation	(194,700		)	—			(194,700		)
Deferred revenue	(43,502		)	5,264			(38,238		)
Other liabilities	(291,874		)	(18,511		)	(310,385		)
Total net assets	$	283,820		$	—		$	283,820

The following table presents details of the identifiable assets acquired at the Acquisition Date (in thousands):



	Fair Value		Estimated Useful Life (Years)
Customer relationships and backlog	$	111,400	8
Developed technology	70,550		5
In-process technology	17,750		n/a
Trade name	1,000		1
Total	$	200,700

Goodwill generated from this business combination is primarily attributable to the synergies from combining

the operations of Coriant with that of the Company, which resulted in strengthening the Company's ability to serve a global customer base and accelerate delivery of product solutions. The goodwill recorded in the Acquisition is not expected to be deductible for income tax purposes.