0001493594-18-000026.txt : 20180801 0001493594-18-000026.hdr.sgml : 20180801 20180801163207 ACCESSION NUMBER: 0001493594-18-000026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 142 CONFORMED PERIOD OF REPORT: 20180629 FILED AS OF DATE: 20180801 DATE AS OF CHANGE: 20180801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MACOM Technology Solutions Holdings, Inc. CENTRAL INDEX KEY: 0001493594 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 270306875 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35451 FILM NUMBER: 18985218 BUSINESS ADDRESS: STREET 1: 100 CHELMSFORD STREET CITY: LOWELL STATE: MA ZIP: 01851 BUSINESS PHONE: (978) 656-2500 MAIL ADDRESS: STREET 1: 100 CHELMSFORD STREET CITY: LOWELL STATE: MA ZIP: 01851 FORMER COMPANY: FORMER CONFORMED NAME: M/A-COM Technology Solutions Holdings, Inc. DATE OF NAME CHANGE: 20100607 10-Q 1 mtsi_2018xq3x10q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2018
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File Number: 001-35451
 
MACOM Technology Solutions Holdings, Inc.
(Exact name of registrant as specified in its charter) 
 
Delaware
 
27-0306875
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
100 Chelmsford Street
Lowell, MA 01851
(Address of principal executive offices and zip code)
(978) 656-2500
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x

  
Accelerated filer
¨
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
  
Smaller reporting company
¨
 
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of July 27, 2018, there were 65,162,822 shares of the registrant’s common stock outstanding.




MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
FORM 10-Q
TABLE OF CONTENTS




PART I—FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
June 29,
2018
 
September 29,
2017
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
85,268

 
$
130,104

Short-term investments
97,723

 
84,121

Accounts receivable (less allowances of $7,643 and $9,410, respectively)
101,285

 
136,096

Inventories
122,866

 
136,074

Income tax receivable
19,945

 
18,493

Assets held for sale
4,971

 
35,571

Prepaid and other current assets
22,335

 
22,438

Total current assets
$
454,393

 
$
562,897

Property and equipment, net
139,415

 
131,019

Goodwill
314,401

 
313,765

Intangible assets, net
533,876

 
621,092

Deferred income taxes
1,662

 
948

Other investments
34,259

 

Other long-term assets
7,709

 
7,402

TOTAL ASSETS
$
1,485,715

 
$
1,637,123

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of lease payable
$
499

 
$
815

Current portion of long-term debt
6,885

 
6,885

Accounts payable
29,370

 
47,038

Accrued liabilities
46,446

 
58,243

Liabilities held for sale

 
2,144

Deferred revenue
8,279

 
1,994

Total current liabilities
$
91,479


$
117,119

Lease payable, less current portion
26,658

 
17,275

Long-term debt, less current portion
659,146

 
661,471

Warrant liability
15,880

 
40,775

Deferred income taxes
7,791

 
15,172

Other long-term liabilities
5,724

 
7,937

Total liabilities
$
806,678


$
859,749

Stockholders’ equity:
 
 
 
Common stock
65

 
64

Treasury stock, at cost
(330
)
 
(330
)
Accumulated other comprehensive income
3,757

 
2,977

Additional paid-in capital
1,067,028

 
1,041,644

Accumulated deficit
(391,483
)
 
(266,981
)
Total stockholders’ equity
$
679,037


$
777,374

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
1,485,715

 
$
1,637,123

See notes to condensed consolidated financial statements.

1



MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
June 29,
2018
 
June 30,
2017
 
June 29,
2018
 
June 30,
2017
Revenue
$
137,872

 
$
194,555

 
$
419,210

 
$
532,391

Cost of revenue
89,703

 
101,926

 
244,486

 
292,403

Gross profit
48,169

 
92,629

 
174,724

 
239,988

Operating expenses:
 
 
 
 
 
 
 
Research and development
48,240

 
38,729

 
131,487

 
108,588

Selling, general and administrative
42,471

 
46,666

 
119,393

 
145,488

Impairment charges

 

 
6,575

 

Restructuring charges
102

 
586

 
6,302

 
2,342

Total operating expenses
90,813

 
85,981

 
263,757

 
256,418

(Loss) income from operations
(42,644
)
 
6,648

 
(89,033
)
 
(16,430
)
Other (expense) income
 
 
 
 
 
 
 
Warrant liability (expense) gain
(6,728
)
 
(9,085
)
 
24,895

 
(16,481
)
Interest expense, net
(8,039
)
 
(7,178
)
 
(23,249
)
 
(21,902
)
Other expense
(37,281
)
 
(1,139
)
 
(41,413
)
 
(2,042
)
Total other expense, net
(52,048
)
 
(17,402
)
 
(39,767
)
 
(40,425
)
Loss before income taxes
(94,692
)
 
(10,754
)
 
(128,800
)
 
(56,855
)
Income tax (benefit) expense
(9,482
)
 
3,223

 
(11,153
)
 
93,559

Loss from continuing operations
(85,210
)
 
(13,977
)
 
(117,647
)
 
(150,414
)
Loss from discontinued operations
(220
)
 
(13,700
)
 
(5,837
)
 
(8,358
)
Net loss
$
(85,430
)
 
$
(27,677
)
 
$
(123,484
)
 
$
(158,772
)
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
Basic loss per share:
 
 
 
 
 
 
 
Loss from continuing operations
$
(1.31
)
 
$
(0.22
)
 
$
(1.82
)
 
$
(2.53
)
Loss from discontinued operations
0.00

 
(0.21
)
 
(0.09
)
 
(0.14
)
Loss per share - basic
$
(1.32
)
 
$
(0.43
)
 
$
(1.91
)
 
$
(2.67
)
Diluted loss per share:
 
 
 
 
 
 
 
Loss from continuing operations
$
(1.31
)
 
$
(0.22
)
 
$
(2.19
)
 
$
(2.53
)
Loss from discontinued operations
0.00

 
(0.21
)
 
(0.09
)
 
(0.14
)
Loss per share - diluted
$
(1.32
)
 
$
(0.43
)
 
$
(2.28
)
 
$
(2.67
)
Shares used:
 
 
 
 
 
 
 
Basic
64,920

 
64,019

 
64,598

 
59,524

Diluted
64,920

 
64,019

 
65,198

 
59,524

See notes to condensed consolidated financial statements.


2



MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
June 29,
2018
 
June 30,
2017
 
June 29,
2018
 
June 30,
2017
Net loss
$
(85,430
)
 
$
(27,677
)
 
$
(123,484
)
 
$
(158,772
)
Unrealized gain (loss) on short-term investments, net of tax
59

 
(77
)
 
(455
)
 
(71
)
Foreign currency translation (loss) gain, net of tax
(3,475
)
 
(307
)
 
1,235

 
(6,358
)
Other comprehensive (loss) income, net of tax
(3,416
)
 
(384
)
 
780

 
(6,429
)
Total comprehensive loss
$
(88,846
)
 
$
(28,061
)
 
$
(122,704
)
 
$
(165,201
)
See notes to condensed consolidated financial statements.


3



MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)

 
 
 
 
 
Accumulated
Other
Comprehensive Income
 
Additional
Paid-in
Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
Common Stock
 
Treasury Stock
 
Shares
 
Amount
 
Shares
 
Amount
Balance at September 29, 2017
64,279

 
$
64

 
(23
)
 
$
(330
)
 
$
2,977

 
$
1,041,644

 
$
(266,981
)
 
$
777,374

Cumulative effect of ASU 2016-09

 

 

 

 

 
1,018

 
(1,018
)
 

Stock options exercises
22

 

 

 

 

 
65

 

 
65

Vesting of restricted common stock and units
883

 
1

 

 

 

 

 

 
1

Issuance of common stock pursuant to employee stock purchase plan
305

 

 

 

 

 
6,879

 

 
6,879

Shares repurchased for stock withholdings on restricted stock awards
(307
)
 

 

 

 

 
(6,673
)
 

 
(6,673
)
Share-based compensation

 

 

 

 

 
24,095

 

 
24,095

Other comprehensive income, net of tax

 

 

 

 
780

 

 

 
780

Net loss

 

 

 

 

 

 
(123,484
)
 
(123,484
)
Balance at June 29, 2018
65,182

 
$
65

 
(23
)
 
$
(330
)
 
$
3,757

 
$
1,067,028

 
$
(391,483
)
 
$
679,037

See notes to condensed consolidated financial statements.


4



MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
Nine Months Ended
 
June 29, 2018
 
June 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net loss
$
(123,484
)
 
$
(158,772
)
Adjustments to reconcile net loss to net cash provided by operating activities (net of acquisitions):
 
 
 
Depreciation and intangibles amortization
83,695

 
65,823

Share-based compensation
24,095

 
27,666

Warrant liability (gain) expense
(24,895
)
 
16,481

Acquired inventory step-up amortization
224

 
43,985

Deferred financing cost amortization
3,572

 
2,545

Acquisition prepaid compensation amortization

 
506

Loss on extinguishment of debt

 
2,008

Loss (gain) on disposition of business
34,046

 
(23,645
)
Deferred income taxes
(8,502
)
 
87,608

Impairment related charges
9,143

 

Loss on minority equity investment
7,241

 

Changes in assets held for sale from discontinued operations
(6,266
)
 
6,329

Other adjustments, net
936

 
285

Change in operating assets and liabilities (net of acquisitions):
 
 
 
Accounts receivable
34,769

 
(12,755
)
Inventories
(1,617
)
 
7,997

Prepaid expenses and other assets
(3,682
)
 
1,104

Accounts payable
(11,049
)
 
(4,718
)
Accrued and other liabilities
(1,952
)
 
(17,821
)
Income taxes
(5,058
)
 
4,063

Net cash provided by operating activities
11,216

 
48,689

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Acquisition of businesses, net

 
(231,712
)
Purchases of property and equipment
(39,443
)
 
(24,496
)
Sale of businesses and assets
5,000

 
215

Proceeds from sales and maturities of short-term investments
85,422

 
32,420

Purchases of short-term investments
(99,363
)
 
(90,508
)
Purchases of other investments
(5,000
)
 

Proceeds associated with discontinued operations
(263
)
 
23,645

Net cash used in investing activities
(53,647
)
 
(290,436
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from notes payable

 
96,558

Payments of financing costs
(505
)
 
(9,077
)
Proceeds from stock option exercises and employee stock purchases
6,944

 
8,162

Payments on notes payable
(5,163
)
 
(3,026
)
Payments of capital leases and assumed debt
(571
)
 
(928
)
Repurchase of common stock
(6,673
)
 
(18,092
)
Proceeds from corporate facility financing obligation
4,000

 
4,250

Payments of contingent consideration and other
(478
)
 
(1,296
)
Net cash (used in) provided by financing activities
(2,446
)
 
76,551

Foreign currency effect on cash
41

 
(175
)
NET CHANGE IN CASH AND CASH EQUIVALENTS
(44,836
)
 
(165,371
)
CASH AND CASH EQUIVALENTS — Beginning of period
$
130,104

 
$
332,977

CASH AND CASH EQUIVALENTS — End of period
$
85,268

 
$
167,606

 
 
 
 
Supplemental disclosure of non-cash activities
 
 
 
Issuance of common stock in connection with the AppliedMicro Acquisition (See Note 2 - Acquisitions)
$

 
$
465,082

See notes to condensed consolidated financial statements.

5



MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information—The accompanying unaudited, condensed consolidated financial statements have been prepared according to the rules and regulations of the United States (the “U.S.”) Securities and Exchange Commission (“SEC”) and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statement of comprehensive loss, condensed consolidated statements of stockholders' equity and condensed consolidated statements of cash flows of MACOM Technology Solutions Holdings, Inc. (“MACOM”, the “Company”, “us”, “we” or “our”) for the periods presented. We prepare our interim financial information using the same accounting principles we use for our annual audited consolidated financial statements. Certain information and note disclosures normally included in the annual audited consolidated financial statements have been condensed or omitted in accordance with prescribed SEC rules. We believe that the disclosures made in our condensed consolidated financial statements and the accompanying notes are adequate to make the information presented not misleading.
The consolidated balance sheet at September 29, 2017 is as reported in our audited consolidated financial statements as of that date. Our accounting policies are described in the notes to our September 29, 2017 consolidated financial statements, which were included in our Annual Report on Form 10-K for our fiscal year ended September 29, 2017 filed with the SEC on November 15, 2017, our Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 2017 filed with the SEC on February 7, 2018 and our Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2018 filed with the SEC on May 3, 2018. We recommend that the financial statements included in this Quarterly Report on Form 10-Q be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for our fiscal year ended September 29, 2017.
Principles of Consolidation—We have one reportable segment, semiconductors and modules. The accompanying consolidated financial statements include our accounts and the accounts of our majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
We have a 52- or 53-week fiscal year ending on the Friday closest to the last day of September. The fiscal years 2018 and 2017 include 52 weeks. To offset the effect of holidays, for fiscal years in which there are 53 weeks, we typically include the extra week arising in such fiscal years in the first quarter.
Use of Estimates—The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities during the reporting periods, the reported amounts of revenue and expenses during the reporting periods, and the disclosure of contingent assets and liabilities at the date of the financial statements. On an ongoing basis, we base estimates and assumptions on historical experience, currently available information and various other factors that management believes to be reasonable under the circumstances. Actual results may differ materially from these estimates and assumptions.
Recent Accounting Pronouncements—Our Recent Accounting Pronouncements are described in the notes to our September 29, 2017 consolidated financial statements, which were included in our Annual Report on Form 10-K for our fiscal year ended September 29, 2017.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers ("Topic 606"). In March, April, May and December 2016, the FASB issued additional guidance related to Topic 606. The new standard superseded nearly all existing revenue recognition guidance. Under Topic 606, an entity is required to recognize revenue upon transfer of promised goods or services to customers in an amount that reflects the expected consideration to be received in exchange for those goods or services. Topic 606 defines a five-step process in order to achieve this core principle, which may require the use of judgment and estimates, and also requires expanded qualitative and quantitative disclosures relating to the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and estimates used. The new standard also defines accounting for certain costs related to origination and fulfillment of contracts with customers, including whether such costs should be capitalized. The new standard permits adoption either by using (i) a full retrospective approach for all periods presented in the period of adoption or (ii) a modified retrospective approach where the new standard is applied in the financial statements starting with the year of adoption. Under both approaches, cumulative impact of the adoption is reflected as an adjustment to retained earnings (accumulated equity (deficit)) as of the earliest date presented in accordance with the new standard. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which delayed the effective date of the new standard from January 1, 2017 to January 1, 2018. We plan to implement the new guidance on September 29, 2018, the beginning of our next fiscal year, using the modified retrospective approach, applied to those contracts that were not completed as of that date. We developed a project plan for the implementation of the guidance, including a review of all revenue streams to

6



identify any differences in the timing, measurement or presentation of revenue recognition and costs to obtain or fulfill the contracts. We have made progress in completing the assessment of the potential impacts of the standard, including any impacts from issued amendments. We do not expect the adoption of Topic 606 to have a material impact on our financial position and results of operations. As we continue our evaluation, we are also assessing any disclosure requirements and preparing to implement changes to accounting policies, business processes and internal controls to support the new standard.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation ("ASU 2016-09"), which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities. We adopted this ASU as of September 30, 2017. Prior to ASU 2016-09, the accounting for share-based compensation required forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. ASU 2016-09 allows an entity to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. ASU 2016-09 requires an entity that elects to account for forfeitures when they occur to apply the accounting change on a modified retrospective basis as a cumulative-effect adjustment to retained earnings as of the date of adoption. We elected to account for forfeitures when they occur, and recorded a $1.0 million cumulative-effect adjustment to beginning retained earnings as of September 30, 2017. We did not record any adjustments to retained earnings for the tax effect of the adoption of ASU 2016-09 as we are in a full valuation allowance position against our U.S. deferred tax asset. ASU 2016-09 requires all excess tax benefits and tax deficiencies to be recorded in the consolidated income statement on a prospective basis when the awards vest or are settled. Due to our full U.S. valuation allowance, ASU 2016-09 had no impact to our tax expense for the three and nine months ended June 29, 2018.
2. ACQUISITIONS
Acquisition of Applied Micro Circuits Corporation— On January 26, 2017, we completed the acquisition of Applied Micro Circuits Corporation (“AppliedMicro”), a global provider of silicon solutions for next-generation cloud infrastructure and Cloud Data Centers, as well as connectivity products for edge, metro and long-haul communications equipment (the “AppliedMicro Acquisition”). We acquired AppliedMicro in order to expand our business in enterprise and Cloud Data Center applications. In connection with the AppliedMicro Acquisition, we acquired all of the outstanding common stock of AppliedMicro for total consideration of $695.4 million, which included cash paid of $287.1 million, less $56.8 million of cash acquired, and equity issued at a fair value of $465.1 million. In conjunction with the equity issued, we granted vested out-of-money stock options and unvested restricted stock units to replace outstanding vested out-of-money stock options and unvested restricted stock units of AppliedMicro. The total fair value of granted vested out-of-money stock options and unvested restricted stock units was $14.5 million, of which $9.3 million was attributable to pre-combination service and was included in the total consideration transferred. We funded the AppliedMicro Acquisition with cash on-hand and short-term investments. We recorded transaction costs related to the acquisition in selling, general and administrative expense. For the three and nine months ended June 29, 2018, we recorded no transaction costs. For the three and nine months ended June 30, 2017, we recorded transaction costs of $0.1 million and $11.9 million, respectively. The AppliedMicro Acquisition was accounted for as a stock purchase and the operations of AppliedMicro have been included in our consolidated financial statements since the date of acquisition.
We recognized the AppliedMicro assets acquired and liabilities assumed based upon the fair value of such assets and liabilities measured as of the date of acquisition. The aggregate purchase price for AppliedMicro has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the acquired net assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, none of which will be tax deductible.
In connection with the acquisition of AppliedMicro, we entered into a plan to divest a portion of AppliedMicro's business specifically related to its compute business (the "Compute business"). The divestiture of the Compute business was completed on October 27, 2017. See Note 3 - Divested Business and Discontinued Operations for further details of the divestiture.
The following table summarizes the total estimated acquisition consideration (in thousands):
Cash consideration paid to AppliedMicro common stockholders
$
287,060

Common stock issued (9,544,125 shares of our common stock at $47.53 per share)
453,632

Equity consideration for vested "in the money" stock options and unvested restricted stock units
2,143

Fair value of the replacement equity awards attributable to pre-acquisition service
9,307

Total consideration paid, excluding cash acquired
$
752,142


7



We finalized the purchase accounting during the fiscal quarter ended December 29, 2017. The final purchase price allocation is as follows (in thousands):
 
Preliminary Allocation as of
 
Allocation Adjustments
 
Adjusted Allocation
 
September 29, 2017
 
 
December 29, 2017
 
 
 
 
 
 
Current assets
$
70,434

 
$
(553
)
 
$
69,881

Intangible assets
412,848

 

 
412,848

Assets held for sale
40,944

 

 
40,944

Other assets
9,800

 

 
9,800

Total assets acquired
534,026

 
(553
)
 
533,473

Liabilities assumed:
 
 
 
 
 
Liabilities held for sale
4,444

 

 
4,444

Other liabilities
17,627

 
651

 
18,278

Total liabilities assumed
22,071

 
651

 
22,722

Net assets acquired
511,955

 
(1,204
)
 
510,751

Consideration:
 
 
 
 
 
Cash paid upon closing
230,298

 

 
230,298

Common stock issued
455,775

 

 
455,775

Equity instruments issued
9,307

 

 
9,307

Total consideration
$
695,380

 
$

 
$
695,380

Goodwill
$
183,425

 
$
1,204

 
$
184,629

The components of the acquired intangible assets were as follows (in thousands):
 
Included In Assets Held For Sale
 
Included in Retained Business
 
Useful Lives (Years)
Developed technology
$
9,600

 
$
78,448

 
7 years
Customer relationships

 
334,400

 
14 years
Total acquired intangible assets
$
9,600

 
$
412,848

 
 
The overall weighted-average life of the identified intangible assets acquired in the AppliedMicro Acquisition is estimated to be 12.7 years and the assets are being amortized over their estimated useful lives based upon the pattern over which we expect to receive the economic benefit from these assets.
The following is a summary of AppliedMicro revenue and earnings included in our accompanying condensed consolidated statements of operations for the three and nine months ended June 30, 2017 (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
June 30, 2017
 
June 30, 2017
Revenue
$
42,019

 
$
78,464

Loss from continuing operations
(3,744
)
 
(34,049
)
Loss from discontinued operations
(15,574
)
 
(32,004
)

8



The pro forma statement of operations data for the nine months ended June 30, 2017, below, gives effect to the AppliedMicro Acquisition, described above, as if it had occurred at October 2, 2015. These amounts have been calculated after applying our accounting policies and adjusting the results of AppliedMicro to reflect transaction costs, retention compensation expense, the impact of the step-up to the value of acquired inventory, as well as the additional intangible amortization that would have been charged assuming the fair value adjustments had been applied and incurred since October 2, 2015. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations.
 
Nine Months Ended
 
June 30, 2017
Revenue
$
589,347

Income from continuing operations
(90,809
)
Loss from discontinued operations
(33,015
)
Acquisition of Picometrix LLC— On August 9, 2017, we completed the acquisition of Picometrix LLC ("Picometrix"), a supplier of optical-to-electrical converters for Cloud Data Center infrastructure (the "Picometrix Acquisition"). We acquired Picometrix in order to expand our business in enterprise and Cloud Data Center applications. The purchase consideration was $33.5 million, comprised of an upfront cash payment of $29.5 million, and $4.0 million placed in escrow for potential satisfaction of certain indemnification obligations that may arise from the closing date through December 15, 2018. For the three and nine months ended June 29, 2018, we recorded no transaction costs. The Picometrix Acquisition was accounted for as a business acquisition, and the operations of Picometrix have been included in our consolidated financial statements since the date of acquisition.
We recognized the Picometrix assets acquired and liabilities assumed based upon the fair value of such assets measured as of the date of acquisition. The aggregate purchase price for the Picometrix assets and liabilities has been allocated to the tangible and identifiable intangible assets acquired based on their estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the acquired assets represents cost and revenue synergies specific to the Company, as well as non-capitalizable intangible assets, such as the employee workforce acquired, and has been allocated to goodwill, all of which will be tax deductible.
We finalized the purchase accounting during the fiscal quarter ended June 29, 2018. The final purchase price allocation is as follows (in thousands):
 
Preliminary Allocation as of
 
Allocation Adjustments
 
Adjusted Allocation
 
September 29, 2017
 
 
June 29, 2018
 
 
 
 
 
 
Current assets
$
7,375

 
$
(1,088
)
 
$
6,287

Intangible assets
19,000

 

 
19,000

Other assets
3,301

 
(81
)
 
3,220

Total assets acquired
29,676

 
(1,169
)
 
28,507

 
 
 
 
 
 
Current liabilities
2,169

 
142

 
2,311

Other liabilities
190

 
275

 
465

Total liabilities assumed
2,359

 
417

 
2,776

Net assets acquired
27,317

 
(1,586
)
 
25,731

Consideration:
 
 
 
 
 
Cash paid upon closing, net of cash acquired
33,500

 

 
33,500

Goodwill
$
6,183

 
$
1,586

 
$
7,769

The pro forma financial information for fiscal year 2017, including revenue and net income, is immaterial, and has not been separately presented.

9



3. DIVESTED BUSINESS AND DISCONTINUED OPERATIONS
Divested Business
On May 10, 2018, we completed the sale and transfer of certain assets associated with our Japan-based long-range optical subassembly business (the “LR4 business”), pursuant to an Asset Purchase and Intellectual Property License Agreement, dated April 30, 2018 (the “LR4 Agreement”). The LR4 Agreement provided that the buyer would pay us $5.0 million within 30 days following the closing of the transactions contemplated by the LR4 Agreement, provide us with the opportunity to supply components, and would pay us further amounts to be determined for inventory and fixed assets within 60 days of receipt of required government approvals. As of June 29, 2018, we have received $5.0 million of consideration and expect additional consideration before the end of calendar 2018 of $12.3 million of which $7.3 million has been recorded as other current assets and $5.0 million has been recorded as assets held for sale.
As a result of the transaction, during our third fiscal quarter we recorded a loss on disposal of $34.0 million associated with LR4 business as other expense, comprised of expected proceeds of $17.3 million, subject to receipt of required government approvals, less the carrying value of assets sold, primarily including customer relationship intangible assets of $27.7 million, inventory of $13.1 million, fixed assets of $7.6 million and goodwill of $2.6 million. The transaction did not meet the criteria of discontinued operations. We also entered into a Transition Services Agreement (the "LR4 TSA") with the buyer, pursuant to which we agreed to incur up to $2.0 million of operating expenses for certain ongoing administrative services to support the buyer for up to six months after the closing of the transaction. During the three and nine months ended June 29, 2018, we have incurred $0.4 million of expenses associated with the LR4 TSA.
Discontinued Operations
On October 27, 2017, we entered into a purchase agreement to sell the Compute business. In consideration for the transfer and sale of the Compute business, we received an equity interest in the buyer valued at approximately $36.5 million, and representing less than 20.0% of the buyer's total outstanding equity. The operations of the Compute business were accounted for as discontinued operations through the date of divestiture.
We also entered into a transition services agreement (the "Compute TSA"), pursuant to which we agreed to perform certain primarily general and administrative functions on the buyer's behalf during a migration period and for which we are reimbursed for costs incurred. During the three and nine months ended June 29, 2018, we received $1.0 million and $3.5 million, respectively, of reimbursements under the Compute TSA, which were recorded as a reduction of our general and administrative expenses.
In August 2015, we sold our automotive business (the "Automotive business"), as the Automotive business was not consistent with our long-term strategic vision from both a growth and profitability perspective. Additionally, we entered into a Consulting Agreement with the buyer (the "Consulting Agreement"), pursuant to which we were to provide the buyer with certain non-design advisory services for a period of two years following the closing of the transaction for up to $15.0 million. During the three and nine months ended June 30, 2017, we recognized $1.9 million and $5.6 million of income, respectively, from the Consulting Agreement with the buyer. During the fiscal quarter ended March 31, 2017, we also received $18.0 million, the full amount of the indemnification escrow. No income was recognized during the three and nine months ended June 29, 2018.

10



The accompanying consolidated statements of operations include the following operating results related to these discontinued operations (in thousands):
 
 
Three Months Ended
 
Nine Months Ended
 
 
June 29, 2018
 
June 30, 2017
 
June 29, 2018
 
June 30, 2017
Revenue (1)
 
$

 
$
35

 
$

 
$
294

Cost of revenue (1)
 

 
(278
)
 
(596
)
 
1,342

Gross profit
 

 
313

 
596

 
(1,048
)
Operating expenses:
 
 
 
 
 
 
 
 
Research and development (1)
 
175

 
10,611

 
4,873

 
18,936

Selling, general and administrative (1)
 
45

 
5,277

 
1,560

 
12,021

Total operating expenses
 
220

 
15,888

 
6,433

 
30,957

Loss from operations
 
(220
)
 
(15,575
)
 
(5,837
)
 
(32,005
)
Other income (2)
 

 
1,875

 

 
5,625

Gain on sale (2)
 

 

 

 
18,022

Loss before income taxes
 
(220
)
 
(13,700
)
 
(5,837
)
 
(8,358
)
Income tax provision
 

 

 

 

Loss from discontinued operations
 
$
(220
)
 
$
(13,700
)
 
$
(5,837
)
 
$
(8,358
)
 
 
 
 
 
 
 
 
 
Cash flow from operating activities
 
(29
)
 
(12,312
)
 
(10,356
)
 
(41,384
)
Cash flow from investing activities
 

 
1,875

 

 
23,645

(1) Amounts are associated with the Compute business.
(2) Amounts are associated with the Automotive business.
4. INVESTMENTS
Our short-term investments are invested in corporate bonds and commercial paper, and are classified as available-for-sale. The amortized cost, gross unrealized holding gains or losses, and fair value of our investments by major investment type as of June 29, 2018 and September 29, 2017 are summarized in the tables below (in thousands):
 
June 29, 2018
 
Amortized
Cost
 
Gross
Unrealized
Holding Gains
  
Gross
Unrealized
Holding Losses
 
Aggregate Fair
Value
Corporate bonds
$
28,726

  
$

 
$
(602
)
 
$
28,124

Commercial paper
69,641

 

 
(42
)
 
69,599

Total short-term investments
$
98,367

  
$

 
$
(644
)
 
$
97,723

 
September 29, 2017
 
Amortized
Cost
 
Gross
Unrealized
Holding Gains
 
Gross
Unrealized
Holding Losses
 
Aggregate Fair
Value
Corporate bonds
$
26,366

  
$
10

 
$
(166
)
 
$
26,210

Commercial paper
57,943

 
4

 
(36
)
 
57,911

Total short-term investments
$
84,309

 
$
14

 
$
(202
)
 
$
84,121


The contractual maturities of investments were as follows (in thousands):
 
 
June 29, 2018
 
September 29, 2017
Less than 1 year
$
70,848

 
$
60,433

Over 1 year
26,875

 
23,688

Total short-term investments
$
97,723

 
$
84,121


11



Available-for-sale investments are reported at fair value and as such, their associated unrealized gains and losses are reported as a separate component of stockholders’ equity within accumulated other comprehensive income.
Other Investments— As of June 29, 2018, we held two non-marketable equity investments classified as other long-term investments.
One of these is an investment in a Series B preferred stock ownership of a privately held manufacturing corporation with preferred liquidation rights over other equity shares. This investment had a value of $5.0 million at the date of purchase and approximates the current fair value. Since we do not have the ability to exercise significant influence or control over the investment we hold this investment at cost, which we evaluate for impairment at each balance sheet date and through June 29, 2018 no impairment has been recorded for this investment.
In addition, we have a minority investment of less than 20.0% of the outstanding equity of a privately held limited liability corporation ("Compute"). This investment was acquired in conjunction with the divestiture of the Compute business during the fiscal quarter ended December 29, 2017 and had an initial value of $36.5 million. We have no obligation to provide further funding to Compute. This investment value is updated quarterly based on our proportionate share of the losses or earnings of Compute utilizing the equity method. During the three and nine months ended June 29, 2018 we recorded a $3.1 million loss and a $7.2 million loss, respectively, associated with this investment as other expense in our consolidated statements of operations. As of June 29, 2018, the carrying value of this investment is $29.3 million.
5. FAIR VALUE
We group our financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1 - Quoted prices in active markets for identical assets or liabilities. 
Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets), or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.
Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by us.
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
We measure certain assets and liabilities at fair value on a recurring basis such as our financial instruments and derivatives. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the three and nine months ended June 29, 2018.
Assets and liabilities measured at fair value on a recurring basis consist of the following (in thousands):
 
June 29, 2018
 
Fair Value
 
Active Markets for Identical Assets (Level 1)
 
Observable Inputs (Level 2)
 
Unobservable Inputs (Level 3)
Assets
 
 
 
 
 
 
 
Money market funds
$
97

 
$
97

 
$

 
$

Commercial paper
69,599

 

 
69,599

 

Corporate bonds
28,124

 

 
28,124

 

Total assets measured at fair value
$
97,820

 
$
97

 
$
97,723

 
$

Liabilities
 
 
 
 
 
 
 
Contingent consideration
$
510

 
$

 
$

 
$
510

Common stock warrant liability
15,880

 

 

 
15,880

Total liabilities measured at fair value
$
16,390

 
$

 
$

 
$
16,390


12



 
September 29, 2017
 
Fair Value
 
Active Markets for Identical Assets (Level 1)
 
Observable Inputs (Level 2)
 
Unobservable Inputs (Level 3)
Assets
 
 
 
 
 
 
 
Money market funds
$
36

 
$
36

 
$

 
$

Commercial paper
57,911

 

 
57,911

 

Corporate bonds
26,210

 

 
26,210

 

Total assets measured at fair value
$
84,157

 
$
36

 
$
84,121

 
$

Liabilities
 
 
 
 
 
 
 
Contingent consideration
$
1,679

 
$

 
$

 
$
1,679

Common stock warrant liability
40,775

 

 

 
40,775

Total liabilities measured at fair value
$
42,454

 
$

 
$

 
$
42,454

As of June 29, 2018 and September 29, 2017, the fair value of the common stock warrants has been estimated using a Black-Scholes option pricing model.
The quantitative information utilized in the fair value calculation of our Level 3 liabilities is as follows:
 
 
 
 
 
Inputs
Liabilities
Valuation Technique
 
Unobservable Input
 
June 29, 2018
 
September 29, 2017
Contingent consideration
Discounted cash flow
 
Discount rate
 
9.2%
 
9.2%
 
 
 
Probability of achievement
 
80%
 
70% - 100%
 
 
 
Timing of cash flows
 
2 months
 
2 - 8 months
 
 
 
 
 
 
 
 
Warrant liability
Black-Scholes model
 
Volatility
 
58.6%
 
44.9%
 
 
 
Discount rate
 
2.52%
 
1.62%
 
 
 
Expected life
 
2.5 years
 
3.2 years
 
 
 
Exercise price
 
$14.05
 
$14.05
 
 
 
Stock price
 
$23.04
 
$44.61
 
 
 
Dividend rate
 
—%
 
—%
The fair values of the contingent consideration liabilities were estimated based upon a risk-adjusted present value of the probability-weighted expected payments by us. Specifically, we considered base, upside and downside scenarios for the operating metrics upon which the contingent payments are to be based. Probabilities were assigned to each scenario and the probability weighted payments were discounted to present value using risk-adjusted discount rates.
The changes in liabilities with inputs classified within Level 3 of the fair value hierarchy consist of the following (in thousands):
 
September 29,
2017
 
Net Realized/Unrealized Gains Included in Earnings
 
Purchases
and
Issuances
 
Sales and
Settlements
 
June 29,
2018
Contingent consideration
$
1,679

 
$
(469
)
 
$

 
$
(700
)
 
$
510

Common stock warrant liability
$
40,775

 
$
(24,895
)
 
$

 
$

 
$
15,880

 
September 30,
2016
 
Net Realized/Unrealized Losses Included in Earnings
 
Purchases
and
Issuances
 
Sales and
Settlements
 
June 30,
2017
Contingent consideration
$
848

 
$
46

 
$
1,701

 
$
(400
)
 
$
2,195

Common stock warrant liability
$
38,253

 
$
16,481

 
$

 
$

 
$
54,734


13



6. INVENTORIES
Inventories, net of reserves, consist of the following (in thousands):
 
June 29,
2018
 
September 29,
2017
Raw materials
$
69,803

 
$
78,999

Work-in-process
13,976

 
13,962

Finished goods
39,087

 
43,113

Total inventory, net
$
122,866

 
$
136,074

7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following (in thousands):
 
June 29,
2018
 
September 29,
2017
Construction in process
$
35,645

 
$
22,195

Machinery and equipment
173,433

 
160,955

Leasehold improvements
13,358

 
13,809

Furniture and fixtures
2,513

 
2,078

Computer equipment and software
17,086

 
16,539

Capital lease assets
19,983

 
20,410

Total property and equipment
$
262,018

 
$
235,986

Less accumulated depreciation and amortization
(122,603
)
 
(104,967
)
Property and equipment, net
$
139,415

 
$
131,019

Depreciation and amortization expense related to property, plant and equipment for the three and nine months ended June 29, 2018 was $7.7 million and $23.0 million, respectively. Depreciation and amortization expense related to property, plant and equipment for the three and nine months ended June 30, 2017 was $6.5 million and $19.7 million, respectively.
8. DEBT
As of June 29, 2018, we are party to a credit agreement dated as of May 8, 2014 with a syndicate of lenders and Goldman Sachs Bank USA ("Goldman Sachs"), as administrative agent (as amended on February 13, 2015, August 31, 2016, March 10, 2017, May 19, 2017, May 2, 2018 and May 9, 2018, the “Credit Agreement”).
On May 2, 2018, we entered into an amendment to our Credit Agreement (the “May 2nd Amendment”) with the lenders party thereto and Goldman Sachs, as the administrative agent. The amendment extended the maturity of $130.0 million of borrowing availability under our existing revolving credit facility (“Revolving Facility”) until November 2021, with the remaining $30.0 million of borrowing availability maturing in May 2019. Prior to the amendment, the entire $160.0 million of the Revolving Facility borrowing availability was scheduled to mature in May 2019.
On May 9, 2018, we entered into another amendment to our Credit Agreement (the “May 9th Amendment”, together with the May 2nd Amendment, the "May 2018 Amendments") with the lenders party thereto and Goldman Sachs, as the administrative agent. The amendment extended the maturity of the remaining $30 million of commitments comprising the aggregate $160 million of borrowing availability under our existing Revolving Facility until November 2021.
As of June 29, 2018, the Credit Agreement consisted of term loans with an aggregate principal amount of $700.0 million (“Term Loans”) and a revolving credit facility with an aggregate borrowing capacity of $160.0 million. The Revolving Facility will mature in November 2021 and the Term Loans will mature in May 2024 and bear interest at: (i) for LIBOR loans for any interest period, a rate per annum equal to the LIBOR rate as determined by the administrative agent, plus an applicable margin of 2.25%; and (ii) for base rate loans, a rate per annum equal to the greater of (a) the prime rate quoted in the print edition of the Wall Street Journal, Money Rates Section, (b) the federal funds rate plus one-half of 1.00% and (c) the LIBOR rate applicable to a one-month interest period plus 1.00% (but, in each case, not less than 1.00%), plus an applicable margin of 1.25%.
All principal amounts outstanding and interest rate information as of June 29, 2018, for the Credit Agreement were as follows (in millions, except rate data):
 
Principal Outstanding
LIBOR Rate
Margin
Effective Interest Rate
Term loans
$681.6
2.09%
2.25%
4.34%

14



We incurred $0.5 million in fees in connection with the May 2018 Amendments, which were recorded as deferred financing costs and are being amortized over the life of the Revolving Facility as interest expense. As of June 29, 2018, approximately $11.6 million of deferred financing costs remain unamortized, of which $10.6 million is related to the Term Loans and is recorded as a direct reduction of the recognized debt liabilities in our accompanying consolidated balance sheet, and $1.0 million is related to the Revolving Facility and is recorded in other long-term assets in our accompanying consolidated balance sheet.
The Term Loans and Revolving Facility are secured by a first priority lien on substantially all of our assets and provide that we must comply with certain financial and non-financial covenants.
As of June 29, 2018, we had $160.0 million of borrowing capacity under our Revolving Facility.
As of June 29, 2018, the following remained outstanding on the Term Loans (in thousands):
Principal balance
$
681,577

Unamortized discount
(4,927
)
Unamortized deferred financing costs
(10,619
)
Total term loans
$
666,031

Current portion
6,885

Long-term, less current portion
$
659,146

As of June 29, 2018, the minimum principal payments under the Term Loans in future fiscal years were as follows (in thousands):
2018 (rest of fiscal year)
$
1,721

2019
6,885

2020
6,885

2021
6,885

2022
6,885

Thereafter
652,316

Total
$
681,577

The fair value of the Term Loans was estimated to be approximately $690.9 million as of June 29, 2018 and was determined using Level 2 inputs, including a quoted rate from a bank.
9. CAPITAL LEASE AND FINANCING OBLIGATIONS
Corporate Facility Financing Obligation
On May 26, 2016, we entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with Calare Properties, Inc. (together with its affiliates, “Calare”), for the sale and subsequent leaseback of our corporate headquarters, located at 100 Chelmsford Street, Lowell, Massachusetts. The transactions contemplated by the Purchase and Sale Agreement closed on December 28, 2016, at which time we also entered into three lease agreements with Calare including: (1) a 20 year leaseback of the facility located at 100 Chelmsford Street (the “100 Chelmsford Lease”), (2) a 20 year build-to-suit lease arrangement for the construction and subsequent lease back of a new facility to be located at 144 Chelmsford Street (the “144 Chelmsford Lease”), and (3) a 14 year building lease renewal of an adjacent facility at 121 Hale Street (the “121 Hale Lease”, and together with the 100 Chelmsford Lease and the 144 Chelmsford Lease, the “Leases”).
Because the transactions contemplated by the Purchase and Sale Agreement and the related Leases were negotiated and consummated at the same time and in contemplation of one another to achieve the same commercial objective, the transactions are accounted for by us as a single unit of accounting. In addition, the Leases were determined to represent a failed sale-leaseback due to our continuing involvement in the properties in the form of non-recourse financing. As a result, the Leases are accounted for under the financing method and we will be deemed the accounting owner under the arrangement, including the assets to be constructed under the 144 Chelmsford Lease. We will continue to recognize the existing building and improvements sold under the Purchase and Sale Agreement, capitalize the 121 Hale Street building as well as the assets constructed under the Leases, and depreciate the assets over the shorter of their estimated useful lives or the lease terms. The sale proceeds from the Purchase and Sale Agreement of $8.2 million (which includes $4.2 million in cash and $4.0 million in construction allowances) and the fair value of the 121 Hale Street building of $4.0 million were recognized as a financing obligation, which is included in lease payable on our consolidated balance sheet, and are being amortized over the 20 year lease term based on the minimum lease payments required under the Leases and our incremental borrowing rate. Future construction costs funded by Calare under the 144 Chelmsford Lease will be recognized as additional financing obligations on our consolidated balance sheet as incurred, and will be amortized

15



over the 20 year lease term based on the minimum lease payments required under the Leases and our incremental borrowing rate when the building is placed into service.
As a result of the failed sale-leaseback accounting, we calculated a financing obligation based on the future minimum lease payments discounted at 8.6% as of June 29, 2018. The discount rate represents the estimated incremental borrowing rate over the lease term of 20 years. The minimum lease payments are recorded as interest expense and in part as a payment of principal reducing the financing obligation. The real property assets in the transaction remain on the consolidated balance sheets and continue to be depreciated over the remaining useful lives. As of June 29, 2018, approximately $26.0 million of the financing obligation was outstanding associated with the Leases, of which $13.9 million was associated with the 144 Chelmsford Lease that has not yet been placed in service.
Additionally, we have certain capital equipment lease obligations, of which approximately $1.1 million was outstanding as of June 29, 2018.
As of June 29, 2018, future minimum payments under capital lease obligations and financing obligations related to the Leases were as follows (in thousands):
Fiscal year ending:
 
Amount
2018 (rest of fiscal year)
 
$
399

2019
 
1,529

2020
 
1,471

2021
 
1,374

2022
 
1,211

Thereafter
 
20,457

Total minimum capital lease payments
 
26,441

Less amount representing interest
 
(14,970
)
Present value of net minimum capital lease payments (1)
 
$
11,471

(1) Excludes $13.9 million associated with the 144 Chelmsford Lease that has not yet been placed in service.
10. INTANGIBLE ASSETS
Amortization expense related to intangible assets is as follows (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
June 29,
2018
 
June 30,
2017
 
June 29,
2018
 
June 30,
2017
Cost of revenue
$
8,594

 
$
8,416

 
$
24,913

 
$
21,694

Selling, general and administrative
13,081

 
10,833

 
35,827

 
24,463

Total
$
21,675

 
$
19,249

 
$
60,740

 
$
46,157

    
Intangible assets consist of the following (in thousands):
 
June 29,
2018
 
September 29,
2017
Acquired technology
$
251,811

 
$
251,655

Customer relationships
518,233

 
556,648

Trade name
3,400

 
3,400

Total
$
773,444

 
$
811,703

Less accumulated amortization
(239,568
)
 
(190,611
)
Intangible assets — net
$
533,876

 
$
621,092


16



Our trade name is an indefinite-lived intangible asset. A summary of the activity in intangible assets and goodwill follows (in thousands):
 
Intangible Assets
 
 
 
Total Intangible Assets
 
Acquired
Technology
 
Customer
Relationships
 
Trade Name
 
Goodwill
Balance at September 29, 2017
$
811,703

 
$
251,655

 
$
556,648

 
$
3,400

 
$
313,765

Allocation to divested business
(39,285
)
 

 
(39,285
)
 

 
(2,560
)
Fair value adjustment

 

 

 

 
2,790

Currency translation adjustment
1,026

 
156

 
870

 

 
406

Balance at June 29, 2018
$
773,444

 
$
251,811

 
$
518,233

 
$
3,400

 
$
314,401

As of June 29, 2018, our estimated amortization of our intangible assets in future fiscal years was as follows (in thousands):
 
2018 Remaining
2019
2020
2021
2022
Thereafter
Total
Amortization expense
$
20,953

83,796

81,706

74,089

61,851

208,081

$
530,476

Accumulated amortization for acquired technology and customer relationships were $131.5 million and $108.1 million, respectively, as of June 29, 2018, and $106.8 million and $83.9 million, respectively, as of September 29, 2017.
11. STOCKHOLDERS' EQUITY
We have authorized 10 million shares of $0.001 par value preferred stock and 300 million shares of $0.001 par value common stock as of June 29, 2018 and September 29, 2017.
Common Stock Warrants—In March 2012, we issued warrants to purchase 1,281,358 shares of common stock for $14.05 per share. The warrants expire December 21, 2020, or earlier as per the terms of the agreement, including immediately following consummation of a sale of all or substantially all assets or capital stock or other equity securities, including by merger, consolidation, recapitalization or similar transactions. We do not currently have sufficient registered and available shares to immediately satisfy a request for registration, if such a request were made. As of June 29, 2018, no exercise of the warrants had occurred, and no request had been made to register the warrants or any underlying securities for resale by the holders.
We are recording the estimated fair values of the warrants as a long-term liability in the accompanying consolidated financial statements with changes in the estimated fair value being recorded in the accompanying statements of operations. See Note 5 - Fair Value for additional information related to the fair value of our warrant liability.

17



12. EARNINGS (LOSS) PER SHARE
The following table sets forth the computation for basic and diluted net loss per share of common stock (in thousands, except per share data):
 
Three Months Ended
 
Nine Months Ended
 
June 29, 2018
 
June 30, 2017
 
June 29, 2018
 
June 30, 2017
Numerator:
 
 
 
 
 
 
 
Loss from continuing operations
$
(85,210
)
 
$
(13,977
)
 
$
(117,647
)
 
$
(150,414
)
Loss from discontinued operations
(220
)
 
(13,700
)
 
(5,837
)
 
(8,358
)
Net loss
$
(85,430
)
 
$
(27,677
)
 
$
(123,484
)
 
$
(158,772
)
Warrant liability gain

 

 
(24,895
)
 

Net loss attributable to common stockholders
$
(85,430
)
 
$
(27,677
)
 
$
(148,379
)
 
$
(158,772
)
Denominator:
 
 
 
 
 
 
 
Weighted average common shares outstanding-basic
64,920

 
64,019

 
64,598

 
59,524

Dilutive effect of warrants

 

 
600

 

Weighted average common shares outstanding-diluted
64,920

 
$
64,019

 
$
65,198

 
$
59,524

Loss per share-basic:
 
 
 
 
 
 
 
Continuing operations
$
(1.31
)
 
$
(0.22
)
 
$
(1.82
)
 
$
(2.53
)
Discontinued operations
0.00

 
(0.21
)
 
(0.09
)
 
(0.14
)
Net loss to common stock holders per share-basic
$
(1.32
)
 
$
(0.43
)
 
$
(1.91
)
 
$
(2.67
)
Loss per share-diluted:
 
 
 
 
 
 
 
Continuing operations
$
(1.31
)
 
$
(0.22
)
 
$
(2.19
)
 
$
(2.53
)
Discontinued operations
0.00

 
(0.21
)
 
(0.09
)
 
(0.14
)
Net loss to common stock holders per share-diluted
$
(1.32
)
 
$
(0.43
)
 
$
(2.28
)
 
$
(2.67
)
As of June 29, 2018, we had warrants outstanding which were reported as a liability on the consolidated balance sheet. During the nine months ended June 29, 2018, we recorded a $24.9 million gain associated with adjusting the fair value of the warrants, in the consolidated statements of operations primarily as a result of changes in our stock price. When calculating earnings per share we are required to adjust for any changes in income or loss to show the maximum dilution possible, and therefore during the nine months ended June 29, 2018 we adjusted the numerator by the warrant gains of $24.9 million and denominator by the incremental shares of 600,192 under the treasury stock method. The table above excludes the effects of 724,885 shares for the three months ended June 29, 2018 of potential shares of common stock issuable upon exercise of stock options, warrants, restricted stock and restricted stock units as the inclusion would be antidilutive. The table also excludes the effects of 422,584 shares for the nine months ended June 29, 2018 of potential shares of common stock issuable upon exercise of stock options, restricted stock and restricted stock units as the inclusion would be antidilutive. The table above excludes the effects of 1,916,434 and 1,940,834 shares, respectively, for the three and nine months ended June 30, 2017, of potential shares of common stock issuable upon exercise of stock options, warrants, restricted stock and restricted stock units as the inclusion would be antidilutive.
13. COMMITMENTS AND CONTINGENCIES
From time to time, we may be subject to commercial disputes, employment issues, claims by other companies in the industry that we have infringed their intellectual property rights and other similar claims and litigations. Any such claims may lead to future litigation and material damages and defense costs. Other than as set forth below, we were not involved in any material pending legal proceedings during the fiscal quarter ended June 29, 2018.
GaN Lawsuit Against Infineon. On April 26, 2016, we and our wholly-owned subsidiary Nitronex, LLC brought suit against Infineon Technologies Americas Corporation ("Infineon Americas") and Infineon Technologies AG ("Infineon AG" and collectively, with Infineon Americas, "Infineon") in the Federal District Court for the Central District of California, seeking injunctive relief, monetary damages, and specific performance of certain contractual obligations. On July 19, 2016, we filed a first amended complaint, and, on November 21, 2016, we filed a second amended complaint. After motions to dismiss certain claims from MACOM’s second amended complaint were denied on February 28, 2017, Infineon AG answered on March 24, 2017, asserting no counterclaims. Infineon Americas also answered and counterclaimed on March 24, 2017 and then submitted amended counterclaims on April 14, 2017. The district court dismissed one of the counterclaims on June 5, 2017, and Infineon filed further amended counterclaims on June 19, 2017. MACOM answered the counterclaims on August 16, 2017. On March 14, 2018, MACOM filed a third amended complaint, which Infineon answered on March 28, 2018. On June 20, 2018, MACOM filed a fourth amended complaint. Infineon’s response is due on August 13, 2018.

18



The suit arises out of agreements relating to GaN-on-Silicon ("GaN") patents that were executed in 2010 by Nitronex Corporation (acquired by us in 2014) and International Rectifier Corporation ("International Rectifier") (acquired by Infineon AG in 2015). We assert claims for breach of contract, breach of the covenant of good faith and fair dealing, declaratory judgment of contractual rights, declaratory judgment of non-infringement of patents, and, against Infineon AG only, intentional interference with contract and unfair competition. If successful, the relief sought would, among other remedies, require Infineon to assign back to us certain GaN-related Nitronex patents that were previously assigned to International Rectifier and enjoin Infineon from proceeding with its marketing and sales of certain types of GaN products. In an order dated October 31, 2016, the district court granted us a preliminary injunction against Infineon, which then issued on December 7, 2016 and was modified on March 6, 2017. The preliminary injunction declared, among other things, that a licensing agreement between us and Infineon that Infineon had purported to terminate is still in effect. On January 29, 2018, the Federal Circuit affirmed the district court’s decision to enter a preliminary injunction declaring the license agreement to still be in effect, although it reversed other aspects of the district court’s decision. Meanwhile, the district court case has been proceeding, and trial is set to begin on May 7, 2019.
With respect to the above legal proceeding, we are not able to reasonably estimate the amount or range of any possible loss, and accordingly have not accrued or disclosed any related amounts of possible loss in the accompanying consolidated financial statements.
14. RESTRUCTURINGS
We have periodically implemented restructuring actions in connection with broader plans to reduce staffing, reduce our internal manufacturing footprint and generally reduce operating costs. The restructuring expenses are primarily comprised of direct and incremental costs related to headcount reductions including severance and outplacement fees for the terminated employees, as well as facility closure costs.
During the fiscal quarter ended December 29, 2017, we initiated plans to restructure our facility in Long Beach, California and to close our facilities in Belfast, the United Kingdom and Sydney, Australia. As of June 29, 2018, the operations from the Long Beach facility have been consolidated into our other California locations in order to achieve operational synergies. The Belfast and Sydney facilities have been closed as we have discontinued certain product development activities that were performed in those locations. We do not expect to incur any additional restructuring costs associated with these facilities. The following is a summary of the restructuring charges incurred for the three and nine months ended June 29, 2018 under these restructuring plans (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
June 29,
2018
 
June 30,
2017
 
June 29,
2018
 
June 30,
2017
Employee related expenses
$
4

 
$
586

 
$
2,796

 
$
2,342

Facility related expenses
98

 

 
3,506

 

Total restructuring charges
$
102

 
$
586

 
$
6,302

 
$
2,342

The following is a summary of the costs incurred for the nine months ended June 29, 2018 and the remaining balances included in accrued expenses at June 29, 2018 (in thousands):
Balance as of September 29, 2017
$
627

       Current period expense
6,302

       Charges paid/settled
(6,131
)
Balance as of June 29, 2018
$
798

As described in Note 20 - Subsequent Events, we have committed to a plan to exit certain production and product lines including certain production facilities located in Ithaca, New York. There were no restructuring charges incurred as of June 29, 2018 for these facilities, and we expect to incur restructuring costs of approximately $4.9 million to $6.2 million during the remainder of calendar year 2018 as we complete these restructuring actions.

19



15. SHARE-BASED COMPENSATION
Stock Plans
As of June 29, 2018, we had 14.1 million shares available for issuance under our 2012 Omnibus Incentive Plan (as Amended and Restated) (the “2012 Plan”) and 3.2 million shares available for issuance under our Employee Stock Purchase Plan. Under the 2012 Plan, we have the ability to issue incentive stock options (“ISOs”), non-statutory stock options (“NSOs”), performance based non-statutory stock options, stock appreciation rights, restricted stock (“RSAs”), restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”), performance shares and other equity-based awards to employees, directors and outside consultants. The ISOs and NSOs must be granted at a price per share not less than the fair value of our common stock on the date of grant. Options granted to date primarily vest based on certain market-based and performance-based criteria. Options granted generally have a term of seven to ten years. Certain of the share-based awards granted and outstanding as of June 29, 2018 are subject to accelerated vesting upon a change in control. There were no material modifications to share-based awards during the periods presented.
Share-Based Compensation
The following table shows a summary of share-based compensation expense included in the Condensed Consolidated Statements of Operations for the three and nine months ended June 29, 2018 and June 30, 2017 (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
June 29,
2018
 
June 30,
2017
 
June 29,
2018
 
June 30,
2017
Cost of revenue
$
1,019

 
$
846

 
$
2,881

 
$
2,245

Research and development
3,785

 
3,006

 
10,422

 
7,677

Selling, general and administrative
3,950

 
6,083

 
10,792

 
17,744

Total share-based compensation expense
$
8,754

 
$
9,935

 
$
24,095

 
$
27,666

As of June 29, 2018, the total unrecognized compensation costs related to outstanding stock options, restricted stock awards and units including awards with time-based and performance-based vesting was $58.7 million, which we expect to recognize over a weighted-average period of 2.5 years. As of June 29, 2018, total unrecognized compensation cost related to our Employee Stock Purchase Plan was $1.0 million.
Stock Options
We had 1.4 million stock options outstanding as of June 29, 2018, with a weighted-average exercise price per share of $31.92 and weighted-average remaining contractual term of 5.1 years. The aggregate intrinsic value of the stock options outstanding as of June 29, 2018 was $2.5 million which represents our closing stock price value on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options outstanding.
We had 0.4 million stock options exercisable as of June 29, 2018, with a weighted-average exercise price per share of $19.12 and weighted-average remaining contractual term of 3.9 years. The aggregate intrinsic value of the stock options exercisable as of June 29, 2018 was $2.5 million which represents our closing stock price value on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options exercisable.
During November 2017, we granted 325,000 non-qualified stock options with a grant date fair value of $5.0 million that are subject to vesting only upon the market price of our underlying public stock closing above a certain price target within seven years of the date of grant. These non-qualified stock options with market related vesting conditions are valued using a Monte Carlo simulation model, using a volatility rate of 45.8%, a risk-free rate of 2.26%, a weighted-average strike price of $36.58 and a term of seven years. Share-based compensation expense is recognized regardless of the number of awards that are earned based on the market condition and is recognized on a straight-line basis over the estimated service period of approximately three years. If the required service period is not met for these options, then the share-based compensation expense would be reversed. In the event that our common stock achieves the target price of $98.99 per share based on a 30 days trailing average prior to the end of the estimated service period, any remaining unamortized compensation cost will be recognized.
During November 2017, we also granted 10,924 incentive stock options and 69,076 non-qualified stock options with a total grant date fair value of $1.4 million. These stock options are valued using a Black Scholes model, using a volatility rate of 45.7%, a risk-free rate of 2.21%, a strike price of $36.61 and an expected term of 6.5 years. Share-based compensation expense is recognized on a straight-line basis over the service period of approximately 4.5 years. If the required service period is not met for these options, then the share-based compensation expense would be reversed.

20



The total intrinsic value of options exercised for the three months ended June 29, 2018 was not material. The total intrinsic value of options exercised for the nine months ended June 29, 2018 was $0.7 million, and was $6.3 million and $8.2 million for the three and nine months ended June 30, 2017, respectively.
Restricted Stock, Restricted Stock Units and Performance-Based Restricted Stock Units
A summary of restricted stock, restricted stock unit and performance-based restricted stock unit activity for the nine months ended June 29, 2018, is as follows (in thousands, except per share data):
 
Number of RSAs, RSUs and PRSUs
 
Weighted-
Average
Grate Date Fair Value
 
Aggregate
Intrinsic
Value
(in thousands)
Balance at September 29, 2017
1,907

 
$
39.20

 
$
72,165

Granted
1,067

 
26.91

 
 
Vested and released
(883
)
 
35.29

 
 
Forfeited, canceled or expired
(217
)
 
34.54

 
 
Balance at June 29, 2018
1,874

 
$
34.59

 
$
43,029

Restricted stock, restricted stock units and performance-based restricted stock units that vested during the nine months ended June 29, 2018 and June 30, 2017 had fair value of $19.2 million and $46.8 million, respectively, as of the vesting date.
16. INCOME TAXES
We are subject to income tax in the U.S. as well as other tax jurisdictions in which we conduct business. Earnings from non-U.S. activities are subject to local country income tax and may also be subject to current U.S. income tax. For interim periods, we record a tax provision or benefit based upon the estimated effective tax rate expected for the full fiscal year, adjusted for material discrete taxation matters arising during the interim periods.
The difference between the U.S. federal statutory income tax rate of 35% and our effective income tax rate for the three and nine months ended June 30, 2017, was primarily driven by the establishment of a valuation allowance against our U.S. deferred tax assets. For the fiscal year ending September 28, 2018, our blended U.S. federal income tax rate is expected to be 24.5%. The difference between the U.S. federal statutory income tax rate of 24.5% and our effective income tax rate for the three and nine months ended June 29, 2018 was primarily impacted by a full valuation allowance against any benefit associated with U.S. losses and income taxed in foreign jurisdictions at generally lower tax rates.
We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making this determination, we consider available positive and negative evidence and factors that may impact the valuation of our deferred tax asset including results of recent operations, future reversals of existing taxable temporary differences, projected future taxable income, and tax-planning strategies. A significant piece of objective negative evidence evaluated was the cumulative U.S. loss initially incurred over the three-year period ended March 31, 2017, which we believe limited our ability to consider other subjective evidence, such as our projections for future growth. Certain transaction and integration related expenses incurred in the U.S. primarily associated with the AppliedMicro Acquisition during the three months ended March 31, 2017 resulted for the first time in significant negative objective evidence in the form of adjusted cumulative losses in the U.S. over the past three-year period. This resulted in our determination during the fiscal quarter ended March 31, 2017 that there was not sufficient objectively verifiable positive evidence to offset this negative objective evidence and we concluded that a full valuation allowance was required for our U.S. deferred tax assets. Significant negative objective evidence in the form of adjusted cumulative losses in the U.S. over the past three-year period ended June 29, 2018 resulted in our continued determination that there was not sufficient objectively verifiable positive evidence to offset this negative objective evidence and we concluded that a full valuation allowance was still appropriate for our U.S. deferred tax assets.
The balance of the unrecognized tax benefit as of June 29, 2018 and September 29, 2017 was $0.3 million and $1.7 million, respectively. The decrease of $1.4 million was primarily the result of an audit settlement of our 2014 U.S. tax filings during the three months ended March 30, 2018. The unrecognized tax benefits as of June 29, 2018 primarily relate to positions taken by us in our foreign tax filings. The entire balance of unrecognized tax benefits, if recognized, will reduce income tax expense. It is our policy to recognize any interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the fiscal quarters ended June 29, 2018 and September 29, 2017, we did not make any accrual or payment of interest and penalties.
On December 22, 2017, the U.S. Congress enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to:
reducing the highest marginal U.S. federal corporate income tax rate from 35% in the period ending December 29, 2017 to 21%, effective January 1, 2018;

21



requiring companies to become liable for a one-time deemed repatriation transition tax (“Transition Tax”) based on previously untaxed accumulated and current earnings and profits (“E&P”) of certain foreign subsidiaries for our fiscal year ending September 28, 2018;
generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries that would apply to our fiscal year beginning September 29, 2018;
requiring the inclusion of certain income such as Global Intangible Low Taxed Income (“GILTI”) earned by controlled foreign corporations (“CFCs”) in our U.S. federal taxable income that would apply to our fiscal year beginning September 29, 2018;
eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized that would apply to our fiscal year beginning September 29, 2018;
repealing the performance-based compensation exception to the section 162(m) $1.0 million deduction limitation and revising the definition of a covered employee for our fiscal year beginning September 29, 2018;
creating the base erosion anti-abuse tax, a new minimum tax that would apply to our fiscal year beginning September 29, 2018;
creating a new limitation on deductible interest expense that would apply to our fiscal year beginning September 29, 2018;
limiting the degree to which net operating losses can be utilized against taxable income that would apply to losses created beginning with our fiscal year beginning September 29, 2018;
changing rules related to the ability to apply net operating losses against later or earlier tax years that would apply to losses created beginning with our fiscal year beginning September 30, 2017; and
an increase in the allowable deduction for costs to acquire qualified property placed into service after September 27, 2017.
Based on preliminary calculations, we currently estimate that our financial results for the fiscal year ending September 28, 2018 will include a non-cash reduction in income tax expense of approximately $3.7 million resulting primarily from the re-measurement of our U.S. deferred tax liabilities to reflect the new 21% U.S. federal tax rate.
To determine the amount of the Transition Tax, we must determine, in addition to other factors, the amount of E&P of the relevant subsidiaries as well as the amount of non-U.S. income taxes paid on such earnings. We were able to make a reasonable estimate of the Transition Tax and have determined that we expect to have sufficient net operating losses to reduce any cash tax payments associated with the one-time repatriation of E&P down to the alternative minimum tax, which we estimate to be less than $1.0 million. On a preliminary basis we have estimated the one-time repatriation of E&P would result in a release of the valuation allowance corresponding with utilization of our U.S. Net Operating Loss ("NOL"), resulting in no impact to our tax expense for the nine months ended June 29, 2018. We are continuing to analyze additional information to more precisely compute the amount of the Transition Tax.
The Tax Act creates a new requirement that certain income such as GILTI earned by CFCs must be included in the gross income of the CFCs’ U.S. shareholder. GILTI is the excess of the shareholder's net CFC tested income over the net deemed tangible income return, which is currently defined as the excess of (1) 10 percent of the aggregate of the U.S. shareholder’s pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over (2) the amount of certain interest expense taken into account in the determination of net CFC-tested income.
The Company must assess whether its valuation allowance analyses are affected by various aspects of the Tax Act (e.g., the Transition Tax, GILTI inclusions and new categories of foreign tax credits). The changes included in the Tax Act are broad and complex. Although we are not able to finalize our evaluation of the impact of the Tax Act at this time due to uncertainties related to any future legislative or regulatory actions related to the Tax Act and availability of information needed to perform the final calculations, we do believe that a full valuation allowance continues to be required. However, we will continue to evaluate the impact the Tax Act may have on our financial statements including the impact on our full valuation allowance against our U.S. deferred tax assets and any impact this would have on our tax expense.
The SEC has issued Staff Accounting Bulletin No. 118 that would allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the application of Accounting Standards Codification Topic 740, Income Taxes. We currently anticipate finalizing and recording any resulting adjustments by the end of our current fiscal year ending September 28, 2018.

22



17. RELATED PARTY TRANSACTIONS
Cadence Design Systems, Inc. ("Cadence") provides us with certain engineering licenses on an ongoing basis. Geoffrey Ribar, who joined our Board of Directors on March 22, 2017, served as an officer of Cadence through September 30, 2017 and served as a Senior Advisor to Cadence until March 31, 2018. Through the nine months ended June 29, 2018, we made payments of $4.1 million to Cadence prior to March 31, 2018. During the three and nine months ended June 30, 2017, we made payments of $3.2 million and $4.7 million, respectively, to Cadence subsequent to Mr. Ribar joining our Board of Directors.
18. SUPPLEMENTAL CASH FLOW INFORMATION
As of June 29, 2018 and June 30, 2017, we had $2.8 million and $0.9 million, respectively, in unpaid amounts related to purchases of property and equipment included in accounts payable and accrued liabilities during each period. These amounts have been excluded from the payments for purchases of property and equipment in the accompanying condensed consolidated statements of cash flows until paid.
During the nine months ended June 29, 2018 and June 30, 2017, we capitalized $16.5 million and $1.3 million, respectively, of net construction costs relating to the 144 Chelmsford Street facility, of which $10.8 million and $1.3 million, respectively, were accounted for as a non-cash transaction as the costs were paid by the developer.
During the nine months ended June 29, 2018, we divested the Compute business with net assets valued at approximately $36.5 million in exchange for a $36.5 million equity interest in Compute. During the three and nine months ended June 29, 2018, we recorded $3.1 million and $7.2 million, respectively, of losses associated with this investment based on our proportionate share of the losses of Compute.
In January 2017, we issued common stock with a fair value of $465.1 million in connection with the AppliedMicro Acquisition. This was accounted for as a non-cash transaction as no shares were purchased or sold as part of the transaction.
The following is supplemental cash flow information regarding non-cash investing and financing activities (in thousands):
 
Nine Months Ended
 
June 29,
2018
 
June 30,
2017
Cash paid for interest
$
21,804

 
$
23,260

Cash paid (refunded) for income taxes
$
3,435

 
$
(548
)
19. GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION
We have one reportable operating segment that designs, develops, manufactures and markets semiconductors and modules. The determination of the number of reportable operating segments is based on the chief operating decision maker’s use of financial information for the purposes of assessing performance and making operating decisions. In evaluating financial performance and making operating decisions, the chief operating decision maker primarily uses consolidated revenue, gross profit and operating income (loss).
Information about our operations in different geographic regions, based upon customer locations, is presented below (in thousands):
 
Three Months Ended
 
Nine Months Ended
Revenue by Geographic Region
June 29,
2018
 
June 30,
2017
 
June 29,
2018
 
June 30,
2017
United States
$
67,861

 
$
82,637

 
$
197,540

 
$
192,821

China
39,016

 
51,191

 
115,068

 
168,026

Asia Pacific, excluding China (1)
17,795

 
43,756

 
64,028

 
129,298

Other Countries (2)
13,200

 
16,971

 
42,574

 
42,246

Total
$
137,872

 
$
194,555

 
$
419,210

 
$
532,391


(1)
Asia Pacific represents Taiwan, Japan, Singapore, India, Thailand, South Korea, Australia, Malaysia, New Zealand, the Philippines and Vietnam.
(2)
No international country or region represented greater than 10% of the total revenue as of the dates presented, other than China and the Asia Pacific region as presented above.

23



 
 
As of
Long-Lived Assets by Geographic Region
 
June 29,
2018
 
September 29,
2017
United States
 
$
111,199

 
$
101,044

Asia Pacific (1)
 
25,754

 
24,945

Other Countries (2)
 
2,462

 
5,030

Total
 
$
139,415

 
$
131,019


(1)
Asia Pacific represents Taiwan, India, Japan, Thailand, South Korea, Australia, Malaysia, New Zealand, the Philippines, Vietnam and China.
(2)
No international country or region represented greater than 10% of the total net long-lived assets as of the dates presented, other than the Asia Pacific region as presented above.
The following is a summary of customer concentrations as a percentage of revenue and accounts receivable as of and for the periods presented:
 
Three Months Ended
 
Nine Months Ended
Revenue
June 29,
2018

June 30,
2017
 
June 29,
2018
 
June 30,
2017
Customer A
14
%

10
%
 
12%
 
10%
Customer B
8
%

10
%
 
8%
 
8%
Customer C
5
%
 
5
%
 
6%
 
12%
Accounts Receivable
June 29,
2018
 
September 29,
2017
Customer A
18
%
 
13
%
Customer D
19
%
 
14
%
No other customer represented more than 10% of revenue or accounts receivable in the periods presented in the accompanying consolidated financial statements. For the three and nine months ended June 29, 2018, our top ten customers represented 59% and 55% of total revenue, respectively, and for the three and nine months ended June 30, 2017, our top ten customers represented 51% and 55% of total revenue, respectively.
20. SUBSEQUENT EVENTS
In connection with a review to streamline our production operations and reduce costs, on July 30, 2018, we committed to a plan to exit certain production and product lines including exiting our production facility located in Ithaca, New York. We expect to complete these restructuring activities during the remainder of calendar 2018, and incur restructuring costs of approximately $4.9 million to $6.2 million, of which approximately $2.0 million to $2.5 million is expected to be future cash expenditures.
In addition, associated with these production and product line exits and our expectations that the net realizable value of certain related inventory would be lower than our carrying amount, we incurred charges of $16.2 million, recorded as cost of revenue, primarily associated with excess and obsolete inventory reserves adjustments during the three months ended June 29, 2018.

ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q, our Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2018 filed with the SEC on May 3, 2018, our Quarterly Report on Form 10-Q for the fiscal quarter ended December 29, 2017 filed with the United States Securities and Exchange Commission ("SEC") on February 7, 2018 and our Annual Report on Form 10-K for the fiscal year ended September 29, 2017 filed with the SEC on November 15, 2017.
In this document, the words “Company,” “we,” “our,” “us,” and similar terms refer only to MACOM Technology Solutions Holdings, Inc. and its consolidated subsidiaries, and not any other person or entity.

24