Mergers and Acquisitions

12 Months Ended

Jul. 02, 2016

Business Combinations [Abstract]

Mergers and Acquisitions

Note 6. Mergers and Acquisitions

Time-Bandwidth

On January 27, 2014, we completed the acquisition of Time-Bandwidth, a privately-held company headquartered in Switzerland. Time-Bandwidth is a provider of high-powered and ultrafast lasers for industrial and scientific markets. We acquired all outstanding shares of Time-Bandwidth for a purchase price consideration of $15.0 million in cash, including a holdback amount of $2.3 million which had been withheld to satisfy potential breaches of representations and warranties. During the first quarter of fiscal 2016, and after the Separation from Viavi, we released the holdback amount of $2.3 million following the eighteen-month anniversary of the Time-Bandwidth Closing Date. The payment is classified as a financing activity within the consolidated statements of cash flows for the year endedJuly 2, 2016.

Time-Bandwidth provides innovative high-powered and ultrafast laser technology that can rapidly and precisely process parts at high volumes during the manufacturing process. Use of ultrafast lasers for micromachining applications is being driven primarily by increasing use of consumer electronics and connected devices globally. Manufacturers are taking advantage of high-power and ultrafast lasers to create quality micro parts for consumer electronics and to process semiconductor chips for consumer devices. Time-Bandwidth's technology complements our current laser portfolio, while enabling Time-Bandwidth to use Lumentum's high volume and low-cost manufacturing model, global sales team and channel relationships. Time-Bandwidth was integrated into our Lasers segment.

We accounted for the transaction in accordance with the authoritative guidance on business combinations; therefore, the tangible and intangible assets acquired and liabilities assumed were recorded at fair value on the acquisition date.

The purchase price was allocated as follows (in millions):

Net tangible assets acquired	$	2.0
Intangible assets acquired:
Developed technology	6.7
Customer relationships	0.5
Goodwill	5.8
Total purchase price	$	15.0

The following table summarizes the components of the net tangible assets acquired at fair value (in millions):

Accounts receivable	$	1.4
Inventories	5.0
Property and equipment	1.5
Accounts payable	(0.6		)
Accrued expenses and other liabilities, net of other assets	(3.5		)
Deferred tax liabilities, net	(1.8		)
Net tangible assets acquired	$	2.0

The fair value of acquired developed technology and customer relationships was determined based on an income approach using the discounted cash flow method. The acquired developed technology and customer relationships are being amortized over their estimated useful lives of eight and three years, respectively.

The goodwill arising from this acquisition is primarily attributed to sales of future products and services and the assembled workforce of Time-Bandwidth. Goodwill has been assigned to the Lasers segment and is not deductible for tax purposes. Goodwill is not amortized, but reviewed annually for impairment or more frequently if impairment indicators arise.

Time-Bandwidth's results of operations have been included in our consolidated financial statements subsequent to the date of acquisition.