Basis of Presentation

In the opinion of the management of Emulex Corporation (Emulex or the Company), the accompanying unaudited condensed consolidated financial statements contain adjustments, including normal recurring accruals necessary to present fairly the Company’s consolidated financial position, results of operations, comprehensive loss, and cash flows. Interim results for the three and nine months ended March 29, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending June 28, 2015. The accompanying condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended June 29, 2014. The preparation of the condensed consolidated financial statements requires the use of estimates and actual results could differ materially from management’s estimates.

The accompanying consolidated financial statements include the accounts of Emulex and its wholly-owned subsidiaries. Material intercompany transactions and balances have been eliminated in consolidation.

The Company has a 52 or 53-week fiscal year that ends on the Sunday nearest to June 30. Accordingly, every fifth or sixth fiscal year will be a 53-week fiscal year. Fiscal 2015 is a 52-week fiscal year. The last 53-week fiscal year was fiscal 2011.

Pending Transaction

On February 25, 2015, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with Avago Technologies Wireless (U.S.A.) Manufacturing Inc. (“Avago”). The Merger Agreement provides for Avago to purchase all of the outstanding shares of Emulex common stock, at a price of $8.00 per share. Pursuant to the terms of the Merger Agreement, Avago commenced a tender offer (the "Offer") on April 7, 2015. In connection with entering into the Merger Agreement, certain of the Company's directors and executive officers entered into a Tender and Support Agreement with Avago, pursuant to which they agreed, among other things, to tender all of their shares in the Offer, unless the Merger Agreement is terminated. In aggregate, such persons own approximately 2.5% of the outstanding shares of Emulex.

The Merger Agreement is subject to various conditions, including, but not limited to (i) at least a majority of shares of Emulex common stock then outstanding (calculated on a fully diluted basis) being tendered into the Offer, (ii) the expiration of the applicable waiting or notification period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”), the absence of a material adverse effect with respect to the Company and other customary conditions. The Offer is scheduled to expire at 12:00 midnight, New York City time, on May 5, 2015, subject to extension in certain circumstances as required or permitted by the Merger Agreement, the SEC or applicable law. On March 11, 2015, Avago and Emulex filed a Premerger Notification and Report Form (“HSR Notice") with the Federal Trade Commission (FTC) and the Antitrust Division in connection with Offer. As of 11:59 p.m., New York City time, on April 14, 2015, the waiting period under the HSR Act applicable to the Offer expired. Accordingly, the condition to the Offer relating to the expiration or termination of the waiting period under the HSR Act has been satisfied.

The agreement contains certain termination rights by the Company and Avago. In the event that the Merger Agreement is terminated, the Company may, under specified circumstances, be required to pay a termination fee of approximately $19.5 million.

For the three and nine months ended March 29, 2015, the Company recorded acquisition-related costs of approximately $4.5 million, primarily for outside legal and financial advisory fees associated with the pending Avago acquisition of Emulex

A copy of the Merger Agreement is attached as Exhibit 2.1 to the Form 8-K filed by the Company on February 26, 2015. Additional information relating to the Merger Agreement is also included in that Form 8-K and in other filings the Company and Avago have made and will make with the SEC relating to the Merger Agreement.

Supplemental Cash Flow Information



	Nine Months Ended
	March 29, 2015		March 30, 2014
	(in thousands)
Cash paid during the period for:
Interest	$	1,542	$	31
Income taxes	2,996		3,395
Non-cash investing and financing activities:
Purchases of property and equipment not paid, net	1,073		379
Treasury stock purchases not settled	—		367
Accrued payroll tax withholdings for shares issued to employees	—		5
Release of In-Process Research & Development (IPRD) to Developed Technology	—		8,070

Recently Issued Accounting Standards

On May 28, 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, "Revenue from Contracts with Customers" (ASU 2014-09). The Company is currently evaluating the impact on its financial statements of the new revenue recognition guidance, which will become effective for the Company beginning in fiscal 2018.