Discontinued Operations

6 Months Ended

Jun. 27, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

DISCONTINUED OPERATIONS

In February 2013, the Company entered into an Asset Purchase Agreement with Aurora pursuant to which the Company agreed to sell its cable access HFC business for $46.0 million in cash. On March 5, 2013, the sale transaction closed and the Company received gross proceeds of $46.0 million from the sale and recorded a net gain of $15.0 million in connection with the sale in the first quarter of fiscal 2013, adjusted by ($0.2) million in the second quarter of fiscal 2013, primarily related to adjustments on inventory and fixed assets sold to Aurora, for a net gain of $14.8 million. The gain was included in income from discontinued operations, net of tax in the Condensed Consolidated Statement of Operations for the six months ended June 28, 2013.

In March 2013, the Company entered into a transition services agreement (‘TSA”) with Aurora to provide contract manufacturing and other various support, including providing order fulfillment, taking warranty calls, attending to product returns from customers, providing cost accounting analysis, receiving payments from customers and remitting such payments to Aurora. The TSA fees were a fixed amount per month and were determined based on the Company’s estimated cost of delivering the transition services. In addition, in April 2013, the Company and Aurora signed a sublease agreement for the Company’s Milpitas warehouse for the remaining period of the lease.

The TSA ended in October 2013 and the billing to Aurora was recorded in the Condensed Consolidated Statements of Operations under income from continuing operations as an offset to the expenses incurred to deliver the transition services. The table below provides details on the income statement caption under which the TSA billing was recorded (in thousands):

	Three months ended		Six months ended
	June 28, 2013
Product cost of revenue	$	361	$	536
Research and development	12		21
Selling, general and administrative	228		372
Total TSA billing to Aurora	$	600	$	928

The Company recorded a gain of $14.8 million in the six months endedJune 28, 2013 , in connection with the sale of the cable access HFC business, calculated as follows (in thousands):

Gross Proceeds				$	46,000
Less : Carrying value of net assets
Inventories, net	$	10,579
Prepaid expenses and other current assets	612
Property and equipment, net	1,180
Goodwill de-recognized	14,547
Deferred revenue	(4,499		)
Accrued liabilities	(939		)
Total net assets sold and de-recognized				$	21,480
Less : Selling cost				2,467
Less : Tax effect				7,234
Gain on disposal, net of taxes				$	14,819

Since the Company has one reporting unit, upon the sale of the cable access HFC business, approximately $14.5 million of the carrying value of goodwill was allocated to the cable access HFC business based on the relative fair value of the cable access HFC business to the fair value of the Company. The remaining carrying value of goodwill was tested for impairment, and the Company determined that goodwill was not impaired as of March 29, 2013.

The results of operations associated with the cable access HFC business are presented as discontinued operations in the Company’s Condensed Consolidated Statements of Operations for fiscal 2013. There were no operating activities associated with the cable access HFC business after December 31, 2013. Revenue and the components of net income related to the discontinued operations for the three and six months endedJune 28, 2013 were as follows (in thousands):

	Three months ended			Six months ended
	June 28, 2013
Revenue	$	—		$	9,556
Operating income (loss)	$	(319	)	$	515
Less : benefit from income taxes	(60		)	(194		)
Add : Gain (loss) on disposal, net of taxes	(137		)	14,819
Income from discontinued operations, net of taxes	$	(396	)	$	15,528