Discontinued Operations

12 Months Ended

Dec. 31, 2015

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 million in cash. On March 5, 2013, the sale transaction closed and the Company received gross proceeds of $46 million from the sale and recorded a net gain of $14.7 million in connection with the sale. The gain was included in income from discontinued operations, net of tax in the Consolidated Statement of Operations for the year ended December 31, 2013.

In accordance with ASC 205 “Presentation of financial statements – Discontinued Operations”, a business is classified as a discontinued operation when: (i) the operations and cash flows of the business can be clearly distinguished and have been or will be eliminated from our ongoing operations; (ii) the business has either been disposed of or is classified as held for sale; and (iii) the Company will not have any significant continuing involvement in the operations of the business after the disposal transactions.

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 Company determined that the cash flows generated from these transactions were both insignificant and were considered indirect cash flows. As a result, the sale of the cable access HFC business was appropriately presented as discontinued operations. 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):

	Year ended
	December 31, 2013
Product cost of revenue	$	577
Research and development	21
Selling, general and administrative	379
Total TSA billing to Aurora	$	977

The Company recorded a gain of $14.7 million for the year ended December 31, 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	1,194
Goodwill de-recognized	14,547
Deferred revenue	(4,499		)
Accrued liabilities	(939		)
Total net assets sold and de-recognized				$	21,494
Less : Selling cost				2,485
Less : Tax effect				7,358
Gain on disposal, net of tax				$	14,663

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 Company had one reporting unit in 2013. 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 Consolidated Statements of Operations for all periods presented. 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 year ended December 31, 2013 was as follows (in thousands):

	Year ended December 31
	2013
Revenue	$	9,717
Operating income	$	539
Less : Benefit from income taxes	(236		)
Add : Gain on disposal, net of tax	14,663
Income from discontinued operations, net of taxes	$	15,438