true EXTREME NETWORKS INC 0001078271 0001078271 2019-08-09 2019-08-09

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 8-K/A

(Amendment No.1)

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of report (date of earliest event reported): August 9, 2019

 

EXTREME NETWORKS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware		000-25711		77-0430270
(State or other jurisdiction of incorporation)		(Commission File No.)		(I.R.S. Employer Identification No.)

 

6480 Via Del Oro

San Jose, California 95119

(Address of principal executive offices)

Registrant's telephone number, including area code:

(408) 579-2800

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		EXTR		NASDAQ Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

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. 

 

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Explanatory Note

 

On August 9, 2019, Extreme Networks, Inc. (“Extreme” or the “Company”), filed a Current Report on Form 8-K (the “Original 8-K”) disclosing, among other things, that the Company had completed its acquisition of Aerohive Networks, Inc., (“Aerohive”), pursuant to that certain definitive Agreement and Plan of Merger, dated as of June 26, 2019, by and among the Company, Aerohive and the other parties thereto.

 

This Amendment No. 1 to the Original 8-K (this “Amendment”) is being filed for the purpose of satisfying the Company’s undertaking to file the historical and pro forma financial information required by Item 9.01 of Form 8-K, and this Amendment should be read in conjunction with the Original 8-K. Except as set forth herein, no modifications have been made to information contained in the Original 8-K, and the Company has not updated any information contained therein to reflect events that have occurred since the date of the Original 8-K.

 

 

Item 9.01.		Financial Statements and Exhibits.

 

(a)		Financial Statements of Business Acquired.   The audited consolidated balance sheets of Aerohive as of December 31, 2018 and 2017, the related audited consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the three year period ended December 31, 2018, and the notes thereto, including the related report of the independent registered public accounting firm thereon, contained in the Annual Report on Form 10-K filed by Aerohive on March 1, 2019 are incorporated by reference herein.   The unaudited consolidated balance sheet of Aerohive as of June 30, 2019, the related unaudited consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for Aerohive for the six months ended June 30, 2019 and June 30, 2018, and the notes thereto, contained  in the Quarterly Report on Form 10-Q filed by Aerohive on July 30, 2019 are incorporated herein by reference.
(b)		Pro Forma Financial Information.
		Unaudited pro forma condensed combined financial information with respect to the Company’s acquisition of Aerohive Networks, Inc. is filed as Exhibit 99.1 to this report and incorporated herein by reference.
(d)		Exhibits.

 

 

Exhibit No.		Description of Exhibit
23.1 99.1		Consent of Deloitte and Touche LLP Unaudited pro forma condensed combined financial statements of the Company, which include a pro forma condensed combined balance sheet as of June 30, 2019 and pro forma condensed combined statements of operations for the year ended June 30, 2019, with respect to the Company’s acquisition of Aerohive Networks, Inc.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: October 25, 2019

 

	EXTREME NETWORKS, INC.
	By:		/s/ REMI THOMAS
			Remi Thomas
			Executive Vice President, Chief Financial Officer (Principal Accounting Officer)

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the registration statements (Nos. 333‑192507, 333-165268, 333-112831, 333-105767, 333-76798, 333-65636, 333-58634, 333-55644, 333-131705, 333-201456, 333-83729, 333‑215648, 333-221876, 333-229582 and 333-233164) on Form S-8 of Extreme Networks, Inc. of our report dated March 1, 2019, relating to the consolidated financial statements of Aerohive Networks, Inc. and its subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the Company’s change in method of accounting for revenue in fiscal year 2018 due to the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers), which is incorporated by reference in this Current Report on Form 8-K of Extreme Networks, Inc.

 

/s/ DELOITTE & TOUCHE LLP

San Jose, California
October 25, 2019

 

Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On August 9, 2019, Extreme Networks, Inc. (the “Company” or “Extreme”) consummated its acquisition (the “Acquisition”) of all of the outstanding common stock of Aerohive Networks, Inc. (“Aerohive”) pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”) entered into as of June 26, 2019.  The Acquisition was accounted for under the acquisition method of accounting for business combinations, with Extreme treated as the acquiring company for accounting purposes.  In conjunction with the Acquisition, the Company entered into an Amended and Restated Credit Agreement (the “2019 Credit Agreement”) which provides for a 5-year first lien term loan facility in an aggregate principal amount of $380 million (the “2019 Term Loan”) and a 5-year revolving loan facility in an aggregate principal amount of $75 million (together “Debt Financing”).  In addition, Extreme may request incremental term loans and/or incremental revolving loan commitments in an aggregate amount not to exceed the sum of $100 million plus an unlimited amount that is subject to pro forma compliance with certain financial tests.

The unaudited pro forma condensed combined balance sheet at June 30, 2019 gives effect to the Acquisition and Debt Financing as if they were consummated on June 30, 2019 and includes all adjustments which give effect to events directly attributable to the Acquisition and Debt Financing and are factually supportable. The unaudited pro forma condensed combined statements of operations for the year ended June 30, 2019 is presented as if the Acquisition and Debt Financing were consummated on July 1, 2018 and include all adjustments which give effect to events directly attributable to the Acquisition and Debt Financing, expected to have a continuing impact and are factually supportable.  The pro forma condensed combined financial statements presented herein are based on the historical financial statements of Extreme and Aerohive after giving effect to the Acquisition and Debt Financing using the acquisition method of accounting and applying the assumptions and adjustments described in the accompanying notes.  The unaudited pro forma condensed combined statement of operations for the year ended June 30, 2019 combine the Company’s audited consolidated statement of operations for the year ended June 30, 2019 with Aerohive’s unaudited quarterly consolidated statements of operations for the year ended June 30, 2019.

The Extreme consolidated balance sheet as of June 30, 2019 was derived from its audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2019, (the “Extreme 10-K”).  The Extreme statement of operations information for the year ended June 30, 2019 was derived from its audited consolidated financial statements included in the Extreme 10-K.    

Extreme and Aerohive have different fiscal year ends.  The historical Aerohive consolidated balance sheet as of June 30, 2019 was derived from its unaudited consolidated financial statements included in its Form 10-Q for the three and six-months ended June 30, 2019.  The historical financial information for Aerohive’s statement of operations for the twelve-months ended June 30, 2019, was derived by adding its quarterly unaudited consolidated financial statements for the twelve-months ended June 30, 2019 included in its Form 10-K and Form 10-Q submissions filed with the SEC during these periods.

The Company has not completed a full, detailed valuation analysis necessary to determine the fair values of Aerohive’s identifiable assets acquired and liabilities assumed in the Acquisition.  However, a preliminary valuation analysis was performed as of June 30, 2019, the date on which the Acquisition is deemed to have occurred solely for purposes of preparing the unaudited pro forma condensed combined balance sheet. Accordingly, the unaudited pro forma condensed combined financial statements include only preliminary estimates.  Additional valuation procedures are expected to be performed and any increase or decreases in the fair value of the assets acquired or liabilities assumed until the purchase price allocation is finalized.  The amounts of assets acquired and liabilities assumed in the acquisition accounting will be based on their respective fair values as determined at the time of closing of the Acquisition on August 9, 2019 and may differ significantly from these preliminary estimates.

The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the acquisition.  The unaudited pro forma condensed combined financial statements also do not include any future integration costs.  The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had Extreme and Aerohive been a combined company during the specified periods.  The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with the historical audited consolidated financial statements of Extreme as of and for the year ended June 30, 2019 included in Extreme’s Form 10-K’s filed with the SEC. The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with the historical unaudited consolidated financial statements included in Aerohive’s Form 10-Q for the six-months ended June 30, 2019 and the historical audited consolidated financial statements included in Aerohive’s Form 10-K as of and for the year ended December 31, 2018 filed with the SEC.

 

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Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2019

(in thousands)

 

See accompanying notes to the unaudited pro forma condensed combined financial statements.

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Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended June 30, 2019

(in thousands, except per share amounts)

 

See accompanying notes to the unaudited pro forma condensed combined financial statements.

(in thousands, except per share amounts)

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NOTES TO UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

1. Description of Transaction

On August 9, 2019, Extreme Networks, Inc. (the “Company” or “Extreme”) consummated its acquisition (the “Acquisition”) of all of the outstanding common stock of Aerohive Networks, Inc. (“Aerohive”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) entered into as of June 26, 2019.  The Acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations, with Extreme treated as the acquiring company for accounting purposes. In conjunction with the Acquisition, the Company entered into an Amended and Restated Credit Agreement (the “2019 Credit Agreement”) which provides for a 5-year first lien term loan facility in an aggregate principal amount of $380 million (the “2019 Term Loan”) and a 5-year revolving loan facility in an aggregate principal amount of $75 million (together “Debt Financing”).  In addition, Extreme may request incremental term loans and/or incremental revolving loan commitments in an aggregate amount not to exceed the sum of $100 million plus an unlimited amount that is subject to pro forma compliance with certain financial tests.  

Under the terms of the Acquisition, the preliminary net consideration to be paid by Extreme to Aerohive stockholders was $267.1 million.  

2. Basis of Presentation

The unaudited pro forma combined financial statements were prepared in accordance with U.S. generally accepted accounting principles and pursuant to the rules and regulations of SEC Regulation S-X, present the pro forma financial position and results of operations of the combined companies after giving effect to the Acquisition and the Debt Financing.  

The unaudited pro forma condensed combined balance sheet as of June 30, 2019 gives effect to the Acquisition as if it was consummated on June 30, 2019.  The unaudited pro forma condensed combined balance sheet as of June 30, 2019 combined the Company’s audited consolidated balance sheet as of June 30, 2019 with Aerohive’s unaudited condensed consolidated balance sheet as of June 30, 2019.

The unaudited pro forma condensed combined statement of operations for the year ended June 30, 2019 are presented as if the Acquisition was consummated on July 1, 2018.  The pro forma condensed combined financial statements presented herein are based on the historical financial statements of Extreme and Aerohive after giving effect to the Acquisition using the acquisition method of accounting and applying the assumptions and adjustments described in the accompanying notes.  The unaudited pro forma condensed combined statement of operations for the year ended June 30, 2019 combined the Company’s audited consolidated statement of operations with Aerohive’s unaudited quarterly consolidated statements of operations for the year ended June 30, 2019.

The unaudited pro forma combined balance sheet as of June 30, 2019 and the unaudited pro forma combined statement of operations for the year ended June 30, 2019 are presented as if the Debt Financing had occurred on the respective consummation dates as noted above.

The historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are;

The unaudited pro forma combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had Extreme and Aerohive been a combined company during the specified periods.

3. Preliminary Purchase Price Allocation

Under the acquisition method of accounting, identifiable assets and liabilities of Aerohive, including identifiable intangible assets, were recorded based on their estimated fair values as of the effective time of the Acquisition.  Goodwill is calculated as the difference between the estimated acquisition consideration and fair values of identifiable net assets acquired.

F-4

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The estimated acquisition consideration and the preliminary allocation of the estimated acquisition consideration are, in part, based upon a preliminary management valuation, as described below, and the Company’s estimates and assumptions which are subject to change.

Tangible assets and liabilities: The fair value of working capital related items, such as other current assets and accrued liabilities, approximated their book values at the date of acquisition.  Inventories were valued at fair value using the net realizable value approach.  The fair value of the acquired deferred revenue was estimated using the cost build-up approach.

Inventories: Inventories acquired include raw materials and finished goods. The fair value of finished goods has been determined based on the estimated selling price, net of selling costs and a margin on the selling costs.  The fair value of raw materials has been estimated to equal their replacement cost.

Deferred revenues: Deferred revenue acquired primarily represents amounts for deferred subscription or support and maintenance contracts which have not yet fully met revenue recognition criteria. The fair value of the acquired deferred revenue was estimated using the cost build-up approach.

Identifiable intangible assets: Identifiable intangible assets acquired include developed technology, customer relationships, trade names and backlog. The fair value of intangible assets is based on management’s preliminary valuation as if the acquisition occurred on June 30, 2019.  Estimated useful lives (where relevant for the purposes of these unaudited pro forma financial statements) are based on the time periods during which the intangibles are expected to result in incremental cash flows.

Pre-acquisition contingencies: The Company has not currently identified any pre-acquisition contingencies, not already reflected in the historical financial statements of Aerohive, where a liability is probable and the amount of the liability can be reasonably estimated. If information becomes available to management prior to the end of the measurement period (no longer than 12 months after the closing of the Acquisition), which would indicate that a liability is probable and the amount can be reasonably estimated, such items will be reflected in the acquisition accounting.    

F-5

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The preliminary determination of the fair value of the acquired net assets, assuming the Acquisition had closed on June 30, 2019, is as follows (in thousands):

 The final determination of the fair value of the identifiable net assets acquired will be based on Aerohive’s assets acquired and liabilities assumed as of the effective time of the Acquisition on August 9, 2019.  The purchase price allocation may change materially based on the receipt of more detailed information.  Therefore, the actual allocations will differ from the pro forma adjustments presented.

4. Pro Forma Adjustments

Pro forma adjustments are necessary to reflect the Acquisition’s estimated consideration and to adjust amounts related to the tangible and intangible assets and liabilities of Aerohive to reflect the preliminary estimate of their fair values and the impact on the statement of operations as if Extreme and Aerohive had been combined during the periods presented.  The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows:

F-6

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5. Non-recurring Transaction Costs

Extreme and Aerohive have incurred and Extreme will continue to incur certain non-recurring transaction expenses.   Non-recurring transaction expenses were incurred after the year ended June 30, 2019. The unaudited pro forma condensed combined balance sheet as of June 30, 2019 includes an adjustment of $6.1 million to accrued liabilities for transaction expenses incurred by Extreme, including those Aerohive expenses paid by Extreme, subsequent to June 30, 2019 (see Note 4, Pro Forma Adjustments above).  These transaction expenses are not reflected in the unaudited pro forma condensed combined statement of operations for the year ended June 30, 2019, as they are not expected to have a continuing impact on operations.

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