6. Acquisitions

Z-Wave

On April 18, 2018, the Company completed the acquisition of the Z-Wave business from Sigma Designs, Inc. for $243 million in cash. Z-Wave is an Internet of Things (IoT) technology for smart home solutions.

This strategic acquisition expands the Company’s IoT connectivity portfolio in the connected home market, while further scaling the Company’s engineering team. These factors contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, the Company recorded goodwill. A portion of the goodwill is deductible for tax purposes. The purchase price was allocated as follows (in thousands):

	Amount			Weighted-Average Amortization Period (Years)
Intangible assets:
In-process research and development	$	20,900		Not amortized
Developed technology	69,875			7
Customer relationships	25,000			4
Trademarks	9,900			7
	125,675

Cash and cash equivalents	2,841
Accounts receivable	5,311
Inventory	15,581
Other current assets	329
Goodwill	108,461
Other non-current assets	2,587
Accounts payable	(3,306		)
Other current liabilities	(8,917		)
Other non-current liabilities	(5,993		)
Total purchase price	$	242,569

In-process research and development (IPR&D) represents acquired smart home technology that had not achieved technological feasibility as of the acquisition date. The fair value of IPR&D was determined using the income approach. The discount rate applied to the projected cash flows was 15.0%, which reflects the risks related to the projects. The allocation of the purchase price is preliminary and subject to change, primarily for the valuation of intangible assets and product warranty accruals and the finalization of income tax matters.

Revenues attributable to the Z-Wave business from the date of acquisition to September 29, 2018 were $20.5 million. The Company recorded approximately $4.9 million of acquisition-related costs in selling, general and administrative expenses during the nine months ended September 29, 2018.

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, giving effect to the acquisition as if it had been completed on January 1, 2017. The pro forma financial information includes charges for the fair value write-up associated with acquired inventory, adjustments for amortization expense of acquired intangible assets and tax-related expenses. The pro forma results of operations are presented for informational purposes only and are not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2017 or of results that may occur in the future (in thousands, except per share data):

	Three Months Ended				Nine Months Ended
	September 29, 2018		September 30, 2017		September 29, 2018		September 30, 2017
Revenues	$	230,243	$	212,572	$	666,575	$	609,482
Net income	$	31,528	$	16,944	$	72,722	$	37,037

Earnings per share:
Basic	$	0.73	$	0.40	$	1.68	$	0.87
Diluted	$	0.71	$	0.39	$	1.65	$	0.86