Business Combination

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

NOTE C – Business Combination

BCD Semiconductor Manufacturing Limited (“BCD”)

On March 5, 2013, the Company completed the acquisition of all the outstanding ordinary shares, par value $0.001 per share, of BCD (the “Shares”), including Shares represented by American Depository Shares (“ADSs”), which were cancelled in exchange for the right to receive $1.33-1/3 in cash per Share, without interest. Each ADS represented six Shares and was converted into the right to receive $8.00 in cash, without interest. The aggregate consideration was approximately $155 million, excluding acquisition costs, fees and expenses.In addition, a $5 million retention plan for employees of BCD, payable at the 12, 18 and 24 month anniversaries of the acquisition, has been established.The employee retention plan is intended to benefit the Company and not the selling shareholders, and therefore has been excluded from the determination of the purchase price. The acquisition was funded by drawings on the Company's bank credit facility. See Note H for additional information regarding the Company's bank credit facility.

                 The Company's purchase price for BCD and related costs are estimated as follows(in thousands):

Purchase price (cost of shares)	$	154,735
Acquisition related costs (included in selling, general and administrative expenses)		2,075
Total purchase price	$	156,810

The results of operations of BCD have been included in the consolidated financial statements from March 1, 2013. The consolidated revenue and earnings of BCD for the period ended September 30, 2013 were approximately $110 million and $3 million, respectively, which include purchase price accounting adjustments. The Company's purpose in making this acquisition is to further its strategy of expanding its market and growth opportunities through select strategic acquisitions. This acquisition is expected to enhance the Company's analog product portfolio by expanding its standard linear and power management offerings, including AC/DC and DC/DC solutions for power adapters and chargers, as well as other electronic products. BCD's established presence in Asia, with a particularly strong local market position in China, offers the Company even greater penetration of the consumer, computing and communications markets. Likewise, the Company believes it can achieve increased market penetration for BCD's products by leveraging the Company's own global customer base and sales channels. In addition, BCD has in-house manufacturing capabilities in China, as well as a cost-effective development team that can be deployed across multiple product families. The Company also believes it will be able to apply its packaging capabilities and expertise to BCD's products in order to improve cost efficiencies, utilization and product mix.

Under the accounting guidance for step acquisitions, the Company is required to record all assets acquired and liabilities assumed at fair value, and recognize goodwill of the acquired business. The step acquisition guidelines also require that the Company remeasure its preexisting investment in BCD at fair value, and recognize any gains or losses from such remeasurement. The fair value of the Company's interest immediately before the closing date was $7 million, which resulted in the Company recognizing a non-cash gain of approximately $4 million within other income (expense) for the nine months ended September 31, 2013. The shares of BCD common stock were valued under the fair value hierarchy as a Level 1 Input.

The following summarizes the allocation of the purchase price to the fair value of the assets acquired and liabilities assumed at the date of acquisition (amounts in thousands):

			Changes in
			purchase price
			allocation		Revised
	March 1, 2013		recorded		March 1, 2013
	purchase price		during third		purchase price
	allocation		quarter of 2013		allocation
Assets acquired:
Cash and cash equivalents	$	29,819	$	-	$	29,819
Accounts receivable, net		20,862		-		20,862
Inventory		42,909		-		42,909
Prepaid expenses and other current assets		27,205		-		27,205
Property, plant and equipment, net		99,716		(326)		99,390
Deferred tax assets		1,612		-		1,612
Other long-term assets		5,497		-		5,497
Other intangible assets		17,200		-		17,200
Goodwill		2,192		326		2,518
Total assets acquired	$	247,012	$	-	$	247,012
Liabilities assumed:
Lines of credit	$	17,336	$	-	$	17,336
Accounts payable		34,758		-		34,758
Accrued liabilities and other		16,703		-		16,703
Deferred tax liability		5,055		-		5,055
Other liabilities		18,425		-		18,425
Total liabilities assumed		92,277		-		92,277
Total net assets acquired, net of cash acquired	$	154,735	$	-	$	154,735

The fair value of the significant identified intangible assets was estimated by using the market approach, income approach and cost approach valuation methodologies. Inputs used in the methodologies primarily included projected future cash flows, discounted at a rate commensurate with the risk involved. The total amount of intangible assets acquired subject to amortization expense is $17 million, which has a residual value of zero and weighted-average amortization period of 6 years. Goodwill arising from the acquisition is attributable to future income from new customer contracts, synergy of combined operations, the acquired workforce and future technology that has yet to be designed or even conceived. In addition, it is not anticipated that goodwill will be deductible for income tax purposes.

The Company estimated the fair value of acquired receivables to be $21million with a gross contractual amount of $21million. The Company expects to collect substantially all of the acquired receivables.The Company evaluated and adjusted the acquired inventory for a reasonable profit allowance, which is intended to permit the Company to report only the profits normally associated with its activities following the acquisition as it relates to the work-in-progress and finished goods inventory. As such, the Company increased the inventory acquired from BCD by approximately $5 million, and recorded that increase into cost of goods sold, of which approximately $2 million was recorded in the first quarter of 2013 and $3 million was recorded in the second quarter of 2013 as the acquired work-in-progress and finished goods inventory was sold.

The following unaudited pro forma consolidated results of operations for the quarters ended September 30, 2013 and 2012 have been prepared as if the acquisition of BCD had occurred at January 1, 2012, for each year. (unaudited; in thousands, except per share data):

	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2012		2013		2012
Net revenues	$	204,639	$	636,954	$	576,406
Net income attributable to common stockholders	$	8,768	$	21,039	$	13,714
Earnings per share—Basic	$	0.19	$	0.45	$	0.30
Earnings per share—Diluted	$	0.19	$	0.44	$	0.29

The unaudited pro forma consolidated results of operations do not purport to be indicative of the results that would have been obtained if the above acquisition had actually occurred as of the dates indicated or of those results that may be obtained in the future. These unaudited pro forma consolidated results of operations were derived, in part, from the historical consolidated financial statements of BCD and other available information and assumptions believed to be reasonable under the circumstances.