Business Combination

12 Months Ended

Dec. 31, 2014

Business Combinations [Abstract]

Business Combination

NOTE 17 – BUSINESS COMBINATION

BCD Semiconductor Manufacturing Limited

On March 5, 2013, we 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 BCD employees, payable at the 12, 18 and 24 month anniversaries of the acquisition, was established. The employee retention plan was intended to benefit us and not the selling shareholders, and therefore was excluded from the determination of the purchase price. The acquisition was funded by drawings on our revolving senior credit facility.

The purchase price for BCD and related costs were estimated as follows:

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 are included in the consolidated financial statements from March 1, 2013. The consolidated revenue and earnings of BCD included in our consolidated financial statements for the year ended December 31, 2013 were approximately $155 million and $6 million, respectively, which include acquisition accounting adjustments. The purpose of the acquisition was to further our strategy of expanding market and growth opportunities through select strategic acquisitions.

Under the accounting guidance for step acquisitions, we were 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 us to remeasure the preexisting investment in BCD at fair value, and recognize any gains or losses from such remeasurement. The fair value of our interest immediately before the closing date was $7 million, which resulted in us recognizing a non-cash gain of approximately $4 million within other income (expense) for the year ended December 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:

	March 1, 2013
	Acquisition
	Method
Assets acquired:
Cash and cash equivalents	$	29,819
Accounts receivable, net		20,862
Inventory		42,909
Prepaid expenses and other current assets		27,205
Property, plant and equipment, net		99,390
Deferred tax assets		1,612
Other long-term assets		5,497
Other intangible assets		17,200
Goodwill		2,518
Total assets acquired	$	247,012
Liabilities assumed:
Lines of credit	$	17,336
Accounts payable		34,758
Accrued liabilities and other		16,703
Deferred tax liability		5,055
Other liabilities		18,425
Total liabilities assumed		92,277
Total net assets acquired, net of cash acquired	$	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 was $17 million, which had 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, goodwill is not deductible for income tax purposes.

We estimated the fair value of acquired receivables to be $21 million with a gross contractual amount of $21million. We expected to collect substantially all of the acquired receivables. We evaluated and adjusted the acquired inventory for a reasonable profit allowance, which is intended to permit us to report only the profits normally associated with the activities following the acquisition as it relates to the work-in-progress and finished goods inventory. As such, we 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 year ended December 31, 2013 have been prepared as if the acquisition of BCD had occurred at January 1, 2012:

	Twelve Months Ended
	December 31,
	2013
Net revenues	$	847,947
Net income attributable to common stockholders	$	25,513
Earnings per share—Basic	$	0.55
Earnings per share—Diluted	$	0.54

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.