Pericom Semiconductor Corporation Acquisition

9 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

Pericom Semiconductor Corporation Acquisition

NOTE 11 – Pericom Semiconductor Corporation Acquisition

During the fourth quarter of 2015, we completed the acquisition of Pericom Semiconductor Corporation (“Pericom”).  The effect of the Pericom acquisition is reflected in our audited consolidated financial statements included in our Form 10-K filed with the SEC on March 11, 2016.   

During 2016 we have continued to finalize our purchase price allocation during the measurement period and obtained additional information related to the assets acquired and liabilities assumed of Pericom. As we have updated our purchase accounting, we have become aware of facts and circumstances that existed at the date of acquisition and, if known, would have affected the measurement of the amounts originally recognized at that date. In accordance with ASC 805, Business Combinations, measurement period adjustments are not included in current earnings, but recognized as of the date of the acquisition with a corresponding adjustment to goodwill resulting from the change in preliminary amounts. As a result, we adjusted the preliminary estimated fair value estimates initially recorded at the acquisition date to reflect these measurement period adjustments. While significant progress was made during the first nine months of 2016, the estimated fair values are preliminary and subject to change.  The size and breadth of the Pericom acquisition may necessitate the use of the one year measurement period to adequately analyze and assess a number of the factors used in establishing the asset and liability fair values as of the acquisition date including the estimated fair values of (i) fixed assets and inventories, (ii) intangible assets such as trademarks and in process research and development and developed technology and (iii) other assets and liabilities. The final estimates of fair value and related valuation work may also result in changes to amortization periods assigned to the assets. Any potential adjustments made could be material in relation to the preliminary values. A final determination of the estimated fair values of the assets acquired and liabilities assumed has not been completed and the following table is considered preliminary. These measurement period adjustments recorded in the first nine months of 2016 had no impact on our condensed consolidated statement of operations.

The table below sets forth the original preliminary fair values determined under the acquisition method as of November 24, 2015, the measurement period adjustments for the nine months ended September 30, 2016 and the revised preliminary fair values as of November 24, 2015.

	Preliminary		Measurement			Adjusted
	November 24, 2015		Period Adjustments			November 24, 2015
Assets acquired:
Cash and cash equivalents	$	48,806	$	-		$	48,806
Short-term investments		72,537		-			72,537
Accounts receivable		22,740		-			22,740
Inventory		22,488		-			22,488
Prepaid expenses and other current assets		5,793		(1,622	)		4,171
Fixed assets		72,210		-			72,210
Intangible assets		156,700		-			156,700
Goodwill		54,304		2,741			57,045
Other long-term assets		16,069		-			16,069
Total assets acquired	$	471,647	$	1,119		$	472,766
							-
Liabilities assumed:							-
Accounts payable		16,925		-			16,925
Accrued liabilities and other		8,818		695			9,513
Income tax payable		1,498		333			1,831
Deferred tax liability		29,077		91			29,168
Other liabilities		12,155		-			12,155
Total liabilities assumed		68,473		1,119			69,592
Total net assets acquired	$	403,174	$	-		$	403,174
Total net assets acquired, net of cash acquired	$	354,368	$	-		$	354,368

The following unaudited pro forma consolidated results of operations for the three and nine months ended September 30, 2015 has been prepared as if the acquisition of Pericom had occurred at January 1, 2015.

	Three Months Ended		Nine Months Ended
	September 30, 2015		September 30, 2015
Net revenues	$	240,458	$	728,413
Net income attributable to common stockholders	$	3,392	$	23,855
Earnings per share - Basic	$	0.07	$	0.49
Earnings per share - Diluted	$	0.07	$	0.48

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. The unaudited pro forma consolidated results for the three and nine months September 30, 2015, exclude $13.9 million of acquisition related costs and $8.0 million of costs from Diodes restricted stock grants and change-in-control agreements for Pericom employees, and include additional $6.1 million of inventory fair value adjustments, additional amortization and depreciation of $3.3 million and $9.9 million, respectively, additional interest expense of $3.3 million and $8.5 million, respectively, and income tax benefit of $3.8 million and $7.8 million, respectively. These unaudited pro forma consolidated results of operations were derived, in part, from the historical consolidated financial statements of Pericom and other available information and assumptions believed to be reasonable under the circumstances.