BUSINESS ACQUISITIONS

Acquisition of ISSC

On July 17, 2014, the Company acquired an 83.5% interest in Taiwan-based ISSC, a leading provider of low power Bluetooth and advanced wireless solutions for the Internet of Things (IoT) market. The total purchase price paid for the 83.5% interest was approximately $267.6 million and was financed with existing cash and investment balances. The Company's primary reason for this acquisition was to expand the Company's range of solutions, products and capabilities in the wireless and IoT areas by extending its served available market. The Company acquired the 83.5% ownership interest through a tender offer process. Since the completion of the tender offer, the Company has acquired additional shares of ISSC. As of March 31, 2015, the Company's ownership percentage in ISSC was approximately 94.1%.

The acquisition was accounted for under the acquisition method of accounting, with the Company identified as the acquirer. Since the Company's acquired ownership interest in ISSC represents a controlling interest, the operating results of ISSC have been included in the Company's condensed consolidated financial statements as of the closing date of the tender offer with the noncontrolling interest deducted to arrive at net income. The fair value of the noncontrolling interest at the acquisition date was calculated based on the expected purchase price of the remaining shares available. As the Company purchases additional shares of ISSC, the noncontrolling interest will be reduced and any gain or loss on the shares purchased will be reflected in the stockholders' equity of the Company. Under the acquisition method of accounting, the aggregate amount of consideration paid by the Company was allocated to ISSC's net tangible assets and intangible assets based on their estimated fair values as of July 17, 2014. The excess of the purchase price over the value of the net tangible assets and intangible assets was recorded to goodwill. The factors contributing to the recognition of goodwill were based upon the Company's conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. The goodwill has been allocated to the Company's semiconductor products reporting segment. None of the goodwill related to the ISSC acquisition is deductible for tax purposes. The Company retained an independent third-party appraiser to assist management with its valuation; however, the purchase price allocation has not been finalized. This could result in adjustments to the carrying value of the assets acquired and liabilities assumed, the useful lives of intangible assets and the residual amount allocated to goodwill. The preliminary allocation of the purchase price is based on the best estimates of management and is subject to revision based on the final valuations and estimates of useful lives.

The amount of cash paid by the Company, net of cash and short-term investments acquired from ISSC of approximately $42.2 million, was $225.4 million. The table below represents the preliminary allocation of the purchase price, including adjustments to the purchase price allocation from the originally reported figures at September 30, 2014, to the net assets acquired based on their estimated fair values as of July 17, 2014, as well as the associated estimated useful lives of the acquired intangible assets at that date (amounts in thousands):



Assets acquired	Previously Reported September 30, 2014			Adjustments			March 31, 2015
Cash and cash equivalents	$	15,120		$	—		$	15,120
Short-term investments	27,063			—			27,063
Accounts receivable, net	8,792			—			8,792
Inventories	19,160			(2,618		)	16,542
Prepaid expenses and other current assets	2,501			—			2,501
Property, plant and equipment, net	2,637			—			2,637
Goodwill	152,243			2,156			154,399
Purchased intangible assets ⁽¹⁾	147,800			—			147,800
Other assets	1,370			—			1,370
Total assets acquired	376,686			(462		)	376,224

Liabilities assumed
Accounts payable	(9,860		)	—			(9,860		)
Other current liabilities	(16,997		)	462			(16,535		)
Long-term income tax payable	(4,402		)	—			(4,402		)
Deferred tax liability	(25,126		)	—			(25,126		)
Other long-term liabilities	(245		)	—			(245		)
Total liabilities assumed	(56,630		)	462			(56,168		)
Net assets acquired including noncontrolling interest	320,056			—			320,056
Less: noncontrolling interest	(52,467		)	—			(52,467		)
Net assets acquired	$	267,589		$	—		$	267,589



⁽¹⁾ Purchased Intangible Assets	Useful Life	April 1, 2014
	(in years)	(in thousands)
Core/developed technology	10	$	68,900
In-process technology	10	27,200
Customer-related	3	51,100
Backlog	1	600
		$	147,800

Purchased intangible assets include core and developed technology, in-process technology, customer-related intangibles and acquisition-date backlog. The estimated fair values of the core and developed technology and in-process technology were determined based on the present value of the expected cash flows to be generated by the respective existing technology or future technology. The core and developed technology intangible assets are being amortized commensurate with the expected cash flows used in the initial determination of fair value. In-process technology is capitalized until such time as the related projects are completed or abandoned at which time the capitalized amounts will begin to be amortized or written off.

Customer-related intangible assets consist of ISSC's contractual relationships and customer loyalty related to its distributor and end-customer relationships, and the fair values of the customer-related intangibles were determined based on ISSC's projected revenues. An analysis of expected attrition and revenue growth for existing customers was prepared from ISSC's historical customer information. Customer relationships are being amortized in a manner consistent with the estimated cash flows associated with the existing customers and anticipated retention rates. Backlog relates to the value of orders not yet shipped by ISSC at the acquisition date, and the preliminary fair values were based on the estimated profit associated with those orders. Backlog related assets are being recognized commensurate with recognition of the revenue for the orders on which the backlog intangible assets were determined. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Thus, approximately $25.1 million was established as a net deferred tax liability for the future amortization of the intangible assets.

The amount of ISSC net sales and net loss attributable to the Company included in the Company's consolidated statements of income for the year ended March 31, 2015 was approximately $37.8 million and $25.6 million, respectively.

The following unaudited pro-forma consolidated results of operations for the years ended ended March 31, 2015 and 2014 assume the ISSC acquisition occurred as of April 1, 2013. Pro-forma adjustments mainly consist of acquired inventory fair value costs and amortization of purchased intangible assets. The pro-forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisition had taken place on April 1, 2013 or of results that may occur in the future (amounts in thousands):



	Year Ended March 31,
	2015		2014
Net sales	$	2,169,390	$	1,998,647
Net income attributable to Microchip Technology	367,428		364,169
Net income attributable to Microchip Technology common stockholders per share - basic	$	1.83	$	1.84
Net income attributable to Microchip Technology common stockholders per share - diluted	$	1.64	$	1.67

Acquisition of Supertex

On April 1, 2014, the Company acquired Supertex Inc., a publicly traded company based in Sunnyvale, California, for $33.00 per share and the exchange of certain share-based payment awards, for a total of $391.8 million. The Company financed the transaction using borrowings under its existing credit agreement. As a result of the acquisition, Supertex became a wholly owned subsidiary of the Company. Supertex is a leader in high voltage analog and mixed signal technologies, with a strong position in the medical, lighting and industrial control markets. The Company's primary reason for this acquisition was to expand the Company's range of solutions, products and capabilities in these areas by extending its served available market.

The acquisition was accounted for under the acquisition method of accounting, with the Company identified as the acquirer, and the operating results of Supertex have been included in the Company's condensed consolidated financial statements as of the closing date of the acquisition. Under the acquisition method of accounting, the aggregate amount of consideration paid by the Company was allocated to Supertex's net tangible assets and intangible assets based on their estimated fair values as of April 1, 2014. The excess of the purchase price over the value of the net tangible assets and intangible assets was recorded to goodwill. The factors contributing to the recognition of goodwill were based upon the Company's conclusion that there are strategic and synergistic benefits that are expected to be realized from the acquisition. The goodwill has been allocated to the Company's semiconductor products reporting segment. None of the goodwill related to the Supertex acquisition is deductible for tax purposes. The Company retained an independent third-party appraiser to assist management with its valuation. The purchase price allocation was finalized as of March 31, 2015. The total purchase price

allocated of $391.8 million includes approximately $1.6 million of non cash consideration for the exchange of certain share-based payment awards of Supertex for stock awards of the Company. The amount of cash paid by the Company, net of cash and short-term investments acquired from Supertex of approximately $155.8 million, was $234.4 million. The table below represents the allocation of the purchase price, including adjustments to the purchase price allocation from the originally reported figures at June 30, 2014, to the net assets acquired based on their estimated fair values as of April 1, 2014 (amounts in thousands):



Assets acquired	Previously Reported June 30, 2014			Adjustments			March 31, 2015
Cash and cash equivalents	$	14,790		$	—		$	14,790
Short-term investments	140,984			—			140,984
Accounts receivable, net	7,047			—			7,047
Inventories	27,630			—			27,630
Prepaid expenses	1,493			—			1,493
Deferred tax assets	3,997			(1,541		)	2,456
Other current assets	16,113			(3,488		)	12,625
Property, plant and equipment, net	15,679			—			15,679
Goodwill	133,713			9,447			143,160
Purchased intangible assets ⁽¹⁾	89,600						89,600
Other assets	325			—			325
Total assets acquired	451,371			4,418			455,789

Liabilities assumed
Accounts payable	(8,481		)	—			(8,481		)
Accrued liabilities	(19,345		)	121			(19,224		)
Long-term income tax payable	(3,796		)	—			(3,796		)
Deferred tax liability	(27,972		)	(4,539		)	(32,511		)
Total liabilities assumed	(59,594		)	(4,418		)	(64,012		)
Net assets acquired	$	391,777		$	—		$	391,777



⁽¹⁾ Purchased Intangible Assets	Useful Life	April 1, 2014
	(in years)	(in thousands)
Core/developed technology	10	$	68,900
In-process technology	10	1,900
Customer-related	2	17,700
Backlog	1	1,100
		$	89,600

Purchased intangible assets include core and developed technology, in-process technology, customer-related intangibles and acquisition-date backlog. The estimated fair values of the core and developed technology and in-process technology were determined based on the present value of the expected cash flows to be generated by the respective existing technology or future technology. The core and developed technology intangible assets are being amortized commensurate with the expected cash flows used in the initial determination of fair value. In-process technology is capitalized until such time the related projects are completed or abandoned at which time the capitalized amounts will begin to be amortized or written off.

Customer-related intangible assets consist of Supertex's contractual relationships and customer loyalty related to its distributor and end-customer relationships, and the fair values of the customer-related intangibles were determined based on Supertex's projected revenues. An analysis of expected attrition and revenue growth for existing customers was prepared from Supertex's historical customer information. Customer relationships are being amortized in a manner consistent with the estimated cash flows associated with the existing customers and anticipated retention rates. Backlog relates to the value of orders not yet shipped by Supertex at the acquisition date, and the preliminary fair values were based on the estimated profit associated with those orders. Backlog related assets are being recognized commensurate with recognition of the revenue for the orders on which the backlog intangible assets were determined. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Thus, approximately $22.8 million was established as a net deferred tax liability for the future amortization of the intangible assets.

The amount of Supertex net sales included in the Company's consolidated statements of income for the year ended March 31, 2015 was approximately $72.7 million. The operations of Supertex were fully integrated into the Company's operations as of July 1, 2014 and as such, cost of sales and operating expenses were no longer segregated as of that date.

The following unaudited pro-forma consolidated results of operations for the years ended March 31, 2015 and 2014 assume the Supertex acquisition occurred as of April 1, 2013. Pro-forma adjustments mainly consist of acquired inventory fair value costs and amortization of purchased intangible assets. The pro-forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisition had taken place on April 1, 2013 or of results that may occur in the future (amounts in thousands):



	Year Ended March 31,
	2015		2014
Net sales	$	2,149,505	$	1,996,819
Net income	391,573		353,381
Basic earnings per share	$	1.95	$	1.78
Diluted earnings per share	$	1.75	$	1.62

Acquisition of SMSC

On August 2, 2012, the Company acquired SMSC, a publicly traded company based in Hauppauge, New York. The acquisition was accounted for under the acquisition method of accounting. The Company retained an independent third-party appraiser to assist management with its valuation. The table below represents the allocation of the purchase price to the net assets acquired based on their estimated fair values as of August 2, 2012. The purchase price allocation was finalized as of August 2, 2013 (amounts in thousands):



Assets acquired
Cash and cash equivalents	$	180,925
Accounts receivable, net	58,441
Inventories	86,244
Prepaid expenses	5,617
Deferred tax assets	15,843
Other current assets	17,578
Property, plant and equipment, net	35,608
Long-term investments	24,275
Goodwill	165,592
Intangible assets, net	10,214
Purchased intangible assets	517,800
Other assets	3,835
Total assets acquired	1,121,972

Liabilities assumed
Accounts payable	(28,035		)
Accrued liabilities	(62,247		)
Deferred income on shipments to distributors	(11,376		)
Long-term income tax payable	(72,781		)
Deferred tax liability	(16,682		)
Other liabilities	(11,250		)
Total liabilities assumed	(202,371		)
Purchase price allocated	$	919,601