Business Acquisitions

Acquisition of Atmel

On April 4, 2016, the Company acquired Atmel, a publicly traded company based in San Jose, California. The Company paid an aggregate of approximately $2.98 billion in cash, issued an aggregate of 10.1 million shares of its common stock to Atmel stockholders valued at $486.1 million based on the closing price of the Company's common stock on April 4, 2016 and incurred transaction and other fees of approximately $14.9 million. The total consideration transferred in the acquisition, including approximately $7.5 million of non-cash consideration for the exchange of certain share-based payment awards of Atmel for stock awards of the Company, was approximately $3.47 billion. The Company financed the cash portion of the purchase price using approximately $2.04 billion of cash held by certain of its foreign subsidiaries and approximately $0.94 billion from additional borrowings under its existing credit agreement. As a result of the acquisition, Atmel became a wholly owned subsidiary of the Company. Atmel is a worldwide leader in the design and manufacture of microcontrollers, capacitive touch solutions, advanced logic, mixed-signal, nonvolatile memory and RF components. The Company's primary reason for this acquisition was to expand the Company's range of solutions, products and capabilities 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 Atmel have been included in the Company's 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 Atmel's net tangible assets and intangible assets based on their estimated fair values as of April 4, 2016. 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 Atmel acquisition is deductible for tax purposes. The Company retained independent third-party appraisers to assist management in its valuation. The purchase price allocation has not been finalized and is based on estimates and assumptions that are subject to change related to the valuation of inventory, intangible assets, taxes and other assets and liabilities. This could result in adjustments to the fair values of the assets acquired and liabilities assumed, the useful lives of intangible assets, the residual amount allocated to goodwill and deferred income taxes recognized. The preliminary allocation of the purchase price is based on the best estimates of management and is subject to revision based on the final valuation and estimates of useful lives.

The table below represents the preliminary allocation of the purchase price, including adjustments to the purchase price allocation from the previously reported figures at June 30, 2016, to the net assets acquired based on their estimated fair values, as well as the associated estimated useful lives of the acquired intangible assets (amounts in thousands).



Assets acquired	Previously Reported June 30, 2016			Adjustments			September 30, 2016
Cash and cash equivalents	$	230,266		$	—		$	230,266
Accounts receivable	135,427						135,427
Inventories	333,208			1,955			335,163
Prepaid expenses and other current assets	28,360			—			28,360
Assets held for sale	24,394						24,394
Property, plant and equipment	129,587			—			129,587
Goodwill	1,378,317			(6,215		)	1,372,102
Purchased intangible assets	1,880,245			(2,300		)	1,877,945
Long-term deferred tax assets	49,466			(106		)	49,360
Other assets	5,948			1,587			7,535
Total assets acquired	4,195,218			(5,079		)	4,190,139

Liabilities assumed
Accounts payable	(55,686		)				(55,686		)
Other current liabilities	(119,152		)	(317		)	(119,469		)
Long-term line of credit	(192,000		)				(192,000		)
Deferred tax liabilities	(74,334		)	(551		)	(74,885		)
Long-term income tax payable	(174,380		)	5,947			(168,433		)
Other long-term liabilities	(106,688		)				(106,688		)
Total liabilities assumed	(722,240		)	5,079			(717,161		)
Purchase price allocated	$	3,472,978		$	—		$	3,472,978



Purchased Intangible Assets	Weighted Average
	Useful Life	April 4, 2016
	(in years)	(in thousands)
Core/developed technology	11	$	1,076,540
In-process technology	—	140,700
Customer-related	6	630,600
Backlog	1	28,300
Other	5	1,805
Total purchased intangible assets		$	1,877,945

Purchased intangible assets include core and developed technology, in-process research and development, customer-related intangibles, acquisition-date backlog and other intangible assets. The estimated fair values of the core and developed technology and in-process research and development 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 in a manner based on 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 Atmel'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 Atmel's projected revenues. An analysis of expected attrition and revenue growth for existing customers was prepared from Atmel's historical customer information. Customer relationships are being amortized in a manner based on the estimated cash flows associated with the existing customers and anticipated retention rates. Backlog relates to the value of orders not yet shipped by Atmel at the acquisition date, and the preliminary fair values were based on the

estimated profit associated with those orders. Backlog related assets have a one year useful life and are being amortized on a straight-line basis over that period. The total weighted average amortization period of intangible assets acquired as a result of the Atmel transaction is 9 years. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Thus, approximately $159.6 million was established as a net deferred tax liability for the future amortization of the intangible assets.

The amount of continuing Atmel net sales included in the Company's condensed consolidated statements of operations for the three and six months ended September 30, 2016 was approximately $274.1 million and $493.1 million, respectively. The amount of Atmel's net loss from continuing operations included in the Company's condensed consolidated statements of operations was $95.8 million and $259.4 million for the three and six months ended September 30, 2016, respectively.

The following unaudited pro-forma consolidated results of operations for the three and six months ended September 30, 2016 and 2015 assume the closing of the Atmel acquisition occurred as of April 1, 2015. The pro-forma adjustments are mainly comprised of acquired inventory fair value costs, amortization of purchased intangible assets, distributor revenue recognition adjustments and share based compensation due to accelerated vesting of outstanding equity awards. 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, 2015 or of results that may occur in the future (amounts in thousands except per share data):



	Three Months Ended					Six Months Ended
	September 30,					September 30,
	2016		2015			2016		2015
Net sales	$	872,034	$	827,924		$	1,709,152	$	1,624,716
Net income (loss) from continuing operations	$	82,332	$	(78,526	)	$	82,102	$	(150,366	)
Basic net income (loss) per common share	$	0.38	$	(0.37	)	$	0.38	$	(0.70	)
Diluted net income (loss) per common share	$	0.35	$	(0.37	)	$	0.35	$	(0.70	)

Acquisition of Micrel

On August 3, 2015, the Company acquired Micrel, Incorporated (Micrel), a publicly traded company based in San Jose, California. The Company paid an aggregate of approximately $430.0 million in cash and issued an aggregate of 8.6 million shares of its common stock to Micrel shareholders. The number of shares issued in the transaction was subsequently repurchased by the Company in the open market during the fiscal year ended March 31, 2016. The total consideration transferred in the acquisition, including approximately $4.1 million of non cash consideration for the exchange of certain share-based payment awards of Micrel for stock awards of the Company, and approximately $13.1 million of cash consideration for the payout of vested employee stock awards, was approximately $816.2 million. The Company financed the cash portion of the purchase price using borrowings under its existing credit agreement. As a result of the acquisition, Micrel became a wholly owned subsidiary of the Company. Micrel's business is to design, develop, manufacture and market a range of high-performance analog, power and mixed-signal integrated circuits. Micrel's products address a wide range of end markets including industrial, automotive and communications. Micrel also manufactures custom analog and mixed-signal circuits and provides wafer foundry services for customers which produce electronic systems utilizing semiconductor manufacturing processes as well as micro-electrical mechanical system technologies. The Company's primary reason for this acquisition was to expand the Company's range of solutions, products and capabilities 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 Micrel 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 Micrel's net tangible assets and intangible assets based on their estimated fair values as of August 3, 2015. 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 Micrel acquisition is deductible for tax purposes. The Company retained an independent third-party appraiser to assist management in 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 3, 2015, as well as the associated estimated useful lives of the acquired intangible assets at that date. The purchase price allocation was finalized as of June 30, 2016 (amounts in thousands):



Assets acquired	Final
Cash and cash equivalents	$	99,196
Accounts receivable, net	14,096
Inventories	73,468
Prepaid expenses and other current assets	10,652
Property, plant and equipment, net	38,491
Goodwill	440,978
Purchased intangible assets	273,500
Other assets	4,268
Total assets acquired	954,649

Liabilities assumed
Accounts payable	(11,068		)
Other current liabilities	(31,552		)
Deferred tax liabilities	(88,035		)
Long-term income tax payable	(7,637		)
Other long-term liabilities	(127		)
Total liabilities assumed	(138,419		)
Purchase price allocated	$	816,230



Purchased Intangible Assets	Weighted Average
	Useful Life	August 3, 2015
	(in years)	(in thousands)
Core/developed technology	10	$	175,800
In-process technology	—	21,000
Customer-related	5	71,100
Backlog	1	5,600
Total purchased intangible assets		$	273,500

Purchased intangible assets include core and developed technology, in-process research and development, customer-related intangibles and acquisition-date backlog. The estimated fair values of the core and developed technology and in-process research and development 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 Micrel'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 Micrel's projected revenues. An analysis of expected attrition and revenue growth for existing customers was prepared from Micrel'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 Micrel 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 $99.7 million was established as a net deferred tax liability for the future amortization of the intangible assets offset by $11.4 million of net deferred tax assets.