Business Combinations and Goodwill

3 Months Ended

Apr. 02, 2016

Business Combinations [Abstract]

Business Combinations and Goodwill

Business Combinations and Goodwill

On March 10, 2015, we acquired 100% of the outstanding equity of Silicon Image, Inc. ("Silicon Image"), a provider of video, audio, and data connectivity solutions for the mobile, consumer electronics, and personal computer markets.

The fair value of the purchase price consideration consisted of the following:

(In thousands)	Estimated Fair Value
Cash paid to Silicon Image shareholders	$	575,955
Cash paid for options and RSUs	7,383
Fair value of partially vested stock options and RSUs assumed	5,139
Total purchase consideration	$	588,477

There is no contingent consideration included in the determination of the purchase consideration.

Purchase consideration was allocated to the tangible and intangible assets and liabilities assumed on the basis of the respective estimated fair values on the acquisition date. The purchase price allocation has been completed after a final detailed analysis of certain tax matters. In the first quarter of 2016, we revised our valuation and allocation of purchase price consideration resulting in $2.1 million of additional long-term liabilities related to an uncertain tax position with an equivalent revision to Goodwill, which is reflected in the Consolidated Balance Sheets for the period ended April 2, 2016.

The final allocation of the total purchase price is as follows:

(In thousands)	Estimated Fair Value
Assets acquired:
Cash, cash equivalents and short-term investments	$	157,923
Accounts receivable	30,677
Inventory	20,839
Other current assets	7,183
Property and equipment	23,429
Other non-current assets	1,573
Intangible assets	192,079
Goodwill	237,608
Total assets acquired	671,311
Less liabilities assumed:
Accounts payable and other accrued liabilities	47,735
Other current liabilities	1,252
Long-term liabilities	26,675
Redeemable noncontrolling interest	7,172
Total liabilities assumed	82,834
Fair value of net assets acquired	$	588,477

The following table presents details of the identified intangible assets acquired through the acquisition of Silicon Image:

(In thousands)	Asset Life in Years	Fair Value
Developed technology	3-5	$	125,000
Customer relationships	4-7	29,458
Licensed technology	3-5	1,852
Patents	5	769
Total identified finite-lived intangible assets		157,079
In-process research and development	indefinite	35,000
Total identified intangible assets		$	192,079

We do not believe there is any significant residual value associated with these intangible assets. We are amortizing the intangible assets using the straight-line method over their estimated useful lives. The estimation of the fair values of the intangible assets required the use of valuation techniques including the income approach and the cost approach, and entailed consideration of all the relevant factors that might affect the fair value such as present value factors, and estimates of future revenues and costs. 

Silicon Image’s results of operations and the estimated fair value of the assets acquired and liabilities assumed are included in Lattice's unaudited consolidated financial statements effective March 11, 2015.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets. The goodwill recognized in the acquisition of Silicon Image was derived from expected benefits from cost synergies and knowledgeable and experienced workforce who joined the Company after the acquisition. Goodwill will not be amortized, but will instead be tested for impairment annually or more frequently if certain indicators of impairment are present. We do not expect Goodwill impairment to be tax deductible for income tax purposes. No impairment charges relating to goodwill or intangible assets were recorded for the first three months of 2016 or 2015 as no indicators of impairment were present. The goodwill balance of $269.8 million at April 2, 2016 is comprised of $44.8 million from prior acquisitions combined with $237.6 million from the acquisition of Silicon Image, reduced by a fiscal 2015 goodwill impairment charge of $12.7 million.