Note 3 Business Combination

6 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

3. Business Combination

On June 27, 2013, we completed the acquisition of a 4-bit and 8-bit microcontroller product line, or the Acquired MCU Business, of the System LSI Division of Samsung Electronics Co., Ltd. The acquired product line includes microcontrollers potentially useful in a number of applications, which have to date been principally used in consumer product applications. The acquisition is intended to bolster our product portfolio and empower customers to utilize products from across our multiple product lines.

The aggregate purchase price for the acquired assets is $50.0 million. The closing payment was $20.0 million and we are obligated to pay $30.0 million in two installment payments of $15.0 million each. The first installment is due on June 27, 2014 and the second installment is due on December 31, 2014, bearing simple interest at a variable annual rate equal to six-month LIBOR plus a 3 percentage point margin. The above deferred payments and interest are included in “Accrued expenses and other current liabilities” and “Other long term liabilities,” respectively, on our unaudited condensed consolidated balance sheets. The effective interest rate of the deferred payments as of September 30, 2013 was 3.42%.

As of September 30, 2013, we have incurred $403,000 in legal and consulting costs related to the acquisition. The costs incurred have been fully expensed and are included in “Selling, general and administrative expenses” on our unaudited condensed consolidated statements of operations.

The following table summarizes the values of the assets acquired at the acquisition date.

		Purchase Price Allocation
Inventories		$	800
Property, plant and equipment			36
Identifiable intangible assets			24,000
	Total identifiable net assets		24,836
Goodwill			25,164
	Total purchase price	$	50,000

Identifiable intangible assets consisted of developed intellectual property, customer relationships, contract backlog and anoncompetition agreement. The valuation of the acquired intangibles was classified as a level 3 measurement under the fair value measurement guidance, because the valuation was based on significant unobservable inputs and involved management judgment and assumptions about market participants and pricing. In determining fair value of the acquired intangible assets, we determined the appropriate unit of measure, the exit market and the highest and best use for the assets. The income approach and cost approach were used to estimate the fair value. The income approach indicates the fair value of an asset based on the value of the cash flows that the asset can be expected to generate in the future through a discounted cash flow method. The income approach was used to determine the fair values of developed intellectual property, noncompetition agreement, contract backlog and customer relationships. We utilized a weighted average cost of capital rate of approximately19% to value these intangibles using the income approach. The inventory and tangible fixed assets were valued using the cost approach, which approximates the fair value. The goodwill will not be deductible for tax purposes.

We received the necessary financial information, including the audited financials of the Acquired MCU Business, during the September 2013 quarter. We completed our review of the financial information received, the fair value calculations and the related assumptions during the September 2013 quarter. As a result of the review, we decreased the fair value of the identifiable intangible assets and increased the fair value of goodwill by approximately $25.0 million, respectively.

The Acquired MCU Business contributed revenues of $7.2 million in our unaudited consolidated statements of operations for the three and six months ended September 30, 2013. As the Acquired MCU Business is fully integrated within our existing operations we are not able to calculate and report the net income contribution specific to the Acquired MCU Business.

Supplemental Pro Forma Financial Information:

The following pro forma summary gives effect to the acquisition of the Acquired MCU Business as if it had occurred at the beginning of fiscal 2013. The pro forma financial information reflects the business combination accounting effects resulting from this acquisition including our amortization charges from acquired intangible assets, the acquisition related expenses and the interest expenses on deferred payments of the acquisition. The summary is provided for illustrative purposes only and is not necessarily indicative of the consolidated results of operations for future periods.

The Acquired MCU Business's fiscal year ended on December 31, while our fiscal year ends on March 31. As such, the financial information of the Acquired MCU Business is included in the following unaudited pro forma so as to align with the reporting periods of our fiscal quarters. In the following unaudited pro forma table, the financial information for the three months ended September 30, 2013 includes the historical results of IXYS Corporation for the three months ended September 30, 2013; the financial information for the six months ended September 30, 2013 includes the historical results of IXYS Corporation for the six months ended September 30, 2013 and the historical results of the Acquired MCU Business for the three months ended March 31, 2013; the financial information for the three and six months ended September 30, 2012 includes the historical results of IXYS Corporation for the three and six months ended September 30, 2012 and the historical results of the Acquired MCU Business for the three and six months ended June 30, 2012 (in thousands, except per share data):

	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
	(unaudited)				(unaudited)
Pro forma net revenues	$	85,901	$	91,127	$	180,985	$	193,814
Pro forma net income	$	5,721	$	4,059	$	10,156	$	11,860
Pro forma net income per share (basic)	$	0.18	$	0.13	$	0.33	$	0.38
Pro forma net income per share (diluted)	$	0.18	$	0.13	$	0.32	$	0.37