Note 3 Business Combinations

6 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

3. Business Combinations

Acquired MCU Business

On June 27, 2013, we completed the acquisition of an 8-bit microcontroller product line, or the Acquired MCU Business, from 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 was 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 was $50.0 million. The closing payment was $20.0 million and we were obligated to pay $30.0 million in two installment payments of $15.0 million each. The first installment and interest were paid on June 26, 2014 and the second installment is due on December 31, 2014. The remaining installment bears simple interest at a variable annual rate equal to six-month LIBOR plus a 3 percentage point margin. The deferred payments and interest are included in “Accrued expenses and other current liabilities” on our unaudited condensed consolidated balance sheets.

We incurred $403,000 in legal and consulting costs related to the acquisition in fiscal 2014. The costs incurred were fully expensed and included in “Selling, general and administrative expenses”, or SG&A expenses, on our unaudited condensed consolidated statements of operations.

The following table summarizes the values of the assets acquired at the acquisition date (in thousands):

		Purchase Price Allocation
		(unaudited)
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 anon-competition 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, the non-competition agreement, contract backlog and customer relationships. The goodwill arising from the acquisition was largely attributable to the synergies expected to be realized after our acquisition and integration of the Acquired MCU Business. The goodwill is not deductible for tax purposes.

Identified intangible assets resulting from the acquisition based on our valuation consisted of the following (in thousands):

					Estimated
		Fair Value		Amortization	Useful Life
		(In thousands)		Method	(In months)
				(unaudited)
Developed intellectual property		$	11,504	Straight-line	60
Customer relationships			6,920	Accelerated	36
Contract backlog			5,155	Straight-line	9
Non-competition agreement			421	Straight-line	60
	Total	$	24,000

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 table 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 financial 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 financial results of IXYS Corporation for the six months ended September 30, 2013 and the historical financial results of the Acquired MCU Business for the three months ended March 31, 2013 (in thousands, except per share data):

	Three Months Ended		Six Months Ended
	September 30, 2013		September 30, 2013
	(unaudited)		(unaudited)
Pro forma net revenues	$	85,901	$	180,985
Pro forma net income	$	5,721	$	10,156
Pro forma net income per share (basic)	$	0.18	$	0.33
Pro forma net income per share (diluted)	$	0.18	$	0.32

Other Acquisition

In the quarter ended June 30, 2014, we completed an acquisition for a cash consideration of $2.3 million, net of cash acquired. The acquisition resulted in $2.8 million of goodwill and we assumed debt of $723,000. During the quarter ended September 30, 2014, we increased the goodwill by $17,000 due to changes in net value of acquired assets. The goodwill balance as of September 30, 2014 reflected a reduction of$196,000caused by changes in the foreign exchange translation rate. This acquisition was not significant to our unaudited condensed consolidated financial statements for the current period.

As of September 30, 2014, we had not yet finalized the valuation of the deferred tax assets in connection with this acquisition. The finalization of these amounts is not expected to have a material effect on our consolidated financial position.