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Business Acquisitions (Notes) | 6 Months Ended
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Sep. 30, 2014
Business Combinations [Abstract] |
Business Acquisitions | Business Acquisitions Acquisition of ISSC On July 17, 2014, the Company acquired an 83.5% interest in Taiwan based ISSC Technologies Corporation (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 and expects to acquire the remaining shares through a follow-on merger which is expected to close in the second half of fiscal 2015. The acquisition was accounted for under the acquisition method of accounting, with the Company identified as the acquirer, and the operating results of ISSC have been included in the Company's condensed consolidated financial statements as of the closing date of the acquisition with the noncontrolling interest deducted to arrive at net income. 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 fair value of the noncontrolling interest was calculated based on the expected purchase price of the remaining shares available. The Company retained an independent third-party appraiser to assist management in 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 table below represents the preliminary allocation of the purchase price 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 | July 17, 2014
Cash and cash equivalents | $ | 15,120 |
Short-term investments | 27,063 |
Accounts receivable, net | 8,792 |
Inventories | 19,160 |
Prepaid expenses and other current assets | 2,501 |
Property, plant and equipment, net | 2,637 |
Goodwill | 152,243 |
Purchased intangible assets | 147,800 |
Other assets | 1,370 |
Total assets acquired | 376,686 |
Liabilities assumed |
Accounts payable | (9,860 | )
Other current liabilities | (16,997 | )
Long-term income tax payable | (4,402 | )
Deferred tax liability | (25,126 | )
Other long-term liabilities | (245 | )
Total liabilities assumed | (56,630 | )
Net assets acquired including noncontrolling interest | 320,056 |
Less: noncontrolling interest | (52,467 | )
Net assets acquired | $ | 267,589 |
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.
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 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 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 condensed consolidated statements of income for the three and six months ended September 30, 2014 was approximately $16.9 million and $8.2 million, respectively. The following unaudited pro-forma consolidated results of operations for the three and six months ended September 30, 2014 and 2013 assume the ISSC acquisition occurred as of April 1, 2013. 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):
| Three Months Ended |  | Six Months Ended
| September 30, |  | September 30,
| 2014 |  | 2013 |  | 2014 |  | 2013
Net sales | $ | 547,543 |  |  | $ | 512,150 |  |  | $ | 1,097,473 |  |  | $ | 993,191 |
Net income attributable to Microchip Technology | 95,261 |  |  | 92,527 |  |  | 178,729 |  |  | 161,602 |
Net income attributable to Microchip Technology common stockholders per share - basic | $ | 0.47 |  |  | $ | 0.47 |  |  | $ | 0.89 |  |  | $ | 0.82 |
Net income attributable to Microchip Technology common stockholders per share - diluted | $ | 0.42 |  |  | $ | 0.43 |  |  | $ | 0.79 |  |  | $ | 0.75 |
Acquisition of Supertex On April 1, 2014, the Company acquired Supertex, 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 in 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 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, 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 |  | September 30, 2014
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 |  |  | — |  |  | 3,997 |
Other current assets | 16,113 |  |  | — |  |  | 16,113 |
Property, plant and equipment, net | 15,679 |  |  | — |  |  | 15,679 |
Goodwill | 133,713 |  |  | (1,205 | ) |  | 132,508 |
Purchased intangible assets | 89,600 |  |  | — |  |  | 89,600 |
Other assets | 325 |  |  | — |  |  | 325 |
Total assets acquired | 451,371 |  |  | (1,205 | ) |  | 450,166 |
Liabilities assumed |  |  |  |  |
Accounts payable | (8,481 | ) |  | — |  |  | (8,481 | )
Accrued liabilities | (19,345 | ) |  | (25 | ) |  | (19,370 | )
Long-term income tax payable | (3,796 | ) |  | — |  |  | (3,796 | )
Deferred tax liability | (27,972 | ) |  | 1,230 |  |  | (26,742 | )
Total liabilities assumed | (59,594 | ) |  | 1,205 |  |  | (58,389 | )
Net assets acquired | $ | 391,777 |  |  | $ | — |  |  | $ | 391,777 |
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.
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 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 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 condensed consolidated statements of income for the three months ended September 30, 2014 was approximately $16.6 million. The amount of Supertex net sales included in the Company's condensed consolidated statements of income for the six months ended September 30, 2014 was approximately $34.4 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 in the three months ended September 30, 2014. The following unaudited pro-forma consolidated results of operations for the three months ended June 30, 2014 and 2013 assume the Supertex acquisition occurred as of April 1, 2013. 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):
| Three Months Ended |  | Six Months Ended
| September 30, |  | September 30,
| 2014 |  | 2013 |  | 2014 |  | 2013
Net sales | $ | 546,243 |  |  | $ | 510,418 |  |  | $ | 1,077,588 |  |  | $ | 986,939 |
Net income | 98,391 |  |  | 91,271 |  |  | 203,896 |  |  | 152,235 |
Basic earnings per share | $ | 0.49 |  |  | $ | 0.46 |  |  | $ | 1.02 |  |  | $ | 0.77 |
Diluted earnings per share | $ | 0.44 |  |  | $ | 0.42 |  |  | $ | 0.91 |  |  | $ | 0.71 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4922-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4934-128472 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4926-128472 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4845-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463 + Details
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