Note 2 Acquisitions

In April 2015, we acquired Vitesse Semiconductor Corporation ("Vitesse"), which designs and markets a diverse portfolio of high-performance semiconductors, application software, and integrated turnkey systems solutions for carrier, enterprise and Internet of Things ("IoT") networks worldwide. Vitesse products enable the fastest-growing network infrastructure markets including mobile access/IP edge, cloud access and industrial-IoT networking. The consideration for this acquisition was $383.2 million for all the equity interests of Vitesse.

We recorded Vitesse's tangible and intangible assets and liabilities based on their estimated fair values as of the acquisition date and allocated the remaining purchase consideration to goodwill. The preliminary allocation is as follows (amounts in millions):



Cash and cash equivalents	$	16.2
Accounts receivable	9.4
Inventories	33.8
Other current assets	4.7
Property and equipment	2.4
Deferred income taxes, net	5.6
Other assets	2.3
Identifiable intangible assets	102.4
Goodwill	252.5
Current liabilities	(28.1		)
Long term debt	(17.7		)
Other non-current liabilities	(0.3		)
Total consideration	$	383.2

As of the acquisition date, the gross contractual amount of acquired accounts receivable of $10.0 million was expected to be fully collected.

The valuation of identifiable intangible assets and their estimated useful lives are as follows (dollar amounts in millions):



	Asset Amount		Weighted Average Useful Life (Years)
Completed technology	$	87.0	7
Customer relationships	14.4		9
Other	1.0		1
	$	102.4

Valuation methodology

The fair value of completed technology was estimated by performing a discounted cash flow analysis using the income approach. This method includes discounting the projected cash flows associated with Vitesse's current products over their expected life. Projected cash flows attributable to the completed technology were discounted to their present value at a rate commensurate with the perceived risk. The valuation of customer relationships was based on the income approach, also taking into account the profit margin a market participant distributor would obtain in selling Vitesse products. The useful lives of customer relationships are estimated based upon customer turnover data and management estimates. Other identifiable intangible assets consisted of backlog and tradename.

Assumptions used in forecasting cash flows for each of the identified intangible assets included consideration of the following:


•	Historical performance including sales and profitability.


•	Business prospects and industry expectations.


•	Estimated economic life of asset.


•	Development of new technologies.


•	Acquisition of new customers.


•	Attrition of existing customers.


•	Obsolescence of technology over time.

Depending on the structure of a particular acquisition, goodwill and identifiable intangible assets may not be deductible for tax purposes. We determined that goodwill and identifiable intangible assets related to the Vitesse acquisition are not deductible.

The factors that contributed to a purchase price resulting in the recognition of goodwill include:


•	Our belief the merger will create a more diverse semiconductor company with expansive offerings which will enable us to expand our product offerings.


•	Our belief we are committed to improving cost structures in accordance with our operational and restructuring plans which should result in a realization of cost savings and an improvement of overall efficiencies.

The purchase price allocation described above is preliminary, primarily with respect to tax contingency matters. A final determination of fair values of assets acquired and liabilities assumed relating to the transaction could differ from the preliminary purchase price allocation. We utilized the straight line method of amortization for completed technology, customer relationships and trade name.

In November 2013, we acquired Symmetricom, Inc. for consideration of $312.7 million. We acquired Symmetricom for its world-leading source of highly precise timekeeping technologies and solutions that enable next generation data, voice, mobile and video networks and services. In July 2014, we acquired Mingoa, Ltd., a provider of semiconductor IP for hardware accelerated Ethernet OAM and embedded tests and in September 2014, we acquired Centellax, Inc., a supplier of high-speed analog and RF semiconductor products for the optical communications and Ethernet datacom markets. The consideration for these acquisitions was $51.5 million. We acquired all the equity interests of each of these companies.

Supplemental pro forma data (unaudited)

The following supplemental pro forma data summarizes the results of operations for the periods presented, as if we completed the acquisition noted above as of the first day of 2014. The supplemental pro forma data reports actual operating results, adjusted to include the pro forma effect and timing of the impact in cost of goods sold from manufacturing profit in acquired inventory, amortization expense of identified intangible assets, incremental interest expense and the related tax effects of the acquisition. Post-acquisition net sales and earnings on a standalone basis are generally impracticable to determine, as on the acquisition date, we implemented a plan developed prior to the completion of the acquisition and began to immediately integrate the acquisitions into existing operations, engineering groups, sales distribution networks and management structure. Related to our acquisition of Vitesse, products acquired with the Vitesse acquisition amounted to approximately 3% of consolidated net sales for 2015. The supplemental pro forma information presented is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the transaction had been completed on the date indicated, does not reflect synergies that might have been achieved, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions we believe are reasonable under the circumstances. Supplemental pro forma data is as follows (amounts in millions, except per share data):



	2015		2014
Net sales	$	1,294.8	$	1,289.0
Net income (loss)	$	71.8	$	(26.2	)
Earnings per share:
Basic	$	0.76	$	(0.28	)
Diluted	$	0.75	$	(0.28	)