Acquisitions

Linear Technology Corporation

On the Acquisition Date, the Company completed its acquisition of all of the voting interests of Linear, an independent manufacturer of high performance analog integrated circuits. Under the terms of the Merger Agreement, Linear stockholders, received, for each outstanding share of Linear common stock, $46.00 in cash and 0.2321 of a share of the Company's common stock at the closing. The combination creates the premier analog technology company with the industry’s most comprehensive suite of high-performance analog offerings. The results of operations of Linear from the Acquisition Date are included in the Company’s consolidated statements of income for the three and six months ended April 29, 2017. The amount of revenue attributable to Linear included in the Company's consolidated statements of income for the three and six months ended April 29, 2017 was $147.5 million.

The Acquisition Date fair value of the consideration transferred in the Acquisition consisted of the following:



(in thousands)
Cash consideration (a)	$	11,092,047
Issuance of common stock (b)	4,593,655
Fair value of replacement share-based and cash awards (c)	70,954
Total estimated purchase consideration	$	15,756,656

_______________

(a)The cash consideration was funded utilizing cash on hand, the net proceeds from the bridge and term loan agreements and the proceeds received from the Company's issuance of the Notes. This reflects the cash portion of the purchase consideration paid to Linear stockholders of approximately $11.1 billion, as well as $16.3 million for the cash-settled portion of consideration paid to holders of restricted stock and restricted stock awards that automatically vested at the effective time of the Acquisition pursuant to pre-existing change-of-control agreements.

(b) The fair value is based on the issuance of approximately 55.9 million shares of the Company's common stock with a per-share value of $82.20 (the closing price of the Company's common stock on The NASDAQ Global Select Market on the Acquisition Date).

(c) In connection with the Acquisition, the Company issued equity and cash awards to certain Linear employees to replace Linear equity awards. The amount represents the portion of the fair value of the replacement equity and cash awards associated with services rendered though the Acquisition Date and have been included as a component of the total estimated purchase consideration.

The preliminary fair values of assets acquired and liabilities assumed as of the Acquisition Date is set forth in the table below. The excess of the purchase price over the aggregate fair value of identifiable net assets acquired was recorded as goodwill. None of the goodwill is expected to be deductible for tax purposes. These preliminary fair values were determined through established and generally accepted valuation techniques and are subject to change during the measurement period as valuations are finalized. As a result, the Acquisition accounting is not complete and additional information that existed at the Acquisition Date may become known to the Company during the remainder of the measurement period. As of the filing date of this Quarterly Report on Form 10-Q, the Company is still in the process of valuing Linear's assets, including inventory, fixed assets, deferred taxes, intangible assets, and liabilities, including deferred revenue.



(in thousands)
Cash and cash equivalents	$	1,411,550
Marketable securities	100,246
Accounts receivable (a)	154,175
Inventories	437,907
Prepaid expenses and other assets	14,782
Property, plant and equipment	461,565
Intangible assets (Note 10)	5,140,400
Goodwill (Note 10)	10,584,333
Total assets	$	18,304,958
Assumed liabilities	138,452
Deferred tax liabilities	2,409,850
Total estimated purchase price	$	15,756,656

____________


(a)	The fair value of accounts receivable was $154.2 million, with the gross contractual amount being $155.9 million, of which the Company estimates that $1.7 million is uncollectible.

The amortizable intangible assets acquired consisted of the following, which are being amortized on a straight-line basis over their estimated useful lives or on an accelerated method of amortization that is expected to reflect the estimated pattern of economic use.



	Fair Value (in thousands)		Weighted Average Useful Lives (in Years)

Technology-based	$	1,046,100	8
Trade name	72,200		7
Customer relationships	4,022,100		11
Total amortizable intangible assets	$	5,140,400	10

The goodwill recognized is attributable to synergies which are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future technologies that have yet to be determined and Linear's assembled workforce. Future technologies do not meet the criteria for recognition separately from goodwill because they are part of future development and growth of the business. As of the filing date of this Quarterly Report on Form 10-Q, the assignment of goodwill resulting from the Acquisition to the Company's reporting units has not been completed.

There were no significant contingencies assumed as part of the Acquisition.

The Company recognized $38.8 million and $46.8 million of transaction-related costs, including legal, accounting and other related fees that were expensed in the three- and six-month periods ended April 29, 2017, respectively. These costs are included in the condensed consolidated statements of income in operating expenses within SMG&A expenses. The Company may incur additional transaction-related costs within the next twelve months related to the Acquisition that will be expensed as incurred.

The following unaudited pro forma consolidated financial information combines the unaudited results of the Company for the three and six months ended April 29, 2017 and the unaudited results of Linear for the three and six months ended January 28, 2017 and assumes that the Acquisition, which closed on March 10, 2017, was completed on November 1, 2015 (the first day of the Company’s 2016 fiscal year). The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for amortization expense of acquired intangible assets, transaction-related costs, a step-up in the value of acquired inventory and property, plant and equipment, compensation expense for ongoing share-based compensation arrangements replaced and interest expense for the debt incurred to fund the Acquisition, together with the consequential tax effects. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the operating results of the Company that would have been achieved had the Acquisition actually taken place on November 1, 2015. In addition, these results are not intended to be a projection of future results and do not reflect events that may occur after the Acquisition, including but not limited to revenue enhancements, cost savings or operating synergies that the combined Company may achieve as a result of the Acquisition.



(thousands, except per share data)	Pro Forma Three Months Ended
	April 29, 2017		April 30, 2016
Revenue	$	1,366,946	$	1,137,468
Net income	$	119,134	$	58,695
Basic net income per common share	$	0.33	$	0.16
Diluted net income per common share	$	0.32	$	0.16



(thousands, except per share data)	Pro Forma Six Months Ended
	April 29, 2017		April 30, 2016
Revenue	$	2,729,393	$	2,218,047
Net income	$	351,625	$	(136,034	)
Basic net income per common share	$	0.96	$	(0.37	)
Diluted net income per common share	$	0.95	$	(0.37	)

Other Acquisitions

The Company has not provided pro forma results of operations for any other acquisitions completed in the three- or six-month periods ended April 29, 2017 or April 30, 2016 herein as they were not material to the Company on either an individual or an aggregate basis. The Company included the results of operations of each acquisition in its consolidated statement of income from the date of each acquisition.