Acquisitions

12 Months Ended

Nov. 02, 2019

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 agreement pursuant to which the Company acquired Linear (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 Company believes 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, consolidated balance sheets, consolidated statements of cash flows and shareholders’ equity for fiscal 2017. The amount of revenue attributable to Linear included in the Company's consolidated statements of income for fiscal 2017 was $913.2 million.

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



Cash consideration (1)	$	11,092,047
Issuance of common stock (2)	4,593,655
Fair value of replacement stock-based and cash awards (3)	70,954
Total estimated purchase consideration	$	15,756,656

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(1)The cash consideration was funded utilizing cash on hand, the net proceeds from bridge credit and term loan facilities and the proceeds received from the Company's issuance of the Notes (as defined in Note 14, Debt, of these Notes to Consolidated Financial Statements). 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.

(2)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).

(3)In connection with the Acquisition, the Company issued equity and cash awards to certain Linear employees to replace Linear equity awards. This 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.

During fiscal 2018, the Company completed the acquisition accounting for the Acquisition. The following is a summary of the amounts recognized in accounting for the Acquisition:



Cash and cash equivalents	$	1,466,445
Marketable securities	100,246
Accounts receivable (1)	143,542
Inventories	461,695
Prepaid expenses and other assets	14,782
Property, plant and equipment	462,285

Intangible assets (Note 2f)	5,157,300
Goodwill (Note 2f)	10,533,919
Total assets	18,340,214
Assumed liabilities	190,925
Deferred tax liabilities	2,392,633
Total estimated purchase consideration	$	15,756,656

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(1)The fair value of accounts receivable was $143.5 million, with the gross contractual amount being $145.2 million, of which the Company estimates that $1.7 million is uncollectible.

The acquired intangible assets 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		Weighted Average Useful Lives (in Years)

Technology-based	$	1,046,100	8
Trade name	72,200		7
Customer relationships	4,039,000		12

Total amortizable intangible assets	$	5,157,300	11

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 did not meet the criteria for recognition separately from goodwill because they are part of future development and growth of the business.

There were no significant contingent obligations assumed as part of the Acquisition.

The Company recognized $47.5 million of transaction-related costs, including legal, accounting and other related fees that were expensed in fiscal 2017. These costs are included in the consolidated statements of income within SMG&A expenses.

The following unaudited pro forma consolidated financial information combines the unaudited results of the Company for the year ended October 28, 2017 and the unaudited results of Linear for the year ended October 28, 2017 and assumes that the Acquisition, which closed on March 10, 2017, was completed on November 1, 2015 (the first day of fiscal 2016). 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 stock-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.


	Pro Forma Twelve Months Ended
	October 28, 2017 (1)
Revenue	$	5,832,412
Net income	$	1,133,097
Basic net income per common share	$	3.07
Diluted net income per common share	$	3.03

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(1)Balances have been restated to reflect the adoption of Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (ASU 2014-09). See Note 2a, Principles of Consolidation, in the Notes to Consolidated Financial Statements.

Other Acquisitions

The Company has not provided pro forma results of operations for any other acquisitions completed in fiscal 2019, fiscal 2018 or fiscal 2017 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 statements of income from the date of each acquisition.