8. Acquisition

On August 21, 2014, Cirrus Logic completed the acquisition of Wolfson Microelectronics plc (the “Acquisition”), a public limited company incorporated in Scotland (“Wolfson”). Upon completion of the acquisition, Wolfson was re-registered as a private limited company. Wolfson is a supplier of high performance, mixed-signal audio solutions for the consumer electronics market. The Acquisition accelerates Cirrus Logic’s strategic roadmap, further strengthens our technology portfolio with the addition of MEMS microphones and extensive software capabilities, while significantly expanding our development capacity.

The enterprise value for Wolfson in connection with the Acquisition was approximately £283 million (approximately $469 million based on a U.S. dollar to pound sterling exchange rate of 1.659), and was based on the agreed upon offer of £2.35 per share (the “Offer”) for the entire issued and to be issued share capital of Wolfson. Cirrus Logic financed the Acquisition through a combination of existing cash on Cirrus Logic’s balance sheet and $225 million in debt funding from Wells Fargo Bank, National Association, as discussed below in Note 9. Upon the completion of the Acquisition, in the second quarter of fiscal year 2015, the Company recorded approximately $12.0 million of realized losses on foreign currency fluctuations in the initial valuation exchange rate of 1.682 (U.S. dollar to pound sterling) and the actual exchange rate at Acquisition date of 1.659. The loss is included in the consolidated condensed statements of income under the caption “Other expense” for the nine months ended December 27, 2014.

The Acquisition was accounted for as a business purchase pursuant to ASC Topic 805, Business Combinations, and the operations of Wolfson have been included in the Company’s consolidated financial statements since August 21, 2014, the date of acquisition. The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition as of December 27, 2014 (in thousands):


		Amount
Cash and cash equivalents	$	25,342
Inventory		30,530
Other current assets		16,226
Property, plant and equipment		27,634
Intangible assets		175,987
Pension assets		1,625
Total identifiable assets acquired	$	277,344

Deferred tax liability - current		(11,958)
Deferred revenue		(551)
Other accrued liabilities		(41,417)
Other long-term liabilities		(2,449)
Total identifiable liabilities assumed	$	(56,375)
Net identifiable assets acquired	$	220,969
Goodwill		248,512
Net assets acquired	$	469,481

The goodwill of $248.5 million arising from the Acquisition is attributable primarily to expected synergies and the product and customer base of Wolfson. None of the goodwill is expected to be deductible for income tax purposes. As of December 27, 2014, the changes in the recognized amounts of goodwill resulting from the Acquisition are as follows:



		September 27,		Fair Value		December 27,
		2014		Adjustments		2014
Inventory	$	28,658	$	1,872	$	30,530
Other current assets		15,633		593		16,226
Property, plant and equipment		29,093		(1,459)		27,634
Deferred tax liability - current		(11,483)		(475)		(11,958)

Total Goodwill	$	249,043	$	(531)	$	248,512

The components of the acquired intangible assets and related weighted average amortization periods are detailed below (in thousands):



Intangible assets		Amount	Weighted-average Amortization Period (years)
Developed technology	$	74,247	6.2
Technology intellectual property		14,572	5.3
Trademark		1,437	1.3
In-process research & development		72,750	7.3
Customer relationships		12,981	10.0
Total	$	175,987

The initial allocation of the purchase price is preliminary and subject to completion, including the areas of taxation, inventory, real property, intangible assets, other assets, deferred revenue, and other liabilities, where valuation assessments are in progress. The adjustments arising from the completion of the outstanding matters may materially affect the preliminary purchase accounting and would be retroactively reflected in the financial statements as of December 27, 2014, and for the interim periods then ended.

The Company recognized a total of $18.1 million of acquisition related costs that were expensed in the second and third quarters of fiscal year 2015. These costs are included in the consolidated condensed statements of income in the line item entitled “Acquisition related costs.” Restructuring costs related to the Acquisition were $1.5 million for the nine months ended December 27, 2014, primarily related to severance payments and the consolidation of our sales functions. These costs are included in the line item “Restructuring and other” on the consolidated condensed statements of income. Prior year credits related to changes in estimates for the Tucson, Arizona design center facility, due to a new sublease on the vacated property in connection with the closing of this facility.

The Company’s consolidated condensed statements of income for the nine months ending December 27, 2014 included $43.8 million of revenue attributable to Wolfson, from the acquisition date to the end of the period. Earnings disclosure related to Wolfson for the period ending December 27, 2014, is excluded as it would be impracticable, due to the integration of Wolfson’s operations with the Company’s operations, primarily the allocation of costs and services shared across both companies’ product lines.

Giving pro forma effect to the Acquisition as if it had occurred as of March 30, 2014, the beginning of the Company’s fiscal year, and after applying the Company’s accounting policies and adjusting the results to reflect these changes since March 30, 2014, $88.0 million of pro forma revenue would have been attributable to Wolfson for the nine months ended December 27, 2014. Disclosure of pro forma earnings attributable to Wolfson is excluded as it would be impracticable, due to the integration of Wolfson’s operations with the Company’s operations, primarily the allocation of costs and services shared across both companies’ product lines.