3. Acquisition of Businesses

PolySwitch

On March 25, 2016, the company acquired 100% of the circuit protection business (“PolySwitch”) of TE Connectivity Ltd. for $350.0 million, subject to certain post-closing adjustments. At April 2, 2016, $70.0 million of the purchase price remained payable subject to certain Chinese regulatory approvals. The company expects to receive these approvals and pay the additional consideration during its fiscal 2016 second quarter. The PolySwitch business, which is split between the Automotive and Electronics segments,

has a leading position in polymer based resettable circuit protection devices, with a strong global presence in the automotive, battery, industrial, communications and mobile computing markets. PolySwitch has operations in Menlo Park, California and manufacturing facilities in Shanghai and Kunshan, China and Tsukuba, Japan. The acquisition allows the company to strengthen its global circuit protection product portfolio, as well as strengthen its presence in the automotive electronics and battery end markets. The acquisition also significantly increases the company’s presence in Japan. The company funded the acquisition with available cash and proceeds from a new credit facility

The following table represents the preliminary allocation of the total consideration to assets acquired and liabilities assumed in the acquisition of PolySwitch based on the Company’s preliminary estimate of their respective fair values at the acquisition date (in thousands):

Total purchase consideration:
Cash	$	280,000
Consideration payable upon certain Chinese regulatory approvals		70,000
Total purchase consideration	$	350,000
Preliminary allocation of consideration to assets acquired and liabilities assumed:
Cash	$	16,958
Current assets, net		56,992
Property, plant and equipment		63,903
Patented and unpatented technologies		56,137
Customer relationships		53,194
Goodwill		120,208
Other long-term assets		19,555
Current liabilities		(35,291	)
Other non-current liabilities		(1,656	)
	$	350,000

All PolySwitch goodwill and other assets and liabilities were recorded in the Automotive and Electronics segments and reflected both the Asia-Pacific and Europe geographical areas. The customer relationships are anticipated to be amortized over 15 years. The patented and unpatented technologies are anticipated to be amortized over 10 years. The goodwill resulting from this acquisition consists largely of the company’s expected future product sales and synergies from combining PolySwitch products with the company’s existing automotive and electronics product portfolio. A portion of the goodwill for the above acquisition is expected to be deductible for tax purposes.

As required by purchase accounting rules, the company recorded a $8.0 million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up is anticipated to be amortized during the second quarter of 2016, as a portion of this inventory is sold and charged to cost of goods sold as a non-cash charge for this step-up.

The company’s unaudited Condensed Consolidated Financial Statements as of April 2, 2016 include the opening balance sheet for the PolySwitch business but do not include any income statement activity of the acquired business as the operating results are not material to the company's financial statements for the three months ended April 2, 2016. The operating results of PolySwitch for the nine day period of March 25, 2016 through April 2, 2016 will be included within the company’s statement of income for the quarter ended July 2, 2016.

The company incurred legal, professional and other costs related to this acquisition aggregating approximately $5.9 million for the three months ended April 2, 2016. These costs were recognized as selling and administrative expenses and reflected as other non-segment costs.

Sigmar S.r.l

On October 1, 2015, the company acquired 100% of Sigmar S.r.l. (“Sigmar”). The total purchase price for Sigmar was $6.2 million, net of cash acquired and including additional consideration of $1.1 million paid in the first quarter of 2016 relating to certain working capital related adjustments and an earn-out clause payment. The purchase price remains subject to an inventory related post-closing adjustment and additional payments of up to $0.4 million, subject to the achievement of certain milestones.

Located in Ozegna, Italy, Sigmar is a leading global manufacturer of water-in-fuel and selective catalytic reduction (SCR) quality sensors, as well as diesel fuel heaters, solenoid valves and rotating oil filters for automotive and commercial vehicle applications. The acquisition further expanded the company’s automotive sensor product line offerings within its Automotive segment. The company funded the acquisition with available cash.

The following table sets forth the preliminary purchase price allocation for Sigmar acquisition-date net assets, in accordance with the purchase method of accounting with adjustments to record the acquired net assets at their estimated fair values:

Sigmar preliminary purchase price allocation (in thousands):
Cash	$	230
Current assets, net		4,011
Property, plant and equipment		1,097
Goodwill		2,271
Patents		2,845
Current liabilities		(1,478	)
Other non-current liabilities		(2,568	)
	$	6,408

All Sigmar goodwill and other assets and liabilities were recorded in the Automotive segment and reflected in the Europe geographical area. The patents are being amortized over 10 years. The goodwill resulting from this acquisition consists largely of the company’s expected future product sales and synergies from combining Sigmar’s products with the company’s existing automotive product offerings. Goodwill for the above acquisition is not expected to be deductible for tax purposes.

Pro Forma Results

The following table summarizes, on a pro forma basis, the combined results of operations of the company and PolySwitch as though the acquisition had occurred as of December 28, 2014. The company has not provided Pro forma results of operations for Sigmar as these results were not material to the company. The pro forma amounts presented are not necessarily indicative of either the actual consolidated results had the PolySwitch acquisition occurred as of December 28, 2014 or of future consolidated operating results

	For the Three Months Ended
(in thousands, except per share amounts)	April 2, 2016		March 28, 2015
Net sales	$	253,608	$	256,133
Income before income taxes		31,432		22,420
Net income		24,424		18,560
Net income per share — basic		1.09		0.82
Net income per share — diluted		1.08		0.81

Pro forma results presented above primarily reflect: (1) incremental depreciation relating to fair value adjustments to property, plant and equipment; (2) amortization adjustments relating to fair value estimates of intangible assets; (3) incremental interest expense on assumed indebtedness; and (4) additional cost of goods sold relating to the capitalization of gross profit which will be recognized during the company’s quarter ended July 2, 2016 as part of purchase accounting recognized for purposes of the pro forma as if it was recognized during the company’s first quarter of 2015. Pro forma adjustments described above have been tax affected using the company's effective rate during the respective periods.

The historical PolySwitch results for the three months ended April 2, 2016 and March 28, 2015 do not include a provision for income taxes. Income tax expense for the historical PolySwitch business was only provided at the end of the business’s fiscal year ended September 25, 2015.