Acquisitions

The company accounts for acquisitions using the acquisition method in accordance with ASC

805,

“Business Combinations,” in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired business are included in the company’s consolidated financial statements from the date of the acquisition.

ON Portfolio

August

29,

2016,

the company acquired certain assets of select businesses (the “ON Portfolio”) of ON Semiconductor Corporation for

$104.0

million. The company funded the acquisition with available cash and proceeds from its credit facility

. The acquired business, which is included in the Electronics segment,

consists of a product portfolio that includes transient voltage suppression (“TVS”) diodes, switching thyristors and insulated gate bipolar transistors (“IGBTs”) for automotive ignition applications. The acquisition expands the company’s offerings in power semiconductor applications as well as increases its presence in the automotive electronics market. The ON Portfolio products have strong synergies with the company’s existing circuit protection business and will strengthen its channel partnerships and customer engagement.

The following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the ON Portfolio acquisition:

(in thousands)	Purcha se Price Allocation
Total purchase consideration:
Cash	$	104,000
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net	$	4,816
Customer relationships		31,800
Patented and unpatented technologies		8,800
Non-compete agreement		2,500
Goodwill		56,084
	$	104,000

All the ON Portfolio business goodwill and other assets were recorded in the Electronics segment and are reflected in the Americas and Europe geographic areas. The customer relationships are being amortized over

13.5

years. The patented and unpatented technologies are being amortized over

8.5

years. The non-compete agreement is being amortized over

years. The goodwill resulting from this acquisition consists largely of the company’s expected future product sales and synergies from combining the ON Portfolio products with the company’s existing

power semiconductor product portfolio.

$7.3

million of goodwill for the above acquisition is expected to be deductible for tax purposes.

As required by purchase accounting rules, the company recorded a

$0.7

million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. All of the step-up was amortized as a non-cash charge to cost of goods sold during

2016,

as the acquired inventory was sold, and reflected as other non-segment costs.

Included in the company’s consolidated statement of net income for the year ended

December

31,

2016

are net sales of approximately

$21.8

million since the

August

29,

2016

acquisition of the ON Portfolio business.

Menber’s

April

2016,

the company completed the acquisition of Menber’s S.p.A. (“Menber’s”) headquartered in Legnago, Italy for

$19.2

million, net of acquired cash and after settlement of a working capital adjustment. The company funded the acquisition with cash on hand and borrowings under the company’s revolving credit facility. The acquired business is part of the company's commercial vehicle product business within the Automotive segment and specializes in the design, manufacturing, and selling of manual and electrical high current switches and trailer connectors for commercial vehicles. The acquisition expands the company’s commercial vehicle products business globally.

The following table summarizes the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in the Menber’s acquisition:

(in thousands)	Purchase Price Allocation
Total purchase consideration:
Cash, net of acquired cash	$	19,162
Preliminary allocation of consideration to assets acquired and liabilities assumed:
Current assets, net	$	12,919
Property, plant, and equipment		1,693
Customer relationships		3,050
Patented and unpatented technologies		224
Trademarks and tradenames		1,849
Goodwill		8,091
Current liabilities		(7,220	)
Other non-current liabilities		(1,444	)
	$	19,162

All Menber’s goodwill and other assets and liabilities were recorded in the Automotive segment and reflected in the Europe geographic area. The customer relationships are being amortized over

years. The patented and unpatented technologies are being amortized over

years. The trademarks and tradenames are being amortized over

years. The goodwill resulting from this acquisition consists largely of the company’s expected future product sales and synergies from combining Menber’s products with the company’s existing automotive product portfolio. Goodwill for the above acquisition is not expected to be deductible for tax purposes.

As required by purchase accounting rules, the company recorded a

$0.2

million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during

2016,

as the acquired inventory was sold, with the charge reflected as other non-segment costs.

Included in the company’s consolidated statements of net income for the year ended

December

31,

2016

are net sales of approximately

$17.3

million since the

April

2016

acquisition of Menber’s.

PolySwitch

March

25,

2016,

the company acquired

100%

of the circuit protection business (“PolySwitch”) of TE Connectivity Ltd. for

$348.3

million, net of acquired cash and after settlement of certain post-closing adjustments. At

December

31,

2016,

$344.5

million of the

$348.3

million purchase price has been paid with the remaining consideration expected to be paid by the

second

quarter of

2017.

The company funded the acquisition with available cash on hand and borrowings under the company’s revolving credit facility. 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 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 following table summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the PolySwitch acquisition:

(in thousands)	Purchase Price Allocation
Total purchase consideration:
Original consideration	$	350,000
Post closing consideration adjustment received		(1,708	)
Acquired cash		(3,810	)
Acquired cash to be returned to seller		3,810
Total purchase consideration	$	348,292
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net	$	60,228
Property, plant, and equipment		51,613
Land lease		4,290
Patented and unpatented technologies		56,425
Customer relationships		39,720
Goodwill		165,088
Other long-term assets		11,228
Current liabilities		(35,280	)
Other non-current liabilities		(5,020	)
	$	348,292

All PolySwitch goodwill and other assets and liabilities were recorded in the Electronics and Automotive segments and reflected in all geographic areas. The customer relationships are being amortized over

years. The patented and unpatented technologies are being amortized over

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.

$103.8

million and

$61.3

million of the goodwill for the above acquisition has been assigned to the Electronics and Automotive segments, respectively, with

$64.9

million expected to be deductible for tax purposes.

As required by purchase accounting rules, the company recorded a

$6.9

million step-up of inventory to its fair value as of the acquisition date based on the preliminary valuation. The step-up was amortized as a non-cash charge to cost of goods sold during the

second

quarter of

2016,

as the acquired inventory was sold, and reflected as other non-segment costs.

Included in the company’s consolidated statements of net income for the year ended

December

31,

2016

are net sales of approximately

$126.5

million since the

March

25,

2016

acquisition of PolySwitch.

Sigmar S.r.l

October

2015,

the company acquired

100%

of Sigmar S.r.l. (“Sigmar”). The total purchase price for Sigmar was

$6.5

million, net of cash acquired and including estimated additional net payments of up to

$0.9

million, a portion of which is subject to the achievement of certain milestones.

Located in Ozegna, Italy, Sigmar is a leading global manufacturer of water-in-fuel sensors and also manufactures selective catalytic reduction (“SCR”) quality sensors and diesel fuel heaters 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 summarizes the purchase price allocation of the fair value of assets acquired and liabilities assumed in the Sigmar acquisition:

(in thousands)	Purchase Price Allocation
Total purchase consideration:
Cash, net of acquired cash	$	5,558
Estimated additional consideration payable		901
Total purchase consideration	$	6,459
Allocation of consideration to assets acquired and liabilities assumed:
Current assets, net	$	2,519
Property, plant, and equipment		1,097
Goodwill		4,084
Patents		2,845
Current liabilities		(1,518	)
Other non-current liabilities		(2,568	)
	$	6,459

All Sigmar goodwill and other assets and liabilities were recorded in the Automotive segment and reflected in the Europe geographic area. The patents are being amortized over

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 the acquired PolySwitch and the ON Portfolio businesses as though the acquisitions had occurred as of

December

28,

2014.

The company has not included pro forma results of operations for Menber’s or 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 or ON Portfolio acquisitions occurred as of

December

28,

2014

or of future consolidated operating results.

	For the Year Ended
(in thousands, except per share amounts)	2016		2015
Net sales	$	1,130,645	$	1,104,838
Income before income taxes		143,110		120,370
Net income		124,388		92,983
Net income per share — basic		5.51		4.12
Net income per share — diluted		5.47		4.09

Pro forma results presented above primarily reflect: (i) incremental depreciation relating to fair value adjustments to property, plant, and equipment; (ii) amortization adjustments relating to fair value estimates of intangible assets; (iii) incremental interest expense on assumed indebtedness; and (iv) additional cost of goods sold relating to the capitalization of gross profit 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 and ON Portfolio business results for the years ended

December

31,

2016

and

January

2016

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.

Income tax expense for the historical ON Portfolio business was not provided on a standalone basis.