ACQUISITION OF FEMTOLASERS

3 Months Ended

Apr. 04, 2015

ACQUISITION OF FEMTOLASERS

ACQUISITION OF FEMTOLASERS

NOTE 3ACQUISITION OF FEMTOLASERS

On February 11, 2015, the Company acquired all of the capital stock of FEMTOLASERS Produktions GmbH (FEMTOLASERS).  The initial purchase price of €9.1 million was paid in cash at closing and is subject to a net asset adjustment.  Based on the preliminary financial information provided by FEMTOLASERS, the Company has estimated an adjustment to the purchase price of approximately €1.6 million, which would result in a purchase price of €7.5 million (approximately $8.5 million).  The amount of this adjustment will be finalized following completion of the audit of FEMTOLASERS’ balance sheet as of the closing date, which the Company expects will occur during the second quarter of 2015.  Of the initial purchase price, €2.3 million was deposited at closing into escrow until thirty months after closing, to secure certain obligations of the FEMTOLASERS selling shareholders under the share purchase agreement, including the net asset adjustment.  The Company incurred $0.4 million in transaction costs, which have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying statements of income and comprehensive income.  FEMTOLASERS expands the Company’s offering of ultrafast laser products and enhances its technology base in this area.  The results of FEMTOLASERS have been included in the results of the Company’s Lasers Group as of the acquisition date.

Immediately following the closing of the transaction, the Company repaid €3.6 million (approximately $4.0 million) of FEMTOLASERS’ outstanding loans that were assumed as part of the acquisition.

The consideration paid by the Company for the acquisition of FEMTOLASERS is allocated to the assets acquired, net of the liabilities assumed, based upon their estimated fair values as of the date of the acquisition.  The excess of the purchase price over the estimated fair value of the assets acquired, net of the estimated fair value of the liabilities assumed, is recorded as goodwill.  The Company has not yet finalized the purchase price or its final evaluation of the fair value of certain assets acquired.  Any changes during the measurement period may have an impact on the allocation of the purchase price, including values assigned to assets, liabilities and the amount of estimated goodwill represented in the table below.

(In thousands)
Assets acquired and liabilities assumed:
Cash	$	78
Accounts receivable	2,007
Inventories	2,315
Deferred tax assets	596
Other assets	2,057
Goodwill	7,841
Developed technology	1,811
In-process research and development	1,664
Other intangible assets	543
Accounts payable	(3,417		)
Debt	(4,021		)
Deferred tax liabilities	(1,005		)
Other liabilities	(1,974		)
	$	8,495

The goodwill related to the acquisition of FEMTOLASERS has been allocated to the Company’s Lasers Group and will not be deductible for tax purposes.

The actual net sales and net income of FEMTOLASERS from February 11, 2015, the closing date of the acquisition, that were included in the Company’s consolidated statements of income and comprehensive income for the three months ended April 4, 2015, are set forth in the table below.  Also set forth in the table below are the pro forma net sales and net income of the Company during the three months ended April 4, 2015 and March 29, 2014, including the results of FEMTOLASERS as though the acquisition had occurred at the beginning of 2014.  This supplemental pro forma financial information is presented for information purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had occurred as of the beginning of 2014.

	Three Months Ended
	April 4,			March 29,
(Unaudited, in thousands)	2015			2014
Actual:
Net sales	$	350		$	—
Net loss attributable to Newport Corporation	$	(460	)	$	—
Supplemental pro forma information:
Net sales	$	156,924		$	149,328
Net income attributable to Newport Corporation	$	8,999		$	7,758

For the purposes of determining pro forma net income, adjustments were made to actual net income of the Company for both periods presented in the table above.  The pro forma net income assumes amortization of acquired intangible assets began at the beginning of 2014 rather than on February 11, 2015.  The result is a net increase in amortization expense of $0.1 million for each of the three months ended April 4, 2015 and March 29, 2014.  Transaction costs totaling $0.4 million, which were incurred prior to the closing of the acquisition, are excluded from pro forma net income.