Acquisition

9 Months Ended

Oct. 01, 2011

Acquisition [Abstract]

Acquisition

NOTE 5 ACQUISITION

On July 29, 2011, the Company acquired all of the capital stock of High Q Technologies GmbH (High Q). The total purchase price was $18.5 million, consisting of an initial purchase price of $17.2 million, $2.9 million of which was deposited into escrow until December 31, 2013 to secure representations and warranties made by the sellers, and $1.3 million of which was subsequently paid to the sellers based on a calculation of High Q's net assets at closing. After considering the cash held by High Q as of the closing date, the net cash used by the Company for this transaction was $12.5 million. The Company incurred $0.3 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. This acquisition broadens the Company's ultrafast laser capabilities, particularly for applications in the life and health sciences and industrial markets, and expands the Company's presence in the European laser markets.

Prior to the closing of the acquisition, High Q sold the building that houses its corporate headquarters and its operations to a company established by the then-largest shareholder of High Q for €3.5 million ($4.7 million as of October 1, 2011), and leased the building from the purchaser for a period of at least ten years. High Q financed the purchase price of the building pursuant to a loan agreement with the purchaser that is secured by a mortgage on the building in favor of High Q. Such loan will be repaid over ten years and accrues interest at an annual rate of 2.0%. The principal balance of the loan was €3.4 million ($4.4 million) as of October 1, 2011. As of October 1, 2011, the current portion of the loan was $0.2 million and was included in prepaid expenses and other current assets and the long-term portion of the loan was $4.2 million and was included in other assets.

The consideration paid by the Company for the acquisition 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 amount of goodwill recorded reflects factors such as the value of expected future product line expansion, the value of the expected synergies to be derived from combining the operations of the business acquired, and the value of the acquired workforce. Below is a summary of the purchase price, assets acquired and liabilities assumed:

(In thousands)
Assets acquired and liabilities assumed:
Cash	$	5,989
Other current assets		10,516
Goodwill		6,880
Developed technology		6,300
Customer relationships		1,350
Other intangible assets		4,170
Other assets		6,191
Liabilities		(22,891	)
	$	18,505

The $6.9 million in goodwill has been allocated to the Company's Lasers Division, a portion of which will be deductible for Austrian tax purposes.

The actual net sales and net income of High Q from July 29, 2011, the closing date of the acquisition, that were included in the Company's consolidated statements of income for the three and nine months ended October 1, 2011 and October 2, 2010, 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 such periods, including the results of High Q as though the acquisition had occurred at the beginning of 2010. 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 each reporting period.

	Three Months Ended				Nine Months Ended
	October 1,		October 2,		October 1,		October 2,
(In thousands)	2011		2010		2011		2010
Actual:
Net sales	$	4,873	$	—	$	4,873	$	—
Net income	$	677	$	—	$	677	$	—
Supplemental pro forma information:
Net sales	$	127,182	$	127,865	$	398,573	$	356,586
Net income	$	10,617	$	11,873	$	45,894	$	23,733

For the purposes of determining pro forma net income, adjustments were made to actual net income of the Company for all periods presented in the table above. The pro forma net income excludes depreciation on the building that houses High Q's corporate headquarters and operations, which was sold in connection with the acquisition, and includes rent associated with the lease back of the building. Transaction costs, which were incurred prior to the closing of the acquisition, are also excluded from pro forma net income for the three and nine months ended October 1, 2011. These adjustments were not material. In addition, the pro forma net income excludes historical intangible asset amortization of $0.5 million for the three and nine months ended October 1, 2011, and replaces it with amortization of acquired identifiable intangible assets of $0.2 million and $0.7 million for the three and nine months ended October 1, 2011, respectively, and $0.7 million and $2.3 million for the three and nine months ended October 2, 2010, respectively.