NOTE 2 ACQUISITIONS AND DIVESTITURES

Acquisition of Vistek Assets

On October 10, 2012, the Company acquired substantially all of the assets of Advanced Vibration Technologies, Inc., a corporation doing business under the trade name of Vistek (Vistek), for a purchase price of $2.5 million. The purchase price was paid in cash at closing, of which $0.25 million was deposited at closing into escrow until October 10, 2013, to secure certain indemnification obligations of Vistek and its sole shareholder under the asset purchase agreement. The Company incurred $49 thousand in transaction costs, which have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. This acquisition expanded the Company’s vibration control and isolation product offerings. The results of the Vistek business are included in the results of the Company’s PPT Division.

Acquisition of ILX

On January 13, 2012, the Company acquired all of the outstanding capital stock of ILX Lightwave Corporation (ILX) by means of a merger of a wholly owned subsidiary of the Company with and into ILX. The total purchase price for the acquisition was $9.0 million. An initial purchase price of $9.3 million was paid in cash at closing, of which $1.2 million was deposited at closing into escrow until July 12, 2013, to secure certain indemnification and other obligations of the ILX securityholders. The purchase price was subsequently reduced by $0.3 million, based on a calculation of ILX’s net assets at closing. The Company incurred $0.1 million in transaction costs, which have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. This acquisition expanded the Company’s optical power meter, laser diode instrumentation and fiber optic source product offerings, and added laser diode and light emitting diode (LED) burn-in, test and characterization systems to its product portfolio. The results of ILX are included in the results of the Company’s PPT Division.

Purchase Price Allocation for 2012 Acquisitions

The consideration paid by the Company for its acquisitions 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 estimated fair values of intangible assets acquired were determined using an income approach. 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. Below is a summary of the purchase price, assets acquired and liabilities assumed:

(In thousands)	ILX			Vistek Business		Total
Assets acquired and liabilities assumed:
Cash	$	44		$	—	$	44
Accounts receivable	1,224			—		1,224
Inventories	861			81		942
Other assets	587			26		613
Goodwill	3,762			273		4,035
Developed technology	2,800			1,200		4,000
Customer relationships	1,100			900		2,000
Other intangible assets	1,090			20		1,110
Deferred income taxes	(1,841		)	—		(1,841		)
Other liabilities	(644		)	—		(644		)
	$	8,983		$	2,500	$	11,483

The goodwill related to the acquisition of ILX has been allocated to the Company’s PPT Division and will not be deductible for tax purposes, as this was a merger. The goodwill related to the Company’s acquisition of the Vistek business has been allocated to its PPT division and will be deductible for tax purposes, as this was an asset purchase.

Pro Forma Results

The actual net sales and net income of ILX and the Vistek business, from the respective closing dates of the acquisitions, that are included in the Company’s consolidated statement of operations for the year ended December 29, 2012 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 the acquired businesses as though each acquisition had occurred at the beginning of 2011. 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 2011.

	Year Ended
	December 29,			December 31,
(Unaudited, in thousands)	2012			2011
Actual:
Net sales	$	7,601		$	—
Net income attributable to Newport Corporation	$	1,126		$	—
Supplemental pro forma information:
Net sales	$	596,484		$	554,112
Net income (loss) attributable to Newport Corporation	$	(88,859	)	$	79,494

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 assumes that the amortization of acquired intangible assets began at the beginning of 2011 rather than on the acquisition dates. The result is a net increase in amortization expense of $0.1 million and $1.4 million for 2012 and 2011, respectively. In addition, $0.1 million in charges to cost of sales related to inventory that was marked up to fair value for purchase accounting was added back to pro forma net income for 2012 and subtracted from pro forma net income for 2011. Transaction costs totaling $0.5 million, which were incurred prior to the closing of the acquisition, are also excluded from pro forma net income.

Acquisition of Opticoat Assets

On December 29, 2011, the Company acquired substantially all of the assets of Opticoat SRL (Opticoat) for a purchase price of $3.0 million in cash, of which $2.0 million was paid upon the closing and $1.0 million was held back to secure certain obligations of Opticoat under the acquisition agreement. The Company paid $0.85 million in 2012 and absent any indemnification claims, the Company will pay the remaining $0.15 million in 2013. The present value of these payments was determined to be $2.9 million. The Company incurred $0.1 million in transaction costs, which have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying statements of operations. This acquisition expanded the Company’s capabilities and capacity in the manufacturing of precision optical components and coatings.

Acquisition of Ophir

On October 4, 2011, the Company acquired all of the outstanding capital stock of Ophir for $242.3 million in cash, of which $242.1 million was allocated to the purchase price and $0.2 million was allocated to the fair value of unearned compensation related to unvested stock options. The Company funded the purchase price with a combination of $162.8 million of cash on hand and $79.5 million of the net proceeds received from the senior secured credit facility obtained by the Company in October 2011 as described more fully in Note 8. After considering the cash held by Ophir as of the closing date, the net cash used by the Company for this transaction was $219.2 million. The Company incurred $4.7 million in transaction costs, which have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying statements of operations. This acquisition added Ophir’s precision infrared optics, laser measurement instrumentation and three-dimensional non-contact measurement sensors and equipment to the Company’s product offerings.

Acquisition of High Q

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 a subsequent payment of $1.3 million, which was 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 $0.4 million in transaction costs, which have been expensed as incurred and are included in selling, general and administrative expenses in the accompanying statements of operations. This acquisition broadened the Company’s ultrafast laser capabilities, particularly for applications in the life and health sciences and industrial markets, and expanded the Company’s presence in 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 ($4.5 million as of December 29, 2012), 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 December 29, 2012. As of December 29, 2012, the current portion of the loan was $0.3 million and is included in prepaid expenses and other current assets and the long-term portion of the loan was $4.1 million and is included in investments and other assets.

Purchase Price Allocation for 2011 Acquisitions

Below is a summary of the purchase price, assets acquired and liabilities assumed related to the Company’s acquisitions in 2011:

(In thousands)	Ophir			High Q			Opticoat			Total
Assets acquired and liabilities assumed:
Cash	$	23,233		$	5,989		$	—		$	29,222
Accounts receivable	18,732			1,494			—			20,226
Inventories	30,370			7,829			—			38,199
Other current assets	4,478			5,957			—			10,435
Goodwill	66,524			6,745			1,302			74,571
Developed technology	41,530			6,300			705			48,535
In-process research and development	9,560			—			—			9,560
Customer relationships	56,640			1,350			148			58,138
Other intangible assets	13,970			4,170			—			18,140
Property and equipment	41,652			1,436			917			44,005
Other noncurrent assets	13,917			225			—			14,142
Short-term borrowings	(7,082		)	(10,699		)	—			(17,781		)
Accounts payable	(7,756		)	(1,792		)	—			(9,548		)
Other current liabilities	(17,562		)	(3,690		)	—			(21,252		)
Long-term debt	(9,781		)	(4,161		)	—			(13,942		)
Deferred income taxes	(23,292		)	(2,063		)	—			(25,355		)
Other noncurrent liabilities	(10,973		)	(585		)	(137		)	(11,695		)
Non-controlling interests	(2,076		)	—			—			(2,076		)
	$	242,084		$	18,505		$	2,935		$	263,524

For the Company’s Ophir and Opticoat acquisitions, goodwill has been allocated to the Company’s Ophir Division and will not be deductible for tax purposes. For the Company’s High Q acquisition, goodwill has been allocated to the Company’s Lasers Division, a portion of which will be deductible for Austrian tax purposes.

In 2012, the Company determined that goodwill and other assets related to its Ophir Division were impaired and recorded impairment charges of $67.8 million related to goodwill, $62.6 million related to other acquired intangible assets and $0.5 million related to fixed assets. See Note 5 for additional information.

Divestiture of Hilger Crystals Limited

On July 19, 2010, the Company sold all of the outstanding capital stock of its Hilger Crystals Limited subsidiary. The Company received $4.0 million in cash as consideration for the sale. The Company recognized a net loss of $0.5 million related to this transaction in 2010. The net asset value of Hilger Crystals Limited at the time of the sale was $2.5 million, including $0.6 million of goodwill allocated to the business, and the Company incurred charges totaling $1.4 million related to the pension plan associated with the business (see Note 14 for additional detail), a charge of $0.4 million to write off an intercompany receivable that will not be repaid by the new owner and $0.2 million in legal and consulting fees related to this transaction. In 2012, the Company recognized a gain of $0.2 million related to an earn-out associated with this transaction. Such gains and losses have been included in (Gain) loss on sale of assets and related costs in the accompanying consolidated statements of operations. In addition, during 2010, the Company recognized $0.6 million in previously unrealized foreign currency losses as a non-operating expense upon the disposition of this business, which are included in interest and other expense, net in the accompanying consolidated statements of operations.

The assets of the Hilger Crystals Limited business had previously been included in the Company’s PPT Division. Below is a summary of the assets and liabilities disposed of:

(In thousands)
Assets and liabilities disposed of:
Current assets	$	1,714
Other assets	1,775
Current liabilities	(1,020		)
	$	2,469