2. Acquisitions

Acquisition of Forkardt

On May 9, 2013, Forkardt, Inc. ("Forkardt", formerly Cherry Acquisition Corporation) and Hardinge Holdings GmbH, direct wholly owned subsidiaries of the Company, and Hardinge GmbH, an indirect wholly owned subsidiary of the Company, acquired the Forkardt operations from Illinois Tool Works for $34.3 million, net of cash acquired. The acquisition of Forkardt will strengthen and expand our leadership position in specialty workholding solutions around the world. The acquisition, which was funded through $24.3 million in bank debt and $10.0 million in cash, has been included in the Aftermarket Tooling and Accessories business segment. Forkardt is a leading global provider of high-precision, specialty workholding devices with headquarters in Traverse City, Michigan. Forkardt has operations in the U.S., France, Germany, and Switzerland. The results of operations of Forkardt have been included in the consolidated financial statements from the date of acquisition. For the year ended December 31, 2013, we recognized $27.8 million in sales and net income of $0.6 million related to Forkardt which includes $1.0 million of inventory step up charges associated with acquisition purchase accounting. These amounts include sales of $6.1 million and net income of $0.6 million associated with the Forkardt Swiss business which was divested on December 31, 2013. Results associated with the Forkardt Swiss business have been reported as discontinued operations in the Consolidated Statement of Operations. We expensed acquisition related costs of $2.2 million for the year ended December 31, 2013 and reported them in selling, general and administration expenses in the Consolidated Statements of Operations.

The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their fair values. The identifiable intangible assets acquired, which primarily consist of customer relationships of $4.3 million, trade name of $5.3 million and technical know-how of $5.0 million, were valued using an income approach. The weighted average life of the acquired identifiable intangible assets subject to amortization was estimated at 17.3 years at the time of acquisition. The excess purchase price over the fair value of the assets acquired and the liabilities assumed was recorded as goodwill, of which $0.4 million is deductible for tax purposes. At December 31, 2013, the purchase price allocation is preliminary, pending the finalization of the working capital adjustments.

The preliminary allocation of purchase price to the assets acquired and liabilities assumed is as follows:

	May 9, 2013

	(in thousands)
Assets Acquired
Accounts receivable	$	5,521
Inventory		5,357
Other current assets		1,180
Property, plant and equipment		6,271
Other non-current assets		105
Trade name, customer list, and other intangible assets		14,614


Total assets acquired		33,048
Liabilities Assumed
Accounts payable and other current liabilities		3,342
Other non-current liabilities		1,134


Net assets acquired		28,572


Total purchase price		34,250


Goodwill	$	5,678

Disposal of Forkardt, Switzerland operations

On December 31, 2013, the Company divested of its Forkardt operations in Switzerland for CHF 5.6 million, net of cash sold ($6.3 million equivalent). The sale is subject to working capital adjustments. The Forkardt Swiss business had net assets of $1.2 million as of the sale date. Income from discontinued operations includes income before tax of $0.8 million (tax expense of $0.2 million) and a gain from the sale of the discontinued operations of $4.9 million (with no tax expense).

Supplemental Pro Forma Information

The following table illustrates the unaudited pro forma effect on the Company's consolidated operating results as if the Forkardt acquisition and related financing occurred on January 1, 2012.

	Year Ended December 31,

	2013		2012
	(in thousands)
Sales	$	342,919	$	371,176
Net income from continuing operations		7,909		18,956
Diluted earnings per share from continuing operations	$	0.66	$	1.62

The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.

Acquisition of Usach Technologies, Inc.

On December 20, 2012, the Company acquired 100% of the issued and outstanding capital stock of Usach Technologies, Inc. ("Usach"), an Illinois based manufacturer of high precision grinding machines and systems, for $18.3 million. The acquisition of Usach is included in the Company's Metalcutting Machine Solutions business segment. The purchase price was comprised of $11.3 million in cash and an earn-out provision valued at $7.5 million. The earn-out is based on the future economic performance of Usach as measured against certain minimum thresholds of earnings from operations before interest, taxes, depreciation and amortization through 2015. The maximum contractual earn-out is $7.5 million. The contingent liability associated with the earn-out is recorded in other liabilities on the Consolidated Balance Sheets. The results of operations of Usach have been included in the consolidated financial statements from the date of acquisition. We expensed acquisition related costs of $0.3 million in 2012 and recorded it in selling, general and administrative expense in the Consolidated Statements of Operations. The acquisition of Usach is not considered significant to the Company's consolidated financial position and results of operations.

The purchase price has been assigned to the assets acquired and the liabilities assumed based on their fair values. The identifiable intangible assets acquired, which primarily consist of customer relationships, trade name and technical know-how, were valued using an income approach. The weighted average life of the identifiable intangible assets acquired was estimated at 16.4 years at the time of acquisition. The excess purchase price over the fair value of the assets acquired and the liabilities assumed was recorded as goodwill, which is not deductable for tax purposes. As of December 31, 2013, the Company has finalized the purchase price allocation.

The final allocation of purchase price to the assets acquired and liabilities assumed is as follows:

	December 20, 2012

	(in thousands)
Assets Acquired
Cash and cash equivalents	$	2,482
Accounts receivable, net		2,514
Inventory, net		5,167
Other current assets		788
Property, plant and equipment		62
Trade name, customer list, and other intangible assets		9,400


Total assets acquired		20,413
Liabilities Assumed
Accounts payable and other current liabilities		6,807
Other non-current liabilities		3,513


Net assets acquired		10,093


Purchase price, including cash received		18,750


Goodwill	$	8,657