Note 2.

Acquisitions

Oclaro’s Fiber Amplifier and Micro-Optics Business

In November 2013, the Company acquired certain assets of Oclaro used in the fiber amplifier and micro-optics business. The Company operates the business under the name II-VI Network Solutions Division (“Network Solutions”) and includes it with II-VI Laser Enterprise, GmbH (“Laser Enterprise”) in the Company’s new operating segment, Active Optical Products. Network Solutions is a manufacturer of fiber amplifiers and micro-optics used in the optical communications market. At closing, the Company paid $79.6 million in cash, plus a $4.0 million holdback amount for 14 months to address any post-closing adjustments or claims, and $5.0 million that was previously paid to Oclaro on September 12, 2013. The purchase price of the Network Solutions acquisition is summarized as follows ($000):

Net cash paid at acquisition	$	79,600
Cash previously paid		5,000
Holdback amount recorded in Other liabilities		4,000
Purchase price	$	88,600

The following table presents the allocation of the purchase price of the assets acquired at the date of acquisition ($000):

Assets
Inventories	$	11,314
Property, plant & equipment		9,700
Intangible assets		32,000
Goodwill		35,586
Total assets acquired	$	88,600

The goodwill of $35.6 million is included in the Active Optical Products segment and is attributed to the expected synergies and the assembled workforce of Network Solutions. All of the goodwill is deductible for income tax purposes.

The amount of revenues and net loss from operations of Network Solutions included in the Company’s Consolidated Statement of Earnings were $53.4 million and $2.6 million, respectively, for the year ended June 30, 2014.

Oclaro’s Switzerland-Based Semiconductor Laser Business

In September 2013, the Company acquired all of the outstanding shares of Oclaro Switzerland GmbH, a limited liability company formed under the laws of the Swiss confederation, as well as certain additional assets of Oclaro used in the semiconductor laser business. The Company operates the acquired business under the name II-VI Laser Enterprise and includes it in the Company’s new operating segment, Active Optical Products. Laser Enterprise is a manufacturer of high-power semiconductor laser components enabling fiber and direct diode laser systems for material processing, medical, consumer and printing applications. In addition, the segment manufactures pump lasers for optical amplifiers for both terrestrial and submarine applications and vertical cavity surface emitting lasers (VCSELS) for optical navigation, optical interconnects and optical sensing applications. At closing, the Company paid $90.6 million of cash, net of cash acquired of $1.7 million, a $6.0 million holdback amount by the Company for 15 months to address any post-closing adjustments or claims, and a $2.0 million holdback amount for potential post-closing working capital adjustments. The Company paid an additional $2.5 million for a working capital adjustment in accordance with the purchase agreement. The purchase price of the Laser Enterprise acquisition is summarized as follows ($000):

Net cash paid at acquisition	$	90,601
Cash paid for working capital adjustment		2,475
Holdback amount recorded in Other liabilities		6,000
Purchase price	$	99,076

The following table presents the allocation of the purchase price of the assets acquired and liabilities assumed at the date of acquisition ($000):

Assets
Inventories	$	26,071
Prepaid and other assets		1,035
Deferred income taxes		1,771
Property, plant & equipment		30,184
Intangible assets		28,900
Goodwill		37,507
Total assets acquired	$	125,468

Liabilities
Accounts payable	$	2,214
Deferred income taxes		8,647
Accrued income taxes		2,714
Other accrued liabilities		12,817
Total liabilities assumed	$	26,392
Net assets acquired	$	99,076

The goodwill of Laser Enterprise of $37.5 million is included in the Active Optical Products segment and is attributed to the expected synergies and the assembled workforce of Laser Enterprise. None of the goodwill is deductible for income tax purposes.

The amount of revenues and net loss from operations of Laser Enterprise included in the Company’s Consolidated Statement of Earnings for the year ended June 30, 2014 was $61.8 million and $17.4 million, respectively.

In conjunction with the acquisitions of Network Solutions and Laser Enterprise, the Company expensed transactions costs of approximately $3.7 million, net of tax of $0.2 million, for the year ended June 30, 2014. These costs were recorded within selling, general and administrative expenses in the Consolidated Statements of Earnings.

Pro Forma Information

The following unaudited pro forma consolidated results of operations for fiscal year 2014 have been prepared as if the acquisitions of Network Solutions and Laser Enterprise had occurred on July 1, 2012, the beginning of the Company’s fiscal year 2013, which is the fiscal year prior to the acquisitions. As a result, certain transaction related expenses of $3.7 million (net of tax) for the year ended June 30, 2014 were only included in the earliest period presented below ($000 except per share data).

	Year Ended June 30,
	2014		2013
Net revenues	$	734,912	$	732,474
Net earnings attributable to II-VI Incorporated	$	47,054	$	44,693
Basic earnings per share	$	0.76	$	0.72
Diluted earnings per share	$	0.75	$	0.70

The pro forma results are not necessarily indicative of what actually would have occurred if the transactions had occurred as described above, are not intended to be a projection of future results and do not reflect any cost savings that might be achieved from the combined operations.