UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 22,
2008
Date
of Report (Date of earliest event reported)
EMCORE
CORPORATION
Exact
Name of Registrant as Specified in its Charter
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New Jersey
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0-22175
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22-2746503
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State
of Incorporation
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Commission
File Number
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IRS
Employer Identification Number
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10420 Research Road, SE,
Albuquerque, NM 87123
Address
of principal executive offices, including zip code
(505)
332-5000
Registrant's
telephone number, including area code
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
|
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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|
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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|
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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[Missing Graphic Reference]
EMCORE
Corporation (the “Company”) hereby amends and supplements Item 9.01 of its
Current Report on Form 8-K that was filed with the Securities and Exchange
Commission (“SEC”) on February 25, 2008 to include the financial statements of
the telecom-related assets of Intel Corporation’s Optical Platform Division that
were acquired by the Company on February 22, 2008. The Company also
hereby amends and supplements Item 9.01 of its Current Report on Form 8-K that
was filed with the SEC on April 24, 2008 to include the financial statements of
the enterprise, storage, and connects cable-related assets of Intel
Corporation’s Optical Platform Division that were acquired by the Company on
April 20, 2008. The Company also hereby amends and supplements
unaudited pro forma financial information as required by Item 9.01
The
assets acquired pursuant to the February 22, 2008 acquisition and the April 20,
2008 acquisition are together referred to as the “Business”.
Item 9.01 Financial
Statements and Exhibits.
(a) Financial
statements of businesses acquired.
Historically,
audited financial statements required by Rule 3-05 of Regulation S-X for the
Business were not prepared by Intel Corporation because the Business was not
managed as a stand-alone business. As such, the financial statements and other
financial information for the Business cannot be provided without unreasonable
effort or expense. Pursuant to a letter dated April 29, 2008 from the SEC, the
SEC staff stated that it would not object to the Company filing
audited annual and unaudited interim statements of assets to be acquired of the
Business and statements of net revenues and direct expenses of the Business, in
satisfaction of Rule 3-05 of Regulation S-X. The Company believes the omission
of the full financial statements and other financial information for these
acquisitions would not have a material impact on a reader’s understanding of the
Company’s financial results, condition and related trends.
The
following financial statements of the Business are filed as Exhibit 99.1 and
incorporated herein by this reference:
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·
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Independent
Auditors’ Report
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·
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Audited
Statements of Assets to be Acquired as of December 29, 2007 and
December 30, 2006
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|
·
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Audited
Statements of Net Revenues and Direct Expenses for the three years ended
December 29, 2007
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|
·
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Notes
to the Statements of Assets to be Acquired and Statements of Net Revenues
and Direct Expenses
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(b) Pro
forma financial information.
The
following unaudited pro forma financial information with respect to the
transactions described above is furnished as Exhibit 99.2 and incorporated
herein by this reference:
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·
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Pro
Forma Combined Financial Information
(unaudited)
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·
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Pro
Forma Combined Balance Sheet as of December 31, 2007
(unaudited)
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·
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Notes
to Pro Forma Combined Balance Sheet as of December 31, 2007
(unaudited)
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Pursuant
to the aforementioned letter dated April 29, 2008 from the SEC, the SEC staff
stated that it would waive the requirement to provide a pro forma statement of
operations, if the use of forward-looking information is necessary to
meaningfully present the effects of the transaction. Accordingly, we
have not included a pro forma statement of operations, as it does not
meaningfully present the effects of the purchase of the Business and would not
be indicative of our operations going forward due to differences in operations,
among other factors.
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(c)
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Exhibits.
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Exhibit
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Description
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No.
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23.1
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Consent
of Independent Auditors
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99.1
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Audited
Statements of Assets to be Acquired as of December 29, 2007 and December
30, 2006 and Statements of Net Revenues and Direct Expenses for the three
years ended December 29, 2007
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99.2
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Unaudited
Pro Forma Combined Financial Information as of December 31,
2007
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Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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EMCORE
CORPORATION
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Dated:
May 7, 2008
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By: /s/ Adam Gushard
Name:
Adam Gushard
Title: Interim
Chief Financial Officer
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EXHIBIT
INDEX
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Exhibit
|
Description
|
|
No.
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|
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23.1
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Consent
of Independent Auditors
|
|
99.1
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Audited
Statements of Assets to be Acquired as of December 29, 2007 and December
30, 2006 and Statements of Net Revenues and Direct Expenses for the three
years ended December 29, 2007
|
|
99.2
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Unaudited
Pro Forma Combined Financial Information as of December 31,
2007
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EXHIBIT 23.1
CONSENT
OF INDEPENDENT AUDITORS
We
consent to the use of our report dated April 11, 2008, with respect to the
Statements of Assets to Be Acquired and Statements of Net Revenues and Direct
Expenses of the Optical Platform Division, incorporated by reference in the
Registration Statements (Form S-8 Nos. 333-27507, 333-37306, 333-36445,
333-39547, 333-60816, 333-45827, 333-118074, 333-118076, 333-132317, and
333-132318; and Form S-3 Nos. 333-949011, 333-87753, 333-65526, 333-71791 and
333-42514) and included in the Current Report (Form 8K/A) of Emcore
Corporation.
Ernst
& Young, LLP
/s/ Ernst
& Young, LLP
San Jose,
California
May 5,
2008
EXHIBIT 99.1
STATEMENTS OF ASSETS TO BE ACQUIRED AND
STATEMENTS OF NET REVENUES AND DIRECT EXPENSES
Optical
Platform Division
As of
December 29, 2007 and December 30, 2006, and for Each of the Three
Years
in the
Period Ended December 29, 2007
With
Report of Independent Auditors
Optical
Platform Division
Statements
of Assets to Be Acquired and Statements of Net Revenues
and
Direct Expenses
As of
December 29, 2007 and December 30, 2006,
and for
Each of the Three Years in the Period Ended December 29, 2007
Contents
Report of
Independent
Auditors........................................................................................................1
Financial
Statements
Statements
of Assets to Be
Acquired........................................................................
.........................2
Statements
of Net Revenues and Direct Expenses
.............................................................................3
Notes to
Statements of Assets to Be Acquired and Statements of Net Revenues
and
Direct
Expenses......................................................................................................................4
Report of
Independent Auditors
The Board
of Directors
Intel
Corporation
We have
audited the accompanying statements of assets to be acquired of the Optical
Platform
Division
(see Note 1 – Basis of Presentation) as of December 29, 2007 and December 30,
2006,
and the
related statements of net revenues and direct expenses for each of the three
years in the
period
ended December 29, 2007. These financial statements are the responsibility of
the
management
of the Optical Platform Division. Our responsibility is to express an opinion
on
these
financial statements based on our audits.
We
conducted our audits in accordance with auditing standards generally accepted in
the United
States.
Those standards require that we plan and perform the audit to obtain reasonable
assurance
about
whether the financial statements are free of material misstatement. We were not
engaged
to
perform an audit of the Optical Platform Division’s internal control over
financial reporting.
Our
audits included consideration of internal control over financial reporting as a
basis for
designing
audit procedures that are appropriate in the circumstances, but not for the
purpose of
expressing
an opinion on the effectiveness of the Optical Platform Division’s internal
control
over
financial reporting. Accordingly, we express no such opinion. An audit also
includes
examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial
statements,
assessing the accounting principles used and significant estimates made
by
management,
and evaluating the overall financial statement presentation. We believe that
our
audits
provide a reasonable basis for our opinion.
In our
opinion, the statements referred to above present fairly the assets to be
acquired of the
Optical
Platform Division as of December 29, 2007 and December 30, 2006, and its net
revenues
and
direct expenses for each of the three years in the period ended December 29,
2007, in
conformity
with accounting principles generally accepted in the United States.
Ernst
& Young, LLP
/s/ Ernst
& Young, LLP
April 11,
2008
Optical
Platform Division
Statements
of Assets to Be Acquired
(In
Thousands)
|
December
29,
2007
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December
30,
2006
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|||||||
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Assets
to be acquired:
|
||||||||
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Inventories
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$ | 12,558 | $ | 7,131 | ||||
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Property
and equipment, net
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19,234 | 18,508 | ||||||
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Total
assets to be acquired
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$ | 31,792 | $ | 25,639 | ||||
See
accompanying notes.
Optical
Platform Division
Statements
of Net Revenues and Direct Expenses
(In
Thousands)
|
December
29,
2007
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December
30,
2006
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December
31,
2005
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||||||||||
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Net
revenue
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$ | 103,704 | $ | 110,675 | $ | 64,788 | ||||||
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Cost
of sales
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134,601 | 149,618 | 117,315 | |||||||||
|
Gross
deficit
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(30,897 | ) | (38,943 | ) | (52,527 | ) | ||||||
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Direct
operating expenses:
|
||||||||||||
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Research
and development
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42,657 | 30,367 | 24,941 | |||||||||
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Selling,
general, and administrative
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27,847 | 35,057 | 18,053 | |||||||||
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Total
direct operating expenses
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70,504 | 65,424 | 42,994 | |||||||||
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Total
direct expenses
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205,105 | 215,042 | 160,309 | |||||||||
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Total
direct expenses in excess of net revenue
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$ | (101,401 | ) | $ | (104,367 | ) | $ | (95,521 | ) | |||
|
See
accompanying notes.
|
Optical
Platform Division
Notes to
Statements of Assets to Be Acquired and Statements of Net Revenues
and
Direct Expenses
As of
December 29, 2007 and December 30, 2006, and for Each of the Three
Years
in the
Period Ended December 29, 2007
|
1.
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Organization
and Basis of Presentation
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Organization
The
Telecommunication and Enterprise product lines within the Optical Platform
Division and
the Intel
Cables Connect Division have been combined to represent the Optical
Platform
Division,
hereinafter, the “Business,” that designs, manufactures, markets, and sells
optical
transceivers
for enterprise applications and tunable lasers and tunable transponders for use
in
applications
throughout the world. The Business was part of a division of Intel
Corporation
(Intel),
operating within the Digital Enterprise Group and New Business Initiatives Group
for the
three
years ended December 29, 2007.
The
Business has a 52- or 53-week fiscal year that ends on the last Saturday in
December. Fiscal
year
2007, a 52-week year, ended on December 29. Fiscal year 2006, a 52-week year,
ended on
December
30. Fiscal year 2005, a 53-week year, ended on December 31.
The U.S.
dollar is the functional currency for the Business. Monetary accounts
denominated in
non-U.S.
currencies, such as payables to employees, have been remeasured to the U.S.
dollar
using
exchange rates in effect at the end of the respective financial
period.
Basis
of Presentation
The
accompanying financial statements were prepared to present, pursuant to the
Asset
Purchase
Agreements dated December 17, 2007 and April 9, 2008 (the Asset Purchase
Agreements)
between
Intel and EMCORE Corporation (Emcore), the assets to be acquired and the related
net
revenues
and direct expenses of the Business. The accompanying financial statements of
the
Business
exclude certain assets and all liabilities of the Business, include all net
revenues and
direct
expenses of the Business, and include an allocation of certain expenses for
services
provided
by Intel for the periods presented. Separate complete historical financial
information
was not
maintained for the Business and, as a result, allocations were required to
approximate
the
operating activity of the Business (see Note 2).
Optical
Platform Division
Notes
to Statements of Assets to Be Acquired and Statements of Net
Revenues
and
Direct Expenses (continued)
|
1.
|
Organization
and Basis of Presentation
(continued)
|
The
accompanying financial statements have been prepared from the historical
accounting
records
of Intel and do not purport to reflect the assets to be acquired and the net
revenues and
direct
expenses that would have resulted if the Business had been a separate,
stand-alone
company
during the periods presented. It is not practical for management to reasonably
estimate
expenses
that would have resulted if the Business had operated as an unaffiliated
independent
company.
Since separate complete financial statements were not maintained for the
Business’s
operations,
preparation of statements of operations and cash flows, including amounts
charged
for
income taxes, interest, and other expenses, was deemed impractical.
Additionally, since only
certain
assets are being acquired and no liabilities are being assumed, a balance sheet
and
statement
of stockholders’ equity are not applicable.
As a
business unit of Intel, the Business is dependent upon Intel for all of its
working
capital
and financing requirements
|
2.
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Accounting
Policies
|
Use
of Estimates
The
preparation of the financial statements in conformity with accounting principles
generally
accepted
in the United States requires management to make estimates and assumptions
that
affect
the reported amounts in the financial statements and accompanying notes. The
accounting
estimates
that require management’s most significant, difficult, and subjective judgments
include
valuation
of inventory and the allocation of Intel expenses related to the Business.
Actual results
could
differ from those estimates.
Revenue
Recognition
Intel,
and therefore the Business, recognizes net revenue when the earnings process is
complete,
as
evidenced by an agreement with the customer, transfer of title, and acceptance,
if applicable,
as well
as fixed pricing and probable collectibility. Pricing allowances, including
discounts based
on
contractual arrangements with customers, are recorded when revenue is recognized
as a
reduction
to both accounts receivable and net revenue. Because of frequent sales price
reductions
and rapid
technology obsolescence in the industry, sales made to distributors under
agreements
allowing
price protection and/or right of return are deferred until the distributors sell
the
merchandise.
Shipping charges billed to customers are included in net revenue, and the
related
shipping
costs are included in cost of sales.
Optical
Platform Division
Notes
to Statements of Assets to Be Acquired and Statements of Net
Revenues
and
Direct Expenses (continued)
|
3.
|
Accounting
Policies (continued)
|
Cost
of Sales
Cost of
sales represents all fixed and variable costs associated with manufacturing,
assembling,
and
testing products, including subcontract manufacturing, direct and indirect labor
and
materials,
manufacturing and other indirect allocations, and excess and obsolete
inventory
charges.
Manufacturing process start-up costs are classified as cost of sales once
manufacturing
process
validation is achieved. Cost of sales also includes costs associated with
engineering
support,
excess manufacturing capacity, indirect materials, and other fixed
manufacturing
overhead.
Direct
Operating Expenses
The
caption “direct operating expenses” on the accompanying statements of net
revenues and
direct
expenses represents the total direct expenses recorded within or allocated to
the Business.
Not all
of the research, development, sales, and general and administrative expenses for
the
Business
were recorded in accounts or cost centers exclusively related to the Business.
Certain
research,
development, sales, and general and administrative costs were extracted or
allocated
from
Intel accounts based upon specifically identifiable cost centers associated with
the activities
of the
Business. These cost centers capture a portion of the Business’s total operating
expenses.
All other
operating expenses, including portions of research, development, sales,
and
general
and administrative expenses, are allocations based primarily on headcount,
normalized
square
footage, revenue, direct attribution of costs to the Business, or other
applicable metrics.
Allocation
methodologies are consistent with Intel policies that existed during the
periods
presented.
Management believes the allocation of operating expenses captured in accounts
or
cost
centers not exclusive to the Business fairly reflect the direct operating
expenses of the
Business.
The Business’s selling, general, and administrative expenses also include
allocations
for
certain corporate-related activities incurred by Intel, such as human resources,
finance, legal,
and sales
and marketing support. In addition, allocations for 2006 and 2007
reflect
stock-based
compensation charges resulting from the adoption of Statement of
Financial
Accounting
Standard (SFAS) No. 123(R), effective January 1, 2006. These
stock-based
compensation
charges were allocated to the business in accordance with Intel’s corporate
allocation
methodology.
The Business’s statements of net revenues and direct expenses also
exclude
allocations
of gains or losses on derivative instruments, interest income, interest expense,
and
income
taxes.
Optical
Platform Division
Notes
to Statements of Assets to Be Acquired and Statements of Net
Revenues
and
Direct Expenses (continued)
|
2.
|
Accounting
Policies (continued)
|
Total
allocations were $20,101,317, $24,028,797, and $12,198,815 (including
$2,001,219,
$3,557,743,
and $5,215,951 classified as cost of sales) for 2007, 2006, and 2005,
respectively.
The
direct operating expenses are not necessarily indicative of the expenses that
would have
been
incurred had the Business operated as a separate stand-alone company during the
periods
presented.
It is not practical for management to reasonably estimate the expenses that
would
have been
incurred had the Business operated as an unaffiliated independent
business.
Product
Warranty
The
Business generally sells products with a limited warranty of product quality.
The Business
accrues
for known warranty expenses if a loss is probable and can be reasonably
estimated, and
accrues
for estimated incurred but unidentified warranty issues based on historical
activity.
Warranty
expenses were not significant during the periods presented.
|
3.
|
Transition
Services and Supply Agreements
|
In
connection with the Asset Purchase Agreements, the two parties entered into a
Transition
Services
Agreements (collectively, the Agreements). Pursuant to the terms of the
Agreements,
Intel
intends to manufacture, assemble, and test and supply products that are sold by
the
Business.
This arrangement is expected to continue through fiscal year 2008, while
Emcore
arranges
other resources. Intel will also provide certain transition services to Emcore,
including
financial
services, supply chain support, data extraction, conversion services, facilities
and site
computing
support, and office space services. The transition period is expected to
be
approximately
180 calendar days. Finished goods are being acquired by the buyer pursuant to
the
Asset
Purchase Agreements; however, for additional consideration, Emcore may purchase
upon
transition
inventory specific to the Business, as identified by Intel at the end of the
Transition
Services
period of 180 days. Further upon transition, Emcore will assume the
Business’s
customer
relationships and responsibilities pursuant to the terms of the Transition
Services
Agreements.
Optical
Platform Division
Notes
to Statements of Assets to Be Acquired and Statements of Net
Revenues
and
Direct Expenses (continued)
|
4.
|
Inventories
|
Inventory
cost is computed on a currently adjusted standard basis (which approximates
actual
cost on
an average of first-in, first-out basis). The valuation of inventory requires
the Business to
estimate
obsolete or excess inventory, as well as inventory that is not of saleable
quality.
Inventory
is determined to be saleable based on an actual demand within a specific time
horizon,
generally
six months or less. Inventory in excess of saleable amounts is not valued, and
the
remaining
inventory is valued at the lower of cost or market. Inventory, as of December
29, 2007
and
December 30, 2006, consisted entirely of finished goods.
|
5.
|
Property
and Equipment, Net
|
Property
and equipment are stated at cost. Depreciation of property and equipment is
computed
on a
straight-line method over the estimated useful lives of the assets or the lease
term,
whichever
is shorter. The estimated useful lives are 2–4 years.
Property
and equipment consisted of the following (in thousands):
|
December
29,
2007
|
December
29,
2006
|
||||||
|
Machinery
and equipment
|
$
|
48,562
|
$
|
40,365
|
|||
|
Less
accumulated
|
(29,328
|
)
|
(21,857
|
)
|
|||
|
Total
Property and equipment, net
|
$
|
19,234
|
$
|
18,508
|
|||
Direct
operating expenses include depreciation on property and equipment of the
Business, a
portion
of which is being acquired by Emcore. Depreciation expense totaled
approximately
$6,621,090,
$8,872,135, and $9,983,528 for 2007, 2006, and 2005, respectively.
Emcore is
in the process of negotiating a lease for the Newark, California facilities. If
a lease is
executed
by April 30, 2008 additional property and equipment related to the facilities
will be
transferred
to Emcore. The net book value of these assets was $272,505 and $224,728 as
of
December
29, 2007 and December 30, 2006, respectively.
Optical
Platform Division
Notes
to Statements of Assets to Be Acquired and Statements of Net
Revenues
and
Direct Expenses (continued)
|
6.
|
Geographic
Information
|
The
Business has historically formed a part of operating segments of Intel as
described in Note 1.
Within
its historical operating segment, the Business was not separated into further
reporting
operating
segments.
Net
revenues from unaffiliated customers by geographic region/country were as
follows (in
thousands):
|
December
29,
2007
|
December
30,
2006
|
December
31,
2005
|
|||||||||||
|
Asia
Pacific
|
$
|
39,315
|
$
|
27,507
|
$
|
7,237
|
|||||||
|
Europe
|
5,169
|
2,910
|
1,972
|
||||||||||
|
United
States
|
36,450
|
61,640
|
50,330
|
||||||||||
|
Japan
|
22,770
|
18,618
|
5,249
|
||||||||||
|
Net
Revenues
|
$
|
103,704
|
$
|
110,675
|
$
|
64,788
|
|||||||
Net
revenue from unaffiliated customers outside the United States totaled
$67,254,271,
$49,034,913,
and $14,458,185 for 2007, 2006, and 2005, respectively.
The
following customers individually accounted for more than 10% of the Business’s
net
revenues
during at least one period presented:
|
Year
Ended
|
|||
|
December
29,
2007
|
December
30,
2006
|
December
31,
2005
|
|
|
Customer
A
|
34%
|
27%
|
25%
|
|
Customer
B
|
8%
|
15%
|
6%
|
|
Customer
C
|
6%
|
13%
|
4%
|
|
Customer
D
|
1%
|
9%
|
14%
|
Optical
Platform Division
Notes
to Statements of Assets to Be Acquired and Statements of Net
Revenues
and
Direct Expenses (continued)
|
6.
|
Geographic
Information (continued)
|
Net
property and equipment by country was as follows (in thousands):
|
Year
Ended
|
||||
|
December
29,
2007
|
December
30,
2006
|
|||
|
United
States
|
$
|
6,398
|
$
|
6,126
|
|
Taiwan
|
825
|
1,087
|
||
|
China
|
2,322
|
1,711
|
||
|
Thailand
|
7,016
|
4,330
|
||
|
Malaysia
|
2,673
|
5,254
|
||
|
Total
property and equipment, net
|
$
|
19,234
|
$
|
18,508
|
|
7.
|
Indemnifications
|
The
Business from time to time enters into types of contracts that contingently
require it to
indemnify
parties against third-party claims. These contracts primarily relate to: (i)
real estate
leases,
under which the Business may be required to indemnify property owners
for
environmental
and other liabilities, and other claims arising from the Business’s use of
the
applicable
premises, and (ii) agreements with customers who use the Business’s
intellectual
property,
under which the Business may indemnify customers for copyright or
patent
infringement
related specifically to use of such intellectual property.
Generally,
a maximum obligation under these contracts is not explicitly stated.
Historically, the
Business
has not been required to make payments under these obligations, and no
liabilities have
been
recorded for these obligations in the accompanying statements of assets to be
acquired.
Exhibit
99.2
EMCORE
Corporation
PRO
FORMA COMBINED FINANCIAL INFORMATION
(unaudited)
Background:
On
February 22, 2008, EMCORE Corporation (the “Company”) acquired the
telecom-related assets of Intel Corporation’s Optical Platform Division. The
assets acquired include inventory, fixed assets, intellectual property, and
technology comprised of tunable lasers, tunable transponders, 300-pin
transponders, and integrated tunable laser assemblies. The purchase
price was $75 million in cash and $10 million in the Company’s common stock,
priced at a volume-weighted average price of $13.84 per share. Under the terms
of the asset purchase agreement, the purchase price of $85 million could be
adjusted based on an inventory true-up, plus specifically assumed
liabilities.
On April
20, 2008, the Company acquired the enterprise, storage, and connects
cable-related assets of Intel Corporation’s Optical Platform
Division. The assets acquired include inventory, fixed assets,
intellectual property, and technology relating to optical transceivers for
enterprise and storage customers, as well as optical cable interconnects for
high-performance computing clusters. As consideration for the
purchase of assets, the Company issued 3.7 million restricted shares of the
Company’s common stock to Intel. These shares were valued at $26.1
million. In addition, the Company may be required to make an
additional payment to Intel based on the Company’s stock price twelve months
after the closing of the transaction. In the event that the Company
is required to make an additional payment, it has the option to make that
payment in cash, common stock or both (but not to exceed the equivalent value of
1.3 million shares).
The
Company also entered into a transition services agreement with Intel for the
orderly segregation and transfer of purchased assets. In March 2008,
the Company incurred approximately $1.1 million in charges related to Intel
transition services.
Direct
transaction costs for the acquisitions are estimated to be $0.5
million.
The
assets acquired pursuant to the February 22, 2008 acquisition and the April 20,
2008 acquisition are together referred to as the “Business”. The
Optical Platform Division acquired from Intel Corporation is also referred to as
“OPD”.
Financial
Information:
The
Unaudited Pro Forma Combined Balance Sheet as of December 31, 2007 combine the
historical Company and OPD Statement of Assets to be as if the acquisitions,
which occurred on February 22, 2008 and April 20, 2008, had been completed on
December 31, 2007.
Pursuant
to the aforementioned letter dated April 29, 2008 from the SEC, the SEC staff
stated that it would waive the requirement to provide a pro forma statement of
operations, if the use of forward-looking information is necessary to
meaningfully present the effects of the transaction. Accordingly, we
have not included a pro forma statement of operations, as it does not
meaningfully present the effects of the purchase of the Business and would not
be indicative of our operations going forward due to differences in operations,
among other factors.
The
Unaudited Pro Forma Combined Balance Sheet as of December 31,
2007 should be read together with the Company’s financial statements
including the notes to these statements as included in the Company’s Annual
Report on Form 10-K for the year ended September 30, 2007 and the historical
audited financial statements of OPD included in Exhibit 99.1 of this Current
Report on Form 8-K.
The pro
forma adjustments reflecting the consummation of the Business included in the
Unaudited Pro Forma Combined Balance Sheet as of December 31, 2007 are based on
the purchase method of accounting, available financial information and certain
estimates and assumptions set forth in the notes to the Unaudited Pro Forma
Combined Balance Sheet as of December 31, 2007. Specifically, the Unaudited Pro
Forma Combined Balance Sheet is presented to give effect to the acquisitions as
if the transactions had been consummated on December 31, 2007. As a result, the
pro forma adjustments giving effect to the allocation of the preliminary
purchase price are based on the fair values of the tangible and intangible
assets acquired as of December 31, 2007 and may be affected and materially
changed by the results of OPD’s operations up to the closing dates of the
acquisitions.
The
preliminary purchase price of the Business totaled $111.6 million, which
consisted of $75.0 million in cash plus $36.1 million in common stock paid, and
direct acquisition-related expenses estimated at $0.5 million. The preliminary
purchase price allocation is summarized as follows: tangible assets
acquired – $52.2 million, identifiable intangible assets – $12.0
million and goodwill – $47.4 million. The allocation to identifiable
intangibles is based on an estimation of approximately 10% of the purchase
price. The preliminary valuations of the tangible and identifiable
intangible assets are subject to final valuations and further review by
management, which may result in material adjustments. The Company is also
currently in the process of engaging a third party valuation specialist to
perform an independent valuation. Adjustments to these estimates will
be included in the final allocation of the purchase price of OPD. The excess of
the purchase price over the tangible and identifiable intangible assets acquired
has been allocated to goodwill.
Until any
associated direct expenses are determinable beyond a reasonable doubt and the
valuation of the tangible and identifiable intangible assets is considered
final, the purchase price is preliminary and subject to adjustment. The pro
forma adjustments do not reflect any operating efficiencies or additional costs
that may result with respect to the combined business of the Company and
OPD.
The
Unaudited Pro Forma Combined Balance Sheet as of December 31, 2007 does not
purport to represent what the actual financial condition of the combined
businesses would have been if the acquisition of OPD had occurred on the date
indicated in the pro forma combined balance sheet, nor does this information
purport to project our results or financial position for any future
periods.
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EMCORE
CORPORATION
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UNAUDITED
PRO FORMA COMBINED BALANCE SHEET
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(In
thousands)
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|||||||||||||||||
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EMCORE
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OPD
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Pro
forma
|
Combined
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||||||||||||||
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December
31, 2007
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December
29, 2007
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adjustments
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Notes
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December
31, 2007
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ASSETS:
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Current
assets:
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Cash
and cash equivalents
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$ | 14,610 | $ | - | $ | 18,227 |
(a)
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$ | 32,837 | ||||||||
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Restricted
cash
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1,307 | - | - | 1,307 | |||||||||||||
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Marketable
securities
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15,150 | - | - | 15,150 | |||||||||||||
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Accounts
receivable, net
|
41,282 | - | - | 41,282 | |||||||||||||
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Receivables,
related party
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332 | - | - | 332 | |||||||||||||
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Inventory,
net
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29,625 | 12,558 | 20,490 |
(e)
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62,673 | ||||||||||||
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Income
tax receivable
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130 | - | - | 130 | |||||||||||||
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Prepaid
expenses and other current
assets
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4,100 | - | - | 4,100 | |||||||||||||
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Total
current assets
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106,536 | 12,558 | 38,717 | 157,811 | |||||||||||||
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Property,
plant and equipment, net
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60,294 | 19,234 | - | 79,528 | |||||||||||||
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Goodwill
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41,681 | - | 47,364 |
(b)
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89,045 | ||||||||||||
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Other
intangible assets, net
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4,899 | - | 12,000 |
(c)
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16,899 | ||||||||||||
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Investments
in unconsolidated
affiliates
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14,872 | - | - | 14,872 | |||||||||||||
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Other
non-current assets, net
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2,001 | - | - | 2,001 | |||||||||||||
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Total
long-term assets
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123,747 | 19,234 | 59,364 | 202,345 | |||||||||||||
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Total
assets
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$ | 230,283 | $ | 31,792 | $ | 98,081 | $ | 360,156 | |||||||||
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LIABILITIES
AND SHAREHOLDERS' EQUITY:
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Current
Liabilities:
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Accounts
payable
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$ | 24,309 | $ | - | $ | - | $ | 24,309 | |||||||||
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Accrued
expenses and other current
liabilities
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27,413 | - | - | 27,413 | |||||||||||||
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Income
taxes payables
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593 | - | - | 593 | |||||||||||||
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Total
current liabilities
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52,315 | - | - | 52,315 | |||||||||||||
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Convertible
subordinated notes
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85,012 | - | - | 85,012 | |||||||||||||
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Total
liabilities
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137,327 | - | - | 137,327 | |||||||||||||
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STOCKHOLDERS’
EQUITY:
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- | ||||||||||||||||
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Preferred
stock
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- | ||||||||||||||||
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Common
stock
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453,358 | - | 129,873 |
(d)
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583,231 | ||||||||||||
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Accumulated
deficit
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(358,309 | ) | - | - | (358,309 | ) | |||||||||||
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Accumulated
other comprehensive loss
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(10 | ) | - | - | (10 | ) | |||||||||||
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Treasury
stock
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(2,083 | ) | - | - | (2,083 | ) | |||||||||||
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Total
shareholders' equity
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92,956 | - | 129,873 | 222,829 | |||||||||||||
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Net
assets
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31,792 | (31,792 | ) |
(d)
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Total
liabilities and
stockholders’
equity or net
assets
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$ | 230,283 | $ | 31,792 | $ | 98,081 | $ | 360,156 | |||||||||
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See
accompanying notes to the Unaudited Pro Forma Combined Financial
Statements.
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NOTES
TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
1.
BASIS OF PRO FORMA PRESENTATION
On
February 22, 2008, EMCORE Corporation (the “Company”) acquired the
telecom-related assets of Intel Corporation’s Optical Platform Division. The
assets acquired include inventory, fixed assets, intellectual property, and
technology comprised of tunable lasers, tunable transponders, 300-pin
transponders, and integrated tunable laser assemblies. The purchase
price was $75 million in cash and $10 million in the Company’s common stock,
priced at a volume-weighted average price of $13.84 per share. Under the terms
of the asset purchase agreement, the purchase price of $85 million could be
adjusted based on an inventory true-up, plus specifically assumed
liabilities.
On April
20, 2008, the Company acquired the enterprise, storage, and connects
cable-related assets of Intel Corporation’s Optical Platform
Division. The assets acquired include inventory, fixed assets,
intellectual property, and technology relating to optical transceivers for
enterprise and storage customers, as well as optical cable interconnects for
high-performance computing clusters. As consideration for the
purchase of assets, the Company issued 3.7 million restricted shares of the
Company’s common stock to Intel. These shares were valued at $26.1
million. In addition, the Company may be required to make an
additional payment to Intel based on the Company’s stock price twelve months
after the closing of the transaction. In the event that the Company
is required to make an additional payment, it has the option to make that
payment in cash, common stock or both (but not to exceed the equivalent value of
1.3 million shares).
The
Company also entered into a transition services agreement with Intel for the
orderly segregation and transfer of purchased assets. In March 2008,
the Company incurred approximately $1.1 million in charges related to Intel
transition services.
Direct
transaction costs for the acquisitions are estimated to be $0.5
million.
Together,
the February 22, 2008 acquisition and the April 20, 2008 acquisition are later
referred to as the “Business”. The Optical Platform Division acquired
from Intel Corporation is also referred to as “OPD”. The
acquisitions have been accounted for as a nontaxable purchase business
combination under Statement of Financial Accounting Standards No. 141,
“Business Combinations”.
The
Unaudited Pro Forma Combined Balance Sheet as of December 31, 2007 combine the
historical Company and OPD Statements of Assets to be Acquired as if the
acquisition, which occurred on February 22, 2008 and April 20, 2008, had been
completed on December 31, 2007.
Pursuant
to the aforementioned letter dated April 29, 2008 from the SEC, the SEC staff
stated that it would waive the requirement to provide a pro forma statement of
operations, if the use of forward-looking information is necessary to
meaningfully present the effects of the transaction. Accordingly, we
have not included a pro forma statement of operations, as it does not
meaningfully present the effects of the purchase of the Business and would not
be indicative of our operations going forward due to differences in operations,
among other factors.
The total
preliminary purchase price of the Business is as follows:
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(in
thousands)
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||||
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Cash
paid for Initial Consideration
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$
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75,000
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Common
stock issued for Initial Consideration
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36,100
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|||
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Estimated
direct transaction costs
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500
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Total
preliminary purchase price
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$
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111,600
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The
preparation of the unaudited pro forma combined balance sheet requires
management to make estimates and judgments that may affect the reported amounts
of assets and revenues and expenses. On an on-going basis, management evaluates
its estimates. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Preliminary
Estimated Purchase Price Allocation
The
preliminary estimated allocation of the purchase price to OPD’s tangible and
identifiable intangible assets acquired was based on their estimated fair values
as of December 31, 2007 and may be affected and materially changed by the
results of OPD’s operations up to the closing dates (February 22, 2008 and April
20, 2008) of the acquisitions. The valuation of the tangible and identifiable
intangible assets is subject to updated valuations and further review by
management, which may result in material adjustments. Adjustments to these
estimates will be included in the final allocation of the purchase price of OPD.
The excess of the purchase price over the tangible and identifiable intangible
assets acquired has been allocated to goodwill.
Until any
associated direct expenses are determinable beyond a reasonable doubt and the
valuation of the tangible and identifiable intangible assets is considered
final, the purchase price is preliminary and subject to adjustment. The pro
forma adjustments do not reflect any operating efficiencies or additional costs
that may result with respect to the combined business of the Company and
OPD.
The total
preliminary purchase price of $111.6 million has been allocated for purposes of
the unaudited pro forma financial statements as follows:
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(in
thousands)
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Fair
value of tangible assets acquired:
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Inventory
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$
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33,920
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Equipment
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18,316
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Identifiable
intangible assets
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12,000
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|||
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Goodwill
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47,364
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Total
preliminary purchase price
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$
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111,600
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Tangible
assets acquired
As
previously noted, the preliminary estimated allocation of the purchase price to
OPD’s tangible assets acquired was based on their estimated fair values as of
December 31, 2007 and may be affected and materially changed by the results of
OPD’s operations up to the closing dates (February 22, 2008 and April 20, 2008)
of the acquisitions. These estimates are based on a preliminary valuation and
are subject to updated valuations and further review by management, which may
result in material adjustments. Tangible assets acquired consist of inventory
and manufacturing and test equipment. The equipment has an average
remaining useful life of 5 years. In connection with the
transaction the parties have agreed to inventory in the amount of
$33,920.
Identifiable
intangible assets
We have
estimated the fair value of the acquired identifiable intangible assets,
consisting of patents, which are subject to amortization, using the income
approach. The allocation to identifiable intangibles is based on an estimation
of approximately 10% of the purchase price. These estimates are based
on a preliminary valuation and are subject to final valuations and further
review by management, which may result in material adjustments. Total
identifiable intangible assets acquired total $12.0 million with an estimated
useful life of 5 years.
Shareholders’
Equity
On
February 22, 2008, the Company acquired the telecom-related assets of Intel
Corporation’s Optical Platform Division for $75 million in cash and $10 million
in the Company’s common stock, priced at a volume-weighted average price of
$13.84 per share.
On April
20, 2008, the Company acquired the enterprise, storage, and connects
cable-related assets of Intel Corporation’s Optical Platform
Division. As consideration for the purchase of assets, the Company
issued 3.7 million restricted shares of the Company’s common stock to
Intel. These shares were valued at $26.1 million. In
addition, the Company may be required to make an additional payment to Intel
based on the Company’s stock price twelve months after the closing of the
transaction. In the event that the Company is required to make an
additional payment, it has the option to make that payment in cash, common stock
or both (but not to exceed the equivalent value of 1.3 million
shares).
Including
estimated direct transaction costs of $0.5 million, the preliminary purchase
price for both of these acquisitions totaled $111.6 million.
2.
PRO FORMA ADJUSTMENTS
The
following pro forma adjustments are included in the Unaudited Pro Forma Combined
Balance Sheet:
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(a)
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The
cash portion of initial consideration of the acquisition was financed
through proceeds received from a private placement of restricted common
stock and warrants that closed on February 20, 2008. The
proceeds from this private placement were $93.2 million, net of
costs. Of these proceeds, $75.0 million was paid to Intel
Corporation as part of the February 22, 2008 acquisition purchase price,
resulting in a net cash adjustment of $18.2
million.
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(b)
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Adjustment
to record the excess of the preliminary purchase price over the estimated
fair value of tangible and identifiable intangible assets
acquired. The preliminary valuations of the tangible and
identifiable intangible assets are subject to final valuations and further
review by management, which may result in material
adjustments. The Company is also currently in the process of
engaging a third party valuation specialist to perform an independent
valuation. Adjustments to these estimates will be included in
the final allocation of the purchase price of OPD. The excess
of the purchase price over the tangible and identifiable intangible assets
acquired has been allocated to goodwill. Until any associated
direct expenses are determinable beyond a reasonable doubt and the
valuation of the tangible and identifiable intangible assets in considered
final, the purchase price is preliminary and subject to
adjustment. The pro forma adjustments do not reflect any
operating efficiencies or additional costs that may result with respect to
the combined business of the Company and
OPD.
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(c)
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We
have estimated the fair value of the acquired identifiable intangible
assets, consisting of patents, to be $12.0 million, which is subject to
amortization. The allocation to identifiable intangibles is based on an
estimation of approximately 10% of the purchase price. These
estimates are based on a preliminary valuation and are subject to final
valuations and further review by management, which may result in material
adjustments. Identifiable intangible assets acquired have an
estimated useful life of 5 years.
|
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(d)
|
On
February 20, 2008, the Company consummated a private placement of $100
million of restricted common stock and warrants. The net
proceeds from the private placement were $93.2 million of which $75
million was used in the acquisition of the Business leaving a net balance
of $18.2 million. The purchase price for the
February 22, 2008 acquisition was $75 million in cash and 722,688 shares
of the Company’s common stock priced at a volume-weighted average price of
$13.84 per share for a total value of $10 million. As
consideration for the April 20, 2008 purchase of assets, the Company
issued 3.7 million restricted shares of the Company’s common stock to
Intel valued at $26.1 million. In addition, the Company may be
required to make an additional payment to Intel based on the Company’s
stock price twelve months after the closing of the
transaction. In the event that the Company is required to make
an additional payment, it has the option to make that payment in cash,
common stock or both (but not to exceed the equivalent value of 1.3
million shares. The total shares issued to complete the two
acquisitions was 4,422,688.
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(e)
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Reflects
estimated inventory value agreed to by the parties in the
transaction.
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3.
FORWARD-LOOKING STATEMENTS
The
foregoing unaudited pro forma combined financial information contains certain
estimates by management and forward-looking statements, within the meaning of
and made pursuant to the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995 that are subject to risks and uncertainties that
could cause actual results to differ materially from those described. All
statements that relate to future events or to our future performance are
forward-looking statements. In some cases, forward looking statements can be
identified by terms such as “may,” “will,” “should,” “expect,” “plans,” “seeks,”
“anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “seek
to continue,” “intends,” or other comparable terminology. Although we believe
that the expectations expressed in these estimates and forward-looking
statements are reasonable, there can be no assurance that our expectations will
turn out to be correct. Actual results could differ materially from the outlook,
guidance and expectations in these estimates and forward-looking statements as a
result of a number of risk factors, including without limitation, (a) that
we may not be able to successfully implement our business strategy,
(b) that we may not be able to successfully integrate operations,
technologies, products or personnel from the acquisition of OPD, (c) that
we may not realize the benefits we are seeking from the OPD acquisition and such
acquisition may be more costly or less profitable than anticipated and may
adversely affect the price of our stock, and (d) the factors listed from
time to time in the Company’s SEC reports, including those listed under “Risk
Factors” in the Company’s Annual Report on Form 10-K for the year ended
September 30, 2007 and in the Company’s Quarterly Reports on Form 10-Q filed
with the SEC each fiscal quarter, and other filings with the SEC. Although
forward-looking statements help provide additional information, investors should
keep in mind that forward-looking statements are inherently less reliable than
historical information. The Company undertakes no duty to update any
forward-looking statement to conform the statement to actual results or changes
in its expectations.