Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

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Acquisitions
 9 Months Ended
May 31, 2012
Acquisitions

Note 2. Acquisitions

The Company continually evaluates potential acquisitions that are a strategic fit with the Company’s existing businesses or expand the Company’s portfolio into new and attractive end markets. These acquisitions result in the recognition of goodwill in the Company’s financial statements because the purchase prices reflect the future earnings and cash flow potential of the acquired companies, as well as the complementary strategic fit and resulting synergies these businesses bring to existing operations.

On March 28, 2012 the Company acquired the stock of Turotest Medidores Ltda (“Turotest”) for $8.1 million of cash and deferred consideration of $5.3 million. Turotest, an Engineered Solutions segment acquisition, headquartered in San Paulo, Brazil designs and manufactures instrument panels and gauges serving the Brazilian agriculture and industrial markets. The acquisition resulted in the recognition of $5.5 million of goodwill (which is not deductible for tax purposes) and $7.0 million of intangible assets (customer relationships, tradename and non-compete).

On February 10, 2012 the Company completed the acquisition of the stock of Jeyco Pty Ltd (“Jeyco”) for $20.7 million of cash. Jeyco, an Energy segment acquisition, headquartered near Perth, Australia, designs and provides specialized mooring, rigging and towing systems and services to the offshore oil & gas industry in Australia and other international markets. Additionally, Jeyco’s products are used in a variety of applications for other markets including cyclone mooring and marine, defense and mining tow systems. The purchase price allocation resulted in the recognition of $14.1 million of goodwill (which is not deductible for tax purposes) and $5.5 million of intangible assets (tradename, non-compete and customer relationships).

 

The Company completed two business acquisitions during fiscal 2011. On June 2, 2011, the Company completed the acquisition of Weasler Engineering, Inc. (“Weasler”) for $153.2 million of cash. Weasler, which is headquartered in Wisconsin, is a global designer and manufacturer of highly engineered drive train components and systems for agriculture, lawn & turf and industrial equipment. Weasler also supplies a variety of torque limiters, high-end gear boxes, clutches and torsional dampers which expand the product offering of the Engineered Solutions segment. On December 10, 2010, the Company completed the acquisition of Mastervolt International Holding B.V. (“Mastervolt”) for $158.2 million of cash. Mastervolt, headquartered in The Netherlands, is a designer, developer and global supplier of highly innovative, branded power electronics, primarily for the European solar and marine markets. Mastervolt expands the Electrical segment’s geographic presence and product offerings to include additional technologies associated with the efficient conversion, control, storage and conditioning of electrical power. The purchase price allocations for these fiscal 2011 acquisitions resulted in the recognition of $152.4 million of goodwill (which is not deductible for tax purposes) and $157.5 million of intangible assets, including $81.5 million of customer relationships, $69.9 million of tradenames, $5.5 million of patents and technologies and $0.6 million of non-compete agreements.

The Company makes an initial allocation of the purchase price, at the date of acquisition, based upon its understanding of the fair value of the acquired assets and assumed liabilities. The Company obtains this information during due diligence and through other sources. If additional information is obtained about these assets and liabilities within the measurement period (not to exceed one year from the date of acquisition), including through asset appraisals and learning more about the newly acquired business, the Company will refine its estimates of fair value. During the nine months ended May 31, 2012 goodwill was reduced by $3.3 million, the net result of purchase accounting adjustments to the fair value of acquired assets and assumed liabilities, including a $7.7 million reduction to Mastervolt’s initial estimated warranty reserve.

The following unaudited pro forma results of operations of the Company for the three and nine months ended May 31, 2012 and May 31, 2011, give effect to these acquisitions as though the transactions and related financing activities had occurred on September 1, 2010 (in thousands, except per share amounts):

 

     Three Months Ended May 31,      Nine Months Ended May 31,  
     2012      2011      2012      2011  

Net sales

            

As reported

    $ 429,215       $ 392,777       $ 1,200,038       $ 1,041,887   

Pro forma

      430,356         427,159         1,219,104         1,178,722   

Earnings from continuing operations

            

As reported

    $ 34,401       $ 38,360       $ 103,750       $ 87,163   

Pro forma

      34,668         42,037         107,485         98,927   

Basic earnings per share from continuing operations

            

As reported

    $ 0.48       $ 0.56       $ 1.50       $ 1.28   

Pro forma

      0.49         0.61         1.55         1.45   

Diluted earnings per share from continuing operations

            

As reported

    $ 0.45       $ 0.51       $ 1.39       $ 1.17   

Pro forma

      0.45         0.56         1.43         1.33   

During the nine months ended May 31, 2012, the Company paid $0.9 million of deferred consideration for acquisitions completed in previous periods. Transaction costs related to various business acquisition activities were $1.0 million for the nine months ended May 31, 2012 and $0.9 million in the comparable prior year period.