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Acquisitions | 9 Months Ended
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Sep. 30, 2015
Acquisitions |
Acquisitions | Note 4 — Acquisitions 2015 Acquisition Finishing Brands On April 1, 2015, the Company acquired 100% of the Finishing Brands business from Graco Inc. (“Graco”) for total cash consideration of $598.9 million, net of $12.2 million cash acquired. The Company funded the acquisition with cash on hand. As of the acquisition date, the Company recorded a payable to Graco for $20.6 million representing the estimated working capital settlement. In the third quarter of 2015, the Company finalized the working capital settlement with Graco for $21.1 million in cash. The additional cash consideration paid has been allocated to goodwill. The Company has reported the results of the acquired business as a new reporting segment named Carlisle Fluid Technologies (“CFT”). CFT is a global manufacturer and supplier of finishing equipment and systems serving diverse end markets for paints and coatings, including original equipment (“OE”) automotive, automotive refinishing, aerospace, agriculture, construction, marine, rail, and other industrial applications. CFT contributed net sales of $129.6 million and earnings before interest and taxes of $9.1 million for the period from April 1, 2015 to September 30, 2015. Earnings before interest and taxes for the period from April 1, 2015 to September 30, 2015 includes $0.7 million of non-recurring acquisition-related costs related primarily to professional fees and $8.6 million of non-recurring incremental cost of goods sold related to measuring inventory at fair value. Earnings before interest and taxes for the period from April 1, 2015 to September 30, 2015 also includes $6.2 million and $2.6 million of amortization expense of customer relationships and acquired technology, respectively. The Finishing Brands amounts included in the pro forma financial information below are based on the Finishing Brands’ historical results and, therefore, may not be indicative of the actual results if operated by Carlisle. The pro forma adjustments represent management’s best estimates based on information available at the time the pro forma information was prepared and may differ from the adjustments that may actually have been required. Accordingly, pro forma information should not be relied upon as being indicative of the historical results that would have been realized had the acquisition occurred as of the date indicated or that may be achieved in the future. The unaudited combined pro forma financial information presented below includes Net sales and Income from continuing operations, net of tax, of the Company as if the business combination had occurred on January 1, 2014 based on the preliminary purchase price allocation presented below:
|  | Pro Forma |  | Pro Forma |
|  | Three Months Ended September 30, |  | Nine Months Ended September 30, |
(in millions) |  | 2015 |  | 2014 |  | 2015 |  | 2014 |
Net sales |  | $ | 973.1 |  | $ | 970.3 |  | $ | 2,728.2 |  | $ | 2,614.9 |
Income from continuing operations |  | 103.6 |  | 91.9 |  | 250.5 |  | 208.9 |
The pro forma financial information reflects adjustments to Finishing Brands’ historical financial information to apply the Company’s accounting policies and to reflect the additional depreciation and amortization related to the preliminary fair value adjustments of the acquired net assets, together with the associated tax effects. Also, the pro forma financial information reflects the non-recurring costs of goods sold related to the fair valuation of inventory and acquisition-related costs described above as if they occurred in the first quarter of 2014. The following table summarizes the consideration transferred to acquire Finishing Brands and the preliminary allocation among the assets acquired and liabilities assumed. The acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, which requires that consideration be allocated to the acquired assets and liabilities based upon their acquisition date fair values with the remainder allocated to goodwill.
|  | Preliminary Allocation |  | Measurement Period Adjustments |  | Preliminary Allocation |
|  | As of |  | Six Months Ended |  | As of |
(in millions) |  | 4/1/2015 |  | 9/30/2015 |  | 9/30/2015 |
Total cash consideration transferred and payable |  | $ | 610.6 |  | $ | 0.5 |  | $ | 611.1 |
Recognized amounts of identifiable assets acquired and liabilities assumed: |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 12.2 |  | $ | — |  | $ | 12.2 |
Receivables |  | 57.3 |  | — |  | 57.3 |
Inventories |  | 40.9 |  | — |  | 40.9 |
Prepaid expenses and other current assets |  | 6.4 |  | (0.1 | ) | 6.3 |
Property, plant, and equipment |  | 41.0 |  | (0.2 | ) | 40.8 |
Definite-lived intangible assets |  | 216.0 |  | — |  | 216.0 |
Indefinite-lived intangible assets |  | 125.0 |  | — |  | 125.0 |
Deferred income tax assets |  | 1.9 |  | — |  | 1.9 |
Other non-current assets |  | 3.8 |  | — |  | 3.8 |
Line of credit |  | (1.4 | ) | — |  | (1.4 | )
Accounts payable |  | (16.3 | ) | — |  | (16.3 | )
Income tax payable |  | (1.9 | ) | — |  | (1.9 | )
Accrued expenses |  | (15.6 | ) | 0.3 |  | (15.3 | )
Deferred income tax liabilities |  | (28.8 | ) | — |  | (28.8 | )
Other non-current liabilities |  | (5.6 | ) | — |  | (5.6 | )
Total identifiable net assets |  | 434.9 |  | — |  | 434.9 |
Goodwill |  | $ | 175.7 |  | $ | 0.5 |  | $ | 176.2 |
The goodwill recognized in the acquisition of Finishing Brands is attributable to its experienced workforce, the expected operational improvements through implementation of the Carlisle Operating System, opportunities for geographic and product line expansions in addition to supply chain efficiencies and other administrative opportunities, and the significant strategic value of the business to Carlisle. The Company acquired $58.8 million of gross contractual accounts receivable, of which $1.5 million is not expected to be collected. Goodwill of $134.9 million is tax deductible, primarily in the United States. All of the goodwill was assigned to the CFT reporting unit which aligns with the reportable segment. Indefinite-lived intangible assets of $125.0 million represent acquired trade names. The $216.0 million value allocated to definite-lived intangible assets consists of $186.0 million of customer relationships with a useful life of 15 years and various acquired technologies of $30.0 million with useful lives ranging from five to eight years. The Company recorded an indemnification asset of $3.0 million in Other long-term assets relating to the indemnification of Carlisle for a pre-acquisition tax liability in accordance with the purchase agreement. The Company has also recorded deferred tax liabilities related to intangible assets of approximately $28.8 million. As additional information is obtained, adjustments may be made to the preliminary purchase price allocation. The Company is still finalizing the fair value of certain property assets, tax liabilities, and accrued expenses. 2014 Acquisition LHi Technology On October 1, 2014, the Company acquired 100% of the equity of LHi Technology (“LHi”) for total cash consideration of $194.0 million, net of $6.7 million cash acquired, inclusive of the working capital settlement. The Company funded the acquisition with cash on hand. LHi is a leading designer, manufacturer and provider of cable assemblies and related interconnect components to the medical equipment and device industry. The acquisition will strengthen Carlisle’s launch of its medical cable and cable assembly product line by adding new products, new customers, and complementary technologies to better serve the global healthcare market. LHi operates within the Interconnect Technologies segment. The following table summarizes the consideration transferred to acquire LHi and the final allocation among the assets acquired and liabilities assumed. The acquisition has been accounted for using the acquisition method of accounting which requires that consideration be allocated to the acquired assets and liabilities based upon their acquisition date fair values with the remainder allocated to goodwill.
|  | Preliminary Allocation |  | Measurement Period Adjustments |  | Final Allocation |
|  | As of |  |  |  | As of |
(in millions) |  | 10/1/2014 |  |  |  | 9/30/2015 |
Total cash consideration transferred |  | $ | 200.7 |  | $ | — |  | $ | 200.7 |
Recognized amounts of identifiable assets acquired and liabilities assumed: |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 6.7 |  | $ | — |  | $ | 6.7 |
Receivables |  | 26.9 |  | — |  | 26.9 |
Inventories |  | 17.1 |  | — |  | 17.1 |
Prepaid expenses and other current assets |  | 2.9 |  | — |  | 2.9 |
Property, plant, and equipment |  | 4.5 |  | — |  | 4.5 |
Definite-lived intangible assets |  | 74.5 |  | — |  | 74.5 |
Indefinite-lived intangible assets |  | 6.0 |  | — |  | 6.0 |
Other non-current assets |  | 8.8 |  | — |  | 8.8 |
Accounts payable |  | (16.9 | ) | — |  | (16.9 | )
Income tax payable |  | (0.3 | ) | — |  | (0.3 | )
Accrued expenses |  | (4.9 | ) | (1.1 | ) | (6.0 | )
Net deferred tax liabilities |  | (16.2 | ) | — |  | (16.2 | )
Other non-current liabilities |  | (20.1 | ) | — |  | (20.1 | )
Total identifiable net assets |  | 89.0 |  | (1.1 | ) | 87.9 |
Goodwill |  | $ | 111.7 |  | $ | 1.1 |  | $ | 112.8 |
The goodwill recognized in the acquisition of LHi is attributable to the workforce of LHi, the solid financial performance in the medical cable market, and the significant strategic value of the business to Carlisle. Goodwill arising from the acquisition of LHi is not deductible for income tax purposes. All of the goodwill was assigned to the Interconnect Technologies reporting unit. Indefinite-lived intangible assets of $6.0 million represent acquired trade names. The $74.5 million value allocated to definite-lived intangible assets consists of $57.0 million of customer relationships with a useful life of 15 years, $16.0 million of acquired technology with a useful life of six years, and a $1.5 million non-compete agreement with a useful life of five years. The Company recorded an indemnification asset of $8.7 million in Other long-term assets relating to the indemnification of Carlisle for certain pre-acquisition liabilities, in accordance with the purchase agreement. The Company has also recorded deferred tax liabilities related to intangible assets as of the closing date. The Company recorded an increase to accrued expenses of $1.1 million and a corresponding increase to goodwill of $1.1 million as a measurement period adjustment.

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