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Acquisitions | 9 Months Ended
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Sep. 30, 2016
Acquisitions |
Acquisitions | Note 4— Acquisitions 2016 Acquisitions Micro-Coax On June 10, 2016, the Company acquired 100% of the equity of Micro-Coax, Inc., and Kroll Technologies, LLC, (collectively “Micro-Coax”) for total consideration of $94.8 million, net of $1.5 million cash acquired, inclusive of an estimated working capital receivable of $0.2 million. The Company expects to finalize the working capital settlement in the fourth quarter of 2016. The acquired business is a provider of high-performance, high frequency coaxial wire and cable, and cable assemblies to the defense, satellite, test and measurement, and other industrial markets. The results of operations of the acquired business are reported within the Interconnect Technologies segment. The following table summarizes the consideration transferred to acquire Micro-Coax and the preliminary allocation of the purchase price 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 |  | Revised Allocation |
|  | As of |  |  |  | As of |
(in millions) |  | 6/10/2016 |  |  |  | 9/30/2016 |
Total consideration transferred |  | $ | 97.3 |  | $ | (1.0) |  | $ | 96.3 |
Recognized amounts of identifiable assets acquired and liabilities assumed: |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1.5 |  | $ | - |  | $ | 1.5 |
Receivables |  |  | 6.3 |  |  | - |  |  | 6.3 |
Inventories |  |  | 8.6 |  |  | - |  |  | 8.6 |
Prepaid expenses and other current assets |  |  | 0.4 |  |  | (0.1) |  |  | 0.3 |
Property, plant, and equipment |  |  | 30.0 |  |  | (14.0) |  |  | 16.0 |
Definite-lived intangible assets |  |  | 31.5 |  |  | (5.3) |  |  | 26.2 |
Indefinite-lived intangible assets |  |  | 2.0 |  |  | (1.1) |  |  | 0.9 |
Other long-term assets |  |  | 1.0 |  |  | - |  |  | 1.0 |
Accounts payable |  |  | (1.7) |  |  | - |  |  | (1.7) |
Accrued expenses |  |  | (2.4) |  |  | (0.1) |  |  | (2.5) |
Total identifiable net assets |  |  | 77.2 |  |  | (20.6) |  |  | 56.6 |
Goodwill |  | $ | 20.1 |  | $ | 19.6 |  | $ | 39.7 |
The valuation of property, plant, and equipment, and intangible assets is preliminary. We expect to complete the valuation in the fourth quarter of 2016. The goodwill recognized in the acquisition of Micro-Coax is attributable to its experienced workforce, expected operational improvements through implementation of the Carlisle Operating System (“COS”), opportunities for product line expansions in addition to supply chain efficiencies and other administrative opportunities, and the significant strategic value of the business to Carlisle. COS is a manufacturing structure and strategy deployment system based on lean enterprise and six sigma principles and is a continuous improvement process that defines the way we do business. Goodwill of $39.7 million is deductible for tax purposes in the U.S. All of the goodwill was assigned to the CIT reporting unit which aligns with the reportable segment. Indefinite-lived intangible assets of $0.9 million represent acquired trade names. The $26.2 million value allocated to definite-lived intangible assets consists of $15.0 million of customer relationships with a useful life of 12 years, various acquired technologies of $10.6 million with useful a useful life of seven years, and a non-compete agreement of $0.6 million with a useful life of three years. MS Oberflächentechnik AG On February 19, 2016, the Company acquired 100% of the equity of MS Oberflächentechnik AG (“MS”), a Swiss-based developer and manufacturer of powder coating systems and related components, for total consideration of CHF 12.3 million, or $12.4 million, including the estimated fair value of contingent consideration of CHF4.3 million, or $4.3 million. The results of operations of MS are reported within the Fluid Technologies segment. Consideration has been primarily allocated to $9.8 million to definite-lived intangible assets, $4.2 million to indefinite-lived intangible assets, and $2.7 million to deferred tax liabilities, with $2.7 million allocated to goodwill. Definite-lived intangible assets consist of $8.4 million of technology with a useful life of seven years and customer relationships of $1.4 million with a useful life of ten years. 2015 Acquisition 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, inclusive of the working capital settlement. The Company reports the results of the acquired business as the CFT segment. 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 purchase price allocation presented below:
|  | Pro Forma |  | Pro Forma |
|  | Three Months Ended |  | Nine Months Ended |
|  | September 30, |  | September 30, |
(in millions) |  | 2015 |  | 2015 |
Net sales |  | $ | 973.1 |  | $ | 2,728.2 |
Income from continuing operations |  |  | 103.6 |  |  | 250.5 |
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 final 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 and measurement period adjustments to arrive at the final allocation of the purchase price 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. The measurement period adjustments resulted primarily from finalizing valuations of inventory with corresponding measurement period adjustment to deferred taxes.
|  | Preliminary Allocation |  | Measurement Period Adjustments |  | Final Allocation |
|  | As of |  |  |  | As of |
(in millions) |  | 4/1/2015 |  |  |  | 3/31/2016 |
Total cash consideration transferred |  | $ | 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 |  |  | 1.2 |  |  | 58.5 |
Inventories |  |  | 40.9 |  |  | 2.2 |  |  | 43.1 |
Prepaid expenses and other current assets |  |  | 6.4 |  |  | (0.2) |  |  | 6.2 |
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 |  |  | (1.2) |  |  | 0.7 |
Other long-term assets |  |  | 3.8 |  |  | (0.3) |  |  | 3.5 |
Line of credit |  |  | (1.4) |  |  | - |  |  | (1.4) |
Accounts payable |  |  | (16.3) |  |  | - |  |  | (16.3) |
Income tax payable |  |  | (1.9) |  |  | (0.1) |  |  | (2.0) |
Accrued expenses |  |  | (15.6) |  |  | - |  |  | (15.6) |
Deferred income tax liabilities |  |  | (28.8) |  |  | 0.6 |  |  | (28.2) |
Other long-term liabilities |  |  | (5.6) |  |  | (0.7) |  |  | (6.3) |
Total identifiable net assets |  |  | 434.9 |  |  | 1.3 |  |  | 436.2 |
Goodwill |  | $ | 175.7 |  | $ | (0.8) |  | $ | 174.9 |
The goodwill recognized in the acquisition of Finishing Brands is attributable to its experienced workforce, the expected operational improvements through implementation of COS, 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 $60.0 million of gross contractual accounts receivable, of which $1.5 million was not expected to be collected at the date of acquisition. Goodwill of $132.9 million is tax deductible, primarily in the U.S. 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 income tax liability in accordance with the purchase agreement. The Company has also recorded deferred tax liabilities related to intangible assets of $28.2 million. LHi Technology In conjunction with the acquisition of LHi Technology (“LHi”) in October 2014, 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, principally related to direct and indirect tax uncertainties. During the third quarter of 2016, the Company concluded that $2.6 million of the indirect tax uncertainties were no longer probable, therefore resulting in the reversal of the related indemnification asset and the corresponding liability.

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