Note 3—Acquisitions

2016 Acquisitions

Star Aviation

On October 3, 2016, the Company acquired 100% of the equity of Star Aviation, Inc. (“Star Aviation”), for estimated consideration of $82.4 million, net of $0.3 million cash acquired, inclusive of a working capital settlement which was finalized in the fourth quarter of 2016. Star Aviation is a leading provider of design and engineering services, testing and certification work and manufactured products for in-flight connectivity applications on commercial, business and military aircraft. The results of operations of the acquired business are reported within the Interconnect Technologies segment.

The following table summarizes the consideration transferred to acquire Star Aviation 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 assumed liabilities based upon their acquisition date fair values, with the remainder allocated to goodwill.


	Preliminary Allocation
	As of
(in millions)	10/3/2016
Total consideration transferred	$	82.7

Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	0.3
Receivables		5.9
Inventories		3.1
Prepaid expenses and other current assets		0.1
Property, plant, and equipment		3.3
Definite-lived intangible assets		29.0
Accounts payable		(1.3)
Accrued expenses		(0.8)
Total identifiable net assets		39.6
Goodwill	$	43.1

The valuation of property, plant, and equipment, and intangible assets is preliminary. We expect to complete the valuation in the first half of 2017. The goodwill recognized in the acquisition of Star Aviation 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 $43.1 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. The $29.0 million value allocated to definite-lived intangible assets consists of $23.9 million of customer relationships with useful lives ranging from five to ten years, various acquired technologies of $4.7 million with useful a useful life of six years, and a non-compete agreement of $0.4 million with a useful life of five years.

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 $95.1 million, net of $1.5 million cash acquired, inclusive of a working capital settlement. The Company finalized 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 assumed liabilities based upon their acquisition date fair values, with the remainder allocated to goodwill.


	Preliminary Allocation		Measurement Period Adjustments		Revised Preliminary Allocation
	As of				As of
(in millions)	6/10/2016				12/31/2016
Total consideration transferred	$	97.3	$	(0.7)	$	96.6

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		(5.0)		26.5
Indefinite-lived intangible assets		2.0		(2.0)		-
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		(21.2)		56.0
Goodwill	$	20.1	$	20.5	$	40.6

The valuation of property, plant, and equipment, and intangible assets is preliminary. We expect to complete the valuation in the first quarter of 2017. 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. Goodwill of $40.6 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. The $26.5 million value allocated to definite-lived intangible assets consists of $14.5 million of customer relationships with a useful life of 12 years, various acquired technologies of $10.6 million with a useful life of seven years, an amortizable trade name of $0.9 million with a useful life of 10 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 Powder”), 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 CHF 4.3 million, or $4.3 million. The results of operations of MS Powder are reported within the Fluid Technologies segment.

Consideration has been primarily allocated to $9.7 million to definite-lived intangible assets, $4.1 million to indefinite-lived intangible assets, and $2.2 million to deferred tax liabilities, with $2.9 million allocated to goodwill. Definite-lived intangible assets consist of $8.3 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

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. The Company reports the results of the acquired business as the CFT segment.

CFT contributed net sales of $203.2 million and earnings before interest and taxes of $20.8 million for the period from April 1, 2015 to December 31, 2015. Earnings before interest and taxes for the period from April 1, 2015 to December 31, 2015 includes $8.6 million of incremental cost of goods sold related to measuring inventory at fair value and $0.7 million of acquisition-related costs related primarily to professional fees, as well as $9.3 million and $3.9 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 purchase price allocation presented below:



	Pro Forma
	Twelve Months Ended December 31,
(in millions)	2015		2014

Net sales	$	3,604.4	$	3,482.3
Income from continuing operations		332.2		271.4

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 costs of goods sold related to the fair valuation of inventory and acquisition-related costs described above as if they occurred in 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 assumed 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 the 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 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 income tax liability in accordance with the purchase agreement. The Company has also recorded, as part of the purchase price allocation, deferred tax liabilities related to intangible assets of approximately $28.2 million. See Note 10 for further information regarding deferred tax liabilities acquired in the Finishing Brands acquisition.

2014 Acquisition

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.