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Acquisitions, Discontinued Operations and Formation of Shanghai Electric JV | 12 Months Ended
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Dec. 31, 2012
Acquisitions, Discontinued Operations and Formation of Shanghai Electric JV |
Acquisitions, Discontinued Operations and Formation of Shanghai Electric JV | (4) Acquisitions, Discontinued Operations and Formation of Shanghai Electric JV We use acquisitions as a part of our strategy to gain access to customer relationships, new technology, expand our geographical reach, penetrate new markets and leverage our existing product, market, manufacturing and technical expertise. Further, as part of our operating strategy, we regularly review and negotiate potential divestitures, some of which are or may be material. As a result of this continuous review, we determined that certain of our businesses would be better strategic fits with other companies or investors. Acquisitions and divestitures for the years ended December 31, 2012, 2011 and 2010 are described below. The consolidated statements of operations include the results of each acquired business since the date of acquisition. The assets acquired and liabilities assumed are recorded at estimates of fair values as determined by us based on information available at the acquisition date. We consider a number of factors, including third-party valuations or appraisals, when making these determinations. We will recognize additional assets or liabilities if new information is obtained during the measurement period about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of those assets and liabilities as of that date. The measurement period shall not exceed one year from the acquisition date. Refer to Note 8 for additional disclosure on the purchase price adjustments of the following acquisitions. Acquisitions — 2012 On March 21, 2012, our Flow Technology reportable segment completed the acquisition of Seital S.r.l. ("Seital"), a supplier of disk centrifuges (separators and clarifiers) to the global food and beverage, biotechnology, pharmaceutical and chemical industries, for a purchase price of $28.8, net of cash acquired of $2.5 and including debt assumed of $0.8. Seital had revenues of approximately $14.0 in the twelve months prior to the date of acquisition. The pro forma effects of the acquisition of Seital were not material, individually or in the aggregate, to our consolidated results of operations. Acquisitions — 2011 On December 22, 2011, our Flow Technology reportable segment completed the acquisition of Clyde Union, a global supplier of pump technologies utilized in oil and gas processing, power generation and other industrial applications for an initial payment of 500.0 British Pounds ("GBP"), less debt assumed and other adjustments of GBP 11.0. In addition, the purchase price includes a potential earn-out payment (equal to Annual 2012 Group EBITDA (as defined by the related agreement) × 10, less GBP 475.0). In no event shall the earn-out payment be less than GBP 0.0 or more than GBP 250.0. Although we are still in the process of completing the earn-out procedure as set forth in the purchase agreement, no liability for an earn-out payment has been provided in the accompanying consolidated balance sheets because, based on projected and actual operating results throughout the year, we have not expected, and do not expect, Clyde Union to achieve the required minimum Annual 2012 Group EBITDA. We financed the acquisition with available cash and committed senior secured financing. See Note 12 to the consolidated financial statements for further details on the senior secured financing. The sellers of Clyde Union also contributed GBP 25.0 of cash to the acquired business at the time of sale. The following is a summary of the recorded fair values of the assets acquired and liabilities assumed for Clyde Union at the date of acquistion, and reflects acquisition accounting adjustments recorded during 2012:
Assets acquired: |  |  |  |
Current assets, including cash and equivalents of $44.3 |  | $ | 354.1 |
Property, plant and equipment |  |  | 89.8 |
Goodwill |  |  | 377.2 |
Intangible assets |  |  | 374.6 |
Other assets |  |  | 25.1 |
Total assets acquired |  |  | 1,220.8 |
Liabilities assumed: |  |  |  |
Current liabilities |  |  | 287.0 |
Other long-term liabilities |  |  | 165.0 |
Total liabilities assumed |  |  | 452.0 |
Noncontrolling interest |  |  | 1.8 |
Net assets acquired |  | $ | 767.0 |
The identifiable intangible assets acquired consist of trademarks, customer lists, customer relationships and technology of $76.8, $3.3, $234.4 and $60.1, respectively. The customer lists, customer relationships and technology assets are being amortized over 2.0, 30.0 and 27.0 years, respectively. The qualitative factors that comprise the recorded goodwill include expected synergies from combining our existing and Clyde Union's operations, expected market growth for existing Clyde Union operations as well as other factors. We expect none of this goodwill to be deductible for income tax purposes. We acquired gross receivables of $152.1, which had a fair value on acquisition date of $148.2 based on our estimates of cash flows expected to be recovered. The following unaudited pro forma information presents our after-tax results of operations as if the acquisition of Clyde Union had taken place on January 1, 2010. The unaudited pro forma financial information is not intended to represent or be indicative of our consolidated results of operations that would have been reported had the acquisition been completed as of the dates presented, and should not be taken as representative of our future consolidated results of operations. The pro forma results include estimates and assumptions that management believes are reasonable; however, these results do not include any anticipated cost savings or expenses of the planned integration of Clyde Union. These pro forma results of operations have been prepared for comparative purposes only and include the following adjustments to historical results for the periods presented: • Additional depreciation and amortization expense associated with the fair value adjustments to the acquired Clyde Union property, plant and equipment and intangible assets (2011 — $5.5 and 2010 — $10.6). • The elimination of interest expense related to the portion of Clyde Union's long-term debt that was paid-off at the time of the acquisition (2011 — $17.8 and 2010 — $11.1). • The addition of interest expense associated with the term loans that were drawn down in order to finance the Clyde Union acquisition (2011 — $19.0 and 2010 — $20.3). • The elimination of rent expense associated with a facility in Scotland that had been leased by Clyde Union and that we purchased on December 23, 2011 (2011 — $2.1 and 2010 — $2.0). • The elimination of $34.6 in charges incurred in 2011 associated with the foreign currency protection agreements that we entered into to hedge the Clyde Union purchase price. • The elimination of $7.4 of transaction fees incurred in 2011 in connection with the acquisition (Buyer — $5.6 and Seller — $1.8). • A reduction in bonding costs for Clyde Union due to more favorable rates under our senior credit facilities (2011 — $5.9 and 2010 — $5.5). • The above modifications were adjusted for the applicable income tax impact.
|  | December 31, Year Ended |
--- | --- | --- | ---
|  | 2011 |  | 2010 |
Revenues |  | $ | 4,971.1 |  | $ | 4,502.2 |
Income from continuing operations attributable to SPX Corporation common shareholders |  |  | 158.5 |  |  | 195.3 |
Net income attributable to SPX Corporation common shareholders |  |  | 188.5 |  |  | 220.1 |
Income from continuing operations: |  |  |  |  |  |  |
Basic |  | $ | 3.14 |  | $ | 3.93 |
Diluted |  | $ | 3.11 |  | $ | 3.88 |
Net income attributable to SPX Corporation common shareholders: |  |  |  |  |  |  |
Basic |  | $ | 3.73 |  | $ | 4.43 |
Diluted |  | $ | 3.70 |  | $ | 4.37 |
On October 31, 2011, in our Flow Technology reportable segment, we completed the acquisition of e&e Verfahrenstechnik GmbH ("e&e"), a supplier of extraction, evaporation, vacuum and freeze drying technologies to the global food and beverage, pharmaceutical and bioenergy industries for a purchase price of 11.7 Euros, net of cash assumed of 3.8 Euros, with an additional potential earn-out of 3.5 Euros. e&e had revenues of 15.3 Euros in the twelve months prior to the date of acquisition. In March 2011, in our Flow Technology reportable segment, we completed the acquisition of B.W. Murdoch Ltd. ("Murdoch"), an engineering company supplying processing solutions for the food and beverage industry, for a purchase price of $8.1. Murdoch had revenues of approximately $13.0 in the twelve months prior to the date of acquisition. The pro forma effects of the acquisitions of e&e and Murdoch were not material, individually or in the aggregate, to our consolidated results of operations in any period. Acquisitions — 2010 In July 2010, in our Flow Technology reportable segment, we completed the acquisition of the Anhydro business ("Anhydro"), a global supplier of liquid concentration equipment, powder processing solutions, and dewatering plants and equipment, for a purchase price of $59.1, net of cash acquired of $10.9. Anhydro had revenues of approximately $71.0 in the twelve months prior to the date of acquisition. In April 2010, in Industrial Products and Services, we completed the acquisition of Torque Tension Systems Ltd. ("TTS"), a global supplier of hydraulic torque wrench and tensioner tool products, for a purchase price of $15.7, net of cash acquired of $2.4. TTS had revenues of approximately $9.0 in the twelve months prior to the date of acquisition. In February 2010, in our Flow Technology reportable segment, we completed the acquisition of Gerstenberg Schröder A/S ("Gerstenberg"), a designer, manufacturer, installer and servicer of processing systems and components serving the global food industry, for a purchase price of $30.9, net of cash acquired of $3.5 and including debt assumed of $3.9. Gerstenberg had revenues of approximately $57.0 in the twelve months prior to the date of acquisition. The pro forma effects of the acquisitions of Anhydro, TTS and Gerstenberg were not material, individually or in the aggregate, to our consolidated results of operations in any period. Discontinued Operations We report businesses or asset groups as discontinued operations when, among other things, we commit to a plan to divest the business or asset group, actively begin marketing the business or asset group, and when the sale of the business or asset group is deemed probable within the next twelve months. The following businesses, which have been sold, met these requirements, and therefore have been reported as discontinued operations for the periods presented.
Business |  | Quarter Discontinued |  | Quarter Sale Closed |
--- | --- | --- | --- | --- | ---
TPS Tianyu Equipment Co., Ltd. ("Tianyu") |  |  | Q4 2012 |  |  | Q4 2012 |
Weil-McLain (Shandong) Cast-Iron-Boiler Co., Ltd. ("Weil-McLain Shandong") |  |  | Q4 2012 |  |  | Q4 2012 |
SPX Service Solutions ("Service Solutions") |  |  | Q1 2012 |  |  | Q4 2012 |
Cooling Spain Packaging business ("Cooling Spain") |  |  | Q4 2010 |  |  | Q4 2010 |
P.S.D., Inc. ("PSD") |  |  | Q2 2009 |  |  | Q1 2010 |
Tianyu — Sold for cash consideration of one RMB (exclusive of cash transferred with the business of $1.1), resulting in a loss, net of taxes, of $1.8 during 2012. Weil McLain Shandong — Sold for cash consideration of $2.7 (exclusive of cash transferred with the business of $3.1), resulting in gain, net of taxes, of $2.2 during 2012. Service Solutions — Sold to Robert Bosch GmbH for cash consideration of $1,134.9, resulting in a gain, net of taxes, of $313.4 during 2012. Cooling Spain — Sold for cash consideration of one Euro (exclusive of cash transferred with the business of $2.3), resulting in a loss, net of taxes, of $1.9 during 2010. During 2011, we recorded a net charge of $0.1 to "Gain on disposition of discontinued operations, net of tax" within our consolidated statement of operations in connection with adjustments to certain liabilities that we retained. PSD — Sold for cash consideration of $3.0, resulting in a gain, net of taxes, of $3.6 during 2010. In addition to the businesses discussed above, we recognized net gains (losses) of $(0.4), $0.4 and $2.7 during 2012, 2011 and 2010, respectively, resulting from adjustments to gains/losses on businesses that we sold (and included in discontinued operations) prior to 2010. During 2010, the field examinations of our 2006 and 2007 federal income tax returns were completed by the Internal Revenue Service ("IRS"). In connection with the completion of these examinations, we reduced our liability for uncertain tax positions and recognized an income tax benefit of $7.3 to "Gain on disposition of discontinued operations, net of tax" associated with a business previously disposed of and reported as a discontinued operation. The final sales price for certain of the divested businesses is subject to adjustment based on working capital existing at the respective closing dates. The working capital figures are subject to agreement with the buyers or, if we cannot come to agreement with the buyers, an arbitration process. Final agreement of the working capital figures with the buyers for some of these transactions has yet to occur. In addition, changes in estimates associated with liabilities retained in connection with a business divestiture (e.g., income taxes) may occur. It is possible that the sales price and resulting gains/losses on these and other previous divestitures may be materially adjusted in subsequent periods. For 2012, 2011 and 2010, income from discontinued operations and the related income taxes are shown below:
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Income from discontinued operations |  | $ | 600.0 |  | $ | 46.8 |  | $ | 19.9 |
Income tax (expense) benefit |  |  | (259.6 | ) |  | (16.8 | ) |  | 4.9 |
Income from discontinued operations, net |  | $ | 340.4 |  | $ | 30.0 |  | $ | 24.8 |
For 2012, 2011 and 2010, results of operations from our businesses reported as discontinued operations were as follows:
|  | Year ended December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Revenues |  | $ | 825.0 |  | $ | 925.0 |  | $ | 793.9 |
Pre-tax income |  |  | 44.4 |  |  | 49.8 |  |  | 20.6 |
The major classes of assets and liabilities, excluding intercompany balances, of the businesses reported as discontinued operations included in the accompanying December 31, 2011 consolidated balance sheet are shown below:
Assets: |  |  |  |
Accounts receivable, net |  | $ | 195.1 |
Inventories |  |  | 132.4 |
Other current assets |  |  | 10.4 |
Property, plant and equipment, net |  |  | 49.2 |
Goodwill and intangibles, net |  |  | 285.8 |
Other assets |  |  | 58.7 |
Assets of discontinued operations |  | $ | 731.6 |
Liabilities: |  |  |  |
Accounts payable |  | $ | 111.9 |
Accrued expenses |  |  | 114.1 |
Income taxes payable |  |  | 1.5 |
Deferred and other income taxes |  |  | 6.6 |
Other liabilities |  |  | 7.6 |
Liabilities of discontinued operations |  | $ | 241.7 |
Formation of Shanghai Electric JV On December 30, 2011, we and Shanghai Electric Group Co., Ltd. established the Shanghai Electric JV, a joint venture supplying dry cooling and moisture separator reheater products and services to the power sector in China and other selected regions of the world. We contributed and sold certain assets of our dry cooling products business in China to the joint venture in consideration for a 45% ownership interest in the joint venture and cash payments of RMB 96.7, with RMB 51.5 received in January, 2012, RMB 25.8 received in December, 2012, and the remaining RMB payment contingent upon the joint venture achieving defined sales order volumes. In addition, we have licensed our dry cooling and moisture separator reheater technologies to the joint venture, for which we are receiving a royalty. We also are continuing to manufacture dry cooling components in our China factories and have entered into an exclusive supply agreement with the joint venture for these products. Final approval for the transaction was not received until January 13, 2012. We determined that this transaction met the deconsolidation criteria of ASC 810, "Consolidation," and, thus, recorded a gain for the transaction equal to the estimated fair value of our investment in the joint venture plus any consideration received, less the carrying value of assets contributed and sold to the joint venture. We recorded the net gain associated with this transaction of $20.5 in the first quarter of 2012, with such gain included in "Other income (expense), net."

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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