Business Combinations

6 Months Ended

Jun. 30, 2012

Business Combinations [Abstract]

Business Combinations

Business Combinations

Schilling Robotics, LLC—On January 3, 2012, we exercised our option to purchase the remaining 55% of outstanding shares of Schilling Robotics LLC (“Schilling”), a Delaware limited liability company, and closed the transaction on April 25, 2012. Schilling is a supplier of advanced robotic intervention products, including a line of remotely operated vehicle systems ("ROV"), manipulator systems and subsea control systems. The acquisition of the remaining interests in Schilling will allow us to grow in the expanding subsea environment, where demand for ROVs and the need for maintenance activities of subsea equipment is expected to increase.

Prior to April 25, 2012 we owned 45.0% of Schilling. Upon the closing of this transaction, we owned 100.0% of Schilling which is included among the consolidated subsidiaries reported in the Subsea Technologies segment. The acquisition-date fair value of our previously held equity interest in Schilling was $144.9 million with the fair value primarily estimated through an income approach valuation. We recorded a gain of $20.0 million related to the fair value remeasurement of our previously held equity interest in Schilling.

The purchase price with respect to the remaining outstanding shares was determined by applying the multiple of our market capital relative to our earnings before interest, taxes, depreciation and amortization ("EBITDA") for the year ended December 31, 2011 (determined in accordance with the terms of the unitholders agreement), to the EBITDA generated by Schilling during the year ended December 31, 2011 (subject to certain adjustments in accordance with the terms of the unitholders agreement). The consideration for the remaining outstanding shares was paid in cash.

Control Systems International, Inc.—On April 30, 2012, we acquired Control Systems International, Inc. ("CSI") which is included among the consolidated subsidiaries reported in the Energy Infrastructure segment. Our acquisition of CSI will enhance FMC's automation and controls technologies, supporting our long-term strategy to expand our subsea production and processing systems. Additionally, we also anticipate the acquisition of CSI to benefit other business units in our portfolio of businesses, such as measurement solutions, through comprehensive fuel terminal and pipeline automation systems.

The acquisition-date fair value of the consideration transferred totaled $486.7 million which consisted of the following:

(In millions)	Schilling		CSI			Total
Cash	$	282.8	$	49.0	*	$	331.8
Previously held equity interest	144.9		—			144.9
Purchase price withheld	—		10.0		**	10.0
Total	$	427.7	$	59.0		$	486.7

_______________________  

*

Includes anticipated recovery of negative working capital.

**

Represents the portion of the purchase price withheld ("holdback") by FMC pursuant to the terms of the stock purchase agreement. The holdback amount will be held and maintained by FMC as security for the payment of any and all amounts to which CSI indemnifies us, including final working capital adjustments and other indemnifications as listed in the stock purchase agreement. FMC may deduct from the holdback any eligible amounts and pay CSI the net amount three years after the closing date.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the acquisition dates.

(In millions)	Schilling			CSI			Total
Assets:
Cash	$	3.9		$	0.3		$	4.2
Accounts receivable	22.4			8.2			30.6
Inventory	50.6			0.1			50.7
Other current assets	2.1			0.2			2.3
Property, plant and equipment	21.7			0.2			21.9
Intangible assets	145.9			36.2			182.1
Other long-term assets	0.7			—			0.7
Total identifiable assets acquired	247.3			45.2			292.5
Liabilities:
Current liabilities	(33.4		)	(15.8		)	(49.2		)
Other long-term liabilities	(1.9		)	—			(1.9		)
Total liabilities assumed	(35.3		)	(15.8		)	(51.1		)
Net identifiable assets acquired	212.0			29.4			241.4
Goodwill	215.7			29.6			245.3
Net assets acquired	$	427.7		$	59.0		$	486.7

The goodwill recognized is primarily attributable to expected synergies and assembled workforce acquired in Schilling and CSI. As of June 30, 2012, there were no changes in the recognized amounts of goodwill resulting from either acquisition. The majority of the combined goodwill recognized for Schilling and CSI is deductible for tax purposes.

The identifiable intangible assets acquired include the following:

	Schilling			CSI
(In millions)	Fair Value		Wgtd. Avg. Amort. Period	Fair Value		Wgtd. Avg. Amort. Period
Technology	$	38.9	12	$	16.9	10
Trademarks/trade name	25.4		20	2.8		15
Customer relationships	42.9		20	16.5		15
Base technology – technical know-how	38.7		15	—		—
Total identifiable intangible assets acquired	$	145.9		$	36.2

We recognized $0.3 million of acquisition-related costs that were expensed in the six months ended June 30, 2012 related to the Schilling and CSI acquisitions. These costs were recognized as selling, general and administrative expense in the consolidated statement of income. Revenue and net income (loss) of Schilling and CSI from the acquisition dates included in our condensed consolidated statements of income were $18.6 million and $4.6 million of revenue, respectively, and $(1.5) million and $0.4 million of net income (loss), respectively.

Pro Forma Impact of Acquisitions (unaudited)

The following unaudited supplemental pro forma results present consolidated information as if the acquisitions had been completed as of January 1, 2011. The 2012 pro forma results include: (i) $2.3 million of amortization for acquired intangible assets, (ii) $5.0 million in inventory fair value step-up amortization for Schilling, and (iii) $0.3 million of acquisition-related costs. The pro forma results do not include any potential synergies, cost savings or other expected benefits of the acquisitions. Accordingly, the pro forma results should not be considered indicative of the results that would have occurred if the acquisitions had been consummated as of January 1, 2011, nor are they indicative of future results.

	Six Months Ended June 30,
(In millions)	2012 Pro Forma		2011       Pro Forma
Revenue	$	2,930.2	$	2,369.6
Net income	$	209.5	$	185.5