Business Combinations

9 Months Ended

Oct. 31, 2016

Business Combinations

Business Combinations

Note 3.Business Combinations

On May 17, 2016, the Company acquired Herndon Aerospace & Defense LLC (“Herndon”), an aftermarket aerospace supply chain management and consumables hardware distributor servicing principally aftermarket military depots as well as the commercial aerospace aftermarket for an aggregate purchase price of $220.8 (net of cash acquired). During the quarter ended October 31, 2016, Herndon’s acquired working capital was finalized resulting in a reduction in purchase price of $0.7 and customary working capital adjustments as of the closing date which were not material individually or in the aggregate. Additionally, the Company adjusted the allocation of the Herndon purchase price to increase intangible assets by $16.4 and decrease goodwill and inventories by $14.2 and $3.0, respectively, related to the Company’s preliminary purchase price allocation. The impact of the purchase price adjustment to the Company’s condensed consolidated statement of earnings from the date of acquisition was not material.

Based on the Company’s preliminary purchase price allocation, the excess of the purchase price of the fair value of the identifiable assets acquired approximated $113.6, of which $68.9 was allocated to identifiable intangible assets consisting of customer contracts and relationships and covenants not to compete, and $44.7 is included in goodwill. The useful life assigned to the customer contracts and relationships is 20 years, and the covenants not to compete are being amortized over their contractual periods of five years.

The Herndon acquisition was accounted for as a purchase under FASB ASC 805, Business Combinations. The assets acquired and liabilities assumed have been reflected in the accompanying condensed consolidated balance sheet as of October 31, 2016 and the results of operations are included in the accompanying condensed consolidated statements of earnings and comprehensive income from the date of acquisition. The valuation of certain assets, principally intangible assets and inventories, is not yet complete, and as such, the Company has not yet finalized its allocation of the purchase price for the acquisition.

The following table summarizes the current estimates of fair values of assets acquired and liabilities assumed in the Herndon acquisition in accordance with ASC 805, which are currently recorded based on management’s estimates as follows:

Accounts receivable-trade	$	12.3
Inventories		103.2
Other current and non-current assets		1.1
Property and equipment		2.3
Goodwill		44.7
Identified intangibles		68.9
Accounts payable		(9.7)
Other current and non-current liabilities		(2.0)
Total consideration paid	$	220.8

The majority of goodwill and intangible assets are expected to be deductible for tax purposes.

On a pro forma basis to give effect to the Herndon acquisition as if it occurred on February 1, 2015, revenues, net earnings (loss) and earnings (loss) per diluted share for the three months ended October 31, 2015 and the nine months ended October 31, 2016 and 2015 were:

	THREE MONTHS ENDED					NINE MONTHS ENDED
	OCTOBER 31,		OCTOBER 31,		OCTOBER 31,		OCTOBER 31,
	2016		2015		2016		2015
	As Reported		Pro forma		Pro forma		Pro forma
Revenues	$	389.0	$	399.5	$	1,198.8	$	1,309.3
Net earnings (loss)		19.8		(398.4)		39.1		(368.6)
Earnings (loss) per diluted share		0.38		(7.63)		0.75		(7.06)

The Company has begun integrating Herndon into its Aerospace Solutions Group (“ASG”) segment systems. As a result, it is not practicable to report stand-alone operating earnings of the acquired business since the acquisition date, and going forward it will not be practicable to report stand-alone revenues of the acquired business. Revenues from Herndon from the acquisition date of May 17, 2016 through October 31, 2016 were $56.7.