Note 2:

Acquisition

Luvata HTS

On November 30, 2016, the Company completed its acquisition of a 100 percent ownership interest in the Luvata HTS business for consideration totaling $415.6 million ($388.2 million, net of cash acquired). The purchase price included 2.2 million Modine common shares, valued at $24.3 million as of November 30, 2016. Operating as Modine’s Commercial and Industrial Solutions (“CIS”) segment, this business is a leading global supplier of coils, coolers and coatings to the heating, ventilation, air conditioning, and refrigeration industry. See Note 22 for a summary of net sales and operating income reported by the CIS segment. In fiscal 2018 and 2017, the Company recorded $4.3 million and $14.8 million, respectively, of costs incurred directly related to the acquisition and integration of Luvata HTS as SG&A expenses within the consolidated statements of operations. The fiscal 2018 costs primarily consisted of incremental costs associated with integration activities, including legal and accounting professional services and severance expenses. The fiscal 2017 costs primarily consisted of transaction advisory and due diligence costs and incremental costs directly associated with integration activities. In addition, during fiscal 2017, the Company charged $4.3 million to cost of sales related to inventory that it wrote-up to fair value upon acquisition.

The Company completed its accounting for the acquisition of Luvata HTS during fiscal 2018 and allocated the purchase price of $415.6 million to the identifiable tangible and intangible assets acquired and the liabilities assumed based upon their estimated fair values as of the acquisition date. The Company allocated the excess of the purchase price over the net assets recognized to goodwill in the amount of $151.9 million, none of which is deductible for income tax purposes. Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Specifically, the goodwill recorded as part of the acquisition includes Luvata HTS’s workforce and anticipated future cost and revenue synergies.

The Company’s allocation of the purchase price for its acquisition of Luvata HTS was as follows:

Cash and cash equivalents	$	27.4
Trade accounts receivable		86.1
Inventories		55.0
Property, plant and equipment		120.4
Intangible assets		130.2
Goodwill		151.9
Other assets		39.1
Accounts payable		(73.7	)
Accrued compensation and employee benefits		(24.3	)
Deferred income taxes		(39.5	)
Pensions		(14.3	)
Other liabilities		(42.7	)
Purchase price	$	415.6

The following unaudited supplemental pro forma information presents the Company’s consolidated results of operations as though the acquisition of Luvata HTS had occurred at the beginning of fiscal 2016. This pro forma financial information is presented for illustrative purposes only and is not considered to be indicative of the operating results that would have been achieved had the acquisition been completed as of the date indicated.

	Year ended March 31, 2017
Net sales	$	1,881.6
Net earnings attributable to Modine		35.8
Net earnings per share attributable to Modine shareholders:
Basic	$	0.72
Diluted		0.71

The supplemental pro forma financial information includes adjustments for: (i) annual amortization and depreciation expense totaling approximately $13.0 million for acquired tangible and intangible assets, (ii) estimated annual interest expense of approximately $14.0 million resulting from acquisition-related borrowings, and (iii) the estimated income tax impacts related to the pro forma adjustments, considering the statutory tax rates within the applicable jurisdictions. In addition, the pro forma financial information assumes that both $8.6 million of acquisition-related transaction costs, not including costs for integration-related activities, and $4.3 million of inventory purchase accounting adjustments were incurred during fiscal 2016. The pro forma financial information does not reflect achieved or expected cost or revenue synergies.