Acquisitions and divestiture

Acquisitions - During the first nine months of fiscal 2017, the Company completed three acquisitions, including the acquisition of a 100 percent equity interest in CLARCOR Inc ("Clarcor") for approximately $4,110 million in cash, including the assumption of debt. The remaining disclosures in Note 3 pertain only to Clarcor as the other two acquisitions completed during the first nine months of fiscal 2017 were deemed immaterial for further disclosure.

Clarcor is a major manufacturer of filtration products under more than a dozen respected brands including CLARCOR, Baldwin, Fuel Manager, PECOFacet, Airguard, Altair, BHA, Clearcurrent, Clark Filter, Hastings, United Air Specialists, Keddeg and Purolator. Clarcor had annual sales of approximately $1,400 million for its fiscal 2016. For segment reporting purposes, Clarcor will be part of the Diversified Industrial Segment.

The Company believes that Clarcor is a highly complementary acquisition that provides the Company with additional proprietary media, industrial and process filtration products and technologies, as well as a broad portfolio of replacement filters. The acquisition of Clarcor also offers significant expected operating synergies.

The Clarcor assets acquired and liabilities assumed will be recognized at their respective fair values as of the acquisition date. The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. The following presents the preliminary estimated fair values of Clarcor's assets acquired and liabilities assumed on the acquisition date. These preliminary estimates are based on available information and will be revised during the measurement period, not to exceed 12 months, as third-party valuations are finalized, additional information becomes available and as additional analysis is performed. Such revisions may have a material impact on the Company's results of operations and financial position.

3. Acquisitions and divestiture, cont'd



	February 28, 2017
Assets:
Cash and cash equivalents	$	145,491
Accounts receivable	249,045
Inventories	278,060
Prepaid expenses	13,903
Plant and equipment	373,698
Deferred income taxes	4,558
Other assets	8,367
Intangible assets	1,497,280
Goodwill	2,649,456
	5,219,858
Liabilities:
Notes payable	20,162
Accounts payable, trade	82,436
Accrued payrolls and other compensation	42,653
Accrued domestic and foreign taxes	4,379
Other accrued liabilities	79,066
Long-term debt	288,336
Pensions and other postretirement benefits	33,928
Deferred income taxes	542,698
Other liabilities	13,878
Noncontrolling interests	1,843
	1,109,379
Net assets acquired	$	4,110,479

Goodwill is calculated as the excess of the purchase price over the net assets acquired and is not deductible for tax purposes. With respect to the Clarcor acquisition, goodwill represents cost synergies and enhancements to the Company's existing filtration technologies. See Note 11 for additional information about intangible assets.

The Company's results of operations for the first nine months of fiscal 2017 include Clarcor's results of operations from the date of acquisition, February 28, 2017, through March 31, 2017. Net sales and segment operating (loss) attributable to Clarcor during this period was $135,986 and $(13,582), respectively.

The following unaudited pro forma information gives effect to the Company's acquisition of Clarcor as if the acquisition had occurred on July 1, 2015 and Clarcor had been included in the Company's results of operations for the first nine months of fiscal 2017 and the twelve months ended June 30, 2016.



	Nine months ended		Twelve months ended
	March 31, 2017		June 30, 2016

Net sales	$	9,562,307	$	12,772,097
Net income attributable to common shareholders	754,323		780,421
Diluted earnings per share	5.57		5.70

3. Acquisitions and divestiture, cont'd

The unaudited pro forma financial information in the table above includes adjustments related to amortization expense, depreciation, interest expense and transaction costs incurred as well as adjustments to cost of sales for the step-up in inventory to estimated acquisition-date fair value and related income tax effects and is based on a preliminary purchase price allocation using currently available information. Transaction costs incurred and the adjustment to cost of sales for the step-up in inventory to estimated acquisition-date fair value are considered to be non-recurring. Adjustments for non-recurring items increased pro forma net income attributable to common shareholders by $72,006 for the nine months ended March 31, 2017 and decreased pro forma net income attributable to common shareholders by $29,106 for the twelve months ended June 30, 2016. The unaudited pro forma financial information does not give effect to any synergies, operating efficiencies or cost savings that may result from the Clarcor acquisition.

Divestiture - During the second quarter of fiscal 2017, the Company divested its Autoline product line, which was part of the Diversified Industrial Segment. The operating results and net assets of the Autoline product line were immaterial to the Company's consolidated results of operations and financial position. The Company recorded a net pre-tax gain in the second quarter of fiscal 2017 of approximately $45 million related to the divestiture. The gain is reflected in the other (income), net caption in the Consolidated Statement of Income and the other expense caption in the Business Segment Information for the nine months ended March 31, 2017.