Acquisitions

6 Months Ended

Dec. 31, 2019

On October 29, 2019, we completed the acquisition of a 100 percent equity interest in LORD Corporation ("Lord") for approximately $3,453 million in cash, including the assumption of debt. On September 16, 2019, we completed the acquisition of a 100 percent equity interest in EMFCO Holdings Incorporated, parent company of Exotic Metals Forming Company LLC ("Exotic") for approximately $1,706 million in cash.

Lord is a diversified technology and manufacturing company developing highly reliable adhesives and coatings, as well as vibration and motion control technologies, that significantly reduce risk and improve product performance. Lord’s products are used in mission-critical applications in the aerospace, automotive and industrial markets. Lord had annual sales of approximately $1,025 million for its fiscal 2018. For segment reporting purposes, approximately 95 percent of Lord's sales are included in the Diversified Industrial Segment, while the remaining five percent are included in the Aerospace Systems Segment. Lord’s unique and proprietary products, solutions and technologies for mission-critical applications are expected to increase the Company's overall engineered materials product and solutions offerings to enable a stronger value proposition for customers.

Exotic designs and manufactures innovative and technically demanding, high temperature, high pressure air and exhaust management solutions for aircraft and engines. Exotic had annual sales of approximately $409 million for its fiscal 2019.

For segment reporting purposes, Exotic is included in the Aerospace Systems Segment. We believe Exotic's products and proprietary manufacturing capabilities are complementary to our portfolio of flight control, fuel and inerting, hydraulics, fluid conveyance and engine components.

Assets acquired and liabilities assumed are 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 Lord and Exotic's assets acquired and liabilities assumed on the respective acquisition dates. These preliminary estimates are based on available information and will be revised during the measurement period, not to exceed 12 months from the acquisition date, as third-party valuations are finalized, additional information becomes available and as additional analysis is performed. Such revisions may have a material impact on our results of operations and financial position within the measurement period. During the current-year quarter, these revisions, which primarily impacted intangible assets, goodwill, and plant and equipment, did not have a material impact on our financial statements.



	Lord		Exotic
	October 29, 2019		September 16, 2019
Assets:
Cash and cash equivalents	$	74,013	$	8,179
Accounts receivable	156,670		81,336
Inventories	251,312		114,661
Prepaid expenses and other	27,624		1,343
Plant and equipment	406,356		178,393
Deferred income taxes	—		2,057
Other assets	34,185		1,226
Intangible assets	1,492,960		873,710
Goodwill	1,978,526		504,485
Total assets acquired	4,421,646		1,765,390
Liabilities:
Notes payable and long-term debt payable within one year	630		—
Accounts payable, trade	56,186		23,176
Accrued payrolls and other compensation	57,371		8,863
Accrued domestic and foreign taxes	4,498		2,123
Other accrued liabilities	91,101		25,662
Long-term debt	223,313		—
Pensions and other postretirement benefits	115,265		—
Deferred income taxes	383,759		—
Other liabilities	30,106		—
Noncontrolling interests	6,255		—
Total liabilities and noncontrolling interests assumed	968,484		59,824
Net assets acquired	$	3,453,162	$	1,705,566

Goodwill is calculated as the excess of the purchase price over the net assets acquired. With respect to the Lord and Exotic acquisitions, goodwill represents cost synergies and enhancements to our existing technologies. For tax purposes, Lord's goodwill is not deductible and Exotic's goodwill is deductible. Based upon a preliminary acquisition valuation, intangibles acquired as part of the Exotic acquisition include $501,610 of customer-related intangible assets, $281,500 of patents and technology and $90,600 of trademarks, with weighted average estimated useful lives of 18, 20 and 20 years, respectively. Similarly, Lord's acquisition includes $917,640 of customer-related intangible assets, $456,680 of patents and technology and $118,640 of trademarks, with weighted average estimated useful lives of 13, 21 and 20 years, respectively.

Our consolidated financial statements include the results of operations of Lord and Exotic from their respective acquisition dates through December 31, 2019. Net sales attributable to these acquisitions during this period and included in our consolidated financial statements for the three and six months ended December 31, 2019 total $285,905 and $307,188, respectively. Segment operating (loss) attributable to these acquisitions during this period and included in our consolidated financial statements for the three and six months ended December 31, 2019 total $(20,054) and $(19,820), respectively.

Acquisition-related transaction costs totaled $114,672 for fiscal 2020. These costs are included in selling, general and administrative expenses in the Consolidated Statement of Income.