Note 3.Divestitures and Business Combinations

Spin-off of KLX Inc.

On June 10, 2014, we announced a plan to spin-off our Consumables Management Segment into a separate publicly traded company. To accomplish the spin-off, we formed KLX Inc. (“KLX”). On December 16, 2014 (the “Distribution Date”), we completed the spin-off of KLX by means of the transfer of our Consumables Management Segment to KLX and the subsequent distribution of all the outstanding KLX common stock to our stockholders. We retained our commercial aircraft and business jet segments. On the Distribution Date, each of our stockholders of record received one share of KLX common stock for every two shares of our common stock held as of the record date. The distribution was structured to be tax free to our U.S. stockholders for U.S. federal income tax purposes.

The divested KLX is presented as a discontinued operation on the condensed consolidated statements of earnings and comprehensive income for all periods presented. The cash flows of KLX are included within our condensed consolidated statement of cash flows for the nine months ended September 30, 2014.

In connection with the spin-off, we entered into certain agreements with KLX relating to transition services and information technology (“IT”) services for a period of approximately 24 months following the distribution. In addition, we entered into an employee matters agreement and a tax sharing and indemnification agreement with KLX in connection with the spin-off.

Sales and cost of sales to KLX for the nine months ended September 30, 2015 were immaterial to the consolidated financial statements. There were no material balances due to or due from KLX as of September 30, 2015.

During the three and nine month periods ended September 30, 2014, KLX generated revenues of $448.7 and $1,241.9, earnings before income taxes of $75.0 and $214.9, and net earnings of $53.0 and $145.1, respectively, which have been presented as net earnings from discontinued operations in the accompanying condensed consolidated statements of earnings and comprehensive income for the three and nine month periods ended September 30, 2014. The results of the KLX discontinued operation exclude certain corporate and group allocations which were historically allocated to our Consumables Management Segment. These costs include primarily corporate overhead and information systems.

Acquisitions

During the second quarter of 2014, the Company acquired the outstanding shares of the Emteq, Inc. group of companies (“EMTEQ”), a domestic provider of aircraft interior and exterior lighting systems, as well as aircraft cabin management and power systems for a purchase price of $253.2, net of cash acquired. The Company also acquired the outstanding shares of the F+E Fischer + Entwicklungen GmbH & Co. KG group of companies (“Fischer”), a leading Europe-based manufacturer of seating products for civilian helicopters for a purchase price of $211.7, net of cash acquired. The Company also acquired the outstanding shares of Wessex Advanced Switching Products Ltd. (“WASP”), which is engaged in the production of lighting, control units and switches and is based in Europe, for a purchase price of $63.0, net of cash acquired. These acquisitions are included in the business jet segment and collectively referred to as the “2014 Acquisitions.”

For the 2014 Acquisitions, based on our purchase price allocation, the excess of the purchase price over the fair value of the identifiable assets acquired approximated $530.5, of which $137.0 was allocated to identified intangible assets, consisting of customer contracts and relationships, developed technologies, trade names and covenants not to compete, and $393.5 is included in goodwill. The useful life assigned to the customer contracts and relationships and developed technologies is 20 years, the useful life assigned to trade names is five to 20 years, and the covenants not to compete are being amortized over their contractual periods of three to five years.

The 2014 Acquisitions were accounted for as purchases under ASC Topic 805, Business Combinations (“ASC Topic 805”). The assets purchased and liabilities assumed for the 2014 Acquisitions have been reflected in the accompanying condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014, and the results of operations for the 2014 Acquisitions are included in the accompanying condensed consolidated statements of earnings from their respective dates of acquisition.

The Company completed its evaluation and allocation of the purchase price for the EMTEQ and Fischer acquisitions during the six months ended June 30, 2015. The Company completed its evaluation and allocation of the purchase price for the WASP acquisition during the three months ended March 31, 2015. The Company recorded measurement period adjustments to previous purchase accounting estimates for the 2014 Acquisitions, which were primarily related to the finalization of the valuation of intangible assets. The adjustments primarily consisted of an increase in identifiable intangible assets and deferred income tax liability of $32.5 and $10.5, respectively, and a decrease in goodwill of $19.1. These adjustments were applied retrospectively to the acquisition date. Accordingly, the Company's consolidated balance sheet as of December 31, 2014 has been adjusted to reflect the effects of the measurement period adjustments. There was no material impact of the measurement period adjustments on the retrospective period statement of earnings and comprehensive income.

The following table summarizes the fair values of assets acquired and liabilities assumed in the 2014 Acquisitions in accordance with ASC Topic 805:


	Domestic		Foreign
Accounts receivable-trade	$	12.5	$	12.0
Inventories		12.3		7.9
Other current and non-current assets		2.5		1.2
Property and equipment		6.5		7.1
Goodwill		194.0		199.5
Identified intangibles		45.7		91.3
Accounts payable		(4.2)		(3.6)
Other current and non-current liabilities		(16.1)		(40.7)
Total purchase price	$	253.2	$	274.7

The majority of the goodwill and intangible assets related to the 2014 Acquisitions are not expected to be deductible for tax purposes.

Consolidated unaudited pro forma revenues, net earnings, and diluted net earnings per share from continuing operations for the three and nine month periods ended September 30, 2014, giving effect to the 2014 Acquisitions as if they had occurred on January 1, 2013 were $653.7, $49.2, and $0.47, and $2,030.1, $179.6 and $1.72, respectively.