EX-99.1 9 a2218170zex-99_1.htm EX-99.1

Exhibit 99.1

 

EGS ELECTRICAL GROUP, LLC

AND SUBSIDIARIES

(A Limited Liability Company)

 

Consolidated Financial Statements

 

September 30, 2013 and 2012

 

(With Independent Auditors’ Report Thereon)

 



 

Independent Auditors’ Report

 

The Board of Members

EGS Electrical Group, LLC:

 

We have audited the accompanying consolidated balance sheets of EGS Electrical Group, LLC and subsidiaries (the Company) as of September 30, 2013 and 2012, and the related consolidated statements of comprehensive income, members’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended September 30, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EGS Electrical Group, LLC and subsidiaries as of September 30, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 2013, in conformity with U.S. generally accepted accounting principles.

 

 

/s/ KPMG LLP

 

Chicago, Illinois

 

January 22, 2014

 

 



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Consolidated Balance Sheets

September 30, 2013 and 2012

(Dollars in thousands)

 

 

 

2013

 

2012

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

32,503

 

35,027

 

Accounts receivable, less allowances of $12,012 and $10,163, respectively

 

77,601

 

78,636

 

Due from members

 

1,739

 

640

 

Inventories:

 

 

 

 

 

Finished goods

 

29,976

 

32,153

 

Work in progress

 

12,281

 

15,005

 

Raw materials

 

15,265

 

15,709

 

Total inventories

 

57,522

 

62,867

 

Prepaid expenses

 

2,016

 

2,813

 

Deferred income taxes

 

3,335

 

226

 

Other current assets

 

5,713

 

3,336

 

Total current assets

 

180,429

 

183,545

 

Property, plant, and equipment:

 

 

 

 

 

Land

 

4,162

 

4,874

 

Buildings and improvements

 

29,745

 

35,775

 

Machinery and equipment

 

153,107

 

146,378

 

Construction in progress

 

4,993

 

5,882

 

Total property, plant, and equipment

 

192,007

 

192,909

 

Less accumulated depreciation

 

128,370

 

130,357

 

Property, plant, and equipment, net

 

63,637

 

62,552

 

Goodwill

 

260,699

 

261,543

 

Other intangibles — gross

 

18,962

 

19,887

 

Accumulated amortization

 

(8,047

)

(6,264

)

Net other intangibles

 

10,915

 

13,623

 

Other assets

 

1,133

 

1,907

 

Total assets

 

$

516,813

 

523,170

 

 

See accompanying notes to consolidated financial statements.

 

2



 

 

 

2013

 

2012

 

Liabilities and Members’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Trade accounts payable

 

$

58,998

 

53,471

 

Due to members

 

20,093

 

33,167

 

Accrued employee compensation

 

6,343

 

6,342

 

Accrued sales rebates

 

7,647

 

8,414

 

Accrued expenses

 

14,934

 

15,465

 

Total current liabilities

 

108,015

 

116,859

 

Deferred income taxes

 

10,141

 

6,026

 

Other liabilities

 

13,837

 

26,966

 

Total liabilities

 

131,993

 

149,851

 

Members’ equity:

 

 

 

 

 

Members’ capital

 

369,596

 

368,150

 

Accumulated other comprehensive income

 

15,224

 

5,169

 

Total members’ equity

 

384,820

 

373,319

 

Total liabilities and members’ equity

 

$

516,813

 

523,170

 

 

3


 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Consolidated Statements of Comprehensive Income

Years ended September 30, 2013, 2012, and 2011

(Dollars in thousands)

 

 

 

2013

 

2012

 

2011

 

Net sales

 

$

517,491

 

526,990

 

495,280

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of goods sold

 

294,235

 

305,051

 

293,731

 

Selling, general, and administrative expenses

 

116,735

 

116,920

 

113,871

 

Related-party management fees

 

3,460

 

3,590

 

3,318

 

Other deductions, net

 

7,041

 

3,196

 

8,214

 

Interest expense, net

 

1,493

 

843

 

75

 

Total costs and expenses

 

422,964

 

429,600

 

419,209

 

Income before income tax expense

 

94,527

 

97,390

 

76,071

 

Income tax expense

 

5,083

 

9,532

 

12,387

 

Net income

 

89,444

 

87,858

 

63,684

 

Other comprehensive income

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

(2,593

)

(314

)

3,344

 

Defined benefit pension plans:

 

 

 

 

 

 

 

Past service cost arising during the period

 

(16

)

742

 

135

 

Actuarial gain/loss arising during the period

 

12,664

 

(5,057

)

(2,295

)

Other comprehensive income

 

10,055

 

(4,629

)

1,184

 

Comprehensive income

 

$

99,499

 

83,229

 

64,868

 

 

See accompanying notes to consolidated financial statements.

 

4



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Consolidated Statements of Members’ Equity and Comprehensive Income

Years ended September 30, 2013, 2012, and 2011

(Dollars in thousands)

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

Members’

 

Retained

 

other comprehensive

 

 

 

 

 

capital

 

earnings

 

income (loss)

 

Total

 

Balance at September 30, 2010

 

$

355,897

 

 

8,614

 

364,511

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

Net income

 

 

63,684

 

 

63,684

 

Cumulative translation adjustment

 

 

 

3,344

 

3,344

 

Pension and postretirement adjustments

 

 

 

(2,160

)

(2,160

)

Total comprehensive income – 2011

 

 

 

 

 

 

 

64,868

 

Member’s contribution, stock-based compensation

 

772

 

 

 

772

 

Distributions to members

 

(2,316

)

(63,684

)

 

(66,000

)

Balance at September 30, 2011

 

354,353

 

 

9,798

 

364,151

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

Net income

 

 

87,858

 

 

87,858

 

Cumulative translation adjustment

 

 

 

(314

)

(314

)

Pension and postretirement adjustments

 

 

 

(4,315

)

(4,315

)

Total comprehensive income – 2012

 

 

 

 

 

 

 

83,229

 

Member’s contribution, stock-based compensation

 

939

 

 

 

939

 

Distributions to members

 

12,858

 

(87,858

)

 

(75,000

)

Balance at September 30, 2012

 

368,150

 

 

5,169

 

373,319

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

Net income

 

 

89,444

 

 

89,444

 

Cumulative translation adjustment

 

 

 

(2,593

)

(2,593

)

Pension and postretirement adjustments

 

 

 

12,648

 

12,648

 

Total comprehensive income – 2013

 

 

 

 

 

 

 

99,499

 

Member’s contribution, stock-based compensation

 

1,976

 

 

 

1,976

 

Distributions to members

 

(530

)

(89,444

)

 

(89,974

)

Balance at September 30, 2013

 

$

369,596

 

 

15,224

 

384,820

 

 

See accompanying notes to consolidated financial statements.

 

5



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Consolidated Statements of Cash Flows

Years ended September 30, 2013, 2012, and 2011

(Dollars in thousands)

 

 

 

2013

 

2012

 

2011

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

89,444

 

87,858

 

63,684

 

Adjustment to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Loss (gain) on sales of property, plant, and equipment

 

518

 

 

1,044

 

Depreciation and amortization

 

10,952

 

10,367

 

10,257

 

Deferred income taxes

 

4,115

 

(921

)

(1,441

)

Stock-based compensation expense

 

1,976

 

939

 

772

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable, net of allowances

 

(1,342

)

(2,426

)

(11,660

)

Inventories

 

5,756

 

(4,035

)

5,009

 

Other current assets

 

1,411

 

(1,459

)

(2,801

)

Other assets

 

3,111

 

5,610

 

 

Payables

 

5,501

 

13,817

 

(4,914

)

Accrued expenses

 

(1,297

)

1,297

 

(3,555

)

Other liabilities

 

(6,655

)

536

 

2,022

 

Net cash provided by operating activities

 

113,490

 

111,583

 

58,417

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(13,273

)

(12,045

)

(16,677

)

Proceeds from disposition of property, plant, and equipment

 

2,914

 

502

 

1,884

 

Acquisitions/other

 

 

(176

)

(473

)

Net cash used in investing activities

 

(10,359

)

(11,719

)

(15,266

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Distribution to members

 

(89,974

)

(75,000

)

(66,000

)

Intercompany loan (borrowings/(repayments))

 

(11,625

)

(22,817

)

24,114

 

Net cash used in financing activities

 

(101,599

)

(97,817

)

(41,886

)

Net increase in cash and cash equivalents

 

1,532

 

2,047

 

1,265

 

Effect of exchange rate changes on cash and cash equivalents

 

(4,056

)

(1,749

)

2,624

 

Cash and cash equivalents at beginning of year

 

35,027

 

34,729

 

30,840

 

Cash and cash equivalents at end of year

 

$

32,503

 

35,027

 

34,729

 

Supplemental cash flow data:

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

Interest

 

$

2,456

 

2,057

 

1,079

 

Income taxes

 

8,505

 

13,275

 

8,573

 

 

See accompanying notes to consolidated financial statements.

 

6


 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

 

(Dollars in thousands)

 

(1)                            Summary of Significant Accounting Policies

 

(a)              Description of Business

 

EGS Electrical Group, LLC (EGS) was created on September 15, 1997 by combining the electrical groups of Emerson Electric Co. (Emerson) and General Signal, Inc. (General Signal). Emerson originally held 52.5% of members’ units and General Signal held 47.5%. General Signal subsequently merged with SPX Corporation (SPX), with SPX becoming the minority member. As of September 30, 2013, and during each of the years in the three-year period then ended, Emerson owned 55.5% of members’ units and SPX owned the remaining 44.5%. On January 7, 2014, Emerson acquired SPX’s interest in EGS for approximately $574,100.

 

EGS and subsidiaries (the Company) operate offices, plants, and warehouses in six U.S. states and eight international countries and are engaged in the manufacture of electrical fittings, enclosures, controls, and industrial lighting; transformers, power conditioning, power protection, and power supplies; resistance wire electrical heating cable and pipe tracing cable; and a variety of electrical heating products. Approximately 38% and 34% of the Company’s assets were located outside the United States of America as of September 30, 2013 and 2012, respectively, primarily in Brazil, Canada, France, and China. International sales, primarily in Brazil, Canada, and France, represented 21%, 21%, and 20% of the Company’s total revenues for the years ended September 30, 2013, 2012, and 2011, respectively.

 

(b)              Principles of Consolidation

 

The consolidated financial statements include the accounts of EGS and its controlled affiliates. All significant intercompany transactions, profits, and balances are eliminated in consolidation. The Company has no involvement with variable interest entities.

 

The functional currency of the Company’s non-U.S. subsidiaries located in Brazil, France, Mexico Distribution Center, Canada, and China is the local currency. The functional currency of the Company’s non-U.S. subsidiary located in Romania is the euro. The functional currency of the Company’s subsidiaries located in Mexico and Singapore are the U.S. dollar. Adjustments resulting from the translation of consolidated financial statements are reflected as a separate component of accumulated other comprehensive income (loss).

 

The Company has evaluated subsequent events through January 22, 2014, the date on which the consolidated financial statements were issued.

 

(c)               Cash Equivalents

 

Cash equivalents consist principally of $26,832 and $32,241 of cash swept to an Emerson-controlled account, but available on demand to the Company as of September 30, 2013 and 2012, respectively. The Company has a credit balance in the cash account related to outstanding checks that have not been funded by Emerson of

 

(Continued)

 

7



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

 

September 30, 2013 and 2012

 

(Dollars in thousands)

 

 

$14,138 as of September 30, 2013. This balance has been reclassified to Trade accounts payable on the accompanying balance sheet.

 

(d)              Trade Accounts Receivable

 

Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows. Allowances provided against accounts receivable are for doubtful accounts and adjustments to reduce amounts recorded to net realizable value as a result of estimated sales returns and pricing adjustments. The allowances for doubtful accounts, and other adjustments to reduce accounts receivable to net realizable value, are the Company’s best estimate of the amount of probable credit losses in the Company’s accounts receivable as of the balance sheet date. The Company determines the allowances based on historical write-off experience and specific analysis of certain individual balances. Account balances are charged off against the allowances after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. The Company’s bad debt expense for the years ended September 30, 2013, 2012, and 2011 was $15, $22, and $246, respectively.

 

(e)               Inventories

 

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method for all inventories.

 

(f)                 Property, Plant, and Equipment

 

The Company records investments in land, buildings, and improvements, and machinery and equipment at cost.

 

Depreciation on plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Useful lives are 3—12 years for machinery and equipment, and 30—40 years for buildings and improvements. Total depreciation expense during the years ended September 30, 2013, 2012, and 2011 was $8,853, $8,204, and $8,260, respectively.

 

(g)              Goodwill and Other Intangible Assets

 

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. All goodwill is assigned to the reporting unit that acquires the business. A reporting unit is a business unit one level below the operating segment if discrete financial information for that business unit is prepared and regularly reviewed by the segment manager. The Company conducts a formal impairment test of goodwill on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company performs its test as of September 30 of each year using a discounted cash flow analysis that requires that certain assumptions and estimates be made. No impairment of goodwill was identified through the

 

(Continued)

 

8



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

performance of the annual impairment tests during the years ended September 30, 2013, 2012, and 2011.

 

Intangible assets determined to have an indefinite useful life are not amortized, but are instead tested for impairment on an annual basis. Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.

 

(h)              Impairment of Long-Lived Assets

 

Long-lived assets such as property, plant, and equipment and purchased intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If events or circumstances indicate that the long-lived assets should be reviewed for possible impairment, the Company uses projections to assess whether future cash flows on a nondiscounted basis related to the tested assets is likely to exceed the recorded carrying amount of those assets, to determine whether a write-down is appropriate. Should an impairment be identified, a loss would be recorded to the extent that the carrying value of the impaired assets exceeds their fair value as determined by valuation techniques appropriate in the circumstance, which could include the use of similar projections on a discounted basis. No such events or circumstances were identified during the years ended September 30, 2013, 2012, and 2011.

 

(i)                 Income Taxes

 

The Company does not pay U.S. federal income taxes, except for its wholly owned Domestic C Corporation subsidiary. Federal taxes are generally paid by the members of EGS. The Company does pay some state income taxes in those states that do not follow the federal treatment of a Limited Liability Corporation (LLC) and foreign taxes are paid on income attributable to the foreign entities. Income taxes paid during the years ended September 30, 2013, 2012, and 2011 were $8,505, $13,275, and $8,573, respectively.

 

(j)                 Financial Instruments

 

The Company accounts for derivatives and hedging activities in accordance with Accounting Standards Codification (ASC or the Codification) Topic 815, Derivatives and Hedging, as amended (ASC 815), which requires entities to recognize all derivative instruments as either assets or liabilities in the consolidated balance sheets at their respective fair values. For derivative instruments designated as a cash flow hedge, the gain or loss on the derivative is deferred as a separate component of accumulated other comprehensive income (loss) until recognized in earnings with the underlying hedged item. For derivative instruments designated as a fair value hedge, the gain or loss on the derivative and the offsetting gain or loss on the hedged item are recognized immediately in earnings.

 

(Continued)

 

9



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

For derivative instruments that do not qualify for hedge accounting, the fair value of the derivative instrument is recorded as an asset or liability on the consolidated balance sheets, with changes in fair value recorded in the consolidated statements of income.

 

(k)              Warranty

 

The Company’s product warranties are competitive for the markets in which it operates. Warranty generally extends for a period of one year from the date of sale. Provisions for warranty are primarily determined based on historical warranty costs as a percentage of sales adjusted for specific problems that may arise. Product warranty expense is less than 1% of sales.

 

(l)                 Stock-Based Compensation

 

Stock-based compensation awards and options to purchase common stock of Emerson are issued to certain employees of the Company. Compensation expense is recognized at fair value over the service periods based on the number of awards expected to be ultimately earned. This expense is recorded in the Company’s consolidated statements of income with a corresponding credit to equity, representing Emerson’s capital contribution. Stock-based compensation was $1,976, $939, and $772 for the years ended September 30, 2013, 2012, and 2011, respectively.

 

(m)           Revenue Recognition

 

The Company recognizes all of its revenues through the sale of manufactured products and records sales as products are shipped, title and risk of loss passes to the customer, and collection is reasonably assured. Allowances, based on historical experience, are made for anticipated returns of products and sales discounts at the time products are sold.

 

Sales taxes are collected from customers and remitted to governmental authorities and are accounted for on a net basis and, therefore, are excluded from revenues in the consolidated statements of income.

 

The Company records amounts billed to a customer for shipping and handling fees in a sales transaction as revenue. These shipping and handling costs were $1,806, $1,881, and $2,101 for the years ended September 30, 2013, 2012, and 2011, respectively.

 

(n)              Use of Estimates

 

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). Significant items subject to such estimates and assumptions include the useful life of fixed assets, useful life of intangibles, allowance for doubtful accounts and sales returns, valuation of deferred tax assets, valuation of derivatives, fixed assets, inventory, and reserves for employee benefit obligations, income tax uncertainties, and other contingencies. The current economic environment has

 

(Continued)

 

10



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

increased the degree of uncertainty inherent in those estimates and assumptions. Actual results could differ from those estimates.

 

(o)              Research and Development

 

Research and development costs are charged to expense as incurred. These costs were $4,600, $6,096, and $4,544 for the years ended September 30, 2013, 2012, and 2011, respectively.

 

(p)              Other Deductions, Net

 

Other deductions, net are summarized as follows:

 

 

 

2013

 

2012

 

2011

 

Intangible amortization

 

$

1,393

 

1,556

 

1,771

 

Litigation costs

 

(25

)

14

 

60

 

Rationalization of operations

 

1,701

 

1,998

 

5,410

 

Translation loss (gain)

 

1

 

549

 

(1,492

)

Transaction loss

 

2,113

 

2,074

 

3,038

 

Losses/(gains) on sale of assets

 

(518

)

157

 

(1,044

)

Fair value hedging loss (gain)

 

2,632

 

(3,091

)

165

 

Other

 

(256

)

(61

)

306

 

Total

 

$

7,041

 

3,196

 

8,214

 

 

Rationalization of operations expense reflects costs associated with the Company’s efforts to continually improve operational efficiency. Rationalization expense primarily consists of severance and other compensation payments as a result of moving facilities to best cost locations and curtailing/downsizing operations because of changing economic conditions.

 

(q)              Other Liabilities

 

Other liabilities are summarized as follows:

 

 

 

2013

 

2012

 

Minimum pension liability

 

$

7,264

 

19,481

 

Minimum retiree medical

 

3,361

 

3,985

 

Termination indemnities

 

1,205

 

862

 

Other

 

2,007

 

2,638

 

Total other liabilities

 

$

13,837

 

26,966

 

 

(Continued)

 

11


 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

 

(Dollars in thousands)

 

(r)                Comprehensive Income

 

Comprehensive income is primarily composed of net earnings plus changes in foreign currency translation and pension and postretirement. Accumulated other comprehensive income (loss) consists of foreign currency translation adjustments of $20,643 and $23,236 and pension and postretirement charges of $(5,419) and $(18,067), respectively, at September 30, 2013 and 2012.

 

(s)                Fair Value Measurements

 

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

·                                         Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

·                                         Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

·                                         Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

 

The carrying value approximates fair value for cash and cash equivalents, accounts receivable, due from members, trade accounts payable, derivatives, and due to members.

 

(t)                 Pension and Other Postretirement Plans

 

The Company has a noncontributory defined-benefit pension plan covering substantially all of its U.S. employees upon their retirement. The benefits are based on age, years of service, and the level of compensation during the five years before retirement. The Company also sponsors a defined-benefit healthcare plan for substantially all retirees and full-time employees hired prior to the establishment of the joint venture.

 

The Company records annual amounts relating to its pension and postretirement plans based on calculations that incorporate various actuarial and other assumptions, including discount rates, mortality, assumed rates of return, compensation increases, turnover rates, and healthcare cost trend rates. The Company reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is appropriate to do so. The effect of modifications to those assumptions is recorded in accumulated other comprehensive income and amortized to net periodic cost over future periods using the corridor method. The Company believes that the assumptions utilized in recording its obligations under its plans are reasonable based

 

(Continued)

 

12



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

on its experience and market conditions.

 

The net periodic costs are recognized as employees render the services necessary to earn the postretirement benefits.

 

(u)              Commitments and Contingencies

 

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Recoveries of environmental remediation costs from third parties that are probable of realization are separately recorded as assets, and are not offset against the related environmental liability.

 

Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of expected future expenditures for environmental remediation obligations are not discounted to their present value.

 

(v)               Recently Issued Accounting Standards

 

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU No. 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on its financial position, and to allow investors to better compare financial statements prepared under U.S. GAAP with financial statements prepared under International Financial Reporting Standards (IFRS). The new standard is effective for annual periods beginning January 1, 2013, and interim periods within those annual periods. Retrospective application is required. The Company will implement the provisions of ASU No. 2011-11 as of October 1, 2014.

 

In September 2011, the FASB issued ASU No. 2011-08, Intangibles — Goodwill and other (Topic 350): Testing Goodwill for Impairment. This ASU permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test. If an entity concludes it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it need not perform the two-step impairment test. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Company implemented the provisions of ASU No. 2011-08 as of October 1, 2012.

 

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. Under this ASU, an entity will have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. The ASU eliminates the

 

(Continued)

 

13



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

option in U.S. GAAP to present other comprehensive income in the statement of changes in equity. An entity should apply the ASU retrospectively. For a nonpublic entity, the ASU is effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted. In December 2011, the FASB decided to defer the effective date of those changes in ASU No. 2011-05 that relate only to the presentation of reclassification adjustments in the consolidated statement of income by issuing ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. The Company implemented the provisions of ASU No. 2011-05 by presenting the components of net income and the components of other comprehensive income in a single continuous statement of comprehensive income.

 

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The new standard does not extend the use of fair value but, rather, provides guidance about how fair value should be applied where it already is required or permitted under IFRS or U.S. GAAP. For U.S. GAAP, most of the changes are clarifications of existing guidance or wording changes to align with IFRS. A nonpublic entity is required to apply the ASU prospectively for annual periods beginning after December 15, 2011. The Company’s adoption of ASU No. 2011-04 in 2013 did not have a material impact on its consolidated financial statements.

 

(2)              Related-Party Transactions

 

The Company has entered into a service agreement with Emerson for corporate management services. For the years ended September 30, 2013, 2012, and 2011, the management fee for such services was a fixed percentage of net sales and was $3,460, $3,590, and $3,318, respectively. In addition, the Company participates in Emerson-sponsored programs for services, such as insurance, freight, benefits administration, legal, workers’ compensation, tax consultation, and other administrative support.

 

The amount paid for these services for the years ended September 30, 2013, 2012, and 2011 was $27,000, $31,480, and $31,466, respectively, and is recorded as a component of selling, general, and administrative expenses in the consolidated statements of income. Additionally, at September 30, 2013 and 2012, the Company had payables to Emerson totaling $20,093 and $33,167, respectively, and receivables from Emerson of $1,739 and $640, respectively. The Company and its subsidiaries have cash pool arrangements with Emerson throughout the world. Net interest received from these cash pool arrangements and other related-party transactions for the fiscal years ended September 30, 2013, 2012, and 2011 was $125, $177, and $350, respectively.

 

The Company’s borrowings from Brazilian subsidiaries of Emerson were $4,106 and $5,308, respectively, as of September 30, 2013 and 2012. The interest rates are reset every three months and are based on interbank rates currently at 9.5%. Interest paid on these loans was approximately $570 and $662 in 2013 and 2012, respectively.

 

(Continued)

 

14



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

 

(Dollars in thousands)

 

(3)                            Financial Instruments

 

The Company selectively uses derivative financial instruments to manage commodity prices and currency exchange risk. The Company does not hold derivatives for trading purposes. No credit loss is anticipated as the counterparties to these agreements are major financial institutions with high credit ratings.

 

As part of its hedging strategy, the Company utilizes forward exchange contracts to minimize the impact of currency and commodity price fluctuations on transactions, cash flows, and firm commitments. The Company had $291 of open foreign currency contracts as of September 30, 2013. The Company had $2,923 of open foreign currency contracts as of September 30, 2012.

 

(4)                       Retirement Plans

 

The Company has pension plans and other postretirement benefit plans covering substantially all of its employees. The Company’s pension and retiree healthcare and life insurance benefit plans are described below.

 

Pension and other postretirement benefit costs included the following components for 2013, 2012, and 2011:

 

 

 

Pension benefits

 

Other postretirement benefits

 

 

 

2013

 

2012

 

2011

 

2013

 

2012

 

2011

 

Service cost

 

$

2,578

 

2,074

 

2,114

 

62

 

93

 

112

 

Interest cost

 

2,749

 

2,555

 

2,516

 

137

 

211

 

248

 

Expected return on plan assets

 

(3,498

)

(2,767

)

(2,483

)

 

 

 

Amortization of net loss

 

2,613

 

1,962

 

1,543

 

(175

)

(188

)

(118

)

Amortization of prior service costs

 

118

 

118

 

118

 

(133

)

(58

)

17

 

Curtailment charge

 

 

 

 

 

 

 

Net periodic pension and other postretirement benefit costs

 

$

4,560

 

3,942

 

3,808

 

(109

)

58

 

259

 

 

(Continued)

 

15


 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

A reconciliation of the changes in the plans’ benefit obligations and fair value of assets for the years ended September 30, 2013 and 2012 and a statement of the funded status as of September 30, 2013 and 2012 for the Company’s domestic benefit plans follows:

 

 

 

Pension benefits

 

Other
postretirement benefits

 

 

 

2013

 

2012

 

2013

 

2012

 

Reconciliation of benefit obligation:

 

 

 

 

 

 

 

 

 

Projected benefit obligation at October 1

 

$

66,900

 

52,433

 

4,307

 

5,495

 

Service cost

 

2,578

 

2,074

 

62

 

93

 

Interest cost

 

2,749

 

2,555

 

137

 

211

 

Plan amendments

 

 

 

 

(681

)

Actuarial loss (gain)

 

(8,162

)

11,104

 

(553

)

(245

)

Benefit payments

 

(1,498

)

(1,266

)

(227

)

(566

)

Projected benefit obligation at September 30

 

$

62,567

 

66,900

 

3,726

 

4,307

 

Reconciliation of fair value of plan assets:

 

 

 

 

 

 

 

 

 

Fair value of plan assets at October 1

 

$

47,349

 

37,550

 

 

 

Actual return on plan assets

 

5,130

 

6,795

 

 

 

Employer contributions

 

4,261

 

4,270

 

227

 

566

 

Benefit payments

 

(1,498

)

(1,266

)

(227

)

(566

)

Fair value of plan assets at September 30

 

$

55,242

 

47,349

 

 

 

 

(Continued)

 

16



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

 

 

Pension benefits

 

Other
postretirement benefits

 

 

 

2013

 

2012

 

2013

 

2012

 

Funded status:

 

 

 

 

 

 

 

 

 

Benefit obligations

 

$

62,567

 

66,900

 

3,726

 

4,307

 

Assets

 

55,242

 

47,349

 

 

 

Funded status

 

$

7,325

 

19,551

 

3,726

 

4,307

 

Amounts recognized in the statement of financial position:

 

 

 

 

 

 

 

 

 

Current liability

 

$

61

 

70

 

365

 

322

 

Noncurrent liability

 

7,264

 

19,481

 

3,361

 

3,985

 

Total amount recognized

 

$

7,325

 

19,551

 

3,726

 

4,307

 

Amounts recognized in accumulated other comprehensive income:

 

 

 

 

 

 

 

 

 

Net actuarial loss (gain)

 

$

6,955

 

19,363

 

(1,334

)

(1,078

)

Prior service cost (credit)

 

188

 

305

 

(389

)

(522

)

Total

 

$

7,143

 

19,668

 

(1,723

)

(1,600

)

Accumulated benefit obligation

 

$

58,241

 

61,487

 

N/A

 

N/A

 

 

The measurement date for the Company’s pension and other postretirement plans is September 30.

 

(Continued)

 

17



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

Prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Accumulated gains and losses in excess of 10% of the greater of the projected benefit obligation or the market-related value of assets are amortized over the remaining service period of active plan participants.

 

 

 

Pension benefits

 

 

 

2013

 

2012

 

2011

 

Weighted average assumptions used to determine net pension expense:

 

 

 

 

 

 

 

Discount rate

 

4.00

%

4.75

%

5.25

%

Expected return on plan assets

 

7.50

 

7.50

 

7.50

 

Rate of compensation increase

 

3.50

 

3.00

 

3.00

 

Weighted average assumptions used to determine pension benefit obligations:

 

 

 

 

 

 

 

Discount rate

 

4.75

 

4.00

 

4.75

 

Rate of compensation increase

 

3.25

 

3.50

 

3.00

 

Weighted average assumptions used to determine net postretirement expense:

 

 

 

 

 

 

 

Discount rate

 

3.25

 

4.25

 

4.25

 

Weighted average assumptions used to determine postretirement benefit obligations:

 

 

 

 

 

 

 

Discount rate

 

4.00

 

3.25

 

4.25

 

 

The estimated amounts that will be amortized from “Accumulated other comprehensive income” at September 30, 2013 into net periodic benefit cost in fiscal year 2014 are as follows:

 

 

 

Pension

 

Other post-
retirement

 

 

 

benefits

 

benefits

 

 

 

 

 

 

 

Actuarial loss (gain)

 

$

942

 

(247

)

Prior service cost (credit)

 

84

 

(133

)

Total

 

$

1,026

 

(380

)

 

The primary objectives for the investment of pension plan assets are to secure participant retirement benefits, while earning a reasonable rate of return. Plan assets are invested consistent with the provisions of prudence and diversification rules of the Employee Retirement Income Security Act and with a long-term investment horizon. The expected return on plan assets assumption is determined by reviewing the investment return of the plans for the past 10 years and the historical return (since

 

(Continued)

 

18


 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

1926) of an asset mix approximating the plan’s current asset allocation and evaluating these returns in relation to expectations of various investment organizations to determine whether long-term future returns are expected to differ significantly from the past. The Company’s pension plan asset allocations are as follows:

 

 

 

Pension benefits

 

 

 

2013

 

2012

 

2011

 

Target

 

Asset category:

 

 

 

 

 

 

 

 

 

Equity securities

 

62

%

61

%

60

%

60

%

Debt securities

 

38

 

39

 

40

 

40

 

 

 

100

%

100

%

100

%

100

%

 

The Company estimates that future benefit payments for the pension plans will be as follows: $1,832 in 2014, $2,086 in 2015, $2,353 in 2016, $2,672 in 2017, $2,987 in 2018, and $18,628 in total over the five years 2019 through 2023. In 2014, the Company expects to contribute $4,200 to the pension plans.

 

The Company’s postretirement benefit obligations were determined using discount rates of 4.00%, 3.25%, and 4.25%, for 2013, 2012, and 2011, respectively. The healthcare cost trend rate for 2013, 2012, and 2011 was 7.00%, 7.50%, and 8.00%, declining to 5.00% in the year 2018, respectively. The healthcare cost trend rate assumption has a significant effect on the amounts reported. A 1.00% increase in the assumed healthcare cost trend rate would increase the benefit obligation by $8 at September 30, 2013 and a 1.00% increase in the assumed healthcare trend rate would increase the service and interest costs by $1. A 1.00% decrease in the assumed healthcare trend rate would decrease the service and interest cost components by $1 and decrease the net postretirement healthcare benefit obligation by $9 at September 30, 2013.

 

The Company monitors the cost of healthcare and life insurance benefit plans and reserves the right to make additional changes or terminate these benefits in the future. The Company estimates that future benefit payments for postretirement benefits will be as follows: $365 in 2014, $372 in 2015, $382 in 2016, $360 in 2017, $333 in 2018, and $1,468 in total over the five years 2019 through 2023.

 

In addition, the Company sponsors defined-contribution (401(k)) plans to which it contributed $702, $1,078, and $482 in 2013, 2012, and 2011, respectively.

 

(Continued)

 

19



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

The Company’s assets in its pension plans are reported at fair value. The fair value of these assets as of September 30, 2013 and 2012 measurement dates were as follows:

 

 

 

 

 

Fair value of measurements at
September 30, 2013

 

 

 

 

 

Pension benefits – plan assets

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

prices

 

 

 

 

 

 

 

 

 

in active

 

 

 

 

 

 

 

 

 

markets

 

Significant

 

Significant

 

 

 

 

 

for identical

 

observable

 

unobservable

 

 

 

 

 

assets

 

inputs

 

inputs

 

 

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Asset category:

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

U.S. large cap (a)

 

$

34,429

 

34,429

 

 

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

U.S. Treasuries (b)

 

20,813

 

20,813

 

 

 

Total

 

$

55,242

 

55,242

 

 

 

 

 

 

 

 

Fair value of measurements at
September 30, 2012

 

 

 

 

 

Pension benefits – plan assets

 

 

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

prices

 

 

 

 

 

 

 

 

 

in active

 

 

 

 

 

 

 

 

 

markets

 

Significant

 

Significant

 

 

 

 

 

for identical

 

observable

 

unobservable

 

 

 

 

 

assets

 

inputs

 

inputs

 

 

 

Total

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Asset category:

 

 

 

 

 

 

 

 

 

Equity securities:

 

 

 

 

 

 

 

 

 

U.S. large cap (a)

 

$

29,025

 

29,025

 

 

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

U.S. Treasuries (b)

 

18,324

 

18,324

 

 

 

Total

 

$

47,349

 

47,349

 

 

 

 


(a) This category comprises low cost equity index funds not actively managed that track the S&P 500.

 

(b) This category comprises low cost bond index funds not actively managed that track the Treasury bond index.

 

(Continued)

 

20



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

(5)                   Income Taxes

 

For the years ended September 30, 2013, 2012, and 2011, income before income tax expense consists of the following:

 

 

 

2013

 

2012

 

2011

 

United States

 

$

84,049

 

77,942

 

62,152

 

Foreign

 

10,478

 

19,448

 

13,919

 

 

 

$

94,527

 

97,390

 

76,071

 

 

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

 

 

 

2013

 

2012

 

2011

 

Statutory federal income tax rate

 

35

%

35

%

35

%

Decrease in tax rate resulting from:

 

 

 

 

 

 

 

LLC Election

 

(35

)%

(35

)%

(35

)%

State income taxes

 

1.0

%

1.0

%

1.5

%

Foreign taxes

 

2.8

 

5.8

 

7.9

 

Domestic Corporation subsidiary

 

1.6

 

3.0

 

6.9

 

Effective tax rate

 

5.4

%

9.8

%

16.3

%

 

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

(Continued)

 

21


 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

 

September 30, 2013 and 2012

 

(Dollars in thousands)

 

Significant temporary differences at September 30, 2013 and 2012 are summarized as follows:

 

 

 

2013

 

2012

 

Net current deferred tax assets attributable to:

 

 

 

 

 

Reserve for employee welfare

 

$

362

 

 

 

Reserve for inventory obsolescence

 

367

 

8

 

Reserve for miscellaneous business taxes

 

477

 

15

 

Reserve for pension/profit sharing expense

 

242

 

108

 

Reserve for vacation pay

 

501

 

14

 

Other

 

1,386

 

81

 

Net deferred tax assets

 

$

3,335

 

226

 

Net noncurrent deferred tax liabilities attributable to:

 

 

 

 

 

Goodwill

 

$

(8,625

)

(1,881

)

Customer relationships

 

(3,041

)

(3,819

)

Net operating loss

 

1,315

 

 

Other

 

210

 

(326

)

Net deferred tax liabilities

 

$

(10,141

)

(6,026

)

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Based upon the level of historical taxable income and projections for future taxable income, management believes it is more likely than not the Company will realize the benefits of the deferred tax assets. Accordingly, no deferred tax asset valuation allowance was recorded as of September 30, 2013 or 2012.

 

The members of the LLC generally pay the federal income taxes of the LLC. The gross book basis of the liabilities and assets of the LLC as of September 30, 2013 is approximately $10,948 greater than the tax basis for the same liabilities and assets. The gross book basis of the liabilities and assets of the LLC as of September 30, 2012 is approximately $3,077 greater than the tax basis for the same liabilities and assets.

 

Beginning with the adoption of ASC Topic 740, Income Taxes, as of October 1, 2007, the Company recognizes the effects of income taxes positions only if those positions are more likely than not of being sustained. Changes in recognition measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.

 

The Company is subject to U.S. federal income tax at its wholly owned Domestic C Corporation, state income tax in multiple state tax jurisdictions, and foreign income tax in a number of foreign tax jurisdictions. The Company has no U.S. federal returns under review at September 30, 2013. The status of state and non-U.S. tax examinations varies by numerous legal

 

(Continued)

 

22



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

entities and jurisdictions in which the Company operates.

 

The Company has not recognized a deferred tax liability for the undistributed earnings of its foreign operations that arose in 2013 and prior years as the Company considers these earnings to be indefinitely reinvested.

 

(6)                   Leases

 

The Company has various lease agreements for offices, distribution, and manufacturing centers. These obligations have various terms extending through 2020. Rent expense was $7,437, $7,246, and $7,867 for 2013, 2012, and 2011, respectively.

 

Future minimum lease payments as of September 30, 2013, under agreements classified as operating leases with noncancelable terms in excess of one year for the years 2014 through 2018 are $2,836, $620, $548, $287, and $229, respectively. There are no lease obligations thereafter.

 

(7)                   Commitments and Contingencies

 

The Company is involved in various claims and legal actions arising in the ordinary course of business for which there is a range of possible outcomes. The Company accrues for such liabilities when it is probable that future costs (including legal fees and expenses) will be incurred and such costs can be reasonably estimated.

 

The Company believes that at September 30, 2013, there were no known contingent liabilities that will have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.

 

(8)                   Goodwill and Other Intangible Assets

 

(a)                          Intangible Assets

 

 

 

September 30, 2013

 

 

 

 

 

Weighted

 

 

 

 

 

Gross

 

average

 

 

 

 

 

carrying

 

amortization

 

Amortization

 

 

 

amount

 

period

 

expense

 

Amortizing intangible assets:

 

 

 

 

 

 

 

Customer list

 

$

10,779

 

10 years

 

$

1,212

 

Trademarks

 

2,571

 

15 years

 

181

 

Capitalized software

 

5,612

 

8 years

 

731

 

Total

 

$

18,962

 

 

 

$

2,124

 

 

(Continued)

 

23



 

EGS ELECTRICAL GROUP, LLC
AND SUBSIDIARIES
(A Limited Liability Company)

 

Notes to Consolidated Financial Statements

September 30, 2013 and 2012

(Dollars in thousands)

 

 

 

September 30, 2012

 

 

 

 

 

Weighted

 

 

 

 

 

Gross

 

average

 

 

 

 

 

carrying

 

amortization

 

Amortization

 

 

 

amount

 

period

 

expense

 

Amortizing intangible assets:

 

 

 

 

 

 

 

Customer list

 

$

11,795

 

10 years

 

$

1,354

 

Trademarks

 

2,813

 

15 years

 

202

 

Capitalized software

 

5,279

 

8 years

 

632

 

Total

 

$

19,887

 

 

 

$

2,188

 

 

Accumulated amortization for amortizing intangible assets was $8,047 and $6,264 as of September 30, 2013 and 2012, respectively. Estimated amortization expense for the next five years is: $2,053 in 2014, $2,271 in 2015, $2,489 in 2016, $2,089 in 2017, and $2,053 in 2018.

 

(b)                   Goodwill

 

The changes in the carrying amount of goodwill for the years ended September 30, 2013 and 2012 are as follows:

 

 

 

2013

 

2012

 

Balance as of October 1:

 

 

 

 

 

Goodwill

 

$

261,543

 

265,717

 

Foreign currency translation

 

(844

)

(4,174

)

Balance as of September 30

 

$

260,699

 

261,543

 

 

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