Acquisitions

On March 29, 2013, we completed our acquisition of all of the equity securities of Aquilex Specialty Repair and Overhaul LLC, a Delaware limited liability company (“Aquilex SRO”), pursuant to the terms of the Securities Purchase Agreement dated February 22, 2013 (the “Purchase Agreement”). Aquilex SRO provides the energy industry with specialty repair and overhaul solutions designed to improve mechanical integrity and extend component life. Aquilex SRO offers services to a diverse base of blue-chip customers in the nuclear, fossil power, refining, chemical processing, pulp and waste-to-energy industries, serving clients that place a high value on reliability, quality and safety. Aquilex SRO’s offering is differentiated through advanced proprietary tooling and process technologies delivered by a uniquely skilled specialized workforce. The acquisition is part of our strategy to expand our offerings in the Energy Segment to enhance our presence in the power generation market.

The Purchase Agreement provided for AZZ's acquisition of all equity securities of Aquilex SRO for cash consideration in the amount of $275.7 million, which is comprised of $271.8 million as cash paid at closing and $3.9 million subsequently paid in connection with a purchase price adjustment based on working capital pursuant to the Purchase Agreement.

The following consolidated supplemental pro forma information assumes that the acquisition of Aquilex SRO took place on March 1, 2013 for the income statements for the three month period ended May 31, 2013. These amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Aquilex SRO to reflect the decrease in interest expense that would have occurred under the new credit agreement entered into in connection with the acquisition of Aquilex SRO and to reflect the decrease in depreciation and amortization expense that would have occurred assuming the fair value adjustments to property, plant and equipment and intangible assets had been applied on March 1, 2013, together with consequential tax effects. In addition, supplemental pro forma earnings were adjusted to exclude approximately $3.2 million of acquisition related costs incurred the three month period ended May 31, 2013.



	Three Months Ended May 31,
	2014		2013
	(In thousands, except for per share amounts)
Net Sales	$	216,126	$	206,270
Net Income	$	14,925	$	17,429
Earnings Per Common Share
Basic Earnings Per Share	$	0.58	$	0.68
Diluted Earnings Per Share	$	0.58	$	0.68

Using the acquisition method of accounting, the total purchase price was allocated to Aquilex SRO's net identifiable assets based on their estimated fair values as of March 29, 2013, the date AZZ acquired control of Aquilex SRO. The excess of the purchase price over the net identifiable assets was recorded as goodwill. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition:



	($ in thousands)
Current Assets	$	78,619
Property and Equipment	27,669
Intangible Assets	87,100
Goodwill	109,636
Other Assets	205
Total Assets Acquired	303,229
Current Liabilities	(27,527		)
Net Assets Acquired	$	275,702

All of the $87.1 million of intangible assets acquired are assigned to customer related intangibles and technology. The goodwill recorded in connection with the acquisition is primarily attributable to a larger geographic footprint and also synergies expected to arise. These intangible assets are being amortized over 14 years for customer related intangibles, 19 years for tradenames and 3-9 years for technology on a straight line basis. Goodwill of $109.6 million arising from the acquisition has been allocated to the Energy Segment and will not be deductible for income tax purposes. During the three month period ended May 31, 2013, we expensed $3.2 million in acquisition costs related to the acquisition of Aquilex SRO.



ASSET		LIFE

Technology		3-9 years
Customer Related Intangibles		14 years
Tradename		19 years