For the Years Ended December 31, 2011, 2010 and 2009
The Company invested $77.7 million, $66.5 million and $0.7 million in acquisitions during 2011, 2010 and 2009, respectively. Included in these acquisition costs are contingency payments to the former owners of the Aerospace Orlando facility. These payments are based on the attainment of certain milestones, and over the term of the agreement could total $25.0 million. These contingency payments are recorded as additional goodwill and totaled $0.7 million, $1.4 million and $0.2 million during 2011, 2010 and 2009, respectively.
On September 2, 2011, the Company acquired the assets of Target Electronic Supply ("Target") . Target, founded in 1978, has become part of the Company's Industrial Distribution segment. Target is a leading motion control distributor in the New England area with locations in Massachusetts, Connecticut and New Hampshire.
On November 4, 2011, the Company acquired Vermont Composites, Inc. ("Vermont Composites"). Vermont Composites, located in Bennington, VT, designs and manufactures composite aerostructures and advanced composite medical equipment. This acquisition supports the Company's strategy of adding scale in Aerospace, particularly in higher growth composite markets, through acquisitions and is included in its Aerospace segment.
On December 15, 2011, the Company acquired Catching Fluidpower, Inc. ("Catching"). Catching, located in Bolingbrook, IL, is one of Parker Hannifin's ("Parker") premier tri-motion distributors and covers a wide variety of product technologies. The business operates six locations in Illinois and Indiana and has become part of the Company's Industrial Distribution segment.
These acquisitions were accounted for as purchase transactions. The value of the assets acquired and liabilities assumed were recorded based on their fair value at the date of acquisition as follows (in thousands):
|Accounts receivable, net||13,098|
|Property, plant and equipment||5,322|
|Other tangible assets||1,668|
|Other intangible assets||27,644|
|Total of net assets acquired||81,230|
|Less cash received||(1,578)|
|Plus debt assumed||—|
|Total consideration||$ 79,652|
The Company has paid $74.6 million of the total consideration of $79.7 million through December 31, 2011. The remaining $5.1 million represents contingent consideration and working capital adjustment holdbacks. The Company recorded a $3.4 million contingent consideration liability, which is based on the attainment of certain gross profit targets by the acquired business through 2014. The total possible undiscounted payments could range from $0 to $4.0 million. The goodwill associated with the acquisitions of Target and Catching is tax deductible (excluding the portion relating to the contingent consideration liability, which is not deductible until paid). The goodwill resulting from the acquisition of Vermont Composites is not tax deductible. The goodwill is the result of expected synergies from combining the operations of the acquired business with the Company's operations and intangible assets that do not qualify for separate recognition, such as an assembled workforce. There is $10.3 million of revenue from these acquisitions included in the Consolidated Statement of Operations for the year ended December 31, 2011.
The fair value of the identifiable intangible assets of $27.6 million, consisting of trade names, non-compete agreements and customer list/relationships, was determined using the income approach. Specifically, the relief-from-royalty method was utilized for the trade names and the discounted cash flows method was utilized for the customer relationships and non-compete agreements. The trade names, $0.5 million, are being amortized over periods ranging from 3 to 5 years; the non-compete agreements, $0.2 million; are being amortized over a 2-year period; and the customer relationships, $26.9 million, are being amortized over periods ranging from 8 to 21 years, the estimated lives of the assets.
During 2011, the Company acquired two smaller distribution businesses. The first was comprised of two locations for a purchase price of $0.9 million and the second was comprised of one location for a purchase price of $1.3 million. These businesses have been merged into our existing distribution operations. Proforma results of operations have not been presented because the effect of the acquisitions were not material.
For the acquisitions completed in 2010, the Company has paid $66.0 million of the total consideration of $77.9 million through December 31, 2011. The remaining $11.9 million includes amounts relating to holdback provisions and debt payments of the acquired businesses that the Company has assumed.