Discontinued Operations

6 Months Ended

Jun. 30, 2019

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Acquisitions and Divestitures

Acquisitions

On May 15, 2019, the Company acquired all the outstanding capital stock of Precision Flow Systems (PFS), a manufacturer of precision flow control equipment including precision dosing pumps and controls that serve the global water, oil and gas, agriculture, industrial and specialty market segments. Total cash paid, net of cash acquired, was approximately $1.46 billion and was financed through the issuance of senior notes. The acquisition was recorded using the acquisition method of accounting in accordance with ASC 805, "Business Combinations" (ASC 805). As a result, the purchase price has been preliminarily allocated to assets acquired and liabilities assumed based on the estimate of fair market value of such assets and liabilities at the date of acquisition.

The preliminary allocation of the purchase price was as follows:



In millions	May 15, 2019
Current assets	$	124.8
Intangibles	662.2
Goodwill	888.0
Other noncurrent assets	48.4
Accounts payable, accrued expenses and other liabilities	(72.3		)
Noncurrent deferred tax liabilities	(195.9		)
Total purchase price, net of cash acquired	$	1,455.2

Accounts receivable and current liabilities were stated at their historical carrying values, which approximates fair value given the short nature of these assets and liabilities. The estimate of fair value for inventory and property, plant and equipment are based on an assessment of the acquired assets condition as well as an evaluation of current market value of such assets.

The Company recorded intangible assets based on their preliminary estimate of fair value, which consisted of the following:



In millions	Weighted-average useful life (in years)	May 15, 2019
Customer relationships	14	$	457.6
Trade names	Indefinite	168.2
Other	7	36.4
Total		$	662.2

The valuation of intangible assets was determined using an income approach methodology. Any excess of the purchase price over the estimated fair value of net assets was recognized as goodwill. The goodwill is attributed primarily to the fair value of the expected cost synergies and revenue growth from PFS businesses. The Company has not finalized the process of allocating the purchase price and valuing the acquired assets and liabilities assumed for the PFS acquisition.

During the six months ended June 30, 2019, the Company incurred $12.2 million of acquisition-related costs which are included in Selling and administrative expenses in the accompanying Condensed Consolidated Statements of Comprehensive Income. The results of PFS are reported within the Industrial segment from the date of acquisition. The Company has not included pro forma financial statements required under ASC 805 as the pro forma impact was deemed not material.

Divestitures

The Company has retained obligations from previously sold businesses, including amounts related to the 2013 spin-off of its commercial and residential security business, that primarily include ongoing expenses for postretirement benefits, product liability and legal costs. The components of Discontinued operations, net of tax for the three and six months ended June 30 were as follows:



	Three months ended						Six months ended
In millions	2019			2018			2019			2018
Pre-tax earnings (loss) from discontinued operations	$	(7.9	)	$	(8.6	)	$	(9.8	)	$	(20.7	)
Tax benefit (expense)	2.3			2.7			2.1			5.4
Discontinued operations, net of tax	$	(5.6	)	$	(5.9	)	$	(7.7	)	$	(15.3	)

Pre-tax earnings (loss) from discontinued operations includes costs associated with Ingersoll-Rand Company for the settlement and defense of asbestos-related claims, insurance settlements on asbestos-related matters and the revaluation of its liability for potential future claims. Refer to Note 21, "Commitments and Contingencies," for more information related to asbestos.