BUSINESS ACQUISITIONS AND INVESTMENTS

Business Acquisitions

CLARCOR Engine Mobile Solutions

On May 1, 2014, the Company acquired Stanadyne Corporation's diesel fuel filtration business (the “Stanadyne Business”) through the acquisition of the stock of Stanadyne Holdings, Inc. The business, which now operates as “CLARCOR Engine Mobile Solutions,” is a leading supplier of original equipment and replacement fuel filtration products, primarily for heavy-duty diesel engines used in off-road, agricultural and construction applications.

CLARCOR Engine Mobile Solutions has approximately 200 employees and is headquartered in Windsor, Connecticut, with manufacturing operations in Washington, North Carolina. Its results are included as part of the Company’s Engine/Mobile Filtration segment from the date of acquisition. The initial purchase price paid was approximately $328,012 in cash (cash to Stanadyne Corporation of $328,012, net of $0 cash acquired), which the Company funded with cash on hand, a $315,000 term loan and $10,000 borrowed under the Company’s revolving credit agreement (see Note 8). The initial purchase price is subject to a post-closing adjustment related to the amount of working capital as of the closing date, as provided in the purchase agreement, which will be determined within 60 days of the purchase date.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of CLARCOR Engine Mobile Solutions:



Accounts receivable		$	19,548
Inventories		7,367
Deferred income taxes		4,121
Property, plant and equipment		10,176
Goodwill		193,144
Intangible assets		147,280
	Total assets acquired	381,636
Current liabilities		8,476
Deferred income taxes		45,148
	Net assets acquired	$	328,012

The Stanadyne Business was acquired to significantly increase CLARCOR’s presence in the design, manufacture and supply of original equipment diesel fuel filtration products and the related original equipment services aftermarket, while also providing enhanced scale and market presence to support growth for CLARCOR’s other Engine/Mobile Filtration businesses -- including the heavy-duty fuel, oil, hydraulic and air filtration products manufactured and marketed by Baldwin Filters -- through original equipment customers and services channels. Goodwill of $193,144 recorded in connection with the acquisition, which is not deductible for tax purposes, represents the estimated value of such future opportunities. A summary of the intangible assets acquired is shown in the following table:



	Estimated		Weighted average	Amortization
Identifiable intangible assets	Value		Useful life	Method
Customer relationships	$	136,100	13 years	Straight-line
Developed technology	11,000		10 years	Straight-line
Trademarks	180		Indefinite	Not amortized
	$	147,280

Net sales and operating loss for CLARCOR Engine Mobile Solutions subsequent to the date it was acquired by the Company (that is, the final month of the three months ended May 31, 2014) were $8,992 and $1,927 respectively.

CLARCOR Industrial Air

On December 16, 2013, the Company acquired the Air Filtration business of General Electric Company’s (“GE”) Power and Water division through the acquisition of certain assets and the assumption of certain liabilities, as well as the acquisition of the stock of a subsidiary of GE. The business, which now operates as “CLARCOR Industrial Air”, was acquired to significantly increase the Company’s presence in air inlet filtration products for natural gas turbines and to expand the Company’s product offerings, technologies and customer base in industrial air filtration. CLARCOR Industrial Air employs approximately 700 people and is headquartered in Overland Park, Kansas, with manufacturing operations in Missouri and the U.K. Its results are included as part of the Company’s Industrial/Environmental Filtration segment from the date of acquisition. The purchase price paid was approximately $260,312 in cash (cash to GE of $263,758, net of $3,446 cash acquired), which the Company funded with cash on hand, a $100,000 term loan and $50,000 of cash borrowed under the Company’s revolving credit agreement.

CLARCOR Industrial Air operates primarily in three markets -- gas turbine filtration, industrial air filtration, and specialty membranes. In gas turbine filtration, CLARCOR Industrial Air designs and manufactures high performance inlet filter houses and replacement filter elements for gas turbines used in a wide range of applications, including on-shore power generation plants, on-shore and off-shore oil and gas platforms and pipelines, distributed power generation and commercial and military marine applications. In industrial air filtration, CLARCOR Industrial Air designs and manufactures high performance filter elements for use in a variety of industries, sold to a wide range of customers under various trade names. The specialty membrane business designs and manufactures high performance membranes for apparel and microfiltration.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition of CLARCOR Industrial Air:



Accounts receivable		$	34,453
Inventories		41,884
Other current assets		837
Property, plant and equipment		22,903
Goodwill		74,324
Intangible assets		133,020
	Total assets acquired	307,421
Total liabilities		47,109
	Net assets acquired	$	260,312

The Company believes the CLARCOR Industrial Air business provides it with a strong platform in the gas turbine filtration market from which to grow, both with respect to first-fit applications as well as the aftermarket, and a broad line of products, in-depth customer knowledge and service capabilities with which to grow in various industrial air filtration markets. Goodwill of $74,324 recorded in connection with the CLARCOR Industrial Air acquisition, which is deductible for tax purposes, represents the estimated value of such future opportunities. A summary of the intangible assets acquired, weighted-average useful lives and amortization methods is shown in the following table:



	Estimated		Weighted average	Amortization
Identifiable intangible assets	Value		Useful life	Method
Trade names	$	35,100	Indefinite	Not amortized
Customer relationships	77,300		13 years	Straight-line
Developed technology	19,900		13 years	Straight-line
GE Transitional Trademark License	50		Less than 1 Year	Accelerated
Backlog	670		Less than 1 Year	Accelerated
	$	133,020

Net sales and operating profit for CLARCOR Industrial Air subsequent to the date it was acquired by the Company for the three and six months ended May 31, 2014 were as follows:



	Three Months Ended		Six Months Ended
	May 31, 2014		May 31, 2014
Net sales	$	66,985	$	112,363
Operating profit	4,820		3,772

Pro Forma Results for CLARCOR giving effect to the acquisitions of CLARCOR Engine Mobile Solutions and CLARCOR Industrial Air

The following unaudited pro forma information presents the combined results of operations of CLARCOR, CLARCOR Industrial Air and CLARCOR Engine Mobile Solutions as if both acquisitions had been completed on December 2, 2012, the beginning of fiscal 2013. The pro forma information is presented for information purposes only and does not purport to be indicative of the results of operations or future results that would have been achieved if the acquisitions and related borrowings had taken place at the beginning of fiscal 2013. The pro forma information combines the historical results of CLARCOR with the historical results of CLARCOR Industrial Air and CLARCOR Engine Mobile Solutions for the periods presented.

Prior to acquisition by CLARCOR, the business now operated as CLARCOR Industrial Air was a wholly-owned business of GE’s Power and Water division, and the business now operated as CLARCOR Engine Mobile Solutions was a wholly-owned business of Stanadyne Corporation. As such, neither business was a stand-alone entity for financial reporting purposes. Accordingly, the historical operating results of CLARCOR Industrial Air and CLARCOR Engine Mobile Solutions may not be indicative of the results that might have been achieved, historically or in the future, if CLARCOR Industrial Air and CLARCOR Engine Mobile Solutions had been stand-alone entities.

The unaudited pro forma results for the three-month and six-month periods ended May 31, 2014 and June 1, 2013 include amortization charges for acquired intangible assets, and adjustments to depreciation expense, interest expense, transaction costs incurred, adjustments to cost of sales to reflect the estimated fair values of inventory at the acquisition date, other income and related tax effects. These pro forma amounts are based on a preliminary allocation of the purchase price to estimates of the fair values of the assets acquired and liabilities assumed. The pro forma amounts include the Company’s preliminary determination of purchase accounting adjustments based on available information and certain assumptions that the Company believes are reasonable.



	Three Months Ended										Three Months Ended
	May 31, 2014										June 1, 2013
	As reported		CLARCOR Engine Mobile Solutions			CLARCOR Industrial Air			Pro forma		As reported		CLARCOR Engine Mobile Solutions			CLARCOR Industrial Air				Pro forma
Net sales	$	386,642	$	19,781		$	—		$	406,423	$	287,583	$	26,272		$	49,535			$	363,390
Operating profit	51,147		10,209		(a)	1,020		(b)	62,376		49,401		7,677		(d)	4,079			(f)	61,157
Net earnings attributable to CLARCOR	34,552		6,240			746			41,538		33,051		4,381			2,840				40,272
Diluted earnings per share	$	0.68	$	0.12		$	0.01		$	0.82	$	0.66	$	0.09		$	0.06			$	0.80

	Six Months Ended										Six Months Ended
	May 31, 2014										June 1, 2013
	As reported		CLARCOR Engine Mobile Solutions			CLARCOR Industrial Air			Pro forma		As reported		CLARCOR Engine Mobile Solutions			CLARCOR Industrial Air				Pro forma
Net sales	$	699,327	$	46,837		$	15,422		$	761,586	$	543,854	$	50,459		$	100,600			$	694,913
Operating profit (loss)	82,413		17,677		(a)	8,643		(c)	108,733		83,216		9,277		(e)	(2,898		)	(g)	89,595
Net earnings attributable to CLARCOR	58,873		10,485			6,426			75,784		56,513		4,801			(2,401		)		58,913
Diluted earnings per share	$	1.16	$	0.21		$	0.13		$	1.49	$	1.12	$	0.10		$	(0.05	)		$	1.17


(a)	Includes adjustments to remove transaction costs of $3,035 and cost of sales related to the step-up of inventory to its estimated acquisition-date fair value of $1,368, which have been pushed back to the three months ended March 2, 2013 for pro forma presentation. Also includes adjustments to intangible asset amortization, depreciation expense and interest expense.


(b)	Includes adjustments to cost of sales related to the step-up of inventory to its estimated acquisition-date fair value of $664, which have been pushed back to the six months ended June 1, 2013 for pro forma presentation.


(c)	Includes adjustments to remove transaction costs of $2,089 and cost of sales related to the step-up of inventory to its estimated acquisition-date fair value of $4,216, which have been pushed back to the period ended March 2, 2013 for pro forma presentation. Also includes adjustments to intangible asset amortization, depreciation expense and interest expense.


(d)	Includes adjustments to push back cost of sales related to the step-up of inventory to its estimated acquisition-date fair value of $144. Also includes adjustments to intangible asset amortization, depreciation expense and interest expense.


(e)	Includes adjustments to push back transaction costs of $3,740 and cost of sales related to the step-up of inventory to its estimated acquisition-date fair value of $4,342. Also includes adjustments to intangible asset amortization, depreciation expense and interest expense.


(f)	Includes adjustments to intangible asset amortization, depreciation expense and interest expense.


(g)	Includes adjustments to push back transaction costs of $3,075 and cost of sales related to the step-up of inventory to its estimated acquisition-date fair value of $1,368. Also includes adjustments to intangible asset amortization, depreciation expense and interest expense.

Bekaert Business

On December 3, 2013, the Company acquired from NV Bekaert SA 100% of the outstanding shares of Bekaert Advanced Filtration SA (Belgium), 100% of the outstanding shares of PT Bekaert Advanced Filtration (Indonesia) and certain other assets in India, China and the U.S. (collectively, the “Bekaert Business”). The purchase price was approximately $7,297 in cash (net of cash acquired), which the Company paid with cash on hand.

The Bekaert Business has approximately 170 employees, and manufacturing facilities located in Belgium and Indonesia, as well as sales personnel in North and South America. The business is engaged in the manufacture and supply of engineered metal filters and systems used primarily in the polymer and plastics industry. The Bekaert Business was acquired to expand the Company’s technical capabilities, improve the Company's product offerings and help the Company continue to grow in Europe and in Asia. The business has been merged into the Company’s Purolator Advanced Filtration Group, headquartered in Greensboro, North Carolina. Its results are included as part of the Company’s Industrial/Environmental Filtration segment from the date of acquisition.

A preliminary allocation of the purchase price to the assets acquired and liabilities assumed was made based on available information and incorporating management’s best estimates. Assets acquired and liabilities assumed in the transaction were recorded at their estimated acquisition date fair values, while transaction costs associated with the acquisition were expensed as incurred. Acquired finite-lived intangible assets of $2,057 were recorded in connection with the purchase. The $2,815 excess of the fair value of the identifiable assets acquired and liabilities assumed over the purchase price was recorded as a bargain purchase gain and is included in “Other, net” income in the Consolidated Condensed Statements of Earnings. Prior to recording this gain, the Company reassessed its identification of assets acquired and liabilities assumed, including the use of independent valuation experts to assist the Company in appraising the personal property, real property and intangible assets acquired. The Company believes there were several factors that contributed to this transaction resulting in a bargain purchase gain, including the business falling outside of NV Bekaert SA’s core activities and historical losses incurred by the business.

The Company is currently in the process of finalizing the valuations of all assets acquired and liabilities assumed. The Company expects to finalize the purchase price allocation during fiscal 2014.

Net sales and operating loss for the Bekaert business subsequent to the date it was acquired by the Company for the three and six months ended May 31, 2014 were as follows:



	Three Months Ended			Six Months Ended
	May 31, 2014			May 31, 2014
Net sales	$	3,526		$	6,303
Operating loss	(303		)	(554		)

Modular

On May 9, 2012, the Company acquired 100% of the shares in Modular Engineering Company Pty Ltd. ("Modular") for $7,875. An initial payment of $5,237 was made at closing with the remaining purchase price to be paid in two installments on the first and second anniversaries of the original closing date. The first installment of $1,530 was made on May 8, 2013 and the second installment of $1,391 was paid on May 8, 2014.

Investments

The Company owns 30% of BioProcessH2O LLC (“BPH”), a Rhode Island-based manufacturer of industrial waste water and water reuse filtration systems. During the three and six months ended May 31, 2014 and June 1, 2013, the Company did not make any additional investments. The Company has $21 accrued which has not yet been funded and is included in Accounts payable and accrued liabilities in the accompanying Consolidated Condensed Balance Sheets at both May 31, 2014 and November 30, 2013. The investment, with a carrying amount of $3,077 and $3,097, at May 31, 2014 and November 30, 2013, respectively, included in Other noncurrent assets in the Consolidated Condensed Balance Sheets, is being accounted for under the equity method of accounting. The carrying amount is adjusted each period to recognize the Company’s share of the earnings or losses of BPH, included in Other, net in the Consolidated Condensed Statements of Earnings, based on the percentage of ownership, as well as the receipt of any dividends. During the three and six months ended May 31, 2014 and June 1, 2013, the Company did not receive any dividends from BPH.

The Company also owns 15.65% of BioProcess Algae LLC (“Algae”), a Delaware-based company developing technology to grow and harvest algae which can be used to consume carbon dioxide and also be used as a renewable energy source. During the three and six months ended May 31, 2014, the Company invested an additional $0 and $473, respectively, into Algae. The investment, with a carrying amount of $2,677 and $2,204 at May 31, 2014 and November 30, 2013, respectively, included in Other noncurrent assets, is being accounted for under the cost method of accounting. Under the cost method, the Company recognizes dividends as income when received and reviews the cost basis of the investment for impairment if factors indicate that a decrease in value of the investment has occurred. During the three and six months ended May 31, 2014 and June 1, 2013, the Company did not receive any dividends from Algae.