BUSINESS ACQUISITIONS, INVESTMENTS AND NONCONTROLLING INTERESTS

Business Acquisitions

Filter Resources

On December 17, 2014, the Company acquired 100% of the outstanding shares of Filter Resources, Inc., Filtration, Inc. and Fabrication Specialties, Inc. (collectively, "Filter Resources"). The purchase price for Filter Resources was approximately $21,861, which the Company funded with borrowings under the Company's revolving credit agreement.

Filter Resources has operating facilities located in the Texas gulf coast and Louisiana region, with approximately 75 total employees. The business is engaged in the manufacture and distribution of filtration products for petrochemical, refinery, pipeline and other industrial applications. The operations of Filter Resources have been merged into the Company's PECOFacet group of companies, headquartered in Mineral Wells, Texas. 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. A contingent liability for a potential earn-out payment to the former owners, based on earnings from certain capital projects, has been recorded at its estimated fair value of $1,282, and is included in Other long-term liabilities in the Consolidated Condensed Balance Sheet. The Company assumed long-term debt of the business of $1,250, which was immediately repaid in connection with the closing. 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 within one year 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 Filter Resources:



Accounts receivable		$	3,180
Inventories		2,042
Other current assets		118
Property, plant and equipment		574
Goodwill		11,938
Intangible assets		10,880
	Total assets acquired	28,732
Current liabilities		2,670
Noncurrent liabilities		4,201
	Net assets acquired	$	21,861

Filter Resources was acquired primarily to expand the Company's access to petrochemical and refinery customers, particularly in the U.S. gulf coast region. Goodwill of $11,938 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	$	10,800	15 years	Straight-line
Trademarks	80		1 year	Straight-line
	$	10,880

Net sales and operating profit for Filter Resources for the three and six months ended May 30, 2015 (which, in the case of the six month period ended May 30, 2015, includes the period from December 17, 2014 to May 30, 2015) were as follows:



	Three Months Ended		Six Months Ended
	May 30, 2015		May 30, 2015
Net sales	$	5,134	$	9,182
Operating profit	410		686

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 purchase price paid was approximately $327,719 in cash (cash to Stanadyne Corporation of $327,719, 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 7).

An 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. During the three month period ended May 30, 2015, the Company completed the allocation of the purchase price to the assets and liabilities assumed and, as a result, retrospectively adjusted the valuation of certain assets and liabilities with a corresponding adjustment to goodwill as of the acquisition date. The retrospective adjustments were approximately $7,378 in the aggregate and primarily relate to updated deferred tax attributes based on the completion of the pre-acquisition tax return filings of the Stanadyne Business.

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



Accounts receivable		$	19,098
Inventories		7,257
Deferred income taxes		4,445
Property, plant and equipment		10,176
Goodwill		187,611
Intangible assets		146,430
	Total assets acquired	375,017
Current liabilities		9,105
Other noncurrent liabilities		2,000
Deferred income taxes		36,193
	Net assets acquired	$	327,719

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 $187,611 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	$	135,250	13 years	Straight-line
Developed technology	11,000		10 years	Straight-line
Trademarks	180		Indefinite	Not amortized
	$	146,430

Net sales and operating profit (loss) for CLARCOR Engine Mobile Solutions for the three and six month periods ended May 30, 2015 and May 31, 2014 (which, in the case of the periods ended May 31, 2014, includes the period from May 1, 2014 to May 31, 2014) were as follows:



	Quarter Ended					Six Months Ended
	May 30, 2015		May 31, 2014			May 30, 2015		May 31, 2014
Net sales	$	25,588	$	8,992		$	49,660	$	8,992
Operating profit (loss)	6,370		(1,927		)	11,211		(1,927		)

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 United Kingdom. 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 (see Note 7).

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 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 for the three and six month periods ended May 30, 2015 and May 31, 2014 (which, in the case of the six-month period ended May 31, 2014, includes the period from December 16, 2013 to May 31, 2014) were as follows:



	Quarter Ended				Six Months Ended
	May 30, 2015		May 31, 2014		May 30, 2015		May 31, 2014
Net sales	$	58,679	$	66,985	$	108,231	$	112,363
Operating profit	7,065		4,820		10,902		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 the first day 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 include adjustments to amortization charges for acquired intangible assets, depreciation expense, interest expense, and transaction costs incurred, as well as adjustments to cost of sales related to the step-up of inventory to estimated acquisition-date fair values, other income and related tax effects. The unaudited pro forma results do not give effect to any synergies, operating efficiencies or cost savings that may result from these acquisitions.



	Three Months Ended
	May 31, 2014
	As reported		CLARCOR Engine Mobile Solutions			CLARCOR Industrial Air			Pro forma
Net sales	$	386,642	$	19,781		$	—		$	406,423
Operating profit	51,147		10,209		(a)	1,020		(b)	62,376
Net earnings attributable to CLARCOR	34,552		6,240			746			41,538
Diluted earnings per share	$	0.68	$	0.12		$	0.01		$	0.82

	Six Months Ended
	May 31, 2014
	As reported		CLARCOR Engine Mobile Solutions			CLARCOR Industrial Air			Pro forma
Net sales	$	699,327	$	46,837		$	15,422		$	761,586
Operating profit	82,413		17,677		(a)	8,643		(c)	108,733
Net earnings attributable to CLARCOR	58,873		10,485			6,426			75,784
Diluted earnings per share	$	1.16	$	0.21		$	0.13		$	1.49


(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, as such costs were 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, as such costs were 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, as such costs were 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.

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.

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.

Net sales and operating loss for the Bekaert business for the three and six months ended May 30, 2015 and May 31, 2014 (which in the case of the six month period ended May 31, 2014, includes the period from December 3, 2013 to May 31, 2014)were as follows:



	Quarter Ended						Six Months Ended
	May 30, 2015			May 31, 2014			May 30, 2015			May 31, 2014
Net sales	$	3,189		$	3,526		$	5,717		$	6,303
Operating loss	(83		)	(303		)	(519		)	(554		)

Investments

The Company owns 30.0% 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 30, 2015 and May 31, 2014, respectively, the Company did not make any additional investments. The investment, with a carrying amount of $2,762 and $2,918 at May 30, 2015 and November 29, 2014, 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 30, 2015 and May 31, 2014, the Company did not receive any dividends from BPH.

The Company also owns 14.6% 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 30, 2015 and May 31, 2014 the Company invested an additional $525 and $473, respectively into Algae. The investment, with a carrying amount of $3,802 and $3,277 at May 30, 2015 and November 29, 2014, respectively, included in Other noncurrent assets in the Consolidated Condensed Balance Sheets, 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 may have occurred. During the three and six months ended May 30, 2015 and May 31, 2014, the Company did not receive any dividends from Algae.

Noncontrolling Interests

Noncontrolling interests changed as follows during the six months ended May 30, 2015 and May 31, 2014:



	Six Months Ended
	May 30, 2015						May 31, 2014
	Redeemable			Non-Redeemable			Redeemable			Non-Redeemable
Noncontrolling interests at beginning of period	$	1,587		$	1,043		$	1,836		$	1,025

Noncontrolling interests (loss) earnings	(19		)	123			(101		)	115
Purchase of Noncontrolling interests	(1,432		)	—			—			—
Foreign currency translation	(136		)	(105		)	(5		)	18
Dividend	—			(206		)	—			(166		)

Noncontrolling interests at end of period	$	—		$	855		$	1,730		$	992

Redeemable Noncontrolling Interests

In March 2007, the Company acquired an 80% ownership share in Sinfa SA (“SINFA”), a manufacturer of automotive and heavy-duty engine filters based in Casablanca, Morocco. As part of the purchase agreement, the Company and the noncontrolling owners each had the option to require the purchase of the remaining 20% ownership share by the Company after December 31, 2012. During the three month period ended May 30, 2015, the Company exercised its option and acquired the remaining 20% ownership share for approximately $1,239, following which SINFA became a wholly owned subsidiary. The difference between the amount paid and the carrying value of the noncontrolling interest was recorded to Retained earnings in the Consolidated Condensed Balance Sheet.