ACQUISITIONS

In an agreement dated March 7, 2012, between the Company and Pioneer Pump Holdings, Inc. ("PPH"), the Company acquired an additional 39.5 percent of the outstanding shares of PPH, net of debt acquired, for approximately $30.3 million, subject to certain terms and conditions. The Company funded the acquisition with approximately $30.3 million in cash. The Company previously held a 31.0 percent equity interest in PPH (see Note 6). As a result of the additional acquisition, the Company's total equity interest in PPH increased to 70.5 percent, resulting in the consolidation of PPH in the Company's financial statements. Accordingly, the original equity interest in PPH was remeasured to its fair value of $23.9 million as of March 7, 2012, based on the income approach which utilized management estimates and consultation with an independent third-party valuation firm. Inputs included an analysis of the enterprise value based on financial projections and ownership percentages. As a result, the Company recognized a one-time gain of $12.2 million in the "Other income/(expense)" line of the Company's condensed consolidated statement of income for the first quarter ended March 31, 2012.

PPH is the holding company for two wholly-owned subsidiaries, Pioneer Pump, Inc. ("PPI") located in Canby, Oregon, and Pioneer Pump, Ltd. ("PPL") located in Rattlesden, United Kingdom, which holds an additional subsidiary in Wadeville, Germiston, South Africa. PPH is a leader in the manufacture of large, engine-driven centrifugal pumps used for dewatering in oil and gas, municipal, construction, and mining applications.

The Company also entered into a further stock purchase agreement with the noncontrolling interest holders to purchase the remaining shares of PPH on or about, but no later than, March 31, 2015, for a purchase price based on a multiple of PPH's adjusted average earnings for 2013 and 2014 less net indebtedness. Accordingly, a resulting liability of $22.9 million was recorded in the "Other long-term liabilities" line of the Company's condensed consolidated balance sheet. Any required adjustments to the liability driven by changes in the expected purchase price will be recorded in the "Interest expense" line of the Company's condensed consolidated statement of income. The mandatory share purchase liability remained recorded at the initial carrying amount as of September 29, 2012. As a result, no adjustments were necessary for the third quarter and nine months ended September 29, 2012.

The PPH intangible assets of $43.9 million consist primarily of customer relationships, which will be amortized utilizing the straight line method over 17 to 19 years, and trademarks, which are classified as indefinite lived assets and will not be amortized.

The preliminary goodwill of $26.5 million resulting from the PPH acquisition consists primarily of expanding sales of packaged systems products and the recording of deferred taxes related to acquired assets. PPH's presence in the oil and gas market will also complement the Company's initiative to introduce submersible pumping systems in this market. All of the goodwill was recorded as part of the Water Systems segment and is not expected to be deductible for tax purposes. Preliminary goodwill increased by $1.5 million during the nine months ended September 29, 2012, due to purchase accounting adjustments to intangible assets and inventory resulting from additional information provided for the provisional valuation.

In an agreement dated August 9, 2012, between the Company and Cerus Industrial Corporation (“Cerus”), the Company acquired all of the outstanding shares of Cerus, net of debt acquired, for approximately $24.5 million, subject to certain terms and conditions. The Company funded the acquisition with cash on hand and short-term borrowings paid back within the period.

Cerus, located in Hillsboro, Oregon, designs, manufactures, and distributes motor controls, motor starters, contactors, protection devices, and variable frequency drives to a wide range of distributor and original equipment manufacturers in North America.

The Cerus intangible assets of $17.3 million consist primarily of customer relationships, which will be amortized utilizing the straight line method over 17 years, and trademarks, which are classified as indefinite lived assets and will not be amortized.

The preliminary goodwill of $5.5 million resulting from the Cerus acquisition consists primarily of accelerated growth resulting from increased technical and product development capacity, broadened product lines, reduced manufacturing costs, and movement into adjacent market areas. All of the goodwill was recorded as part of the Water Systems segment and is not expected to be deductible for tax purposes.

The preliminary purchase prices assigned to the major identifiable assets and liabilities for the PPH and Cerus acquisitions are as follows:



(In millions)	PPH			Cerus			Total
Assets:
Cash acquired	$	0.8		$	—		$	0.8
Current assets	38.1			3.8			41.9
Property, plant, and equipment	3.6			0.3			3.9
Intangible assets	43.9			17.3			61.2
Goodwill	26.5			5.5			32.0
Total assets	112.9			26.9			139.8
Liabilities	(58.7		)	(2.4		)	(61.1		)
Total	54.2			24.5			78.7
Less: Fair value of original equity interest	(23.9		)	—			(23.9		)
Total purchase price	$	30.3		$	24.5		$	54.8

The fair values of the PPH and Cerus identifiable intangible assets and property, plant, and equipment are provisional amounts pending final valuations and purchase accounting adjustments. The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuations. Transaction costs were expensed as incurred under the guidance of FASB Accounting Standards Codification ("ASC") Topic 805, Business Combinations. Transaction costs included in the "Selling, general, and administrative expenses" line of the Company’s condensed consolidated statement of income were $0.3 million for the nine months ended September 29, 2012.

The results of operations of PPH and Cerus were included in the Company's condensed consolidated statement of income, from the respective acquisition dates through the third quarter ended September 29, 2012. The difference between actual sales for the Company and proforma sales including PPH and Cerus as if they were acquired at the beginning of each period was not material as a component of the Company's consolidated sales for the nine months ended September 29, 2012 and October 1, 2011, respectively. Due to the immaterial nature of the acquisitions, the Company has not included full year proforma statements of income for the acquisition year and previous year.

The fair values of the identifiable intangible assets and property, plant, and equipment for the 2011 Impo Motor Pompa Sanayi ve Ticaret A.S. (“Impo”) acquisition were final as of the first quarter ended March 31, 2012. The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuation. No adjustments were required as a result of the final valuation to the preliminary amounts previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011.