ACQUISITIONS

During the third quarter 2014, the Company acquired controlling interests in two entities in India in separate unrelated transactions. Neither of the acquisitions was individually material, and the combined purchase price paid was approximately $6.6 million. The results of the two businesses from their respective dates of acquisition through January 3, 2015 were not material.

In an agreement dated June 6, 2014, between the Company and Bombas Leao S.A. ("Bombas Leao"), the Company acquired rights to 100 percent of the outstanding shares of Bombas Leao for a cash purchase price of approximately BRL 69.0 million, $30.7 million at the then current exchange rate, subject to certain terms and conditions. The Company also acquired debt and certain liabilities of Bombas Leao. The Company funded the acquisition with cash on hand and short-term borrowings from the Company's revolving credit agreement.

Bombas Leao, based in Monte Azul Paulista, State of Sao Paulo, Brazil, designs, manufactures, and distributes submersible groundwater pumping equipment through manufacturing and distribution facilities.

The Bombas Leao intangible assets of $23.5 million consist primarily of customer relationships, which will be amortized utilizing the straight line method over 20 years, and trade names, which are classified as indefinite lived assets and will not be amortized. Preliminary intangible asset values decreased by $3.0 million during 2014, primarily due to purchase accounting adjustments resulting from additional information provided for the provisional valuation and working capital adjustments.

The preliminary goodwill of $3.1 million resulting from the Bombas Leao acquisition consists primarily of broadened product offerings and expanded customer base. 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 decreased by $2.1 million during 2014, primarily due to purchase accounting adjustments to property, plant, and equipment and intangible assets resulting from additional information provided for the provisional valuation.

The preliminary purchase price assigned to the major identifiable assets and liabilities for the acquisition is as follows:



(In millions)
Assets:
Cash acquired	$	1.1
Current assets	13.7
Property, plant, and equipment	6.5
Intangible assets	23.5
Goodwill	3.1
Other assets	3.1
Total assets	51.0
Liabilities	(20.3		)
Total consideration paid	$	30.7

The fair values of the Bombas Leao identifiable intangible assets and property, plant and equipment are provisional amounts as of January 3, 2015, pending the finalization of tax valuations and purchase accounting adjustments. The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuation process.

The results of operations of Bombas Leao were included in the Company's consolidated statement of income from the acquisition date through the year ended January 3, 2015. The difference between actual sales for the Company and proforma sales including Bombas Leao as if it was acquired at the beginning of each year was not material as a component of the Company's consolidated sales for the years ended January 3, 2015 and December 28, 2013, respectively. Due to the immaterial nature of the acquisition, the Company has not included full year proforma statements of income for the acquisition year or previous year.

During 2013, the Company made two acquisitions, neither of which was individually material, in the Water Systems segment for a total purchase price of approximately $3.6 million. The results of the two acquired businesses from the dates of acquisition through December 28, 2013 were not material.

In an agreement dated November 16, 2012, the Company added to its Fueling Systems segment by acquiring certain assets and 100 percent of the common stock of Flex-ing, Incorporated ("Flex-ing") for approximately $10.4 million in an all cash transaction. Located in Sherman, Texas, Flex-ing designs and manufactures a variety of fueling equipment that is distributed through the same channels as the core product offering of the Fueling Systems segment.

The Flex-ing intangible assets of $8.9 million consist primarily of customer relationships, which will be amortized utilizing the straight line method over 15 years, and trademarks, which are classified as indefinite lived assets and will not be amortized. All of the goodwill was recorded as part of the Fueling Systems segment and is not expected to be deductible for tax purposes.

The goodwill amount of $4.0 million resulting from the Flex-ing acquisition consists primarily of broadened product lines that can be distributed through the Company's existing international distribution channels.

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 $24.4 million, subject to certain terms and conditions. The Company funded the acquisition with cash on hand and short-term borrowings paid back within the year.

Cerus, located in Hillsboro, Oregon, designs, manufactures, and distributes motor controls, motor starters, contractors, 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 goodwill amount of $5.4 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. Preliminary goodwill decreased by $0.1 million during the year ended December 28, 2013, due to an escrow refund received by the Company.

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 8). 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 during the first half of 2015, for a purchase price based on a multiple of PPH's adjusted average earnings for 2013 and 2014 less net indebtedness. Accordingly, the resulting liability of $22.9 million is recorded in the "Accrued expenses and other current liabilities" line of the Company's 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 consolidated statement of income. The mandatory share purchase liability remained recorded at the initial carrying amount as of January 3, 2015. As a result, no adjustments were necessary for the years ended January 3, 2015, December 28, 2013 and December 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 goodwill amount 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 year ended December 29, 2012, due to purchase accounting adjustments to intangible assets and inventory resulting from additional information provided for the provisional valuation.

The final purchase prices assigned to the major identifiable assets and liabilities for the Flex-ing, Cerus, and PPH acquisitions are as follows:



(In millions)	Flex-ing			Cerus			PPH			Total
Assets:
Cash acquired	$	0.1		$	—		$	0.8		$	0.9
Current assets	2.0			3.8			38.1			43.9
Property, plant, and equipment	0.4			0.3			3.6			4.3
Intangible assets	8.9			17.3			43.9			70.1
Goodwill	4.0			5.4			26.5			35.9
Total assets	15.4			26.8			112.9			155.1
Liabilities	(5.0		)	(2.4		)	(58.7		)	(66.1		)
Total	10.4			24.4			54.2			89.0
Less: Fair value of original equity interest	—			—			(23.9		)	(23.9		)
Total purchase price	$	10.4		$	24.4		$	30.3		$	65.1

The fair values of the Flex-ing, Cerus, and PPH identifiable intangible assets and property, plant, and equipment are final amounts as of fiscal year end 2013 in conjunction with final valuations. An additional valuation adjustment of $0.1 million was made to Cerus goodwill in 2013 and is reflected in the table above. The Company utilized management estimates and consultation with an independent third-party valuation firm to assist in the valuations.

The following unaudited proforma financial information for the years ended December 29, 2012 and December 31, 2011 gives effect to the acquisitions of Flex-ing, Cerus, and PPH by the Company as if the acquisitions had occurred at the beginning of the 2012 and 2011 years. These unaudited proforma combined condensed financial statements are prepared for informational purposes only and are not necessarily indicative of actual results or financial position that would have been achieved had the acquisitions been consummated on the dates indicated and are not necessarily indicative of future operating results or financial position of the consolidated companies. The unaudited proforma combined condensed financial statements do not give effect to any cost savings or incremental costs that may result from the integration of Flex-ing, Cerus, and PPH with the Company.

FRANKLIN ELECTRIC CO., INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME



(In millions, except per share amounts)	(Unaudited) 2012		(Unaudited) 2011

Net sales	$	925	$	914
Net income	84		68

Per share data:
Basic earnings per share	$	1.79	$	1.46
Diluted earnings per share	$	1.76	$	1.43

Flex-ing, Cerus, and PPH contributed a total of $48.4 million of revenue and $1.7 million of earnings to the Company's consolidated statements of income from date of acquisition through December 29, 2012.

Transaction costs were expensed as incurred under the guidance of FASB ASC Topic 805, Business Combinations. Transaction costs included in selling, general, and administrative expense in the Company’s consolidated statements of income were $2.4 million, $1.1 million, and $0.3 million for the fiscal years ended 2014, 2013, and 2012, respectively.