ACQUISITIONS

The following table illustrates cash paid for acquisitions:



	For the year ended December 31,
	2015		2014		2013
In thousands
Cash paid for acquisitions completed during the year	$	196,395	$	70,948	$	17,284
Cash paid for holdback payments during the year	3,404		3,060		828
Earn-out and other payments during the year	1,453		3,610		50
Total cash paid for acquisitions	$	201,252	$	77,618	$	18,162

2015 Acquisitions

On November 30, 2015, the Company acquired GRW Bearing GmbH ("GRW"), a German-based designer and manufacturer of super precision, miniature ball bearings, at a purchase price of approximately €134.1 million, net of cash acquired. GRW is focused on the demanding applications segment of the miniature ball bearings market, where low noise requirements, extreme temperatures, ultra-high speeds and/or caustic environments require both exceptional engineering design and continuous operating performance capabilities. GRW operates from two state-of-the-art production facilities in Rimpar, Germany and Prachatice, Czech Republic. GRW brings additional scale and new market segments to the Company's specialty bearing and engineered products lines. The businesses are aligned through a focus on solving the critical problems of original equipment manufacturer ("OEM") customers and achieving the highest standards of performance in the most demanding applications.

On October 21, 2015, the Company acquired Timken Alcor Aerospace Technologies, Inc. ("TAAT") of Mesa, Arizona, at a purchase price of approximately $44.5 million, net of cash acquired. TAAT, which was renamed EXTEX Engineered Products, Inc. ("EXTEX"), designs and supplies aftermarket parts to support businesses conducting maintenance, repair and overhauls in aerospace markets primarily located in North America. This acquisition strengthened the Company's position in the MRO market and provides synergy opportunities to leverage the Company's global sales organization to accelerate growth. EXTEX complements the aftermarket business of the Company's specialty bearings and engineered products lines.

On January 30, 2015, the Company acquired substantially all the operating assets of G.C. Fabrication, Inc. ("GCF") for a purchase price of approximately $9.5 million, net of cash acquired. Located in Northvale, New Jersey, GCF is a premier Schneider Electric/Square D distributor and carries a variety of electrical power, automation, process controls, specialized HVAC, water and wasterwater systems, communication and networking devices from a premier set of global manufacturers. The acquisition of GCF has expanded the Company's automation, control and energy product offerings into the New York metro market. This acquisition is immaterial to the Company's results of operations and financial position.

In addition to the above acquisitions, the Company's Distribution segment acquired substantially all the assets of Calkins Fluid Power, Inc. ("Calkins"), a small distributor of fluid power components and systems, on December 1, 2015.

These acquisitions were accounted for as purchase transactions. The assets acquired and liabilities assumed were recorded based on their fair values at the date of acquisition as follows (in thousands):



Cash	$	6,345
Accounts receivable	10,786
Inventories	24,319
Property, plant and equipment	24,790
Other tangible assets	1,192
Goodwill	108,659
Other intangible assets	61,323
Liabilities	(33,920		)
Net assets acquired	203,494
Less cash received	(6,345		)
Net consideration	$	197,149

3. ACQUISITIONS (CONTINUED)

2015 Acquisitions - continued

The preliminary purchase price allocations for the acquisitions of GRW and EXTEX, completed during the fourth quarter of 2015, were based upon a preliminary valuation and our estimates and assumptions for these acquisitions are subject to change as we obtain additional information during the measurement period. The principle areas of these purchase price allocations that are not yet finalized relate to certain identifiable intangible assets, certain environmental matters, income and non-income based taxes and residual goodwill.

The goodwill associated with these acquisitions is tax deductible and is the result of expected synergies from combining the operations of the acquired businesses with the Company's operations and intangible assets that do not qualify for separate recognition, such as an assembled workforce. Included in the Consolidated Statements of Operations for the year ended December 31, 2015, is $26.1 million of revenue from these acquisitions.

The fair value of the identifiable intangible assets of $61.3 million, consisting of customer relationships, developed technologies, non-compete agreements, trade names and acquired backlog, was determined using the income approach. Specifically, the discounted cash flows method was utilized for the customer relationships, backlog and non-compete agreements and the relief-from-royalty method was utilized for the trade names and developed technology. The fair value of the customer relationships ($36.0 million) is being amortized on a straight-line basis over periods ranging from 6 to 26 years; the fair value of the developed technologies ($19.1 million) is being amortized over periods ranging from 10 to 20 years; the fair value of the non-compete agreements ($0.6 million) is being amortized over 1 year; the fair value of the trade names ($4.8 million) is being amortized over periods ranging from 3 to 15 years; and the fair value of the acquired backlog ($0.8 million) is being amortized over 2 years. These amortization periods represent the estimated useful lives of the assets.

The following table reflects the unaudited pro forma operating results of the Company for the years ended December 31, 2015 and 2014, which give effect to the acquisitions of GRW, EXTEX, GCF, and Calkins as if the companies had been acquired on January 1, 2014. The pro forma results are based on assumptions that the Company believes are reasonable under the circumstances. The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisitions been effective January 1, 2015 or 2014, nor are they intended to be indicative of results that may occur in the future. The underlying pro forma information includes the historical financial results of the Company and the four acquired businesses adjusted for certain items including depreciation and amortization expenses associated with the assets acquired and the Company’s expenses related to financing arrangements, with the related tax effects. The pro forma information does not include the effects of any synergies, cost reduction initiatives or anticipated integration costs related to the acquisitions.



	For the year ended December 31,
	2015		2014
In thousands
Net sales	$	1,844,535	$	1,895,990
Earnings from continuing operations	$	69,450	$	59,223
Net earnings	$	69,450	$	51,315

The pro forma earnings during the year ended December 31, 2015, were adjusted to exclude non-recurring items including acquisition-related costs and expenses related to the fair value adjustments to inventory. The pro forma earnings in 2014 were adjusted to include these items, reflecting acquisition-related costs of $4.2 million and expenses of $3.0 million related to adjustments to inventory.

3. ACQUISITIONS (CONTINUED)

2014 Acquisitions

On April 25, 2014, the Company acquired specific assets of B.W. Rogers Company and certain affiliated entities ("B.W. Rogers"). Headquartered in Akron, Ohio, B.W. Rogers operated from twenty-one locations in seven states from the Northeast to the Midwest. The acquisition of B.W. Rogers expanded the Company's capabilities in both the fluid power and automation and motion control product areas.

This acquisition was accounted for as a purchase transaction. The assets acquired and liabilities assumed were recorded based on their fair values at the date of acquisition as follows (in thousands):



Cash	$	11
Accounts receivable, net	13,332
Inventories	9,614
Property, plant and equipment	850
Other tangible assets	784
Goodwill	37,804
Other intangible assets	16,870
Liabilities	(7,367		)
Total of net assets acquired	71,898
Less cash received	(11		)
Net consideration	$	71,887

The goodwill associated with B.W. Rogers is tax deductible and is the result of expected synergies from combining the operations of the acquired business with the Company's operations and intangible assets that do not qualify for separate recognition, such as an assembled workforce. Included in the Consolidated Statements of Operations for the year ended December 31, 2014, is $73.1 million of revenue from this acquisition.

The fair value of the identifiable intangible assets of $16.9 million, consisting primarily of customer relationships, non-compete agreements and trade names, was determined using the income approach. Specifically, the discounted cash flows method was utilized for the customer relationships and non-compete agreements and the relief-from-royalty method was utilized for the trade names. The fair value of the customer relationships ($14.9 million) is broken out into two asset categories, which are amortized on a straight-line basis over periods ranging from 11 to 18 years; the fair value of the non-compete agreements ($1.1 million) is being amortized over periods ranging from 1.5 to 3 years; and the fair value of the trade name ($0.9 million) is being amortized over 8 years, the estimated useful lives of the assets.

During the third quarter of 2014, the Company acquired a small distribution business that operates in the fluid power market as a Parker Hannifin distributor of pneumatic and hydraulic fluid power and motion control systems. The results of this operation are not material to the results of the Distribution segment.

Proforma results of operations have not been presented because the combined effects of the 2014 acquisitions were not material.

Contingency Payments - Aerospace

Included in acquisition costs are contingency payments to the former owners of the Aerospace Orlando operations acquired in 2003. These payments are based on the attainment of certain milestones, and over the term of the agreement could total $25.0 million. These contingency payments are recorded as additional goodwill and totaled $5.4 million, $1.5 million and $3.5 million during 2015, 2014 and 2013, respectively. Through December 31, 2015, the Company has recorded additional goodwill of $23.4 million related to these contingency payments. Payment of the $5.4 million recorded in 2015 will occur in the first quarter of 2016. The remaining $1.6 million of these contingency payments is expected to be earned by the former owners of the Aerospace Orlando facility in 2016 with final payment to occur in the first quarter of 2017.