Acquisition

On February 20, 2014, the Company completed the acquisition of certain industrial filtration businesses (“Industrial Filtration”) of Andrew Industries Limited, an Altham, United Kingdom based corporation. The Industrial Filtration business serves a global customer base in the manufacture of non-woven felt filtration media and filter bags used primarily in industrial air filtration applications including power, cement, asphalt, incineration, food and pharmaceutical. This business, which will strengthen the Company’s position as an industry leading, global provider of filtration and engineered materials products, adds complementary and new technologies, and diversifies the Company’s end markets and geographic base. The Company acquired the Industrial Filtration business for $86.7 million cash (including cash acquired of $7.5 million) and with no debt being acquired. The purchase price was financed with a combination of cash on hand and $60.0 million of borrowings through the Company’s amended $100 million credit facility.

During the three months ended March 31, 2014, the Company incurred $2.4 million of transaction related costs. These transaction costs include investment banker fees, legal fees and other professional services fees to complete the transaction. These corporate office expenses have been recognized in the Company’s Condensed Consolidated Statements of Operations as selling, product development and administrative expenses.

The operating results of the Industrial Filtration business have been included in the Condensed Consolidated Statements of Operations since February 20, 2014, the date of the acquisition. The Industrial Filtration business is being reported as a separate reportable segment. The Industrial Filtration segment reported $17.7 million in net sales and operating income of $0.8 million, inclusive of a $1.3 million purchase accounting inventory fair value step-up adjustment in cost of sales upon the sale of inventory, for the period from the acquisition date through March 31, 2014. The total purchase accounting inventory fair value step-up adjustment included in the balance sheet at the acquisition date was $2.1 million.

The following table summarizes the fair values of identifiable assets acquired and liabilities assumed at the date of the acquisition:

In thousands
Cash	$	7,493
Accounts Receivable		26,779
Inventory		25,046
Other current assets		2,894
Property, plant and equipment		38,780
Deferred Taxes		2,501
Intangible assets (Note 4)		5,596
Goodwill (Note 4)		3,693
Total assets acquired		112,782

Other liabilities		(18,002)
Deferred taxes		(8,130)
Total liabilities assumed		(26,132)
Net assets acquired	$	86,650

The final purchase price allocation is subject to post-closing adjustments pursuant to the terms of the Sale and Purchase Agreement with Andrews Industries Limited. The Company anticipates that any post-closing adjustment will not be significant to the total purchase price consideration.

The following table reflects the unaudited pro forma operating results of the Company for the three months ended March 31, 2014 and March 31, 2013, which give effect to the acquisition of Industrial Filtration as if it had occurred on January 1, 2013. The pro forma information includes the historical financial results of the Company and Industrial Filtration. The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisition been effective January 1, 2013, nor are they intended to be indicative of results that may occur in the future. The pro forma information does not include the effects of any synergies related to the acquisition.

	(Unaudited Pro Forma)
	Quarter Ended March 31,
In thousands	2014		2013
Net Sales	$	142,742	$	129,716
Net Income	$	7,476	$	2,601

Earnings per share:
Basic	$	0.45	$	0.16
Diluted	$	0.44	$	0.15

Pro forma earnings during the three months ended March 31, 2014 were adjusted to exclude non-recurring items such as acquisition-related costs of $2.4 million and expense related to the fair value adjustment to inventory of $1.3 million, and to include additional amortization of the acquired Industrial Filtration intangible assets recognized at fair value in purchase accounting as well as additional interest expense associated with borrowings under the Company’s Amended Credit Facility. No amount is included in the pro forma earnings during the three months ended March 31, 2014 related to inventory fair value adjustments which would have been recognized in cost of sales as the corresponding inventory would have been completely sold during 2013.

Pro forma earnings during the three months ended March 31, 2013 were adjusted to include acquisition-related costs of $2.4 million and expense of $2.2 million related to the amortization of the fair value adjustments to inventory and additional amortization of the acquired Industrial Filtration intangible assets recognized at fair value in purchase accounting as well as interest expense associated with borrowings under the Company’s Amended Credit Facility.