Note 22 – Acquisitions

Martin

On December 19, 2012, we entered into an agreement to acquire all of the issued and outstanding shares of Martin (the “Martin Acquisition”), a leading provider of dynamic lighting solutions for the entertainment, architectural and commercial sectors, for a purchase price of €110 million (the “Martin Purchase Price”), subject to both an estimated and final: (1) net interest bearing debt adjustment and (2) a working capital adjustment (the “Adjustments”). The final Adjustments are to be calculated within 45 business days of the closing date of the Martin Acquisition. The Martin Acquisition closed on February 28, 2013 (“the Martin Acquisition Date”) at which time the initial purchase price of €70.6 million, or $ 92.8 million was paid based on the estimated Adjustments. The purchase price included the assumption of approximately $50.5 million of debt, the majority of which was paid off during the third quarter of fiscal year 2013. The final purchase price will be settled once the calculation of the final Adjustments is completed. The results of operations of Martin are included in our Professional segment.

The total cost of the Martin Acquisition was allocated to the assets acquired and liabilities assumed based on their fair values at the Martin Acquisition Date, as follows:


	February 28, 2013
Cash and cash equivalents	$	2,382
Accounts receivable		26,203
Inventories		47,735
Deferred taxes, current, net		5,795
Other current assets		5,134

Current assets		87,249
Property, plant and equipment		9,420
Goodwill		57,660
Investments in unconsolidated subsidiaries		1,932
Intangibles		36,299
Other noncurrent assets		1,902

Total assets		194,462

Current portion of long-term debt		2,389
Short-term debt		39,061
Accounts payable		11,873
Accrued liabilities		30,385
Income taxes payable		975

Total current liabilities		84,683
Deferred tax liabilities, long-term, net		7,885
Long-term debt		9,080

Total liabilities		101,648

Net assets	$	92,814

Based on our preliminary valuation, goodwill and intangibles were recorded in connection with the acquisition based on third-party valuations and management’s estimates for those acquired intangible assets. The valuation of the acquired net assets is subject to change as we obtain additional information for our estimates during the measurement period. The primary areas of those purchase price allocations that are not yet finalized relate to identifiable intangible assets, certain legal matters and residual goodwill. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Of the $57.7 million of goodwill recognized, none is deductible for tax purposes. Intangible assets included a non-amortized indefinite useful life tradename of $20.1 million, customer relationships of $13.2 million with approximate useful lives ranging from six to seven years, backlog of $2.3 million with a useful life of four months and technology of $0.7 million with an approximate useful life of two years. We also recorded adjustments of $3.7 million and $4.5 million to Inventories and Property, plant and equipment, net, respectively, to adjust the opening balances to fair value. These fair value adjustments will be amortized over their estimated lives of 12 months and four years, respectively, through Cost of Sales and depreciation expense within Cost of sales and SG&A, respectively. Expenses of $2.3 million were recognized in connection with this acquisition and are included in SG&A in our Consolidated Statements of Income for the three and nine months ended March 31, 2013. The operating results of Martin are included in our Professional segment. Pro-forma financial information has not been presented as the Martin Acquisition is not material to our results of operations.

Interchain

On July 31, 2012, we entered into an agreement to purchase certain assets and liabilities of Interchain (the “Interchain Acquisition”), a technology product company that specializes in developing telematics, fleet management, Android^® based in-vehicle infotainment and location-based solutions, for a purchase price of 45 million Indian Rupees or approximately $0.8 million, of which $0.3 million was paid on July 31, 2012 and $0.5 million was paid on October 13, 2012, which is the date the transaction closed (the “Interchain Acquisition Date”). The Interchain Acquisition is also subject to a 50 million Indian Rupee earn-out (approximately $0.9 million) which is payable upon the achievement of certain financial targets in the 12 month periods ending September 1, 2013 and September 2, 2014, which we recorded as a $0.3 million Non-current liability in our Condensed Consolidated Balance Sheet at March 31, 2013, based upon management’s estimate of its fair value. The total cost of the Interchain Acquisition including the fair value of the earn-out, was allocated to the assets acquired and liabilities assumed based on their fair values at the Interchain Acquisition Date. Goodwill of $0.6 million and intangibles of $0.4 million were recorded in connection with the acquisition. The operating results of the Interchain Acquisition are included in our Infotainment segment. Pro-forma financial information has not been presented as the Interchain Acquisition is not material to our results of operations.

MWM Acoustics

On July 22, 2011 (the “MWM Acquisition Date”), we and our wholly-owned subsidiary, Harman Holding Limited (“Harman Holding”), entered into an equity securities purchase agreement with a group of sellers (the “MWM Sellers”), to acquire all of the issued and outstanding equity interests of MWM Acoustics, a leading provider of high performance embedded acoustic solutions (the “MWM Acquisition”), for a purchase price of $80.0 million (the “Fixed Purchase Price”), plus a working capital adjustment of $0.1 million which was determined within 60 days of the MWM Acquisition Date and has been paid. On the MWM Acquisition Date, we and Harman Holding paid the MWM Sellers a total of $72.0 million. The remainder of the Fixed Purchase Price of $8.0 million was paid in December 2012. The MWM Acquisition is also subject to a $57.0 million earn-out, which is payable contingent upon the achievement of certain financial targets in the fiscal year ended June 30, 2014. Our preliminary valuation of the contingent consideration was originally valued at $22.1 million and was reduced to $9.6 million during the second quarter of fiscal year 2013, based on revised management estimates. Refer to Note 14 – Fair Value Measurements for more information.

The total cost of the MWM Acquisition, including the fair value of the contingent consideration, was allocated to the assets acquired and liabilities assumed based on their fair values at the MWM Acquisition Date, as follows:


	July 22, 2011
Cash and cash equivalents	$	1,465
Accounts receivable		4,434
Inventories		1,062
Other current assets		42

Current assets		7,003
Property, plant and equipment		273
Goodwill		79,757
Intangibles		20,600
Other noncurrent assets		1,091

Total assets		108,724

Accounts payable		5,187
Accrued liabilities		206

Total current liabilities		5,393
Other noncurrent liabilities		1,125

Total liabilities		6,518

Net assets	$	102,206

Goodwill and intangibles were recorded in connection with the acquisition based on third-party valuations and management’s estimates for those acquired intangible assets. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Of the $79.8 million of goodwill recognized, approximately $35.6 million is deductible for tax purposes. Intangible assets included customer relationships of $19.2 million with an approximate useful life of 10 years and technology of $1.4 million with an approximate useful life of four years. Expenses of $0.9 million were recognized in connection with this acquisition and are included in SG&A in our Consolidated Statements of Income for the fiscal year ended June 30, 2012. The operating results of MWM Acoustics are included in our Lifestyle segment. Pro-forma financial information has not been presented as the MWM Acquisition is not material to our results of operations.