2. DIVESTITURES AND BUSINESS COMBINATIONS

Spin-off of KLX Inc.

On June 10, 2014, we announced a plan to spin-off our Consumables Management Segment into a separate publicly traded company. To accomplish the spin-off, we formed KLX. On the Distribution Date, we completed the spin-off of KLX by means of the transfer of our Consumables Management Segment to KLX and the subsequent distribution of all the outstanding KLX common stock to our stockholders. We retained our commercial aircraft and business jet segments. On the Distribution Date, each of our stockholders of record as of the close of business on the Record Date received one share of KLX common stock for every two shares of our common stock held as of the Record Date. The distribution was structured to be tax free to our U.S. stockholders for U.S. federal income tax purposes.

The divested KLX is presented as a discontinued operation on the consolidated statements of earnings and comprehensive income for all periods presented. The KLX balance sheet, other comprehensive income and cash flows are included within our consolidated financial statements through December 16, 2014.

Summary results of operations for KLX through December 16, 2014 were as follows:


	For the Period January 1, 2014		For the Years Ended December 31,
	through December 16, 2014		2013		2012

Revenues	$	1,611.2	$	1,280.4	$	1,171.0

Earnings before income taxes	$	207.9	$	267.5	$	246.8
Provision for income taxes		161.3		96.8		92.7

Earnings from discontinued operations, net of income taxes	$	46.6	$	170.7	$	154.1

The results of the KLX discontinued operation exclude certain corporate and group allocations which were historically allocated to KLX. These costs include primarily corporate overhead and information systems.

On December 16, 2014, we divested the following assets and liabilities in connection with the Spin-Off:


Assets
Cash and cash equivalents	$	460.0
Accounts receivable		310.8
Inventories		1,303.4
Deferred income taxes		40.2
Other current assets		52.3
Property and equipment		323.1
Goodwill		1,370.4
Identifiable intangible assets		430.7
Other assets		119.1
		4,410.0
Liabilities
Accounts payable		167.1
Accrued liabilities		182.4
Long-term debt		1,200.0
Deferred income taxes		121.1
Other non-current liabilities		112.0
		1,782.6
Net assets divested in the Spin-Off	$	2,627.4

We entered into transitional services agreements with KLX prior to the spin-off pursuant to which we and KLX are providing various services to each other on an interim transitional basis. Transition services may be provided for up to 24 months, and for information technology services, KLX has an option for a one-year extension by the recipient. Services being provided by us include certain information technology and back office support. We record billings under these transition services agreements which are recorded as a reduction of the costs of the respective service in the applicable expense category in the consolidated statement of earnings and comprehensive income. This transitional support will enable KLX to establish its stand-alone processes for various activities that were previously provided by us and does not constitute significant continuing support of KLX’s operations.

Under the Tax Sharing and Indemnification Agreement between the Company and KLX we generally assume liability for all federal and state income taxes for all tax periods ending on or prior to December 31, 2014. We assume the liability for all federal and state income taxes of KLX’s U.S. operations through the Distribution Date. KLX assumes all other federal taxes, foreign income tax/non-income taxes and state/local non-income taxes related to their business for all periods and we assume all other federal taxes, foreign income tax/non-income taxes and state/local non-income taxes related to our business for all periods. Additional taxes incurred related to the internal restructuring to separate the businesses to complete the spin-off shall be shared equally between the Company and KLX. Taxes incurred related to certain international tax initiatives for the KLX business shall be assumed by KLX subject to the calculation provisions of the Tax Sharing and Indemnification Agreement. In addition, we transferred to KLX all of its deferred tax assets and liabilities as of December 16, 2014.

In connection with the spin-off, we have adjusted our employee stock compensation awards and separated our employee medical and dental benefit plans.

Acquisitions

Energy Services Acquisitions

In April 2014, the Company acquired the assets of the Vision Oil Tools, LLC (“Vision”), a provider of technical services and associated rental equipment and logistics services to the energy sector. Vision established a new geographical base of operations for the Company in the North Dakota (Williston/Bakken) and Rocky Mountain regions. The purchase price was initially $140.0 with an additional $35.0 to be paid by KLX in 2015 based on the achievement of 2014 financial results. The Company has not yet completed its evaluation and allocation of the purchase price for Vision although a customary post-closing adjustment to working capital resulted in a $0.7 increase to the purchase price. During June 2014, the Company also acquired the assets of the Cornell group of companies (“Cornell”), which provides technical services, associated logistic services and rental equipment to the energy sector in the Eagle Ford and Permian basins. The purchase price was $70.7 with the potential for an additional $57.2 to be paid by KLX in 2015 based on the achievement of 2014 financial results. The Company has not yet completed its evaluation and allocation of the purchase price for Cornell although a customary post-closing adjustment to working capital resulted in a $1.5 increase to the purchase price. In April 2014, the Company also acquired the assets of the Marcellus group of companies (“MGS”) engaged in manufacturing and rental of equipment in the Marcellus/Utica shales for approximately $45.0. In January 2014, the Company acquired the assets of the LT Energy Services group of companies (“LT”), an Eagle Ford basin provider of rental equipment, for a net purchase price of approximately $102.5. In February 2014, the Company acquired the assets of Wildcat Wireline LLC (“Wildcat”), a provider of wireline services primarily in the Eagle Ford basin, and also in the Marcellus/Utica basin, for a net purchase price of approximately $153.4.

For the 2014 energy services acquisitions, based on our preliminary purchase price allocation, the excess of the purchase price over the fair value of the identifiable assets acquired approximated $437.1, of which $131.2 was allocated to identified intangible assets, consisting of customer contracts and relationships and covenants not to compete, and $305.9 is included in goodwill. The useful life assigned to the customer contracts and relationships is between 11-20 years, and the covenants not to compete are being amortized over their contractual periods of five years.

During the third and fourth quarters of 2013, the Company acquired the assets of Blue Dot Energy Services, LLC (“Blue Dot”) and Bulldog Frac Rentals, LLC (“Bulldog”), providers of technical services and associated rental equipment and logistics services to the energy sector, for a net purchase price of $114.0. For the 2013 acquisitions, the excess of the purchase price over the fair value of the identifiable assets acquired approximated $70.6, of which $42.6 was allocated to identified intangible assets, consisting of customer contracts and relationships and covenants not to compete, and $28.0 is included in goodwill. The useful life assigned to the customer contracts and relationships is 20 years, and the covenants not to compete are being amortized over their contractual periods of five years.

All of the aforementioned acquisitions are included in the assets and liabilities divested in connection with the spin-off and collectively referred to as the “Energy Services Acquisitions”.

Manufacturing Acquisitions

In June 2014, the Company acquired the outstanding shares of the Emteq, Inc. group of companies, a domestic provider of aircraft interior and exterior lighting systems, as well as aircraft cabin management and power systems for a purchase price of $256.3, net of cash acquired. The Company also acquired the outstanding shares of the F+E Fischer + Entwicklungen GmbH & Co. KG group of companies, a leading Europe-based manufacturer of seating products for civilian helicopters for a purchase price of $212.3, net of cash acquired. During the second quarter, the Company also acquired the outstanding shares of Wessex Advanced Switching Products Ltd., engaged in the production of lighting, control units and switches, based in Europe for a purchase price of $63.0, net of cash acquired. These acquisitions are included in the business jet segment and collectively referred to as the “Manufacturing Acquisitions.”

For the Manufacturing Acquisitions, based on our preliminary purchase price allocation, the excess of the purchase price over the fair value of the identifiable assets acquired approximated $516.4, of which $99.3 was allocated to identified intangible assets, consisting of customer contracts and relationships, developed technologies, trademarks and patents and covenants not to compete, and $417.1 is included in goodwill. The useful life assigned to the customer contracts and relationships and developed technologies is 20 years, the useful life assigned to trademarks and patents is 15 years, and the covenants not to compete are being amortized over their contractual periods of three to five years.

The Energy Services Acquisitions and Manufacturing Acquisitions were accounted for as purchases under FASB ASC 805, Business Combinations (“ASC 805”). The assets purchased and liabilities assumed for the Manufacturing Acquisitions have been reflected in the accompanying consolidated balance sheet as of December 31, 2014. The results of operations for the Manufacturing Acquisitions are included in the accompanying consolidated statements of earnings and comprehensive income from their respective dates of acquisition. The assets purchased and liabilities assumed for the Energy Services acquisitions have been reflected in the accompanying balance sheet as of December 16, 2014. The results of operations for the Energy Services Acquisitions are included in the accompanying consolidated statements of earnings and comprehensive income from their respective dates of acquisition through December 16, 2014.

The valuation of certain assets, principally intangible assets, is not yet complete, and as such, the Company has not yet finalized its allocation of the purchase prices for the Energy Services Acquisitions or Manufacturing Acquisitions except for the Blue Dot and Bulldog acquisitions.

The following table summarizes the current estimates of fair values of assets acquired and liabilities assumed in the Energy Services Acquisitions in accordance with ASC 805, which are currently recorded based on management’s estimates as follows:


								Other 2014
		Wildcat		Vision		Cornell		acquisitions		2014		2013
Accounts receivable-trade	$	0.4	$	10.8	$	10.5	$	15.1	$	36.8	$	14.8
Inventories		1.3		--		--		0.4		1.7		3.9
Other current and non-current assets		--		2.4		--		0.1		2.5		0.2
Property and equipment		25.7		44.1		28.5		40.3		138.6		35.5
Goodwill		88.3		89.9		66.6		61.1		305.9		28.0
Identified intangibles		37.7		30.0		24.5		39.0		131.2		42.6
Accounts payable		--		(1.5)		(0.7)		(4.3)		(6.5)		(10.0)
Other current and non-current liabilities		--		(35.0)		(57.2)		(4.2)		(96.4)		(1.0)
Total purchase price	$	153.4	$	140.7	$	72.2	$	147.5	$	513.8	$	114.0

All of the goodwill and other intangible assets related to the Energy Services Acquisitions are expected to be deductible for tax purposes.

The following table summarizes the current estimates of fair values of assets acquired and liabilities assumed in the Manufacturing Acquisitions in accordance with ASC 805, which are currently recorded based on management’s estimates as follows:


	Domestic		Foreign
Accounts receivable-trade	$	12.5	$	12.8
Inventories		13.2		7.6
Other current and non-current assets		0.9		0.5
Property and equipment		6.5		7.1
Goodwill		197.4		219.7
Identified intangibles		46.8		52.5
Accounts payable		(4.2)		(3.7)
Other current and non-current liabilities		(16.8)		(21.2)
Total purchase price	$	256.3	$	275.3

The majority of the goodwill and intangible assets related to the Manufacturing Acquisitions are not expected to be deductible for tax purposes.

Consolidated unaudited pro forma revenues, net earnings and diluted net earnings per share giving effect to the Manufacturing Acquisitions as if they had occurred on January 1, 2013 were $2,668.0, $77.4, and $0.74, and $2,372.5, $120.9 and $1.16, for the years ended December 31, 2014 and 2013, respectively.