Acquisitions

On January 31, 2012, the Company completed its acquisition of 100% of the outstanding common stock of Racine Federated, Inc. (“Racine Federated”) of Racine, Wisconsin and its subsidiary Premier Control Technologies, Ltd. located in Thetford, England for approximately $57.3 million in cash, plus an estimated working capital adjustment of $0.3 million. $4.6 million of the purchase price is due on July 31, 2013 and is included in payables on the consolidated balance sheet. Racine Federated manufactures and markets flow meters for the water industry as well as various industrial metering and specialty products. These products complement and expand the Company’s existing lines for the global flow measurement business.

The acquisition was accounted for under the purchase method, and accordingly, the results of operations are included in the Company’s financial statements from the date of acquisition.

On May 23, 2012, the Company signed a new credit agreement which increased its principal line of credit (increasing it from $90.0 million to $125.0 million) for a three year period. The line will be permanently reduced by $16.7 million annually. The line was increased to meet short-term cash needs, if any, that may arise as the result of funding the acquisition of Racine Federated with cash, as well as any cash needs resulting from a $30.0 million stock repurchase program that began in the first quarter of 2012 and ended in the second quarter of 2012. The issuance of commercial paper may comprise a maximum of $70.0 million of the line of credit. This facility is unsecured, but there are a number of financial covenants in effect for the period with which the Company is in compliance.

The Company has not finalized the allocation of the purchase price as of September 30, 2012 because it has not completed its analysis of the fair value of inventories, property, plant and equipment, intangible assets, income tax liabilities and certain contingent liabilities. The following table summarizes the preliminary estimates of fair value of the assets acquired and the liabilities assumed as of the acquisition date:



(In thousands)	January 31, 2012
Assets Acquired:
Cash	$	1,529
Receivables	5,002
Inventories	7,602
Prepaid expenses and other current assets	172
Current deferred income taxes	466
Property, plant and equipment	3,774
Intangible assets	29,500
Goodwill	26,305
Total assets acquired	$	74,350
Liabilities Assumed:
Payables	$	3,430
Accrued compensation and employee benefits	569
Income taxes	31
Long-term deferred income taxes	12,273
Other long-term liabilities	451
Total liabilities assumed	$	16,754

The intangible assets acquired are primarily customer relationships and developed technology, with an estimated average useful life of 15 years.

The following preliminary, unaudited pro forma information combines historical results as if Racine Federated had been owned by the Company for the periods presented.



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In thousands except per share amounts)	2012		2011		2012		2011
Net sales	$	87,130	$	80,617	$	249,193	$	234,574
Net earnings	$	8,857	$	7,281	$	22,987	$	19,765
Diluted earnings per share	$	0.62	$	0.48	$	1.59	$	1.31

The pro forma results include amortization of the intangibles mentioned above, interest expense on debt incurred to finance the acquisition, the elimination of certain acquisition costs and the income tax effect on the pro forma adjustments. The pro forma results are not necessarily indicative of what would have occurred if the acquisition had been completed as of the beginning of each fiscal period presented, nor are they necessarily indicative of future consolidated results.

On January 26, 2011, the Company purchased Remag, AG (“Remag”) of Bern, Switzerland for $4.9 million. Remag distributes a line of precision flow measurement products, some of which they manufacture, for the global industrial market. Their small turbine meters complement and expand the Company’s existing line of industrial flow products. The Company’s purchase price allocation included $0.9 million of cash, plus approximately $0.4 million of receivables, $0.4 million of inventory, $2.0 million of property, plant and equipment, $1.8 million of intangibles, $0.2 million of goodwill, and $0.1 million of net other assets and liabilities.

The Remag acquisition was accounted for under the purchase method, and accordingly, the results of operations are included in the Company’s financial statements from the date of acquisition. The acquisition did not have a material impact on the Company’s consolidated financial statements or the notes thereto.