Note 2: Acquisitions

We acquired 97.37% of the shares of Miranda Technologies Inc. (Miranda) for cash of $364.8 million on July 27, 2012, and we acquired the remaining 2.63% of shares of Miranda for cash of $9.9 million on July 30, 2012. Miranda is a leading provider of hardware and software solutions for the broadcast infrastructure industry and expands our solution offerings in the broadcast end-market. Miranda is headquartered in Montreal, Quebec, Canada. Miranda’s strong brands and technology enhance our portfolio of broadcast products. The results of Miranda have been included in our Condensed Consolidated Financial Statements from July 27, 2012, and are reported within the Americas segment. The impact of the noncontrolling interest from July 27, 2012 to July 30, 2012 was not material to our financial position or results of operations. The following table summarizes the estimated fair value of the assets acquired and the liabilities assumed as of July 27, 2012 (in thousands).


Cash	$	33,324
Receivables		27,592
Inventories		31,109
Other current assets		1,831
Property, plant and equipment		23,452
Goodwill		164,470
Intangible assets		159,695

Total assets	$	441,473


Accounts payable	$	23,917
Accrued liabilities		6,909
Current deferred tax liabilities		4,839
Other long-term liabilities		11,835
Non-current deferred tax liabilities		19,294

Total liabilities		66,794

Net assets	$	374,679

The above purchase price allocation has been determined provisionally, and is subject to revision as additional information about the fair value of individual assets and liabilities becomes available. We are in the process of finalizing third party valuations of certain tangible and intangible assets and ensuring our accounting policies are applied at Miranda. The provisional measurement of inventories, property, plant, and equipment, intangible assets, goodwill, deferred income taxes, deferred revenue, and other assets and liabilities are subject to change. Any change in the acquisition date fair value of the acquired net assets will change the amount of the purchase price allocable to goodwill.

The fair value of acquired receivables is $27.6 million, with a gross contractual amount of $28.3 million. We do not expect to collect $0.7 million of the acquired receivables.

A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The judgments we have used in estimating the fair values assigned to each class of acquired assets and assumed liabilities could materially affect the results of our operations.

For purposes of the above allocation, we have estimated a fair value adjustment for inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date less the sum of the costs to complete the work-in-process, the costs of disposal, and a reasonable profit allowance for our post acquisition selling efforts. We based our estimate of the fair value for the acquired property, plant, and equipment on a valuation study performed by a third party valuation firm. We used various valuation methods including discounted cash flows to estimate the fair value of the identifiable intangible assets.

Goodwill and other intangible assets reflected above were determined to meet the criterion for recognition apart from tangible assets acquired and liabilities assumed. The goodwill is primarily attributable to expected synergies and the assembled workforce. We acquired tax basis in goodwill of approximately $45 million, due to previous acquisitions completed by Miranda prior to Belden’s ownership. The goodwill balance we recorded is only deductible for tax purposes up to the amount of the tax basis. Intangible assets related to the acquisition consisted of the following:


	Estimated Fair Value		Amortization Period
	(In thousands)		(In years)
Intangible assets subject to amortization:
Developed technologies	$	69,132		4.0
Customer relationships		43,454		20.0
Backlog		4,642		1.0

Total intangible assets subject to amortization		117,228

Intangible assets not subject to amortization:
Goodwill		164,470
Trademarks		35,554
In-process research and development		6,913

Total intangible assets not subject to amortization		206,937

Total intangible assets	$	324,165

Weighted average amortization period				9.8

Trademarks have been determined by us to have indefinite lives and are not being amortized, based on our expectation that the trademarked products will generate cash flows for us for an indefinite period. We expect to maintain use of trademarks on existing products and introduce new products in the future that will also display the trademarks, thus extending their lives indefinitely. In-process research and development assets are considered indefinite-lived intangible assets until the completion or abandonment of the associated research and development efforts. Upon completion of the development process, we will make a determination of the useful life of the asset and begin amortizing the assets over that period. If the project is abandoned, we will write-off the asset at such time.

The amortizable intangible assets reflected in the table above were determined by us to have finite lives. The useful life for the developed technologies intangible asset was based on the estimated time that the technology provides us with a competitive advantage and thus approximates the period of consumption of the intangible asset. The useful life for the customer relationship intangible asset was based on our forecasts of customer turnover. The useful life of the backlog intangible asset was based on our estimate of when the ordered items would ship.

Our revenues and income (loss) from continuing operations before taxes for both the three and nine months ended September 30, 2012 included $29.3 million and ($10.0 million), respectively, from Miranda. Included in our income (loss) from continuing operations before taxes for both the three and nine months ended September 30, 2012 are $7.2 million of cost of sales related to the adjustment of inventory to fair value and $5.4 million of amortization of intangible assets. In addition, we recognized $2.2 million and $2.5 million of transaction costs associated with the acquisition for the three and nine months ended September 30, 2012, respectively, which are included in our selling, general, and administrative expenses.

The following table illustrates the unaudited pro forma effect on operating results as if the Miranda acquisition had been completed as of January 1, 2011.


	Three Months Ended					Nine Months Ended
	September 30, 2012			October 2, 2011		September 30, 2012		October 2, 2011
	(In thousands, except per share data)
	(Unaudited)
Revenues	$	500,971		$	565,461	$	1,531,882	$	1,639,175
Income (loss) from continuing operations		(46,699	)		38,310		12,370		74,996
Diluted income (loss) per share from continuing operations	$	(1.04	)	$	0.79	$	0.27	$	1.55

For purposes of the pro forma disclosures, the three months ended October 2, 2011 include nonrecurring expenses from the effects of purchase accounting for the amortization of the sales backlog intangible asset of $0.6 million. The nine months ended October 2, 2011 include nonrecurring expenses from the effects of purchase accounting, including inventory cost step-up of $10.8 million, amortization of the sales backlog intangible asset of $4.2 million, and Belden’s transaction costs of $2.5 million. For all periods presented, the pro forma information above also reflects interest expense under the term loan borrowed to finance the acquisition.

The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what our results of operations would have been had we completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition.