Note 3: Acquisitions

PPC Broadband, Inc.

We acquired 100% of the outstanding shares of PPC Broadband, Inc. (PPC) in exchange for cash of $521.4 million on December 10, 2012. PPC is a leading manufacturer and developer of advanced connectivity technologies for the broadband market and expands our solution offerings in the broadband end-market. PPC is headquartered in Syracuse, New York. PPC’s strong brands and technology enhance our portfolio of broadband products. The results of PPC have been included in our Consolidated Financial Statements from December 10, 2012, and are reported within the Americas segment. The following table summarizes the estimated fair value of the assets acquired and the liabilities assumed as of December 10, 2012 (in thousands).


Cash	$	7,511
Receivables		28,756
Inventories		42,327
Other current assets		480
Property, plant and equipment		27,752
Goodwill		277,187
Intangible assets		161,500
Other non-current assets		134

Total assets	$	545,647


Accounts payable	$	19,634
Accrued liabilities		3,967
Other long-term liabilities		646

Total liabilities		24,247


Net assets	$	521,400

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 PPC. The provisional measurement of inventories, property, plant, and equipment, intangible assets, goodwill, deferred income taxes, 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.

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.

The fair value of acquired receivables is $28.8 million, with a gross contractual amount of $29.3 million. We do not expect to collect $0.5 million of the acquired receivables.

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. Our tax basis in the acquired goodwill is $277.2 million. The goodwill balance we recorded is only deductible for tax purposes up to the amount of the tax basis. Intangible assets related to the PPC acquisition consisted of the following:


	Estimated Fair Value		Amortization Period
	(In thousands)		(In years)
Intangible assets subject to amortization:
Developed technologies	$	70,500		5.0
Customer relationships		50,000		20.0
Backlog		2,000		0.5

Total intangible assets subject to amortization		122,500

Intangible assets not subject to amortization:
Goodwill		277,187
In-process research and development		7,000
Trademarks		32,000

Total intangible assets not subject to amortization		316,187


Total intangible assets	$	438,687


Weighted average amortization period				11.0

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 2012 included $9.8 million and ($2.0 million), respectively, from PPC. Included in our income from continuing operations before taxes for 2012 are $2.9 million of cost of sales related to the adjustment of inventory to fair value and $1.7 million of amortization of intangible assets. In addition, we recognized $1.0 million of transaction costs associated with the acquisition in 2012, which are included in our selling, general, and administrative expenses.

Miranda Technologies Inc.

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 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		1,923
Property, plant and equipment		23,452
Goodwill		162,764
Intangible assets		159,991

Total assets	$	440,155


Accounts payable	$	23,917
Accrued liabilities		5,591
Current deferred tax liabilities		4,839
Other long-term liabilities		11,835
Non-current deferred tax liabilities		19,294

Total liabilities		65,476


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 our analysis of Miranda’s income tax assets and liabilities and ensuring our accounting policies are applied at Miranda. The provisional measurement of 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.

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. None of the goodwill related to the Miranda acquisition is deductible for tax purposes. 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		44,442		20.0
Backlog		3,950		1.0

Total intangible assets subject to amortization		117,524

Intangible assets not subject to amortization:
Goodwill		162,764
Trademarks		35,554
In-process research and development		6,913

Total intangible assets not subject to amortization		205,231


Total intangible assets	$	322,755


Weighted average amortization period				9.9

Our revenues and income (loss) from continuing operations before taxes for 2012 included $73.6 million and ($11.5 million), respectively, from Miranda. Included in our income from continuing operations before taxes for 2012 are $10.6 million of cost of sales related to the adjustment of inventory to fair value and $10.9 million of amortization of intangible assets. In addition, we recognized $2.5 million of transaction costs associated with the acquisition in 2012, which are included in our selling, general, and administrative expenses.

Pro forma—PPC and Miranda

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


	Years Ended December 31,
	2012		2011
	(In thousands, except per share data) (Unaudited)
Revenues	$	2,163,302	$	2,280,189
Income from continuing operations		78,827		108,117
Diluted income per share from continuing operations	$	1.72	$	2.25

For purposes of the unaudited pro forma disclosures, the year ended December 31, 2011 includes nonrecurring expenses from the effects of purchase accounting, including inventory cost step-up of $19.2 million, amortization of sales backlog intangible assets of $6.7 million, and Belden’s transaction costs of $3.5 million. For both years ended December 31, 2012 and 2011, the pro forma information above also reflects interest expense from the term loan borrowed to finance the acquisition of Miranda and from the borrowings under our senior secured credit facility to finance the acquisition of PPC.

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 acquisitions 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 acquisitions.

ICM Corp.

We acquired 100% of the outstanding shares of ICM Corp. (ICM) for cash of $21.8 million on January 7, 2011. ICM is a broadcast connectivity product manufacturer. ICM’s strong brands and technology enhance our portfolio of broadcast products. The results of ICM have been included in our Consolidated Financial Statements from January 7, 2011, and are reported within the Americas segment.

Poliron Cabos Electricos Especiais Ltda

We acquired Poliron Cabos Electricos Especiais Ltda (Poliron) for cash of $28.7 million on April 1, 2011. Poliron is an industrial cable manufacturer located in Sao Paulo, Brazil. The acquisition of Poliron expands our presence in emerging markets. The results of Poliron have been included in our Consolidated Financial Statements from April 1, 2011, and are reported within the Americas segment.

Byres Security, Inc.

We acquired Byres Security, Inc. (Byres Security) for cash of $7.2 million on August 31, 2011. Byres Security is an industrial network security company located in Vancouver, Canada. The acquisition of Byres Security expands our industrial networking product capabilities. The results of Byres Security have been included in our Consolidated Financial Statements from August 31, 2011, and are reported within the EMEA segment.

The acquisitions of ICM, Poliron, and Byres Security were not material to our financial position or results of operations reported as of and for the year ended December 31, 2011. During the year ended December 31, 2011, we recorded $27.8 million and $21.3 million of goodwill and intangible assets, respectively, due to the ICM, Poliron, and Byres Security acquisitions.

Thomas & Betts Communications Business

We acquired all of the assets and liabilities of the Communications Products business of Thomas & Betts (Communications Business) for cash of $77.2 million on November 19, 2010. The Communications Business provides drop and hard line connectors, hardware and grounding products, and telecom enclosures and connectors for the broadband/CATV markets. This acquisition improves our position as an end-to-end solution provider in the broadcast end market, including broadband/CATV, security and surveillance, and professional broadcasting. The results of operations of the Communications Business have been included in our results of operations from November 19, 2010, and are reported within the Americas segment. The Communications Business acquisition was not material to our financial position or results of operations reported as of and for the year ended December 31, 2010. The following table summarizes the estimated fair value of the assets acquired and the liabilities assumed as of November 19, 2010 (in thousands).


Receivables	$	6,740
Inventories		10,882
Other current assets		227
Property, plant and equipment		15,773
Goodwill		29,335
Other intangible assets		22,900

Total assets	$	85,857


Accounts payable	$	6,546
Accrued liabilities		1,245
Other long-term liabilities		877

Total liabilities		8,668


Net assets	$	77,189

The fair value of acquired receivables was $6.7 million, with a gross contractual amount of $7.0 million. We do not expect to collect $0.3 million of the acquired receivables.

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 an analysis utilizing 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 related to the Communications Business is deductible for tax purposes, and is primarily attributable to expected synergies and the assembled workforce of the Communications Business. Intangible assets related to the acquisition consisted of the following:


	Estimated Fair Value		Amortization Period
	(In thousands)		(In years)

Intangible assets subject to amortization:
Customer relationships	$	15,600		15.0
Developed technologies		1,500		5.0
Backlog		200		0.1

Total intangible assets subject to amortization		17,300

Intangible assets not subject to amortization:
Goodwill		29,335
Trademarks		5,600

Total intangible assets not subject to amortization		34,935

Total intangible assets	$	52,235

Weighted average amortization period				14.0

GarrettCom, Inc.

We acquired 100% of the outstanding shares of GarrettCom, Inc. (GarrettCom) for cash of $56.6 million on December 5, 2010. We paid $47.3 million at closing, $4.1 million in 2011 and $4.1 million in 2012. The remaining $1.1 million is due to be paid in 2013. GarrettCom provides advanced industrial networking products and smart grid solutions, including industrial grade switches, routers, converters, serial communications, and security software to the power utility, surveillance and security, transportation, specialty industrial automation, and telecommunications markets. The acquisition complements our existing portfolio of industrial networking products and will enable us to provide a more diverse set of end market solutions. The results of operations of GarrettCom have been included in our results of operations from December 5, 2010, and are reported within the Americas segment. The GarrettCom acquisition was not material to our financial position or results of operations reported as of and for the year ended December 31, 2010. The following table summarizes the fair value of the assets acquired and the liabilities assumed as of December 5, 2010 (in thousands).


Cash	$	6,143
Receivables		5,126
Inventories		7,428
Other current assets		1,059
Property, plant and equipment		523
Goodwill		24,059
Other intangible assets		19,200
Other noncurrent assets		2,767

Total assets	$	66,305


Accounts payable	$	1,176
Accrued liabilities		2,151
Current and deferred taxes		6,400

Total liabilities		9,727


Net assets	$	56,578

The fair value of acquired receivables was $5.1 million, with a gross contractual amount of $5.3 million. We do not expect to collect $0.2 million of the acquired receivables.

For purposes of the above allocation, we have estimated a fair value adjustment for inventory 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 used an analysis utilizing 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. None of the goodwill related to the GarrettCom acquisition is deductible for tax purposes, and is primarily attributable to expected synergies and the assembled workforce. Intangible assets related to the acquisition consisted of the following:


	Estimated Fair Value		Amortization Period
	(In thousands)		(In years)
Intangible assets subject to amortization:
Customer relationships	$	11,800		15.0
Developed technologies		3,400		4.0
Backlog		100		0.1

Total intangible assets subject to amortization		15,300

Intangible assets not subject to amortization:
Goodwill		24,059
Trademarks		3,900

Total intangible assets not subject to amortization		27,959

Total intangible assets	$	43,259

Weighted average amortization period				12.5