4. Acquisitions

On April 1, 2017, we acquired all of the issued and outstanding stock of BCH Holdings, Inc. and each of its wholly-owned subsidiaries (collectively “BCH”). BCH is an integrated, single-source provider of mechanical service, maintenance and construction with headquarters in Tampa, Florida and operations throughout the southeastern region of the United States, which reports as a separate operating location.

The following summarizes the acquisition date fair value of consideration transferred and identifiable assets acquired and liabilities assumed, including an amount for goodwill (in thousands):


Cash and cash equivalents	$	9,613
Receivables		28,263
Costs and estimated earnings in excess of billings		1,690
Other current assets		708
Property and equipment		3,927
Goodwill		50,512
Identifiable intangible assets		46,500
Accounts payable and other current liabilities		(11,763)
Billings in excess of costs and estimated earnings		(8,039)
Other non-current liabilities		(104)
Total purchase price	$	121,307

The total purchase price was $121.3 million, including $95.4 million in cash, $14.3 million in notes payable to former owners and an $11.6 million contingent earn-out obligation. Our consolidated balance sheet includes preliminary allocations of the purchase price to the assets acquired and liabilities assumed pending the completion of the final valuation of intangible assets and accrued liabilities.

The contingent earn-out obligation is based upon exceeding specified earnings milestones each year during a four-year period. We determined the initial fair value of the contingent earn-out obligation based on a Monte Carlo simulation model which represents a Level 3 measurement. We measure the contingent earn-out obligation at fair value each reporting period and changes in the estimated fair value of the contingent payments are recognized in earnings.

Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. All of the goodwill recognized as a result of this transaction is tax deductible.

The acquired assets include the following (in thousands):


	Valuation	Estimated	Estimated
	Method	Amortization Life	Value
Customer relationships	Excess Earnings	10 years	$	36,500
Backlog	Excess Earnings	1 year		6,300
Tradenames	Relief-from-royalty	25 years		3,700
Total acquired intangible assets			$	46,500

In estimating the fair value of the acquired intangible assets, we utilized the valuation methodology determined to be the most appropriate for the individual intangible asset. In order to estimate the fair value of the backlog and customer relationships, we utilized an excess earnings methodology, which consisted of the projected cash flows attributable to these assets discounted to present value using a risk-adjusted discount rate that represented the required rate of return. The tradename value was determined based on the relief-from-royalty method, which applies a royalty rate to the revenue stream attributable to this asset and the resulting royalty payment is tax effected and discounted to present value. Some of the more significant estimates and assumptions inherent in determining the fair value of the identifiable intangible assets are associated with forecasting cash flows and profitability, which represent Level 3 inputs. The primary assumptions used were generally based upon the present value of anticipated cash flows discounted at rates ranging from 13%-18%. Estimated years of projected earnings generally follow the range of estimated remaining useful lives for each intangible asset class.

Other Acquisitions

We completed two acquisitions in the first quarter of 2016. We acquired the remaining 40% noncontrolling interest in Environmental Air Systems, LLC (“EAS”) on January 1, 2016 for $46.6 million, including $42.0 million funded on the closing date plus a holdback, an earn-out that will be earned if certain financial targets are met after the acquisition date and a working capital adjustment. Due to our majority ownership and control over EAS on the acquisition date, the difference between the purchase price and the noncontrolling interest liability was recorded in Additional Paid-In Capital in our Balance Sheet.

Additionally in the first quarter of 2016, we acquired 100% of the ShoffnerKalthoff family of companies (collectively, “Shoffner”), which reports as a separate operating location in the Knoxville, Tennessee area. The acquisition date fair value of consideration transferred for this acquisition was $19.8 million, of which $14.8 million was allocated to goodwill and identifiable intangible assets. The purchase price included $15.5 million funded on the closing date plus a note payable to former owners, an earn-out that we will pay if certain financial targets are met after the acquisition date and a working capital adjustment.

We completed various other acquisitions in 2017 and 2016 which were not material, individually or in the aggregate, and were “tucked-in” with existing operations. The total purchase price for the “tucked-in” acquisitions, including earn-outs, was $9.4 million in 2017 and $0.1 million in 2016.

The results of operations of acquisitions are included in our consolidated financial statements from their respective acquisition dates. The acquisitions completed in the current and prior year were not material, individually or in the aggregate. Additional contingent purchase price (“earn-out”) has been or will be paid if certain acquisitions achieve predetermined profitability targets. Such earn-outs are not subject to the continued employment of the sellers.