Acquisition

On July 10, 2017, the Company completed the acquisition of substantially all of the assets of Farner-Bocken Company ("Farner-Bocken"), a regional convenience wholesaler headquartered in Carroll, Iowa. The acquisition increased the Company’s market presence primarily in the Midwestern U.S. and will further enhance the Company’s ability to cost effectively service national and regional retailers. The acquisition was accounted for as a business combination in accordance with ASC 805 - Business Combinations. The total purchase consideration was approximately $174.0 million, of which, $169.0 million was paid at closing. The remaining $5.0 million indemnity holdback will be released in annual installments over two years from the date of the agreement, less amounts related to indemnification claims made pursuant to the purchase agreement, if any. The acquisition was funded through borrowings under the Company's revolving credit facility. As a result of the acquisition, the number of customer locations the Company services increased by approximately 4,500.

The fair values of the assets acquired and liabilities assumed were preliminarily determined using the income, cost and market approaches. The following table presents the assets acquired and liabilities assumed, based on their fair values and purchase consideration as of the acquisition date (in millions):



	July 10, 2017
Accounts receivable	$	43.2
Other receivables	0.4
Inventories	35.5
Deposits and prepayments	10.2
Property and equipment	39.5
Goodwill	43.4
Other intangible assets	20.5
Less: Capital lease liability	(16.7		)
Less: Accrued liabilities, and other	(2.0		)
Total consideration	$	174.0

The fair values are based on preliminary estimates and are subject to change as the Company obtains additional information during the measurement period (up to one year from the acquisition date). The Company determined the fair values of intangible assets acquired with the assistance of independent valuation consultants. Based on the preliminary valuation, intangible assets acquired include the following (in millions):



	Fair Value in Millions		Useful Life in Years
Customer relationships	$	17.6	10-12
Non-competition agreements	0.1		4-6
Trade names	2.8		1-2
Total Other intangible assets	$	20.5

The results of Farner-Bocken's operations have been included in the Company’s unaudited condensed consolidated interim financial statements since the date of acquisition. The Company incurred $0.3 million and $1.7 million of acquisition-related costs, which are included in selling, general and administrative expenses for the three and nine months ended September 30, 2017. Simultaneous with the closing of the acquisition, the Company executed a capital lease for a warehouse facility in Carroll, Iowa. The lease has an initial 15 year term and a capital lease obligation of $16.7 million as of September 30, 2017.

Supplemental Pro Forma Information

The following unaudited supplemental pro forma information for the three and nine months ended September 30, 2017, assumes the asset acquisition of Farner-Bocken had occurred as of January 1, 2016, giving effect on a pro forma basis to purchase accounting adjustments such as depreciation of property and equipment, amortization of intangible assets, and acquisition-related costs. The pro forma data is for informational purposes only and may not necessarily reflect the actual results of operations had the assets of Farner-Bocken been operated as part of the Company since January 1, 2016. Furthermore, the pro forma results do not intend to project the future results of operations of the Company.

The following table presents consolidated unaudited pro forma results of operations for the three and nine months ended September 30, assuming the acquisition of Farner-Bocken had occurred as of January 1, 2016 (in millions, except per share amounts):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017^[1]		2016^[1]		2017^[1]		2016^[1]
	Pro forma		Pro forma		Pro forma		Pro forma
Net sales	$	4,310.7	$	4,356.2	$	12,355.9	$	11,702.0
Net income	13.9		16.8		27.6		42.5
Basic earnings per share	$	0.30	$	0.36	$	0.60	$	0.92
Diluted earnings per share	0.30		0.36		0.59		0.91


(1)	Includes consolidated results of Farner-Bocken.