On October 14, 2022, we completed the acquisition of the Martin Doors brand. The acquisition was done by WWS Acquisition, LLC, a Missouri limited liability company, indirectly wholly-owned by PGT Innovations, Inc., which acquired all of the shares of stock of Martin Door Holdings, Inc., a Utah corporation, headquartered in Salt Lake City, Utah, a custom manufacturer of overhead garage doors and hardware serving the Western U.S. (the "Martin Acquisition"), pursuant to that certain Share Purchase Agreement dated as of October 14, 2022 (the “Martin Purchase Agreement”). The fair value of consideration transferred in the Martin Acquisition was $187.8 million, composed entirely of cash, including $185.0 million for purchase price and $2.8 million in estimated working capital adjustments paid at closing.

The cash portion of the Martin Acquisition of $98.4 million was financed with borrowings under the fifth amendment of our 2016 Credit Agreement due 2027, with the remaining $89.4 million fund with cash on hand. Generally, cash on hand for the Martin Acquisition was provided by cash generated through operations.

The preliminary estimated fair value of assets acquired, and liabilities assumed as of the closing date, are as follows:



	Preliminary Allocation
Accounts receivable	$	6,653
Inventories		9,543
Contract assets, net		5,242
Prepaid expenses and other assets		90
Property and equipment		11,422
Operating lease right-of-use asset		12,259
Intangible assets		91,900
Total assets acquired		137,109
Accounts payable		(2,482	)
Accrued and other liabilities		(1,270	)
Deferred tax liabilities		(23,604	)
Operating lease liability		(12,259	)
Total liabilities assumed		(39,615	)
Net assets acquired		97,494
Goodwill		90,300
Fair value of consideration transferred	$	187,794

Consideration:
Cash	$	187,794
Fair value of consideration transferred	$	187,794

The fair value of certain working capital related items, including Martin’s accounts receivable, prepaid expenses and other assets, and accounts payable and accrued and other liabilities, approximated their book values at the date of the Martin Acquisition. The fair value of inventory was estimated by major category, at net realizable value, which we believe approximates the price a market participant could achieve in a current sale. The substantial majority of inventories at the acquisition date was comprised of raw materials. The fair value of property and equipment and remaining useful lives were estimated by management, with the assistance of a third-party valuation firm, using the cost approach. Valuations of the intangible assets were done using income and royalty relief approaches based on projections provided by management, which we consider to be Level 3 inputs, with the assistance of a third-party valuations firm. Certain aspects of our intangible valuations, as well as the amount of deferred tax liabilities acquired in the Martin Acquisition are still being finalized and subject to change.

We incurred acquisition costs totaling $4.8 million relating to legal expenses, representations and warranties insurance, diligence, accounting and other services in the Martin Acquisition, classified as selling, general and administrative expenses in the accompanying consolidated statements of operations for the year ended December 31, 2022.

Because the Martin Acquisition was an acquisition of stock, Martin's assets and liabilities retain their tax bases at the time of the acquisition. Therefore, none of the identifiable intangible assets or goodwill acquired in the Martin Acquisition are deductible for tax purposes. As of December 31, 2022, goodwill is estimated to be $90.3 million. Martin's goodwill is included as part of the Western

reporting unit. We believe Martin's goodwill relates to the expansion of our footprint in a key, strategic market we have identified as a geographic area of growth for our Company, as well as being a key component of our strategy to expand into adjacent building material products, other than windows and doors.

Pro forma results of operations as well as net sales and income attributable to the Martin Acquisition are not presented as it did not have a material impact on our results of operations,

The valuation of the identifiable intangible assets acquired in the Martin Acquisition and our estimate of their respective useful lives are as follows:


			Initial
	Preliminary		Useful Life
	Valuation		(in years)
(in thousands)
Trade name	$	24,000	indefinite
Customer relationships		52,700	15
Customer-related backlog (amortized in 2022)		400	<1
Developed technology		14,600	3 - 14
Non-compete-related intangible		200	5

Intangible assets, net	$	91,900

On October 25, 2021, we completed the acquisition of Anlin Windows & Doors. The acquisition was done by Western Window Holding LLC, a Delaware limited liability company, indirectly wholly-owned by PGT Innovations, Inc., which acquired substantially all of the assets, properties and rights owned, used or held for use in the business, as operated by Anlin Industries, a California corporation, of manufacturing vinyl windows and doors for the replacement market and the new construction market, and all activities conducted in connection therewith (the "Anlin Acquisition"), pursuant to that certain Asset Purchase Agreement dated as of September 1, 2021 (the “Anlin Purchase Agreement”), by and among the Company, and Anlin Industries. The fair value of consideration transferred in the Anlin Acquisition was $121.7 million, composed of $115.0 million in cash, including $113.5 million for purchase price and $1.5 million in working capital adjustments, including $0.8 million paid during the three months ended October 1, 2022, and fair value of contingent consideration of $6.7 million, discussed in greater detail below.

The Anlin Purchase Agreement provides for the potential for earn-out contingency payments to sellers should Anlin achieve a certain level of earnings before interest, taxes, depreciation and amortization, ("Anlin EBITDA"), as defined in the Anlin Purchase Agreement, for its fiscal years of 2021 and 2022, of up to $3.2 million to be paid out by March 31, 2022, and of up to $9.5 million to be paid out by March 31, 2023, respectively. We had recorded a preliminary earn-out contingent liability of $5.9 million as of our year ended January 1, 2022, which represented its then estimated fair value based on probability adjusted levels of estimated Anlin EBITDA. Estimated Anlin EBITDA is a significant input that is not observable in the market, which ASC 820 considers to be a Level 3 input. In the first quarter of 2022, we finalized the fair value of the earn-out contingency, which we adjusted by an additional $0.8 million, to a total of $6.7 million of estimated fair value of contingent consideration as of the effective date of the Anlin Acquisition. This amount included $2.4 million for the contingent consideration relating to 2021 Anlin EBITDA and $4.3 million for the contingent consideration relating to the 2022 Anlin EBITDA.

The first contingent consideration payment was agreed to be $2.7 million, which exceeded its estimated fair value by $0.3 million. This excess is classified as selling, general and administrative expenses in the accompanying consolidated statement of operations for year ended December 31, 2022. The payment was made during the second quarter of 2022 after both parties agreed to extend the deadline for the first payment past the March 31, 2022 due date stated in the Anlin Purchase Agreement.

As of the end of 2022, we updated our estimate of the fair value of the contingent consideration relating to 2022 Anlin EBITDA, which was estimated to be $9.5 million, the maximum potential payout for fiscal year 2022 under the Anlin Purchase Agreement, which we expect to pay-out in the first quarter of 2023. As such, we recognized an expense of approximately $5.1 million, representing the difference between this updated estimated fair value, and the fair value estimated in our purchase price allocation, classified as selling, general and administrative expenses in the accompanying consolidated statement of operations for the year ended December 31, 2022.

For tax purposes, contingent consideration does not become part of tax goodwill until paid. As such, the amount of goodwill deductible for tax purposes will not be finalized until the payment of the contingent consideration for 2022 is known. As of December 31, 2022, the estimated fair value of the contingent consideration in the allocation relating to this remaining payment was $4.3 million,

and goodwill according to the current allocation of consideration is $9.6 million. As such, as of December 31, 2022, the amount of goodwill estimated to be tax deductible is the difference of $5.3 million. Anlin's goodwill is included as part of the Western reporting. We believe Anlin's goodwill relates to the expansion of our footprint in a key, strategic market we have identified as a geographic area of growth for our Company. Our estimate of the amount of tax deductible goodwill may change as the amounts of the payments of contingent consideration are finalized.