On February 1, 2020 (the “closing date”), we completed the acquisition of NewSouth Window Solutions LLC and NewSouth Window Solutions of Orlando LLC (together, “NewSouth”, and the “NewSouth Acquisition”), which became wholly-owned subsidiaries of PGT Innovations, Inc. The fair value of consideration transferred in the acquisition was $90.4 million. The acquisition was financed with proceeds of $53.2 million from the add-on issuance of $50.0 million in 2018 Senior Notes due 2026 (“Add-On Senior Notes”), including a premium of $3.2 million, and with $37.2 million in cash, including a post-closing adjustment owed to sellers of $0.2 million, which was paid during the third quarter of 2020, described below. See Note 9 for a discussion of the Add-On Senior Notes.

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

	Initial Allocation			Adjustments to Allocation			Preliminary Allocation
Accounts receivable	$	10,294		$	(1,639	)	$	8,655
Inventories		3,757			(698	)		3,059
Contract assets, net		4,413			—			4,413
Prepaid expenses and other assets		1,756			—			1,756
Property and equipment		7,423			10			7,433
Operating lease right-of-use asset		10,578			—			10,578
Intangible assets		28,670			(1,300	)		27,370
Goodwill		46,200			4,625			50,825
Accounts payable		(6,621	)		—			(6,621	)
Accrued and other liabilities		(5,524	)		(998	)		(6,522	)
Operating lease liability		(10,578	)		—			(10,578	)
Purchase price	$	90,368		$	—		$	90,368

Consideration:
Cash	$	90,145		$	223		$	90,368
Due to Sellers		223			(223	)		-
Total fair value of consideration	$	90,368		$	—		$	90,368

The fair value of certain working capital related items, including NewSouth’s retail accounts receivable, prepaid expenses, and accounts payable and accrued liabilities, approximated their book values at the date of the NewSouth Acquisition. Subsequent to our initial allocation, we adjusted the fair value of certain acquired commercial receivable accounts based on a further post-acquisition assessment of their collectability. The fair value of inventory was estimated by major category, at net realizable value. The substantial majority of inventories at the acquisition date was composed 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.

We incurred acquisition costs totaling $2.4 million relating to legal expenses, representations and warranties insurance, diligence, accounting and printing services in the NewSouth Acquisition, which includes $0.9 million in the nine months ended October 3, 2020, classified as selling, general and administrative expenses in the accompanying condensed consolidated statement of operations for the three and nine months ended October 3, 2020. We began incurring these costs in the fourth quarter of 2019.

The remaining consideration, after identified intangible assets and the net assets and liabilities recorded at fair value, has been determined to be $50.8 million, all of which we expected to be deductible for tax purposes. Goodwill represents the increased value of the combined entity through new direct-to-consumer sales channel opportunities, as well as NewSouth’s extensive advertising throughout Florida, and NewSouth’s market intelligence, which we expect to utilize. During the three months ended October 3, 2020, we made additional adjustments to accrued liabilities assumed in the acquisition totaling $0.9 million, relating to certain commercial contracts that existed at the acquisition date, which required additional warranty-related rework to complete and which we did not become aware of until the 2020 third quarter. We continue to assess the full extent of additional warranty-related rework required for other commercial contracts that existed at the acquisition date. As such, the calculation of the warranty reserve relating to our acquisition of NewSouth is not finalized. Other adjustments to our initial allocation recorded prior to our third quarter of 2020 primarily relate to the commercial assets acquired and liabilities assumed in the NewSouth acquisition. The adjustments included a $1.6 million decrease in acquired commercial accounts receivable, which we determined were uncollectible, a $1.3 million decrease in acquired intangible assets relating to the commercial trade name, which we have determined had no fair value at the acquisition date, $0.7 million relating to certain commercial inventories, which we determined were obsolete at the acquisition date, and an immaterial increase in liabilities assumed of $0.1 million. The net increase in goodwill relating to these adjustments since the initial allocation was $4.6 million.

The purchase agreement relating to the NewSouth Acquisition (“PA”) requires certain post-closing adjustments, under which we determined that we owe sellers an additional $0.2 million. The calculation resulted in a net increase in purchase price of $0.2 million. We paid this amount during the third quarter ended October 3, 2020.

The following unaudited pro forma financial information assumes the acquisition had occurred at the beginning of the earliest period presented that does not include NewSouth’s actual results for the entire period. Pro forma results have been prepared by adjusting our historical results to include the results of NewSouth adjusted for the following: amortization expense related to the intangible assets arising from the acquisition and interest expense to reflect the Additional Senior Notes. The unaudited pro forma results below do not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the earliest periods presented, nor does it indicate the results of operations in future periods. The unaudited pro forma results do not include the impact of synergies, nor any potential impacts on current or future market conditions which could alter the following unaudited pro forma results.

	Three Months Ended		Nine Months Ended
	September 28,		October 3,		September 28,
	2019		2020		2019
			(unaudited)
Net sales	$	219,780		668,772		633,344

Net income	$	15,619		35,351		42,181

Net income per common share:
Basic	$	0.27	$	0.60	$	0.72

Diluted	$	0.26	$	0.60	$	0.71

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

								Initial
	Initial		Adjustment to			Current		Useful Life
	Valuation		Valuation			Valuation		(in years)
(in thousands)
Trade name	$	23,500	$	(1,300	)	$	22,200	15
Non-compete agreements		1,670		—			1,670	5
Developed technology		2,600		—			2,600	6
Customer-related intangible		900		—			900	<1

Other intangible assets, net	$	28,670	$	(1,300	)	$	27,370