Acquisitions (Notes)

12 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

ACQUISITIONS

Acquisition of Turner

On May 30, 2018, the Company acquired all of the equity of Turner, a non-potable irrigation water utility in Mesa, Arizona, for total consideration of $2.8 million. This acquisition is consistent with the Company's declared strategy of making accretive acquisitions. At the time of acquisition, Turner had 963 residential irrigation connections and approximately seven square miles of service area. The acquisition was accounted for as a business combination under ASC 805, "Business Combinations." The purchase price was allocated to the acquired utility assets and liabilities assumed based on the seller's book value at acquisition as the historical cost of these assets and liabilities will be the amounts that will continue to be reflected in customer rates.

Final purchase price allocation of the net assets acquired in the transaction is as follows (in thousands):

Net assets acquired:
Cash	$	176
Accounts receivable	121
Gross property, plant and equipment	4,495
Construction work-in-progress	92
Accumulated depreciation	(3,554)
Accounts payable	(30)
Accrued expenses	(49)
Total net assets assumed	1,251
Goodwill	1,549
Total purchase price	$	2,800

The revenue and earnings recognized post acquisition and the pro forma effect of the business acquired are not material to the Company's financial position or results of operations.

Acquisition of Red Rock Utilities

On October 16, 2018, the Company completed the acquisition of Red Rock, an operator of a water and a wastewater utility with service areas in the Pima and Pinal counties of Arizona, for a purchase price of $5.9 million. This acquisition is consistent with the Company's declared strategy of making accretive acquisitions. The acquisition added over 1,650 connections and approximately nine square miles of service area. The acquisition was accounted for as a business combination under ASC 805, "Business Combinations." The purchase price was allocated to the acquired utility assets and liabilities assumed based on the seller's book value at acquisition as the historical cost of these assets and liabilities will be the amounts that will continue to be reflected in customer rates.

Under the terms of the purchase agreement, the Company is obligated to pay to the seller a growth premium equal to $750 for each new account established within three specified growth premium areas, commencing in each area on the date of the first meter installation and ending on the earlier of ten years after such first installation date or twenty years from the acquisition date. The three specified growth premium areas are located in Pima County, Arizona where Red Rock has not yet begun operating, and where Red Rock is authorized to provide water utility services only. As of December 31, 2019, no meters have been installed and no accounts have been established in any of the three growth premium areas. The fair value of the acquisition liability was determined based on management's estimates and assumptions regarding the probability that connection growth will be achieved during the growth premium period. Any subsequent adjustments to the fair value estimate will be recorded to earnings. Refer to Note 11 — "Fair Value" for additional information.

Final purchase price allocation of the net assets acquired in the transaction is as follows (in thousands):

Net assets acquired:
Accounts receivable	$	111
Gross property, plant and equipment	19,841
Construction work-in-progress	748
Accumulated depreciation	(6,084)
Prepaids	12
Intangibles1	196
Accounts payable	(26)
Other taxes	(14)
Other accrued liabilities	(47)
Customer and meter deposits	(76)
AIAC	(3,423)
CIAC - Net	(7,397)
Acquisition liability	(838)
Total net assets assumed	3,003
Goodwill	2,848
Total purchase price	$	5,851

¹ Intangibles consist of franchise contract rights and organization costs. Refer to Note 8 — "Goodwill & Intangible Assets" for additional information regarding the intangibles.

The revenue and earnings recognized post acquisition and the pro forma effect of the business acquired are not material to the Company's financial position or results of operations.