NOTE D—BUSINESS COMBINATIONS

2018 Acquisition:

On May 1, 2018, we completed the acquisition of all of the outstanding capital stock of EP Acquisition Parent, Inc., a Delaware corporation (“EPAP”), and the ultimate parent of EP Minerals, LLC ("EPM"). Contemporaneous with the merger, EPAP was renamed EP Minerals Holdings, Inc. ("EPMH"). The consideration paid consisted of $742.8 million of cash, net of cash acquired of $19.1 million, subject to customary post-closing adjustments. A portion of the cash consideration has been deposited into escrow to support the post-closing purchase price adjustment. EPM is a global producer of engineered materials derived from industrial minerals, including diatomaceous earth, clay (calcium bentonite) and perlite. EPM's industrial minerals are used as filter aids, absorbents and functional additives for a variety of industries including food and beverage, biofuels, recreational water, oil and gas, farm and home, landscape, sports turf, paint, plastics, and insecticides. The acquisition of EPM increased our industrial materials product offering in our Industrial & Specialty Products segment.

We have accounted for the acquisition of EPMH under the acquisition method of accounting in accordance with ASC 805, Business Combinations. Estimates of fair value included in the consolidated financial statements represent our best estimates and valuations. In accordance with the acquisition method of accounting, the allocation of consideration value is subject to adjustment until we complete our analysis, within a period of time not to exceed one year after the date of acquisition, or May 1, 2019, in order to provide us with the time to complete the valuation of its assets and liabilities.

The following table sets forth the preliminary allocation of the purchase price to EPMH's identifiable tangible and intangible assets acquired and liabilities assumed (in thousands):



Preliminary allocation of purchase price:	(In thousands)
Accounts receivable, net	$	43,354
Inventories	84,395
Property, plant and mine development	123,086
Mineral rights	462,050
Identifiable intangible assets - finite lived	21,050
Identifiable intangible assets - indefinite lived	25,050
Prepaids and deposits	2,054
Other assets	4,089
Goodwill	139,378
Total assets acquired	904,506
Accounts payable	13,435
Accrued expenses and other current liabilities	8,255
Deferred tax liabilities	130,209
Long term obligations	9,766
Total liabilities assumed	$	161,665
Net assets acquired	$	742,841

The acquired intangible assets and the related estimated useful lives consist of the following:



	Approximate Fair Value		Estimated Useful Life
	(in thousands)		(in years)
Technology and intellectual property	2,000		15
Customer relationships	$	19,050	15
Total identifiable intangible assets - finite lived	$	21,050

Goodwill represents the excess of the purchase price over the fair value of the underlying net assets acquired. Goodwill in this transaction is attributable to planned growth in our industrial materials product offering in our Industrial & Specialty Products segment. Intangibles and goodwill are not expected to be deductible for tax purposes.

Our Income Statement included revenue of $41.7 million and a net loss of $0.7 million for both the three and six months ended June 30, 2018, associated with EPMH following the date of acquisition. We incurred $8.8 million and $10.9 million of acquisition-related charges, excluding debt issuance costs, for the three and six months ended June 30, 2018, respectively, which are included in selling, general and administrative expenses on our Income Statement.

The acquisition of EPMH was accounted for using the acquisition method of accounting. The purchase price and purchase price allocation is subject to customary post-closing adjustments and changes in the fair value of assets and liabilities. The above estimated fair values of net assets acquired are based on the information that was available as of the reporting date. We believe that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on our continuing review of matters related to the acquisition. As a result, our final purchase price allocation may be significantly different than reflected above. We expect to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

Unaudited Pro Forma Results

The results of EPMH's operations have been included in the consolidated financial statements subsequent to the acquisition date. EPMH's fiscal year end was November 30 and the Company's fiscal year end was December 31. Under SEC regulations, if a target's fiscal year end varies by more than 93 days from the acquirer's fiscal year end, it is required to adjust interim periods until it is within 93 days. Since EPMH’s fiscal year end was within 93 days of the Company's fiscal year end, no adjustment is necessary and EPMH’s fiscal year end and interim period ends are used as if they coincided with the Company's fiscal year end and interim period end. The following unaudited pro forma consolidated financial information reflects the results of operations as if the EPMH acquisition had occurred on January 1, 2017, after giving effect to certain purchase accounting adjustments. Material non-recurring transaction costs attributable to the business combination were $15.2 million. Pro forma net income includes incremental interest expense due to the related debt financing, incremental depreciation and depletion expense related to the fair value adjustment of property, plant and mine development, amortization expense related to identifiable intangible assets, and tax expense related to the combined tax provisions. This information does not purport to be indicative of the actual results that would have occurred if the acquisition had actually been completed on the date indicated, nor is it necessarily indicative of the future operating results or the financial position of the combined company (in thousands, except per share amounts):



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Sales	$	451,566	$	341,113	$	879,493	$	629,196
Net income	$	19,693	$	13,196	$	70,539	$	8,097
Basic earnings per share	$	0.25	$	0.16	$	0.90	$	0.10
Diluted earnings per share	$	0.25	$	0.16	$	0.89	$	0.10

Basic shares	77,784		81,087		78,636		81,032
Diluted shares	78,480		81,945		79,328		82,103

2017 Acquisitions:

White Armor Acquisition:

On April 1, 2017, we completed the acquisition of White Armor, a product line of cool roof granules used in industrial roofing applications, for cash consideration of $18.6 million. The final purchase price was allocated to goodwill of approximately $3.9 million, identifiable intangible assets of $12.8 million and other net assets of approximately $1.9 million.

Goodwill in this transaction is attributable to planned growth in our specialty industrial sand segment. The goodwill amount is included in our Industrial & Specialty Products segment. Identifiable definite lived intangibles, including customer relationships, and goodwill are expected to be deductible for tax purposes.

We incurred $0.2 million of acquisition-related charges which are included in selling, general and administrative expenses during the year ended December 31, 2017. Revenue and earnings for White Armor after the acquisition date are not presented as the business was integrated into our operations subsequent to the acquisition and therefore impracticable to quantify.

MS Sand Acquisition:

On August 16, 2017, we completed the acquisition of Mississippi Sand, LLC ("MS Sand"), a Missouri limited liability company, for cash consideration of approximately $95.4 million, net of cash acquired of $2.2 million. As is normal and customary, subsequent adjustments were made including $(0.5) million to the net working capital adjustment plus an additional $6.1 million consideration paid related to a pre-existing contracted asset sale, which was entered into prior to our acquisition, for total cash consideration of $101.0 million. MS Sand is a frac sand mining and logistics company based in St. Louis, Missouri. The acquisition of MS Sand increased our regional frac sand product offering in our Oil & Gas Proppants segment.

We have accounted for the acquisition of MS Sand under the acquisition method of accounting in accordance with ASC 805, Business Combinations, and have accounted for measurement period adjustments in accordance with ASU 2015-16, Simplifying the Accounting for Measurement-Period Adjustments. Estimates of fair value included in the consolidated financial statements represent our best estimates and valuations. In accordance with the acquisition method of accounting, the allocation of consideration value is subject to adjustment until we complete our analysis, in a period of time, but not to exceed one year after the date of acquisition, or August 16, 2018, in order to provide us with the time to complete the valuation of its assets and liabilities.

The following table sets forth the current allocation of the purchase price to MS Sands' identifiable tangible and intangible assets acquired and liabilities assumed, including measurement period adjustments (in thousands):



	Estimate as of December 31, 2017		Measurement Period Adjustments			Purchase Price Allocation
Accounts receivable	$	11,201	$	—		$	11,201
Inventories	8,067		—			8,067
Other current assets	362		—			362
Assets held for sale	9,453		—			9,453
Property, plant and mine development	27,458		—			27,458
Mineral rights	26,300		(2,800		)	23,500
Other non-current assets	1,136		—			1,136
Goodwill	22,522		2,800			25,322
Customer relationships	1,840		—			1,840
Total assets acquired	108,339		—			108,339
Accounts payable and accrued expenses	3,761		—			3,761
Unfavorable leasehold positions	2,237		—			2,237
Notes Payable	866		—			866
Other long term liabilities	—		—			—
Asset retirement obligations	474		—			474
Total liabilities assumed	7,338		—			7,338
Net assets acquired	$	101,001	$	—		$	101,001

The acquired intangible assets and the related estimated useful lives consist of the following:



	Approximate Fair Value		Estimated Useful Life
	(in thousands)		(in years)
Customer relationships	$	1,840	15

Goodwill in this transaction is attributable to planned growth in our regional frac sand product offering in our Oil & Gas Proppants segment. The goodwill amount is included in our Oil & Gas Proppants segment. Identifiable definite lived intangibles, including customer relationships, and goodwill are expected to be deductible for tax purposes.

We have incurred $1.0 million to date of acquisition-related charges which are included in selling, general and administrative expenses. Revenue and earnings for MS Sand after the acquisition date are not presented as the business was integrated into our operations subsequent to the acquisition and therefore impracticable to quantify.

Both acquisitions were accounted for using the acquisition method of accounting. The purchase price and purchase price allocation for the MS Sand acquisition is preliminary and subject to customary post-closing adjustments and changes in the fair value of assets and liabilities. The above estimated fair values of net assets acquired are based on the information that was available as of the reporting date. We believe that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on our continuing review of matters related to the acquisition. As a result, our final purchase price allocation may be significantly different than reflected above. We expect to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date.

Unaudited Pro Forma Results

The results of MS Sand’s operations have been included in the consolidated financial statements subsequent to the acquisition dates. The following unaudited pro forma consolidated financial information reflects the results of operations as if the MS Sand Acquisition had occurred on January 1, 2016, after giving effect to certain purchase accounting adjustments. These adjustments mainly include incremental depreciation expense related to the fair value adjustment of property, plant, equipment and mine development, amortization expense related to identifiable intangible assets and tax expense related to the combined tax provisions. This information does not purport to be indicative of the actual results that would have occurred if the acquisition had actually been completed on the date indicated, nor is it necessarily indicative of the future operating results or the financial position of the combined company (in thousands, except per share amounts):



	For the year ended December 31,
	2017		2016
Sales	$	1,287,202	$	642,951
Net income (loss)	$	143,604	$	(55,835	)
Basic earnings (loss) per share	$	1.77	$	(0.86	)
Diluted earnings (loss) per share	$	1.75	$	(0.86	)