On June 14, 2018, we acquired the remaining 50% ownership interest in WJH for $37.5 million, whereby WJH became a 100% owned subsidiary of the Company. We initially acquired a 50% ownership interest in WJH in November 2016 as part of a joint venture, which was accounted for under the equity method of accounting. Our Wade Jurney Homes brand targets first time homebuyers in markets which are traditionally underserved by new homebuilders, primarily sells homes through retail studios and the internet, and provides no option or upgrade selections. The acquired assets primarily include homes under construction that are in various stages of completion and are geographically dispersed. We determined that the fair value of the gross assets acquired was not concentrated in a single identifiable asset or group of similar identifiable assets. As the acquired assets and processes have the ability to create outputs in the form of revenue from the sale of single-family residences, we concluded that the acquisition represents a business combination. We incurred $0.4 million in acquisition costs.

Authoritative guidance on accounting for business combinations requires that an acquirer re-measure its previously held equity interest in the acquisition at its acquisition date fair value and recognize the resulting gain or loss in earnings. As such, we valued our previously held equity interest in WJH at June 14, 2018 at $35.6 million, which was inclusive of an estimated discount for lack of control of $1.9 million, and recognized a gain of $7.2 million during the nine months ended September 30, 2018.

The following table outlines the total consideration transferred, inclusive of cash acquired and the fair value of our previously held equity interest (in thousands):


Cash consideration transferred for 50% ownership interest	$	37,500
Previously held equity interest acquisition date fair value		35,625
Net assets acquired	$	73,125

The following table summarizes our estimates of the assets acquired and liabilities assumed as of the acquisition date (in thousands):


Cash and cash equivalents	$	9,464
Cash held in escrow		260
Accounts receivable		1,042
Inventories		156,828
Prepaid expenses and other assets		7,710
Amortizable intangible assets, net		3,600
Goodwill		3,317
	$	182,221

Accounts payable	$	12,516
Accrued expenses and other liabilities		2,349
Total senior notes and revolving line of credit		94,231
Total liabilities		109,096
Fair value of assets acquired	$	73,125

Acquired inventories consist primarily of work in process inventories. We estimated the fair value of acquired work in process inventories based upon the stage of production of each unit and a gross margin that we believe a market participant would require to complete the remaining development and requisite selling efforts. The stage of production, as of the acquisition date, ranged from recently started lots to fully completed single family residences. Amortizable intangible assets include acquired trade names and a non-compete agreement, which were estimated to have fair values of $3.3 million and $0.3 million, respectively, and are amortized over 10 years and 2 years, respectively.

The Company determined that WJH’s carrying costs approximated fair value for all other acquired assets and assumed liabilities.

Pro forma revenue and income before tax expense for the nine months ended September 30, 2018 give effect to the results of the acquisition of WJH. The effect of the WJH acquisition is reflected as though the acquisition date was as of January 1, 2018. Unaudited pro forma income before tax expense adjusts the operating results of WJH to reflect the additional costs that would have been recorded assuming the fair value adjustments had been applied as of the beginning of the year preceding the year of the acquisition and excludes acquisition expense incurred related to the transactions.


	Nine Months Ended September 30, 2018
Total revenues	$	1,645,858

Income before tax expense	$	87,092
Income tax expense		(21,773)
Net income	$	65,319
Less: Undistributed earnings allocated to participating securities		(54)
Numerator for basic and diluted pro forma EPS	$	65,265

Pro forma weighted average shares-basic		29,885,858
Pro forma weighted average shares-diluted		30,189,058

Pro forma basic EPS	$	2.18
Pro forma diluted EPS	$	2.16