Business Acquisitions

6 Months Ended

Oct. 31, 2016

Business Acquisitions

Business Acquisitions

2. Business Acquisitions

The Company operates in a highly fragmented industry. A key component of the Company’s strategy is growth through acquisition that expands its geographic coverage, provides complementary lines of business and increases its market share.

The Company has accounted for all business combinations using the purchase method, in accordance with ASC 805, to record a new cost basis for the assets acquired and liabilities assumed. The Company recorded, based on preliminary purchase price allocations, intangible assets representing client relationships, tradenames, and excess of purchase price over the estimated fair value of the tangible assets acquired and liabilities assumed as “Goodwill” in the accompanying Condensed Consolidated Financial Statements. The goodwill is attributable to synergies achieved through the streamlining of operations combined with improved margins attainable through increased market presence. The results of operations of these acquisitions are reflected in the Condensed Consolidated Financial Statements of the Company from the date of acquisition.

(a)          2017 Acquisitions

In the six months ended October 31, 2016, the Company completed the following acquisitions, with an aggregate purchase price of $144,079, comprised of $139,171 net of cash consideration and $4,908 of contingent consideration, subject to finalization of working capital settlement amounts. These acquisitions increased net sales by $32,425 and operating income by $1,615 for the six months ended October 31, 2016.

Company name	Form of acquisition	Date of acquisition
Wall & Ceiling Supply Co., Inc.	Purchase of net assets	May 2, 2016
Rockwise, LLC	Purchase of net assets	July 5, 2016
Steven F. Kempf Building Materials, Inc.	Purchase of net assets	August 29, 2016
Olympia Building Supplies, LLC/Redmill, Inc.	Purchase of 100% of outstanding common stock	September 1, 2016
United Building Materials, Inc.	Purchase of net assets	October 3, 2016
Ryan Building Materials, Inc.	Purchase of net assets	October 31, 2016

The preliminary allocation of purchase consideration for these acquisitions is summarized as follows:

	Preliminary
	purchase price
	allocation
	October 31, 2016
Cash and cash equivalents	$	1,554
Trade accounts and notes receivable		34,364
Inventories		13,125
Property and equipment		8,305
Other assets		489
Tradenames		8,900
Customer relationships		61,400
Goodwill		37,685
Deferred tax liability		(5,898)
Liabilities assumed		(15,845)
Purchase price	$	144,079

Goodwill of $23,919 and other intangible assets of $49,700 are expected to be deductible for U.S. federal income tax purposes. Goodwill of $13,766 and other intangible assets of $20,600 are expected to be nondeductible for U.S. federal income tax purposes. The Company believes that the information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed but the Company is waiting for additional information necessary to finalize those fair values. Thus, the provisional measurements of fair value set forth above are preliminary. Such changes are not expected to be significant. The Company expects to complete the purchase price allocation as soon as practicable but no later than one year from the applicable acquisition date. The pro forma impact of these acquisitions is not presented as it is not considered material to our Condensed Consolidated Financial Statements.

(b)          2016 Acquisitions

In fiscal 2016, the Company completed the following acquisitions, with an aggregate purchase price of $117,253, comprised of $113,801 net of cash consideration and $3,452 of contingent consideration, subject to the finalization of working capital settlement amounts. These acquisitions increased net sales by $112,329 and operating income by $3,870 for the six months ended October 31, 2016

Company name	Form of acquisition	Date of acquisition
Tri-Cities Drywall & Supply Co.	Purchase of net assets	September 29, 2015
Badgerland Supply, Inc.	Purchase of net assets	November 2, 2015
Hathaway & Sons, Inc.	Purchase of net assets	November 9, 2015
Gypsum Supply Company	Purchase of 100% of outstanding common stock	January 1, 2016
Robert N. Karpp Co., Inc.	Purchase of net assets	February 1, 2016
Professional Handling & Distribution, Inc.	Purchase of net assets	February 1, 2016
M.R. Lee Building Materials, Inc.	Purchase of net assets	April 4, 2016

The preliminary allocation of purchase consideration for these acquisitions is summarized as follows:

	Preliminary				Preliminary
	purchase price				purchase price
	allocation		Adjustments/		allocation
	April 30, 2016		Reclassifications		October 31, 2016
Cash and cash equivalents	$	956	$	—	$	956
Trade accounts and notes receivable		26,707		322		27,029
Inventories		17,543		—		17,543
Property and equipment		9,236		—		9,236
Other assets		809		1		810
Tradenames		12,500		—		12,500
Below market leases		2,020		—		2,020
Customer relationships		29,055		—		29,055
Goodwill		38,833		(256)		38,577
Deferred tax liability		(6,676)		—		(6,676)
Liabilities assumed		(13,804)		7		(13,797)
Purchase price	$	117,179	$	74	$	117,253

During the first six months of fiscal 2017, the Company recorded adjustments to working capital resulting in a decrease in total consideration paid of $74. Goodwill of $13,515 and other intangible assets of $26,335 are expected to be deductible for U.S. federal income tax purposes. Goodwill of $25,062 and other intangible assets of $17,240 are expected to be nondeductible for U.S. federal income tax purposes. The Company believes that the information gathered to date provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed but the Company is waiting for additional information necessary to finalize the fair values of these acquisitions, all of which occurred after October 31, 2015. Thus, the provisional measurements of fair value set forth above are preliminary for these acquisitions. Such changes are not expected to be significant. The Company expects to complete the purchase price allocation for these acquisitions as soon as practicable but no later than one year from the applicable acquisition date. The pro forma impact of these acquisitions is not presented as it is not considered material to our Condensed Consolidated Financial Statements.