Business Acquisitions

9 Months Ended

Jan. 31, 2017

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 nine months ended January 31, 2017, the Company completed the following acquisitions, with an aggregate purchase price of $151,186, comprised of $145,248 of cash consideration and $5,938 of contingent consideration, subject to finalization of working capital settlement amounts.

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
Interior Products Supply	Purchase of net assets	December 5, 2016

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

	Preliminary
	purchase price
	allocation
	January 31, 2017
Cash and cash equivalents	$	1,555
Trade accounts and notes receivable		35,681
Inventories		13,961
Property and equipment		8,615
Other assets		613
Tradenames		9,490
Customer relationships		63,310
Goodwill		39,903
Deferred tax liability		(5,898)
Liabilities assumed		(16,044)
Purchase price	$	151,186

Goodwill of $25,795 and other intangible assets of $52,200 are expected to be deductible for U.S. federal income tax purposes. Goodwill of $14,108 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 Consolidated Financial Statements.

(b)          2016 Acquisitions

In fiscal 2016, the Company completed the following acquisitions, with an aggregate purchase price of $117,233, comprised of $113,801 of cash consideration and $3,432 of contingent consideration, subject to the finalization of working capital settlement amounts. The pro forma impact of these acquisitions is not presented as it is not considered material to our Consolidated Financial Statements.

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		January 31, 2017
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		(276)		38,557
Deferred tax liability		(6,676)		—		(6,676)
Liabilities assumed		(13,804)		7		(13,797)
Purchase price	$	117,179	$	54	$	117,233

During the first nine months of fiscal 2017, the Company recorded adjustments to working capital resulting in a decrease in total consideration paid of $54. 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 $25,042 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 acquisitions for which final working capital settlements have not been determined. The additional information necessary is that which will result from final working capital settlements; 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.