Business Acquisitions

3 Months Ended

Jul. 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 and is all attributable to our one operating reportable segment. The results of operations of these acquisitions are reflected in the Condensed Consolidated Financial Statements of the Company from the date of acquisition.

(a) Fiscal 2018 Acquisitions

In the three months ended July 31, 2017, the Company did not complete an acquisition. Subsequent to the end of the quarter, on August 1, 2017, the Company acquired ASI Building Products, LLC (“ASI”) for a total purchase price of approximately $16,500. ASI is a distributor of ceilings and other building products with three locations in Michigan.

(b) Fiscal 2017 Acquisitions

In fiscal 2017, the Company completed the following acquisitions, with an estimated aggregate purchase price of $154,043, comprised of $149,771 of cash consideration and $4,272 of consideration related to working capital settlements and contingent consideration. The pro forma impact of these acquisitions is not presented as it is not considered material to our Condensed Financial Statements.

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
Hawaii-based distribution business of Grabber Construction Products	Purchase of net assets	February 1, 2017

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

	Preliminary				Preliminary
	purchase price				purchase price
	allocation		Adjustments/		allocation
	April 30, 2017		Reclassifications		July 31, 2017
Cash and cash equivalents	$	1,558	$	—	$	1,558
Trade accounts and notes receivable		37,691		238		37,929
Inventories		16,504		—		16,504
Property and equipment		8,357		—		8,357
Other assets		657		—		657
Tradenames		9,490		—		9,490
Customer relationships		64,660		—		64,660
Goodwill		37,728		129		37,857
Deferred tax liability		(6,011)		—		(6,011)
Liabilities assumed		(16,958)		—		(16,958)
Purchase price	$	153,676	$	367	$	154,043

During the first three months of fiscal 2018, the Company recorded adjustments to working capital resulting in an increase in total consideration paid of $367. As of July 31, 2017 goodwill of $25,639 and other intangible assets of $53,550 are expected to be deductible for U.S. federal income tax purposes. Also as of July 31, 2017, goodwill of $12,218 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 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 these 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.