Acquisitions

12 Months Ended

Dec. 31, 2019

In March 2019, we acquired VPI Quality Windows, Inc (“VPI”). VPI is a leading manufacturer of vinyl windows, specializing in customized solutions for mid-rise multi-family, industrial, hospitality and commercial projects, primarily in the western U.S. VPI is located in Spokane, Washington and is a part of our North America segment.

The preliminary fair values of the assets and liabilities acquired of this acquisition are summarized below:



(amounts in thousands)	Preliminary Allocation		Measurement Period Adjustment			Revised Preliminary Allocation
Fair value of identifiable assets and liabilities:
Accounts receivable	$	11,417	$	(420	)	$	10,997
Inventories	2,555		(141		)	2,414
Other current assets	261		40			301
Property and equipment	3,166		176			3,342
Identifiable intangible assets	17,702		5,735			23,437
Operating lease assets	3,739		—			3,739
Goodwill	26,553		(3,053		)	23,500
Other assets	10		—			10
Total assets	$	65,403	$	2,337		$	67,740
Accounts payable	2,629		—			2,629
Other current liabilities	1,875		522			2,397
Operating lease liability	3,413		—			3,413
Other liabilities	—		1,502			1,502
Total liabilities	$	7,917	$	2,024		$	9,941
Purchase price:
Cash consideration, net of cash acquired	$	57,486	$	313		$	57,799

The revised preliminary goodwill of $23.5 million, calculated as the excess of the purchase price over the fair value of net assets, represents operational efficiencies and sales synergies, and the full amount is expected to be tax-deductible. The intangible assets include customer relationships and tradenames and will be amortized over an estimated weighted average amortization period of 8 years. Total 2019 net revenues and net loss, excluding retention bonuses disclosed below, relating to VPI since the date of acquisition were $46.6 million and $0.8 million, respectively.

Acquisition-related costs are expensed as incurred and are included in selling, general and administrative expense in our accompanying consolidated statements of operations. We incurred acquisition-related costs of $0.4 million during the year ended December 31, 2019. Prior to our purchase of VPI, certain employees held employment agreements including retention bonuses with service requirements extending into the post-acquisition period. As agreed with the former owners, the retention bonuses were prepaid at the acquisition date and any repayments of the retention bonuses under the terms of the employment agreements will accrue to the benefit of the former owners. The cash used to pay the retention bonuses was excluded from our determination of purchase price. In 2019, we expensed the post-acquisition value of these retention bonuses as acquisition-related cost totaling $7.1 million, which are included in SG&A expense in our consolidated statements of operations for the year ended December 31, 2019.

During 2018, we completed four acquisitions. The fair values of the assets and liabilities acquired of the completed acquisitions are summarized below:



(amounts in thousands)	Preliminary Allocation			Measurement Period Adjustment			Final Allocation
Fair value of identifiable assets and liabilities:
Accounts receivable	$	58,714		$	(2,079	)	$	56,635
Inventories	97,305			(8,069		)	89,236
Other current assets	14,910			(6,137		)	8,773
Property and equipment	53,128			26,170			79,298
Identifiable intangible assets	70,057			(1,363		)	68,694
Goodwill	64,950			(4,330		)	60,620
Other assets	7,283			(3,528		)	3,755
Total assets	$	366,347		$	664		$	367,011
Accounts payable	29,512			(6,097		)	23,415
Current maturities of long-term debt	17,278			803			18,081
Other current liabilities	27,595			4,496			32,091
Long-term debt	47,369			5,129			52,498
Other liabilities	17,551			(2,353		)	15,198
Total liabilities	$	139,305		$	1,978		$	141,283
Purchase price:
Cash consideration, net of cash acquired	$	169,002		$	(1,314	)	$	167,688
Contingent consideration	3,898			—			3,898
Gain on previously held shares	20,767			—			20,767
Existing investment in acquired entity	33,483			—			33,483
Non-cash consideration related to acquired intercompany balances	(108		)	—			(108		)
Total consideration, net of cash acquired	$	227,042		$	(1,314	)	$	225,728

Goodwill of $60.6 million, calculated as the excess of the purchase price over the fair value of net assets, represents operational efficiencies and sales synergies, and no amount is expected to be tax-deductible. The intangible assets include customer relationships, tradenames, patents and software and will be amortized over a weighted average amortization period of 16 years. Acquisition-related costs of $8.1 million were expensed as incurred and are included in SG&A expense in our accompanying consolidated statements of operations for the year ended December 31, 2018. The purchase price allocation was considered complete for the Domoferm, A&L, ABS and D&K acquisitions as of March 30, 2019.

The contingent consideration relating to the A&L acquisition was based on underlying business performance through June 2018 and was paid in the third quarter of 2018 in the amount of $3.7 million. The gain on previously held shares relates to the remeasurement of our existing 50% ownership interest to fair value for one of the recent acquisitions.

During the second and third quarters of 2017, we completed three acquisitions for total consideration of approximately $131.7 million, net of cash acquired, with $46.7 million of the purchase price allocated to intangible assets. The intangible assets included tradenames, software, and customer relationships and are being amortized over an estimated weighted average amortization period of 18 years. Goodwill is the excess of the purchase price over the fair value of net assets acquired in business combinations and was $25.1 million for these acquisitions with $14.2 million expected to be tax-deductible. There were $1.8 million of acquisition-related costs included in SG&A expense in the accompanying consolidated statements of operations for the year ended December 31, 2017. In 2017, the measurement period adjustment reduced the preliminary allocation of goodwill by $23.6 million and increased the preliminary allocation of property and equipment, intangible assets, and cash consideration, net of cash acquired by $16.7 million, $16.3 million and $7.7 million, respectively, with the remaining preliminary allocation changes related to other working capital accounts. In 2018, the measurement period adjustment increased the preliminary allocation of goodwill by $0.9 million with the offset primarily to working capital accounts. The purchase price allocation was considered completed within the appropriate remeasurement period for all three acquisitions.

We evaluated these acquisitions quantitatively and qualitatively and determined them to be insignificant both individually and in the aggregate. Therefore, certain pro forma disclosures under ASC 805-10-50 have been omitted.

The results of the acquisitions are included in our consolidated financial statements from the date of their acquisition.