(5) Business Acquisitions and Disposition

AERCO

On December 1, 2014, the Company completed the acquisition of AERCO in a share purchase transaction. The aggregate purchase price was approximately $272.2 million and was financed from a borrowing under the Company's Credit Agreement. The purchase price includes an estimated working capital adjustment of $7.7 million and is subject to a final post-closing working capital adjustment.

AERCO is a leading provider of commercial high-efficiency boilers, water heaters and heating solutions in North America. AERCO is based in New York and its products are distributed for commercial and municipal use primarily in North America. AERCO strengthens Watts' strategic vision to expand into heat source products and strengthens the Company's solutions and system offerings.

The Company accounted for the transaction as a business combination. The Company completed a purchase price allocation that resulted in the recognition of $174.3 million in goodwill and $102.4 million in intangible assets. Intangible assets consist primarily of customer relationships valued at $78.5 million with estimated lives of 16 years, developed technology valued at $15.8 million with estimated lives of 10 years and trade name valued at $7.4 million with a 20 year life. The goodwill is attributable to the workforce of AERCO and the strategic platform adjacency that will allow Watts to extend its product offerings as a result of the acquisition. Approximately $19.4 million of the goodwill is deductible for tax purposes. The following table summarizes the value of the assets and liabilities acquired (in millions):

Accounts receivable	$	16.7
Inventory		16.4
Fixed assets		7.6
Deferred tax assets		8.0
Other assets		7.6
Intangible assets		102.4
Goodwill		174.3
Accounts payable		(6.7	)
Accrued expenses and other		(18.1	)
Deferred tax liability		(36.0	)

Purchase price	$	272.2

The consolidated statement of operations for the year ended December 31, 2014 includes the results of AERCO since the acquisition date and includes $5.3 million of revenues and $(1.4) million of operating loss, which includes acquisition accounting charges of $0.8 million.

Supplemental pro-forma information (unaudited)

Had the Company completed the acquisition of AERCO at the beginning of 2013, net sales, net income from continuing operations and earnings per share from continuing operations would have been as follows:

	Years Ended
Amounts in millions (except per share information)	December 31, 2014		December 31, 2013
Net sales	$	1,610.1	$	1,562.8
Net income from continuing operations	$	59.7	$	63.4
Net income per share:
Basic EPS—continuing operations	$	1.69	$	1.79
Diluted EPS—continuing operations	$	1.69	$	1.78

Net income from continuing operations for the years ended December 31, 2014 and December 31, 2013 was adjusted to include $3.1 million and $3.3 million, respectively, of net interest expense related to the financing and $3.9 million and $4.3 million, respectively, of net amortization expense resulting from the estimated allocation of purchase price to amortizable tangible and intangible assets. Net income from continuing operations for the year ended December 31, 2014 was also adjusted to exclude $3.3 million of net acquisition-related charges and third-party costs.

tekmar

On January 31, 2012, the Company completed the acquisition of tekmar in a share purchase transaction. A designer and manufacturer of control systems used in heating, ventilation, and air conditioning applications, tekmar enhances the Company's hydronic systems product offerings in the U.S. and Canada and is part of the Americas segment. The initial purchase price paid was equal to approximately $17.8 million and a contingent liability of $5.1 million was recognized as the estimate of the acquisition date fair value of the earn-out. The Company accounted for the transaction as a business combination. The Company completed a purchase price allocation that resulted in the recognition of $11.7 million in goodwill and $10.1 million in intangible assets. Intangible assets consist primarily of acquired technology with an estimated life of 10 years, distributor relationships with an estimated life of 7 years, and a trade name with an estimated life of 20 years. The goodwill is not deductible for tax purposes. The results of tekmar are not material to the Company's consolidated financial statements. The results of operations for tekmar are included in the Company's Americas segment since acquisition date.

A portion of the contingent consideration was paid during 2014 and 2013, in the amount of $2.2 million and $1.2 million, respectively, based on performance metrics achieved in 2013 and 2012. The contingent liability was increased by $0.5 million and $1.0 million during the years ended December 31, 2014 and 2013, respectively, based on performance metrics achieved or expected to be achieved. The final payment based on 2014 performance will be made in 2015.