3.Acquisitions

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 as of March 29, 2015, was subject to a final post-closing working capital adjustment.

The Company accounted for the transaction as a business combination. The Company completed a preliminary 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 first quarter ended March 29, 2015 includes the results of AERCO. The results include $22.2 million of revenues and $1.2 million of operating income, respectively, which includes $0.9 million of purchase accounting charges.

Supplemental pro-forma information

Had the Company completed the acquisition of AERCO at the beginning of 2014, net sales, net income from continuing operations and earnings per share from continuing operations would have been as follows:

	First Quarter Ended
Amounts in millions (except per share information)	March 29, 2015		March 30, 2014
Net sales	$	356.2	$	383.7
Net income from continuing operations	$	12.3	$	13.3
Net income per share:
Basic EPS—continuing operations	$	0.35	$	0.38
Diluted EPS—continuing operations	$	0.35	$	0.38

Net income from continuing operations for the quarter ended March 30, 2014 was adjusted to include $0.7 million of net interest expense related to the financing and $1.1 million 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 quarter ended March 29, 2015 was also adjusted to exclude $0.7 million of net acquisition-related charges and third-party costs.