Acquisitions

Crystal Rock Acquisition

On March 21, 2018, the Company, through its wholly owned subsidiary, CR Merger Sub, Inc. (“Purchaser”), completed a cash tender offer for all outstanding shares of common stock of Crystal Rock Holdings, Inc., a direct-to-consumer home and office water, coffee and filtration business serving customers throughout New York and New England (“Crystal Rock”). On March 23, 2018 (“Crystal Rock Acquisition Date”), the Purchaser merged with and into Crystal Rock, with Crystal Rock becoming a wholly-owned indirect subsidiary of the Company (the “Crystal Rock Acquisition”). The aggregate consideration was approximately $37.7 million and includes the purchase price paid by the Company to the Crystal Rock shareholders of $20.7 million, $0.8 million in costs paid on behalf of the sellers for the seller’s transaction costs and $16.2 million of assumed debt and accrued interest obligations of the acquired company that was paid by the Company.

The total purchase price paid by Cott in the Crystal Rock Acquisition is summarized below:



(in millions of U.S. dollars)
Cash paid to sellers	$	20.7
Cash paid on behalf of sellers for sellers’ transaction expenses	0.8
Total consideration	$	21.5

The Crystal Rock Acquisition strengthens the Company’s presence in New York and New England. The Company has accounted for this transaction as a business combination.

The purchase price of $21.5 million, net of debt, was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the Crystal Rock Acquisition Date. Measurement period adjustments recorded during the six months ended June 30, 2018 primarily included adjustments to deferred taxes and other long-term liabilities based on a preliminary analysis of certain tax positions, as well as accounts payable and accrued liabilities based on review of liabilities and other accrued expenses existing on the Crystal Rock Acquisition Date. The measurement period adjustments did not have a material effect on our results of operations in prior periods.

The table below summarizes the originally reported estimated acquisition date fair values, measurement period adjustments recorded and the adjusted purchase price allocation of the assets acquired and liabilities assumed:



(in millions of U.S. dollars)	Originally Reported			Measurement Period Adjustments			Acquired Value
Cash	$	1.6		$	—		$	1.6
Accounts receivable	6.5			0.1			6.6
Inventory	2.3			(0.1		)	2.2
Prepaid expenses and other assets	1.2			(0.5		)	0.7
Property, plant and equipment	9.4			(0.1		)	9.3
Goodwill	16.7			(1.3		)	15.4
Intangible assets	13.3			—			13.3
Other assets	0.8			—			0.8
Short-term borrowings	(4.1		)	—			(4.1		)
Current maturities of long-term debt	(1.6		)	—			(1.6		)
Accounts payable and accrued liabilities	(5.2		)	(1.0		)	(6.2		)
Long-term debt	(10.4		)	—			(10.4		)
Deferred tax liabilities	(6.5		)	3.8			(2.7		)
Other long-term liabilities	(2.5		)	(0.9		)	(3.4		)
Total	$	21.5		$	—		$	21.5

The assets and liabilities acquired with the Crystal Rock Acquisition are recorded at their estimated fair values per management’s estimates and are subject to change when formal valuations and other studies are finalized. The fair values of acquired property, plant and equipment, customer relationships, and deferred taxes are provisional pending validation and receipt of the final valuations for those assets. In addition, consideration for potential loss contingencies, including uncertain tax positions, are still under review.

The amount of revenues related to the Crystal Rock Acquisition included in the Company’s Consolidated Statement of Operations for the period from the Crystal Rock Acquisition Date through June 30, 2018 was $15.8 million. During the six months ended June 30, 2018, the Company incurred $1.4 million of acquisition-related costs associated with the Crystal Rock Acquisition, which are included within acquisition and integration expenses in the Consolidated Statement of Operations. During the second quarter of 2018, Crystal Rock was integrated within our DSS business, therefore it is impracticable to determine the amount of net income related to the Crystal Rock Acquisition included in the Company's Statement of Operations for the period from the Crystal Rock Acquisition Date through June 30, 2018.

Intangible Assets

In our preliminary determination of the fair value of the intangible assets, we considered, among other factors, the best use of acquired assets, analysis of historic financial performance and estimates of future performance of Crystal Rock’s products. The estimated fair values of identified intangible assets were calculated considering market participant expectations and using an income approach and estimates and assumptions provided by management. The following table sets forth the components of identified intangible assets associated with the Crystal Rock Acquisition and their estimated weighted average useful lives:



(in millions of U.S. dollars)	Estimated Fair Market Value		Estimated Useful Life
Customer relationships	$	9.4	11 years
Trademarks and trade names	3.9		Indefinite
Total	$	13.3

Customer relationships represent future projected revenue that will be derived from sales to existing customers of Crystal Rock.

Trademark and trade names represent the future projected cost savings associated with the premium and brand image obtained as a result of owning the trademark or trade name rather than through a royalty or rental fee.

Goodwill

The principal factor that resulted in recognition of goodwill was that the purchase price for the Crystal Rock Acquisition was based in part on cash flow projections assuming the reduction of administrative costs and the integration of acquired customers and products into our operations, which is of greater value than on a standalone basis. The goodwill recognized as part of the Crystal Rock Acquisition was allocated to the Route Based Services reporting segment, none of which is expected to be tax deductible.