ACQUISITIONS

On June 1, 2017, the Company completed the acquisition of The Valspar Corporation (Valspar) at $113 per share in an all cash transaction for a total purchase price of $8.9 billion, net of divestiture proceeds of $431.0 million (Acquisition). The Acquisition expanded the Company's diversified array of brands and technologies, expanded its global platform and added new capabilities in its packaging and coil businesses. See Note 2 to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for additional information.

The preliminary allocation of the fair value of the Acquisition is summarized in the following table. Allocations are based on the acquisition method of accounting and in-process third-party valuation appraisals. The allocation of the fair value will be finalized within the allowable measurement period. There were no material purchase accounting adjustments during the first quarter of 2018.



(Millions of dollars)

Cash	$	129.1
Accounts receivable	817.5
Inventories	684.4
Indefinite-lived trademarks	775.9
Finite-lived intangible assets	5,071.8
Goodwill	5,654.4
Property, plant and equipment	841.0
All other assets	231.3
Accounts payable	(553.2		)
Long-term debt	(1,603.5		)
Deferred taxes	(2,015.3		)
All other liabilities	(1,094.0		)
Total	$	8,939.4
Total, net of cash	$	8,810.3

Finite-lived intangible assets include customer relationships of $3.3 billion and intellectual property and technology of $1.8 billion, which are being amortized over weighted average amortization periods ranging from 15 to 20 years. Based on the preliminary purchase accounting, goodwill of $2.3 billion, $1.9 billion and $1.5 billion was recorded in The Americas Group, Performance Coatings Group and Consumer Brands Group, respectively, and relates primarily to expected synergies.

The Company's Net sales and Net income for the three months ended March 31, 2018 included sales of $1.067 billion and a profit before tax of $80.7 million related to the Acquisition. Net income for the three months ended March 31, 2018 included Acquisition-related costs and purchase accounting amortization impacts of $119.8 million and Acquisition-related interest expense of $68.6 million. Net income for the three months ended March 31, 2017 included Acquisition-related costs and Acquisition-related interest expense of $8.0 million and $5.0 million, respectively.

The following pro forma information presents consolidated financial information as if Valspar had been acquired at the beginning of 2017. Pro forma adjustments have been made to exclude Valspar's divested North American industrial wood coatings business results and certain transaction and integration costs from all periods presented. Interest expense has been adjusted as though total debt related to the Acquisition had been outstanding at January 1, 2017. Amortization of acquired intangibles and fixed asset step-ups has been adjusted as though the amortization period started January 1, 2017. The $54.9 million amortization of inventory cost increases resulting from the preliminary purchase accounting has been included in 2017 to reflect the pro forma transaction date of January 1, 2017. The unaudited pro forma consolidated financial information does not necessarily reflect the actual results that would have occurred had the Acquisition taken place on January 1, 2017, nor is it meant to be indicative of future results of operations of the combined companies under the ownership and operation of the Company.



(Thousands of dollars except per share data)	Three Months Ended March 31,
	2018		2017
Net sales	$	3,965,006	$	3,708,528
Net income	280,110		124,536
Net income per common share:
Basic	$	3.00	$	1.35
Diluted	$	2.93	$	1.32