Note 5. Business Combination

On February 1, 2019, two subsidiaries of the Company, MSC IndustrialSupply, S. de R.L. de C.V. and MSC Import Export LLC (together, “MSC Mexico”) completed the acquisition of certain assets of TAC Insumos Industriales, S. de R.L. de C.V. and certain of its affiliates (together, “TAC”). The Company holds a 75% interest in each of the MSC Mexico entities. The acquisition provides the Company with the opportunity to further expand its business throughout North America. The portion of the consideration attributable to the Company is $13,911, which includes the Company’s portion of a post-closing working capital adjustment in the amount of $2,286 that is payable to TAC in December 2019 and is subject to finalization. Total cash consideration funded by the Company came from available cash resources and borrowings under its revolving credit facilities (see Note 8 “Debt and Capital Lease Obligations”). The Company also loaned the noncontrolling interest owner $2,850 to fund a portion of its initial capital contributions to MSC Mexico.

The acquisition was accounted for as a business acquisition pursuant to ASC Topic 805, “Business Combinations” (“ASC 805”). As required by ASC 805, the Company allocated the consideration to assets and liabilities based on their estimated fair value at the acquisition date. The Company’s acquisition accounting as of March 2, 2019 is preliminary primarily due to the pending final valuation and any additional working capital adjustments to the purchase price. The following table summarizes the amounts of identified assets acquired based on the estimated fair value at the acquisition date:



Inventories	$	9,476
Identifiable intangibles		6,200
Goodwill		2,872
Total Assets Acquired	$	18,548
Less: Fair Value of Noncontrolling Interest		(4,637)
Total MSC Industrial Purchase Price Consideration	$	13,911

Acquired intangible assets with a fair value of $6,200 consisted of customer relationships with a useful life of 9 years. The goodwill amount of $2,872 represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired and noncontrolling interest. The primary items that generated the goodwill were the premiums paid by the Company for the right to control the acquisition of certain assets and benefit from adding a platform to expand the Company’s footprint in Mexico. This goodwill will not be amortized and will be included in the Company’s periodic test for impairment at least annually. Goodwill is deductible for tax purposes. The fair value of the noncontrolling interest was determined utilizing the market approach and consideration of the overall business enterprise value. The amount of revenue and income before provision for income taxes from MSC Mexico included in the condensed consolidated statements of income was $2,941 and $31, respectively, for both the thirteen and twenty-six-week periods ended March 2, 2019. In addition, the Company incurred non-recurring transaction and integration costs relating to MSC Mexico totaling $158, which are included in the Company’s condensed consolidated statement of income as operating expenses for the thirteen and twenty-six-week periods ended March 2, 2019.