Note 2. Acquisition

On September 16, 2014, the company completed its acquisition of 100% of Severstal Columbus, LLC (Columbus), on a debt-free basis, for a purchase price of $1.625 billion, with additional working capital adjustments of $44.4 million. The Columbus acquisition was funded through the issuance of $1.2 billion in Senior Notes (see Note 3), borrowings under the company's senior secured credit facility, and available cash. The company purchased Columbus to significantly expand and diversify its steel operating base with the addition of 3.4 million tons of hot roll steel production capacity. The product offerings are diversified with respect to width, gauge, and strength when compared to the capabilities of our Butler Flat Roll Division. Located in northeast Mississippi, Columbus is one of the newest and most technologically advanced sheet steel electric arc furnace mills in North America, with access to non-energy related pipe and tube, OCTG and automotive markets. Additionally, Columbus is advantageously located to serve the growing markets in the southern U.S. and Mexico, providing the company with geographic diversification and growth opportunities. Columbus' operating results have been reflected in the company's financial statements since September 16, 2014, the effective date of the acquisition, in the steel operations reporting segment. Columbus reported revenues of $638.3 million and $29.8 million pretax income during the September 16, 2014, to December 31, 2014, period, which includes the effect of $26.4 million of purchase accounting related cost of goods sold expenses associated with the step-up in inventory, fixed assets, and intangible assets. In conjunction with the acquisition, the company recognized $25.2 million of acquisition and related costs that are included in other expenses in the consolidated income statement for the year ended December 31, 2014.

The aggregate purchase price was allocated to the opening balance sheet of Columbus at September 16, 2014, based on the fair value of the acquired assets, assumed liabilities, and identifiable intangible assets (in thousands):

Current assets, net of cash acquired	$	553,255
Property, plant & equipment		1,279,714
Intangible assets		15,000
Goodwill		19,682
Other assets		3,875

Total assets acquired		1,871,526

Liabilities assumed		202,077

Net assets acquired	$	1,669,449

The fair values of inventory were determined on the cost (raw materials) and market (work-in-process and finished goods) approaches, real property on the market and cost approaches, personal property on the cost approach, and identifiable intangible assets on the multi-period excess earnings method (an income approach), in each case using Level 3 inputs as provided for under ASC 820.

Goodwill and intangible assets of $19.7 million and $15.0 million, respectively, were recorded as a result of the acquisition. Goodwill recognized from the acquisition primarily relates to the expected contributions of Columbus to the overall company strategy in addition to the acquired workforce, which are not separable from goodwill. The goodwill is deductible for tax purposes. The identifiable intangible assets related to the acquisition consisted of the following (in thousands):

	Amount		Useful Life
Customer relationships	$	11,000	15 years
Backlogs		4,000	2 months

	$	15,000

The company utilizes an accelerated amortization method so as to follow the pattern in which the economic benefits of the intangible assets are anticipated to be consumed. The related aggregate amortization expense recognized for the year ended December 31, 2014, was $4.4 million; $4.0 million recognized in cost of goods sold related to order backlog, and $400,000 of amortization expense related to the customer relationships. The estimated customer relationships intangible asset amortization expense for the next five years and thereafter follows (in thousands):

2015	$	790
2016		1,038
2017		964
2018		859
2019		753
Thereafter		6,196

Total	$	10,600

Unaudited Pro Forma Results

Columbus' operating results have been reflected in the company's financial statements since the effective date of the acquisition, September 16, 2014. The following unaudited pro forma information is presented below as if the Columbus acquisition was completed as of January 1, 2013 (in thousands):

	Years Ended December 31,
	2014		2013
Net Sales	$	10,355,774	$	9,193,344
Net Income attributable to Steel Dynamics, Inc.		264,779		155,357

The information presented is for information purposes only and is not necessarily indicative of the actual results that would have occurred had the acquisition been consummated at the beginning of the respective period, nor are they necessarily indicative of future operating results of the combined companies under the ownership and management of the company. The 2014 and 2013 pro forma results reflect Columbus operations for the years ended December 31, 2014, and 2013. As the unaudited pro forma information above is presented as if the acquisition had occurred on January 1, 2013, the gross margin reduction related to the step-up in inventory of $19.7 million and backlogs of $4.0 million, and acquisition and related costs of $25.2 million is reflected in 2013, but not in 2014.