3. Acquisitions

(All references to square footage, acres and megawatts are unaudited)

Carpathia Acquisition

On June 16, 2015, the Company completed the acquisition of 100% of the outstanding stock of Carpathia Hosting, Inc. (“Carpathia”), a Virginia-based colocation, cloud and managed services provider for approximately $366.7 million (based on the preliminary assessment of the fair value of assets acquired and liabilities assumed). Upon completion of this acquisition, the Company assumed all of the assets and liabilities of Carpathia Acquisition, Inc. Carpathia Acquisition, Inc. and its subsidiaries, including Carpathia, became indirect, wholly-owned subsidiaries of the Company. Carpathia is a provider of colocation, hybrid cloud and Infrastructure-as-a-Service (IaaS) servicing enterprise customers and federal agencies, with a customer base of approximately 230 customers as of June 16, 2015. Carpathia utilizes eight domestic data centers located in Dulles, Virginia; Phoenix, Arizona; San Jose, California; Harrisonburg, Virginia and Ashburn, Virginia; and five international data centers located in Toronto, Canada; Amsterdam, Netherlands; London, United Kingdom; Hong Kong and Sydney, Australia.

The Company accounted for this acquisition in accordance with ASC 805, Business Combinations, as a business combination. The preliminary purchase price allocation was based on an assessment of the fair value of the assets acquired and liabilities assumed, and excludes acquisition-related costs which in accordance with ASC 805 were expensed as incurred. The Company is valuing the assets acquired and liabilities assumed using Level 3 inputs in valuation techniques which are consistent with those used throughout the industry.

The following table summarizes the consideration for the Carpathia acquisition and the preliminary allocation of the fair value of assets acquired and liabilities assumed at the acquisition date (in thousands). This allocation is subject to change pending the final valuation of these assets and liabilities:


	Adjusted Carpathia Allocation as of December 31, 2015	Original Allocation Reported as of June 30, 2015	Adjusted Fair Value
Land	$ 1,130	$ 1,130	$ -
Buildings and improvements	78,898	79,372	(474)
Construction in progress	12,127	12,127	-
Acquired intangibles	93,400	89,847	3,553
Net working capital	3,610	2,569	1,041
Total identifiable assets acquired	189,165	185,045	4,120

Capital lease and lease financing obligations	43,832	43,832	-
Deferred income taxes	29,934	19,766	10,168
Acquired above market lease	2,453	-	2,453
Total liabilities assumed	76,219	63,598	12,621

Net identifiable assets acquired	112,946	121,447	(8,501)
Goodwill	181,738	173,237	8,501
Net assets acquired	$ 294,684	$ 294,684	$ -

Goodwill recognized in the transaction relates primarily to anticipated operating synergies, Carpathia’s in-place workforce and access to Carpathia’s broader potential customer base. For tax purposes, QTS acquired goodwill with a tax basis of $16.6 million, which will be deductible in future periods. Based on the preliminary purchase price allocation, amortization expenses relative to the intangible assets acquired are expected to be approximately $11.0 million, $11.0 million, $8.8 million, $6.7 million and $6.7 million for the years ended December 31, 2016 through December 31, 2020, respectively.

The following table represents the pro forma condensed consolidated statements of operations of the combined entities for the years ended December 31, 2015, 2014 and 2013 (in thousands):


	(Unaudited) Pro Forma Condensed Consolidated Statements of Operations
	Year Ended December 31,
	2015	2014	2013
Revenue	$ 352,529	$ 299,906	$ 250,338
Net income	$ 28,109	$ 12,919	$ (9,592)

These amounts have been calculated after applying the Company’s accounting policies, and give effect to the Carpathia acquisition. The purchase price allocation for this acquisition has been prepared on a preliminary basis. Accordingly, the purchase accounting adjustments made in connection with the development of the unaudited pro forma consolidated statements of operations are preliminary and subject to change.

The unaudited pro forma condensed consolidated financial information is for comparative purposes only and not necessarily indicative of what actual results of operations of the Company would have been had the transactions noted above been consummated on January 1, 2013, nor does it purport to represent the results of operations for future periods.

Revenue and net income generated by Carpathia entities subsequent to the Company’s acquisition from June 16, 2015 to December 31, 2015 were $49.2 million and $2.3 million, respectively.

Duluth, Georgia Acquisition

On December 30, 2015, the Company purchased an office building in Duluth, Georgia for approximately $3.8 million, of which the Company allocated $1.9 million to land and $1.9 million to buildings and improvements on the consolidated balance sheet.