4. ACQUISITIONS

On October 7, 2016, we acquired all of the issued and outstanding common stock of Allied Specialty Foods, Inc. (“Allied”) for a purchase price of $62,319 (net of cash acquired of $440). The purchase price was funded entirely from cash on hand at the time of the acquisition. Allied is a manufacturer of raw and cooked beef and chicken Philly steak products. The acquisition of Allied provides us with additional sandwich component production capacity and expands our market position in the Philly steak platform by providing entry into fully-cooked product offerings, and expands our geographic reach. We expect that the acquisition will provide certain cost synergies. Allied’s customers are primarily in the Foodservice industry, and prior to the opening of its new 70,000 square foot facility in Vineland, New Jersey in 1^st Quarter 2017, such customers were being served from a 20,000 square foot manufacturing facility also located in Vineland, New Jersey that had two cook lines, three raw slicing lines and one breakaway steak line. The new 70,000 square foot facility has seven raw slicing/breakaway lines and four cook lines.

In connection with the acquisition, we performed valuations of the acquired assets and assumed liabilities. Intangible assets identified in the valuations included customer relationships, the Allied trade name and certain non-compete agreements. Fair values were derived using Level 3 inputs, as defined by ASC 820, “Fair Value Measurement” (“ASC 820”). The purchase price allocation is still preliminary, pending further information relating to a tax incentive. Such assets and liabilities include tangible and intangible assets for which fair values were determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as methods for which the determination of fair value required significant management judgment and/or estimates. Unobservable inputs were developed based on the best information available, which in some instances included our own data. Intangible assets with finite lives are being amortized over the estimated useful lives of such assets using a method that is based on estimated future cash flows.

The acquisition was recorded in accordance with ASC 805, “Business Combinations” (“ASC 805”) and the net purchase price was allocated to assets acquired and liabilities assumed based on estimated fair values at the date of the acquisition as follows:


Current assets	$	7,184
Property, plant and equipment		13,821
Other intangibles:
Customer relationships (15-year estimated useful life)		17,682
Trade name (20-year weighted average life)		12,910
Non-compete agreements (useful lives of between 3 and 5 years)		1,110
Goodwill		30,685
Deferred tax liabilities		(13,958	)
Assumed liabilities		(7,115	)

Net assets acquired	$	62,319

The goodwill arising from the acquisition is not deductible for tax purposes and consists largely of the synergies and economies of scale expected from combining and integrating the acquired business into our business, as well as the assembled workforce.

The accompanying Condensed Consolidated Statement of Operations and Comprehensive Income for 1^st Quarter 2017 include revenue and net income for Allied of $14,118 and $639, respectively. Pro forma information for 1^st Quarter 2016 as if the acquisition had occurred prior to January 2, 2016 is presented in the following table:


Net sales	$	407,657
Net income	$	17,280