NOTE 2 – ACQUISITIONS

The following table summarizes the locations of our acquisitions for the nine months ended September 30, 2016:

Acquisition Locations	2016
United States		16
Republic of Korea		1
Romania		2
Spain		2
United Kingdom		1
Total		22

During the quarter ended March 31, 2016, we completed seven acquisitions. Domestically, we acquired 100% of the stock of one regulated waste business and selected assets of four secure information destruction businesses. Internationally, we acquired selected assets of one regulated waste business in Romania and one in Spain.

During the quarter ended June 30, 2016, we completed ten acquisitions. Domestically, we acquired selected assets of three regulated waste businesses and three secure information destruction businesses. Internationally, we acquired selected assets of one regulated waste business in each of the Republic of Korea, Romania, Spain and the United Kingdom.

During the quarter ended September 30, 2016, we completed five domestic acquisitions, acquiring selected assets of one communication services business and four secure information destruction businesses.

The following table summarizes the acquisition date fair value of consideration transferred for acquisitions completed during the nine months ended September 30, 2016:

In thousands
	Nine Months Ended September 30, 2016
Cash	$	41,052
Promissory notes		31,063
Deferred consideration		2,045
Contingent consideration		75
Total purchase price	$	74,235

For financial reporting purposes, our acquisitions were accounted for using the acquisition method of accounting. These acquisitions resulted in the recognition of goodwill in our financial statements reflecting the premium paid to acquire businesses that we believe are complementary to our existing operations and fit our growth strategy. During the nine months ended September 30, 2016, we recognized an increase in goodwill of $40.3 million related to current year acquisitions, excluding the effect of foreign currency translation, of which $33.0 million was assigned to our Domestic Regulated Waste and Compliance Services (“Domestic RCS”) reportable segment, $4.4 million was assigned to our International Regulated Waste and Compliance Services (“International RCS”) reportable segment, and $2.9 million was assigned to other (see Note 9 – Goodwill and Other Intangible Assets). Approximately $35.4 million of the goodwill recognized from current year acquisitions will be deductible for tax purposes.

During the nine months ended September 30, 2016, we recognized an increase in intangible assets from current year acquisitions of $23.2 million, excluding the effect of foreign currency translation. We recognized $22.4 million for the estimated fair value of acquired customer relationships with amortizable lives of 10 to 40 years, and $0.8 million for a covenant not-to-compete with an amortizable life of 5 years.

The fair value of consideration transferred in business combinations is allocated to the tangible and intangible assets acquired and liabilities assumed at the acquisition date, with the remaining unallocated amount recorded as goodwill. The allocations of the acquisition price for recent acquisitions have been prepared on a preliminary basis, pending completion of certain intangible asset valuations and finalization of the opening balance sheet. The following table summarizes the preliminary purchase price allocation for current period acquisitions during the nine months ended September 30, 2016:

In thousands
	Nine Months Ended September 30, 2016
Fixed assets	$	10,487
Intangibles		23,235
Goodwill		40,336
Accounts receivable		1,574
Net other assets/ (liabilities)		8
Current liabilities		(355	)
Net deferred tax liabilities		(1,050	)
Total purchase price allocation	$	74,235

During the nine months ended September 30, 2016 and 2015 the Company incurred $7.9 million and $40.0 million, respectively, of acquisition related expenses. These expenses are included in “Selling, general and administrative expenses” (“SG&A”) on our Condensed Consolidated Statements of Income. The results of operations of these acquired businesses have been included in the Condensed Consolidated Statements of Income from the date of the acquisition. Pro forma results of operations for these acquisitions are not presented because the pro forma effects, individually or in the aggregate, were not material to the Company’s consolidated results of operations.

The following table summarizes the adjustments to the consideration transferred for prior year acquisitions and primarily includes $9.5 million of additional cash consideration paid in March 2016 as part of the final working capital adjustment for the 2015 Shred-it acquisition:

In thousands
	Nine Months Ended September 30, 2016
Cash	$	10,145
Promissory notes		(1,789	)
Total purchase price	$	8,356

During the third quarter of 2016, we recorded various adjustments to our provisional amounts related to the Shred-it and other prior year acquisitions. The following table summarizes these adjustments by major assets acquired and liabilities assumed for prior year acquisitions:

In thousands
	Shred-it Acquisition			Other Prior Year Acquisitions			Total Changes
Fixed assets	$	40,831		$	6,677		$	47,508
Intangibles		158,940			19,681			178,621
Goodwill		(157,405	)		(22,849	)		(180,254	)
Accounts receivable		(1,085	)		775			(310	)
Net other assets		(65	)		148			83
Current liabilities		(12,298	)		(1,342	)		(13,640	)
Net deferred tax liabilities		(18,798	)		(4,854	)		(23,652	)
Total purchase price allocation	$	10,120		$	(1,764	)	$	8,356

As of September 30, 2016, the purchase price accounting has been completed for the Shred-it acquisition. We do not anticipate material changes in the purchase price allocation of other prior year acquisitions.

Following is a description of the methodologies for estimating the fair value of major tangible and identifiable intangible assets of the Company.

Intangible Asset Valuation:

The methods commonly used to value intangible assets are the income, market and cost approaches. The nature and characteristics of the asset indicate which approach is most appropriate. Based on the analysis performed by the Company, the fair values of intangible assets were estimated using acceptable income approaches.

Following is a description of the methodologies for estimating the fair value of major intangible asset classes:

Customer Relationships: A multi-period excess earnings method (“MPEEM”) was used to determine the fair value of the customer relationships. The fair value was derived by calculating the present value of the estimated after-tax earnings attributable to the respective intangible assets. Key inputs and assumptions to the valuation model are forecasted after-tax cash-flows, the identification of contributory assets and the quantification of appropriate returns on these assets, the discount rate applied to present value the cash-flows and attrition rates.

Brand: A relief from royalty method was used to determine the fair value of the brand. Key inputs and assumptions to the valuation model are a reasonable approximation of the license rate for the brand, forecasted revenues and the discount rate applied to present value the after-tax stream of estimated royalties avoided by acquiring the brand.

Tangible Asset Valuation:

Shred trucks, consoles and equipment are some of the major asset classes of fixed assets that were subject to revaluation as of October 1, 2015.

The indirect and direct methods of the cost approach and the market approach were used by the Company to value the tangible personal property assets. Following is a description of the methodologies for estimating the fair value of major tangible fixed asset classes:

Shred Trucks: The market approach was used for the valuation of the shred trucks. The market approach is based on market conditions and transactions. In the market approach, the assets being valued are compared to recent sales and/or asking prices of comparable properties or assets. In using similar units of comparison, adjustments are made to the comparable assets to account for factors such as condition, capacity, and age.

Consoles: The direct method of the cost approach was used in the valuation of the consoles. In the direct method of the cost approach, replacement cost new (RCN) is determined through current cost information obtained from original equipment manufacturers, equipment dealers and vendors, and independent research.

Equipment: The cost of reproduction new (CRN) of equipment was calculated using the indirect method of the cost approach. Historical equipment costs and dates were used to calculate the current CRN. In the indirect method of the cost approach, trend factors are applied to the historical costs to estimate the CRN of the assets. Time-adjusted trend factors are applied to historical costs using asset category specific cost indices published by industry sources. The CRN is then adjusted for physical deterioration and functional and economic obsolescence.