Note 2—Acquisitions

HOD Water Business Acquisitions

During the three months ended April 2, 2016, the Company acquired two HOD water businesses for an aggregate cash purchase price of $1.2 million. The Company has accounted for these transactions as business combinations in accordance with GAAP. These tuck-in acquisitions support the Company’s ongoing objective of leveraging its assets and further strengthening its customer density. Net assets, including goodwill, acquired have been allocated to the DSS reporting segment. All of the goodwill recorded is expected to be tax deductible.

Aquaterra Acquisition

On January 4, 2016 (the “Acquisition Date”), the Company acquired 100% of the share capital of Aquaterra Corporation (“Aquaterra”) pursuant to a Share Purchase Agreement dated December 7, 2015 (the “Aquaterra Acquisition”). Aquaterra operates a Canadian direct-to-consumer HOD bottled water and OCS business. The aggregate purchase price paid by the Company in the Aquaterra Acquisition was approximately C$62 million (approximately U.S. $44.5 million). The purchase price was paid at closing in cash and is subject to a customary post-closing adjustment for net working capital.

This acquisition supports our strategy to become a more diversified beverage provider across multiple channels and geographies, as well as our continuing consolidation of the higher margin HOD bottled water and OCS categories. The Company has accounted for this transaction as a business combination in accordance with authoritative accounting guidance.

The purchase consideration of $44.5 million was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the Acquisition Date. A preliminary allocation of the purchase price has been made to major categories of assets and liabilities based on management’s estimates. The table below presents the preliminary purchase price allocation of the estimated acquisition date fair values of the assets acquired and the liabilities assumed:


(in millions of U.S. dollars)	Acquired Value
Cash	$	1.3
Accounts receivable		6.2
Inventories		2.1
Prepaid expenses and other current assets		1.3
Property, plant & equipment		13.4
Goodwill		19.2
Intangible and other assets		17.4
Accounts payable and accrued liabilities		(15.8	)
Long-term debt		(0.3	)
Other long-term liabilities		(0.3	)

Total	$	44.5

The fair values of acquired property, plant & equipment, identifiable intangible assets and deferred taxes are provisional pending validation and receipt of the final valuations for those assets. In addition, consideration for potential loss contingencies are still under review.

The amount of revenues and net loss related to the Aquaterra Acquisition included in the Company’s consolidated statement of operations for the period from the Acquisition Date through April 2, 2016 were $14.2 million and $0.1 million, respectively. During the three months ended April 2, 2016, the Company incurred $0.2 million of acquisition related costs associated with the Aquaterra Acquisition, which are included in acquisition and integration expenses in the consolidated statements of operations.

Intangible Assets

In our preliminary determination of the fair value of the intangible assets, we considered, among other factors, the best use of acquired assets, analysis of historic financial performance and estimates of future performance of Aquaterra’s products. The estimated fair values of identified intangible assets were calculated considering market participant expectations and using an income approach and estimates and assumptions provided by Aquaterra’s and our management. The following table sets forth the components of identified intangible assets associated with the Aquaterra Acquisition and their estimated weighted average useful lives:


	Estimated Fair		Estimated
(in millions of U.S. dollars)	Market Value		Useful Life
Customer relationships	$	10.0		12 years
Trademarks and trade names		6.7		Indefinite

Total	$	16.7

Customer relationships represent future projected revenue that will be derived from sales to existing customers of Aquaterra.

Trademark and trade names represent the future projected cost savings associated with the premium and brand image obtained as a result of owning the trademark or trade name as opposed to obtaining the benefit of the trademark or trade name through a royalty or rental fee.

Goodwill

The principal factor that resulted in recognition of goodwill was that the purchase price for the Aquaterra Acquisition was based in part on cash flow projections assuming the reduction of administration costs and the integration of acquired customers and products into our operations, which is of greater value than on a standalone basis. The goodwill recognized as part of the Aquaterra Acquisition was allocated to the DSS reporting segment, none of which is expected to be tax deductible.