Acquisitions

6 Months Ended

Jun. 30, 2018

Note 8 - Acquisitions

ARI Acquisition

On October 10, 2017, the Company completed the Acquisition of ARI.

At closing, the Company paid net cash consideration of approximately $209 million, which included preliminary post-closing adjustments relating to: (i) changes in the net working capital of ARI as of the closing relative to a net working capital target, (ii) the actual amount of specified types of R-22 refrigerant inventory on hand at closing relative to a target amount thereof, and (iii) other consideration pursuant to the Stock Purchase Agreement.

Due to the timing of the ARI acquisition, which closed during the fourth quarter of 2017, our estimates of

the

fair values of the assets that we acquired and the liabilities that we assumed are based on information that was available as of the acquisition date of ARI and are preliminary. We are continuing to evaluate the underlying inputs and assumptions used in our valuations, particularly with respect to certain aspects of the acquired inventory and property and equipment. In addition, in accordance with the stock purchase agreement, the purchase price remains subject to

a further working capital adjustment

. Accordingly, these preliminary estimates are subject to change during the measurement period, which is the period subsequent to the acquisition date during which the acquiror may adjust the provisional amounts recognized for a business combination, not to exceed one year from the acquisition date.

The following table summarizes the Company’s preliminary estimates of the fair values of the assets acquired and the liabilities assumed on the date the Company completed the Acquisition of ARI, as previously reported as of year-end 2017 and June 30, 2018:

	Amortization ‎ life ‎ (in months)			As previously reported	Adjustments (1)			As Adjusted (in ‎ thousands)
Accounts receivable			$	14,668	$			$	14,668
Other assets				734					734
Inventories				103,876		1,661			105,537
Property and equipment				24,179					24,179
Customer relationships		144		29,660					29,660
Above-market leases		153		567					567
Goodwill				48,609		(1,661	)		46,948
Total assets acquired			$	222,293	$	-		$	222,293

Accounts payable and accrued expenses			$	3,210	$			$	3,210
Other current liabilities				10,114					10,114
Total liabilities assumed			$	13,324	$	-		$	13,324

Total purchase price			$	208,969	$	-		$	208,969

(1)

The Company obtained further information regarding the fair value of acquired inventory based on information that exists as of the acquisition date.

The fair values of the acquired intangibles were determined using discounted cash flow models that include a discount factor based on an estimated risk-adjusted weighted average cost of capital. The customer relationships were valued using the multi-period excess-earnings method, a form of the income approach. The above-market leases were valued using the differential cash flow method of the income approach.

The acquisition resulted in the recognition of $46.9 million of goodwill, which should be deductible for tax purposes. Goodwill largely consists of expected growth in revenue from new customer acquisitions over time.

The cash consideration paid by the Company at closing was financed with available cash balances, plus $80 million of borrowings under the PNC Facility and a new term loan of $105 million from the Term Loan Facility.