Quarterly report pursuant to Section 13 or 15(d)

BUSINESS COMBINATIONS

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BUSINESS COMBINATIONS
 9 Months Ended
Sep. 30, 2014
Business Combinations [Abstract]  
BUSINESS COMBINATIONS

NOTE 8.      BUSINESS COMBINATIONS

 

The Company made ten acquisitions during the nine month period ended September 30, 2014.

 

Acquisition of Allpest WA (“Allpest”) – The Company completed the acquisition of Allpest on February 17, 2014. This is the Company’s first acquisition outside of North America and places the Company as the number one pest control provider in Western Australia. A valuation of the acquired assets of Allpest is currently being performed and an estimate has been recorded in the Company’s financial statements. The effect of any adjustments to these estimates for Allpest is not expected to have a material effect on the Company’s financial statements as the net total adjustment will effect a combination of goodwill, customer contracts, and other intangible assets at the end of the measurement period.

 

Acquisition of Wilco Enterprises, Inc. (sole holder of PermaTreat Exterminating Company, Inc. d/b/a PermaTreat Pest Control, Inc.) (“PermaTreat”) – The Company completed the acquisition of PermaTreat effective August 1, 2014. PermaTreat is a leading pest control company located in Central and Northern Virginia and was founded in 1967. The Company issued 582,233 shares of its $1 par value common stock valued at $28.19 per share to Joseph R. Wilson and Jack Broome. A valuation of the acquired assets is currently being performed and an estimate has been recorded in the Company’s financial statements. The effect of any adjustments to these estimates for PermaTreat is not expected to have a material effect on the Company’s financial statements as the net total adjustment will affect a combination of goodwill, customer contracts, and other intangible assets at the end of the measurement period.

 

Total cash purchase price for the Company’s ten acquisitions in 2014 was $59.7 million, and the Company issued common stock as purchase price in acquisition having a total value of $16.4 million.

 

The fair values of major classes of assets acquired and liabilities assumed along with the contingent consideration liability recorded at the date of acquisition is included in the reconciliation of the total consideration as follows (in thousands):

 

Accounts receivable, net   $ 2,360  
Materials and supplies     477  
Prepaid expenses     167  
Equipment and property     4,370  
Goodwill     40,521  
Customer contracts     35,089  
Other intangible assets     8,403  
Current liabilities     (6,784 )
Other assets and liabilities, net     (5,074 )
Total consideration paid   $ 79,529  
Less:  Common Stock Payment     (16,413 )
Less:  Contingent consideration liability     (3,456 )
Total cash purchase price   $ 59,660  

 

Goodwill from acquisitions represents the excess of the purchase price over the fair value of net assets of businesses acquired. The carrying amount of goodwill was $250.5 million and $211.8 million at September 30, 2014 and December 31, 2013, respectively. Goodwill generally changes due to the timing of acquisitions, finalization of allocation of purchase prices of previous acquisitions and foreign currency translations. The carrying amount of goodwill in foreign countries was $42.8 million at September 30, 2014 and $9.2 million at December 31, 2013.

 

The Company completed its most recent annual impairment analyses as of September 30, 2014. Based upon the results of these analyses, the Company has concluded that no impairment of its goodwill or other intangible assets was indicated.

 

The carrying amount of customer contracts and other intangible assets was $118.5 million and $31.8 million, respectively, at September 30, 2014 and $101.5 million and $27.1 million, respectively at December 31, 2013. The carrying amount of customer contracts and other intangible assets in foreign countries was $20.3 million and $5.2 million, respectively, at September 30, 2014 and $6.3 million and $0.4 million, respectively, at December 31, 2013.

 

Customer contracts and other amortizable intangible assets are amortized on a straight-line basis over their economic useful lives. The following table sets forth the components of intangible assets as of September 30, 2014 (in thousands):

 

        Usefull Life
Intangible Asset   Fair Value   in Years
Customer contracts   $ 118,500        3 - 12.5  
Non-compete agreements     6,740        3 - 20  
Trademarks and tradenames     18,914        0 - 20  
Patents     3,740       15  
Internet domains     2,227       n/a  
Know How     165       10  
Total customer contracts and other intangible assets   $ 150,286