equity awards
1,072
Total consideration transferred
$
502,448
Assets acquired and liabilities assumed
Cash and cash equivalents
$
53,800
Accounts receivable
654
Real estate inventories
539,677
Intangible asset
17,300
Goodwill
139,304
Other assets
28,060
Total assets acquired
778,795
Accounts payable
26,105
Accrued expenses and other liabilities
23,114
Notes payable and other borrowings
227,128
Total liabilities assumed
276,347
Total net assets acquired
$
502,448
Cash and cash equivalents, accounts receivable, other assets, accounts payable, accrued payroll liabilities, and accrued expenses and other liabilities were generally stated at historical carrying values given the short-term nature of these assets and liabilities. Notes payable and other borrowings are stated at carrying value due to the limited amount of time since the notes payable and other borrowings were entered into prior to the Closing Date.
The Company determined the fair value of real estate inventories on a community-by-community basis primarily using a combination of market-comparable land transactions, land residual analysis and discounted cash flow models. The estimated fair value is significantly impacted by estimates related to expected average selling prices, sales pace, cancellation rates and construction and overhead costs. Such estimates must be made for each individual community and may vary significantly between communities.
The fair value of the acquired intangible asset was determined based on a valuation performed by an independent valuation specialist. The $17.3 million intangible asset is related to the TRI Pointe Homes trade name which is deemed to have an indefinite useful life.
Goodwill is primarily attributed to expected synergies from combining WRECO’s and TRI Pointe’s existing businesses, including, but not limited to, expected cost synergies from overhead savings resulting from streamlining certain redundant corporate functions, improved operating efficiencies, including provision of certain corporate level administrative and support functions at a lower cost than was historically allocated to WRECO for such services by its former direct parent, and growth of ancillary operations in various markets as permitted under applicable law, including a mortgage business, a title company and other ancillary operations. The Company also anticipates opportunities for growth through expanded geographic and customer segment diversity and the ability to leverage additional brands. The acquired goodwill is not deductible for income tax purposes.
The Company completed its business combination accounting during the first quarter of 2015.
Supplemental Pro Forma Information (Unaudited)
The following represents unaudited pro forma operating results as if the acquisition had been completed as of January 1, 2014 (in thousands, except per share amounts):
|
|
|
| Three Months Ended June 30, 2014 |
|
| Six Months Ended June 30, 2014 |
| ||
Total revenues |
|
|
| $ | 429,899 |
|
| $ | 750,843 |
|
Net income |
|
|
| $ | 32,200 |
|
| $ | 44,514 |
|
Earnings per share – basic |
|
|
| $ | 0.20 |
|
| $ | 0.28 |
|
Earnings per share – diluted |
|
|
| $ | 0.20 |
|
| $ | 0.27 |
|
The unaudited pro forma operating results have been determined after adjusting the operating results of TRI Pointe to reflect the purchase accounting and other acquisition adjustments including interest expense associated with the debt used to fund a portion of the Merger. The unaudited pro forma results do not reflect any cost savings, operating synergies or other enhancements that we may achieve as a result of the Merger or the costs necessary to integrate the operations to achieve these cost savings and synergies. Accordingly, the unaudited pro forma amounts are for comparative purposes only and may not necessarily reflect the results of operations had the Merger been completed at the beginning of the period or be indicative of the results we will achieve in the future.