Acquisition of RSI Communities On March 9, 2018, the Company completed its acquisition of RSI Communities, a Southern California- and Texas-based homebuilder, pursuant to the Purchase and Sale Agreement (the Purchase Agreement) dated February 19, 2018 among California Lyon, RSI Communities, RS Equity Management L.L.C., Class B Sellers of RSI Communities, and RS Equity Management L.L.C. as the sellers representative, and its acquisition of three additional related real estate assets (the Legacy Assets) pursuant to each of the separate asset purchase agreements with each of RG Onion Creek, LLC, RSI Trails at Leander LLC and RSI Prado LLC (collectively referred to herein as "RSI Communities"), for an aggregate cash purchase price of $479.3 million, which is inclusive of approximately $15.2 million of net asset related adjustments at closing (collectively, the "RSI Acquisition"). Part of the acquired entities specific to the Southern California region now operate under the Companys existing California segment. The remaining acquired entities now operate as a new segment of the Company in Texas, with core markets of Austin and San Antonio. The Company financed the RSI Acquisition with a combination of proceeds from its issuance of $350 million in aggregate principal amount of 6.00% senior notes due 2023, cash on hand, and approximately $194.3 million of aggregate proceeds from a land banking arrangement with respect to land parcels in various stages of development. As a result of the RSI Acquisition, the entities comprising the business of RSI Communities became wholly-owned direct or indirect subsidiaries of the Company, and its results are included in our condensed consolidated financial statements and related disclosures from the date of the RSI Acquisition. The RSI Acquisition was accounted for as a business combination in accordance with ASC 805. Under ASC 805, the Company recorded the acquired assets and assumed liabilities of RSI Communities at their estimated fair values, with the excess allocated to Goodwill, as shown below. Goodwill represents the value the Company expects to achieve through the operational synergies and the expansion of the Company into new markets. The Company estimates that the entire $56.8 million of goodwill resulting from the RSI Acquisition will be tax deductible. Goodwill will be allocated to the California and Texas operating segments (see Note 6). A reconciliation of the consideration transferred as of the acquisition date is as follows: Net proceeds received from RSI inventory involved in land banking transactions $ 194,131 Issuance of 6.00% Senior Notes due September 1, 2023 190,437 Cash on hand 94,760 $ 479,328 The Company completed its final estimate of the fair value of the net assets of RSI Communities during December 2018. The following table summarizes the amounts for acquired assets and liabilities recorded at their fair values as of the acquisition date (in thousands): Assets Acquired Real estate inventories $ 434,628 Goodwill 56,793 Other 7,771 Total Assets $ 499,192 Liabilities Assumed Accounts payable $ 9,315 Accrued expenses 8,244 Notes payable 2,305 Total liabilities 19,864 Net assets acquired $ 479,328 The Company determined the fair value of real estate inventories on a project level basis using a combination of discounted cash flow models, and market comparable land transactions, where available. These methods are significantly impacted by estimates relating to i) expected selling prices, ii) anticipated sales pace, iii) cost to complete estimates, iv) highest and best use of projects prior to acquisition, and v) comparable land values. These estimates were developed and used at the individual project level, and may vary significantly between projects. Other assets, accounts payable, accrued expenses and notes payable were generally stated at historical value due to the short-term nature of these liabilities. The Company recorded no acquisition related costs for the three and nine months ended September 30, 2019 (excluding the transaction expenses incurred for the acquisition of South Pacific Financial Corporation, discussed in Note 2), and zero and $3.9 million in acquisition related costs for the three and nine months ended September 30, 2018, respectively, which are included in the Condensed Consolidated Statement of Operations in Transaction expenses. Such costs were expensed as incurred in accordance with ASC 805. Supplemental Pro Forma Information The following table presents unaudited pro forma amounts for the three and nine months ended September 30, 2018 as if the RSI Acquisition, had been completed as of January 1, 2017 (amounts in thousands, except per share data): Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018 Operating revenues $ 534,704 $ 1,467,959 Net income available to common stockholders $ 26,558 $ 57,143 Income per share - basic $ 0.70 $ 1.51 Income per share - diluted $ 0.68 $ 1.44 The unaudited pro forma operating results have been determined after adjusting the unaudited operating results of RSI Communities, excluding the Legacy Assets, but including acquisition costs, to reflect the estimated purchase accounting and other acquisition adjustments. The unaudited pro forma results presented above do not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquired entity, the costs to combine the operations of the Company and the acquired entity or the costs necessary to achieve any of the foregoing cost savings, operating synergies or revenue enhancements. As such, the unaudited pro forma amounts are for comparative purposes only and may not necessarily reflect the results of operations which would have resulted had the acquisition been completed at the beginning of the applicable period or indicative of the results that will be attained in the future.