Company: PRMB
Filing Date: 2025-02-27
Form Type: 10-K
Source: 0002042694-25-000003
Chunk: 109

Company: Primo Brands Corp
Filing Date: 2025-02-27
Form: 10-K
Item: Item 16
Chunk 109
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leness of management’s estimate by (a) developing an independent range of expected losses and (b) comparing the independent range of expected losses to management’s estimate. Developing the independent range of expected losses involved independently developing loss development factors and expected loss rates.

Acquisition of Primo Water Corporation - Valuation of Customer Relationships 

As described in Note 3 to the consolidated financial statements, on November 8, 2024, the Company completed the acquisition of Primo Water Corporation for $3,950.3 million of total purchase price.  Of the acquired identifiable intangible assets, $1,046.4 million of acquired customer relationships were recorded. The estimated fair value of customer relationships was calculated by management considering both market participant expectations, using an income approach, as well as estimates and assumptions. Management’s assumptions include projected revenue growth rates, operating expense rates, cost synergies, customer attrition rates, tax rates, contributory asset charges, and risk-adjusted discount rates. 

The principal considerations for our determination that performing procedures relating to the valuation of customer relationships acquired in the acquisition of Primo Water Corporation is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the customer relationships acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to projected revenue growth rates, operating expense rates, cost synergies, customer attrition rates, tax rates, contributory asset charges, and risk-adjusted discount rates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge. 

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others (i) reading the purchase agreement; (ii) testing management’s process for developing the fair value estimate of the customer relationships acquired; (iii) evaluating the appropriateness of the income approach used by management; (iv) testing the completeness and accuracy of the underlying data used in the income approach; and (v) evaluating the reasonableness of the significant assumptions used by management related to projected revenue growth rates, operating expense rates, cost synergies, customer attrition rates, tax rates, contributory asset charges, and risk-adjusted discount rates. Evaluating management’s assumptions related to projected revenue growth rates, operating expense rates, cost synergies, and tax rates involved considering (i) the current and past performance of the Primo Water Corporation business; (ii