Quarterly report pursuant to Section 13 or 15(d)

Business Acquisitions

v3.3.1.900
Business Acquisitions
 9 Months Ended
Feb. 29, 2016
Business Combinations [Abstract]  
Business Acquisitions
BUSINESS ACQUISITIONS

Easton Hockey

On January 13, 2016 (the “Closing Date”), the Company, through its wholly-owned subsidiaries, Bauer Hockey, Inc. and Bauer Hockey Corp., acquired substantially all of the assets and assumed certain liabilities of Easton Hockey Holdings, Inc. (the “Easton Hockey Acquisition”), a manufacturer and distributor of hockey equipment, pursuant to an asset purchase agreement among Bauer Hockey, Inc., Bauer Hockey Corp., Easton Hockey Holdings, Inc., Easton Hockey, Inc. and Easton Hockey Canada, Inc. The Easton Hockey Acquisition provides the Company with intellectual property that strengthens its research and development portfolio and provides the Company with full ownership and control of the Easton brand in all sports other than cycling and archery.

The purchase price paid by the Company at closing was $5,585 in cash, with future cash payments of an aggregate of $5,358 payable over 10 months following the Closing Date. The Company financed the Easton Hockey Acquisition through additional borrowings on its asset-based revolving loan.

The Company has completed a preliminary valuation of assets acquired and liabilities assumed. The estimates and assumptions
used in determining the preliminary fair values of certain assets and liabilities are subject to change within the measurement period, which is up to one year from the Closing Date. The primary areas of the allocation of the purchase price that are not yet finalized include trade receivables, inventories, property, plant and equipment and deferred income taxes since the Easton Hockey Acquisition occurred in the current fiscal quarter. The preliminary allocation of the purchase price to the individual assets acquired and liabilities assumed under the purchase method of accounting resulted in a gain on bargain purchase of $987. The gain on bargain purchase associated with the Easton Hockey Acquisition was due to a distressed sale by the previous owners whose financial position had been deteriorating over time.

The following table presents the preliminary allocation of purchase price related to the Easton Hockey business as of the Closing Date of the Easton Hockey Acquisition:
Net assets acquired:
 
Trade receivables
$
5,685

Inventories
6,000

Property, plant and equipment
350

Intangible assets
1,175

Other assets
327

Total assets acquired
13,537

Current liabilities
(1,607
)
Total liabilities assumed
(1,607
)
Net assets acquired
$
11,930

Consideration paid or payable to seller
$
10,943

Gain on bargain purchase
$
987



The estimated fair values and useful lives of intangible assets acquired as of the acquisition date were as follows:
 
Amount
 
Weighted-Average Remaining Useful Life
Trade names and trademarks
$
370

 
7
Customer relationships
155

 
8
Purchased technology
650

 
7
Total intangible assets acquired
$
1,175

 
 


The trade names and trademarks and purchased technology were valued using the relief-from-royalty method. The relief-from-royalty method recognizes that the current value of an asset may be premised upon the expected receipt of future economic benefit in the use of the acquired technology. These benefits are generally considered to be higher income resulting from the avoidance of a loss in revenue that would likely occur without the specific technology.

Customer relationships were valued using the excess earnings method. The excess earnings method recognizes that the current value of an asset may be premised upon the present value of the earnings it generates, net of a reasonable return on other assets also contributing to that stream of earnings.

The Company incurred acquisition-related costs of $414 in the three and nine months ended February 29, 2016 relating to external legal fees, consulting fees and due diligence costs. These costs are included in selling, general and administrative expenses.

The amounts of Easton Hockey's revenue and net loss excluding the gain on bargain purchase included in the Company’s consolidated statements of income for the three and nine months ended February 29, 2016 were $848 and $2,729, respectively.

Pro forma information (Unaudited)

The Company has not provided unaudited pro forma revenue and earnings of the Company as if the Easton Hockey Acquisition had occurred on June 1, 2014 due to the effects of the Easton Hockey Acquisition not being considered material.