|9 Months Ended|
Oct. 01, 2011
|Business Combination [Abstract]|
Note 5—Business Combination
In August 2010, the Company completed the purchase (the "Acquisition") of all of the issued and outstanding shares of Automotive Specialty Accessories and Parts ("WAG"), a leader in the automobile aftermarket performance parts and accessories market. Assets acquired include intangible assets consisting of customer relationships, technology, and trade names, tangible assets such as furniture and fixtures, machinery and equipment, and a 350,000 square foot distribution center in LaSalle, Illinois with a headquarter office located in Chicago, Illinois. The final purchase price of WAG was $26.7 million in cash, including certain adjustments as set forth in that certain Stock Purchase Agreement executed August 2, 2010 (the "Purchase Agreement") among Go Fido, Inc., WAG, 2000 Riverside Capital Appreciation Fund, L.P. and the other stockholders of WAG. The Acquisition provided the Company with product line expansion into all terrain vehicles, recreational vehicles and motorcycles, as well as deep product knowledge into niche segments like Jeep, Volkswagen and truck enthusiasts. This expansion in the Company's product line has increased its customer reach in the do-it-yourself automobile and off-road accessories market. In addition, WAG's state-of-the-art facility located in Illinois, which was custom built for business-to-consumer distribution of auto parts, allowed the Company to complete a three-distribution center network. The Company believes that the combination of WAG's established brands and focus on the customer experience, coupled with the Company's capacity to compete online, creates opportunity for growth. These expected synergies from the Acquisition contributed to the goodwill associated with the Acquisition of $9.1 million. See the purchase price allocation table below for further details.
The Acquisition has been accounted for under the purchase method of accounting in accordance with ASC 805. Accordingly, the assets and liabilities of WAG have been recorded as of the acquisition date at their respective fair values, and combined with the Company's assets and liabilities. The determination of estimated fair value requires management to make significant estimates and assumptions. The results of operations of WAG and the estimated fair market values of the acquired assets and liabilities have been included in the consolidated financial statements from the date of the Acquisition.
The following table summarizes our allocation of the purchase price for the Acquisition to the estimated fair values of the assets acquired and liabilities assumed at the date of the Acquisition (in thousands):
Of the total purchase price, approximately $8.2 million has been allocated to trade name assets with an indefinite life and $9.2 million has been allocated to amortizable intangible assets acquired. The amortizable intangible assets are being amortized on a straight line basis over their respective useful lives except for internet platform intellectual property which is being amortized on an accelerated basis over 10 months based on the Company's estimated usage of the asset as follows:
WAG's financial results have been included in our condensed consolidated statement of operations since the acquisition date of August 12, 2010. Therefore, pro forma information for the thirteen and thirty-nine weeks ended October 1, 2011 has not been presented since the results of operations of WAG have been included in our actual consolidated results of operations for the entire period. The following pro forma financial information presents the results as if the Acquisition had occurred on January 3, 2010 (in thousands, except share and per share amounts):
Related to the Acquisition, the Company has incurred acquisition and integration related costs of $3.8 million and $6.6 million for the thirteen and thirty-nine weeks ended October 1, 2011, respectively, which have been recorded in general and administrative expenses. These costs included one-time contract cancellation costs of $1.5 million that the Company recorded in September 2011, pursuant to ASC Topic 420, Exit or Disposal Cost Obligations ("ASC 420"), for terminating WAG's sublease agreement related to its former corporate offices located in Chicago, Illinois. See "Note 14 – Subsequent Events" for details on the sublease termination.
During the current quarter, the Company discovered that certain accounts receivable were erroneously overstated by $1.5 million which also resulted in an understatement of $1.5 million in related goodwill. Accordingly, the Company reclassified $1.5 million from accounts receivable to goodwill in the consolidated balance sheet as of January 1, 2011. The Company considers this an immaterial reclassification. This reclassification had no effect on the Company's previously reported consolidated statements of operations, consolidated statements of shareholders' equity nor the consolidated net cash provided by operating activities, the net cash used in investing activities and the net cash (used in) provided by financing activities within the consolidated statement of cash flows.
No significant integration costs are anticipated in the future, subject to changes in the integration plan. The majority of the acquisition and integration related costs were paid as of October 1, 2011.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://www.xbrl.org/2003/role/presentationRef