Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v2.4.0.6
Acquisitions
9 Months Ended
Sep. 30, 2012
Acquisitions [Abstract]  
Acquisitions

NOTE 3.  ACQUISITIONS 

 

On July 2, 2012, the Company acquired all of the issued and outstanding shares of capital stock of POC Sweden AB (“POC”), a Stockholm-based developer and manufacturer of protective gear for action sports athletes pursuant to the terms of the Share Transfer Agreement (the “Agreement”) dated as of June 7, 2012, and as amended on July 2, 2012 (the “Amendment,” and together with the Agreement, the “POC Agreement”), by and among the Company, Ember Scandinavia AB, a Swedish corporation and a wholly owned subsidiary of the Company, and the shareholders of POC (the “Sellers”).  Under the terms of the POC Agreement, the Company acquired POC for a total consideration valued at 311,300 Swedish kronor (SEK) or $44,917 through the delivery to the Sellers of $40,569 in cash and 460 shares of Black Diamond common stock, par value $0.0001 (the “Black Diamond Shares”).  The Black Diamond Shares issued to the Sellers were valued based on the average closing price of such shares on NASDAQ-GS for the ten consecutive trading days ending five trading days prior to the execution of the Agreement.  The Black Diamond Shares issued at closing are subject to a lock-up agreement (the “POC Lock-up Agreement”) restricting sales for two years and are pledged to the Company as security for indemnification claims under the POC Agreement.  The Company’s actual closing stock price was $9.45 on June 29, 2012, the last closing stock price prior to the completion of the POC acquisition.  Because the Black Diamond Shares issued to the Sellers are subject to a two-year lock-up pursuant to the POC Lock-up Agreement, a discount of $1.21  (12.8%) was applied against the $9.45 closing stock price to yield a fair value of $8.24 per share.  The 12.8% discount was calculated using the Finerty model with a two-year term and a volatility of 40.5%.  

 

The Company believes the acquisition of POC is expected to provide the Company with the following benefits: 

 

·

increased intellectual property that compliments and expands multi-seasonal offerings; 

·

greater combined global revenue balance;  

·

improved efficiencies by combining certain operational functions; 

·

ability to better leverage existing supply chain and distribution channels; 

·

advance the development and appeal of products; and 

·

access to ample liquidity to fuel brand penetration and expansion. 

  

 

The Company’s fair value estimates for the purchase price allocation are preliminary and may change during the allowable allocation period, which is up to one year from the date of acquisition, as we continue to obtain information that existed as of the date of acquisition so that we may finalize the assets acquired and liabilities assumed and determine the associated fair values.  The following table is a reconciliation to the fair value of the purchase consideration and how the purchase consideration is allocated to assets acquired and liabilities assumed which have been estimated at their fair values.  The excess of purchase consideration over the assets acquired and liabilities assumed is recorded as goodwill. 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Shares

 

Estimated Fair Value

 

 

 

 

 

 

 

Cash Paid

 

 

 -

 

$

40,569 

 

 

 

 

 

 

 

Issuance of Shares of Black Diamond, Inc.

 

 

460 

 

 

3,791 

 

 

 

 

 

 

 

Total Purchase Consideration

 

 

460 

 

$

44,360 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets Acquired and Liabilities Assumed

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

$

441 

Accounts receivable, net

 

 

 

 

 

1,350 

Inventories

 

 

 

 

 

8,983 

Prepaid and other current assets

 

 

 

 

 

848 

Property and equipment

 

 

 

 

 

1,203 

Amortizable definite lived intangible assets

 

 

 

 

 

17,800 

Identifiable indefinite lived intangible assets

 

 

 

 

 

14,200 

Goodwill

 

 

 

 

 

15,158 

Other long-term assets

 

 

 

 

 

512 

Total Assets

 

 

 

 

 

60,495 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

 

 

 

6,054 

Current portion of long-term debt

 

 

 

 

 

1,664 

Long-term debt

 

 

 

 

 

649 

Deferred income taxes

 

 

 

 

 

7,387 

Other long-term liabilities

 

 

 

 

 

381 

Total Liabilities

 

 

 

 

 

16,135 

 

 

 

 

 

 

 

Net Book Value Acquired

 

 

 

 

$

44,360 

 

 

 

 

 

 

 

The amount of accounts receivable deemed to be not collectible was $115.  The estimated fair value of inventory was recorded at expected sales price less cost to sell plus a reasonable profit margin for selling efforts.  The debt assumed as part of the Company’s acquisition of POC consists of (i) a line of credit with an outstanding balance of $1,277 with a variable interest rate of 4.2%, which matures on December 31, 2012, (ii) a term note of $865 with an interest rate of 9.2%, which was subsequently reduced to 6.0% on October 10, 2012, and which matures on November 30, 2014 and (iii) $171 in capital leases and other debt.   

 

In connection with the acquisition, the Company acquired exclusive rights to POC’s tradenames and trademarks.  The intangible assets, other than goodwill, acquired and related weighted average useful lives are as follows:  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average

 

 

Gross

 

Useful Life

 

 

 

 

 

 

 

Intangibles subject to amortization

 

 

 

 

 

 

Customer relationships

 

$

9,900 

 

 

13.1 years

Product technologies

 

 

5,800 

 

 

16.0 years

Tradenames and trademarks

 

 

2,100 

 

 

20.0 years

Intangibles not subject to amortization

 

 

 

 

 

 

Tradenames and trademarks

 

 

14,200 

 

 

N/A

 

 

$

32,000 

 

 

14.8 years

 

 

 

 

 

 

 

The fair value of POC’s assembled workforce and buyer-specific synergies has been included in goodwill.  There is no amount of goodwill that is expected to be deductible for tax purposes. 

 

Pro Forma Results 

 

The following pro forma results are based on the individual historical results of the Company and POC, with adjustments to give effect to the combined operations as if the acquisition had been consummated at the beginning of the periods presented.  The pro forma results are intended for information purposes only and do not purport to represent what the Company’s results of operations would actually have been had the Company’s acquisition of POC on July 2, 2012 in fact occurred at the beginning of the earliest periods presented. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THREE MONTHS ENDED

 

NINE MONTHS ENDED

 

 

 

 

 

 

 

 

 

September 30, 2011

 

September 30, 2012

 

September 30, 2011

 

 

 

 

 

 

 

 

 

 

Sales

 

$

48,468 

 

$

132,082 

 

$

119,197 

Net income (loss)

 

$

1,834 

 

$

164 

 

$

(3,176)

Net income (loss) per share - basic

 

$

0.08 

 

$

0.01 

 

$

(0.15)

Net income (loss) per share - diluted

 

$

0.08 

 

$

0.01 

 

$

(0.15)