Note 4 - Acquisitions

12 Months Ended

Dec. 31, 2011

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

(4)       ACQUISITIONS:

Ideal Image

On November 1, 2011, we acquired all the stock of Ideal Image. We acquired Ideal Image to expand our services, add an incremental revenue stream and assist in the growth of our products distribution. The purchase price of the acquisition, funded from existing cash and common shares and through borrowings under our new credit facility, was $175 million in cash, less cash acquired. The results of operations of Ideal Image are included in our results of operations for the periods subsequent to November 1, 2011. During the year ended December 31, 2011, we incurred and expensed approximately $2.1 million of transaction costs related to this acquisition and the acquisitions discussed below, which we included in administrative expenses in the accompanying consolidated statement of income.

We applied the purchase method of accounting to record this transaction. The preliminary purchase price allocation for the acquisition is as follows (in thousands):

Accounts receivable	$	5,875
Other current assets		3,061
Property and equipment		6,666
Goodwill and intangible assets		241,360
Other assets		327
Accounts payable		(2,419	)
Deferred tax liability		(18,075	)
Deferred revenue		(63,223	)
Accrued expenses		(5,696	)
Common stock and additional paid-in capital		(5,660	)
Cash used in acquisition, net of cash acquired	$	162,216

The Company has recorded a receivable from the sellers of $2.3 million related to post-closing working capital adjustments, which is included in other current assets. The purchase price and initial recording of the transaction were based on a preliminary valuation assessments that are subject to change. Additional information is necessary to complete the purchase price allocation for this transaction with respect to deferred taxes. Certain of the Goodwill and intangible assets related to the acquisition are tax deductible. The Goodwill amounts are comprised primarily of expected synergies from combining operations and other intangible assets that do not quality for separate recognition.

The intangible assets of Ideal Image that we acquired are as follows (in thousands):

	At December 31, 2011
	Life	Fair Value
Trade names	Indefinite	$	44,300
Leases	Lease term		329
Employment agreement	Two years		135
Franchise agreement	Franchise term		1,520
		$	46,284

The fair values of the leases were based on the current market for similar leases; the fair value of the trade names was based on the relief from royalty method.

The following is a summary of the unaudited pro forma historical results, as if Ideal Image had been acquired at January 1, 2009 (in thousands).

	Year Ended December 31,
	2011		2010		2009
Total revenues	$	764,870	$	667,231	$	519,774
Income from operations	$	63,832	$	51,001	$	32,643
Basic income per share	$	3.30	$	2.27	$	1.49
Diluted income per share	$	3.25	$	2.24	$	1.47

These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had this acquisition occurred at January 1, 2009, nor are they necessarily indicative of future operating results.

Onboard

In January 2011, we acquired the assets of Onboard. Onboard provided spa services and sold spa products on a number of cruise ships. As a result of that acquisition, we provide spa services and sell spa products on the ships previously served by Onboard. In connection with this transaction, the principal owners of Onboard entered into consulting and non-competition agreements with us. The purchase price of this acquisition was $4.5 million, including contingent consideration, which was paid from our existing cash.

Cortiva

On November 7, 2011, we acquired all of the assets of Cortiva. We acquired Cortiva to expand our school operations and to assist the future growth of our Schools segment. The purchase price of the acquisition, funded from existing cash, was $33 million in cash, less cash acquired. The results of operations of Cortiva are included in our results of operations subsequent to November 7, 2011.

We applied the purchase method of accounting to record these transactions. The preliminary purchase price allocations for Cortiva and the completed Onboard purchase price allocation are as follows (in thousands):

Accounts receivable	$	8,465
Inventories		54
Other current assets		3,047
Property and equipment		1,256
Other assets		272
Goodwill and intangible assets		35,709
Accounts payable		(389	)
Gift certificate liability		(285	)
Deferred tuition revenue		(10,257	)
Accrued expenses		(5,812	)
Cash used in acquisition, net of cash acquired	$	32,060

The Company has recorded a receivable from the sellers of Cortiva of $2.6 million related to a post-closing working capital adjustment, which is included in other current assets. The purchase price and initial recording of the transaction was based on a preliminary valuation assessment subject to change. The purchase price allocation is not yet complete for deferred taxes and the working capital adjustment. Additional information is necessary to complete the purchase price allocation. All of the Goodwill and intangible assets related to the Cortiva acquisition are tax deductible. The Goodwill amounts are comprised primarily of expected synergies from combining operations and other intangible assets that do not quality for separate recognition.

The intangible assets of Cortiva and Onboard that we acquired are as follows (in thousands):

	At December 31, 2011
	Life	Fair Value
Trade names	Indefinite	$	4,606
Title IV rights	Indefinite		11,640
Non-compete	Five years		840
Leases	Lease term		1,706
		$	18,792

The fair values of the leases were based on the current market for similar leases; the fair values of the trade names were based on the relief from royalty method.