Business Acquisitions

6 Months Ended

Jun. 14, 2014

Business Combinations [Abstract]

Business Acquisitions

BUSINESS ACQUISITIONS

On October 9, 2012, the Company acquired all of the outstanding equity interests of PLG as well as certain other assets. Consideration paid to acquire PLG was approximately $1,249.5 million in cash. PLG marketed casual and athletic footwear, apparel and related accessories for adults and children under well-known brand names including Sperry Top-Sider^®, Saucony^®, Stride Rite^® and Keds^®. The acquisition was accounted for under the acquisition method of accounting. The related assets acquired and liabilities assumed were recorded at fair value on the acquisition date. The operating results for PLG are included in the Company’s consolidated results of operations beginning October 9, 2012.

The Company funded the transaction using a combination of approximately $88.8 million of cash on hand and new borrowings. The Company’s debt financing included net proceeds from the term loan debt associated with the Credit Agreement and net proceeds from the Public Bonds.

For the 12 weeks ended June 14, 2014, the Company incurred $2.5 million of acquisition-related integration costs. These costs include compensation expenses ($1.0 million) and other integration costs ($1.5 million). For the 12 weeks ended June 15, 2013, the Company incurred $7.9 million of acquisition-related integration costs. These costs include compensation expense ($5.4 million), other purchased services ($2.0 million) and professional and legal fees ($0.5 million).

For the 24 weeks ended June 14, 2014, the Company incurred $4.1 million of acquisition-related integration costs. These costs include compensation expenses ($1.8 million) and other integration costs ($2.3 million). For the 24 weeks ended June 15, 2013, the Company incurred $23.1 million of acquisition-related integration costs. These costs include compensation expense ($15.7 million), other purchased services ($3.7 million), amortization related to short-lived intangible assets ($2.4 million), and professional and legal fees ($1.3 million).

The following table summarizes the final fair values of the assets acquired and liabilities assumed in connection with the PLG acquisition.

(In millions)
Cash	$	23.6
Accounts receivable	151.2
Inventories	203.5
Deferred income taxes	13.6
Other current assets	13.2
Property, plant and equipment	77.1
Goodwill	408.8
Intangible assets	821.8
Other	11.2
Total assets acquired	1,724.0
Accounts payable	97.4
Other accrued liabilities	42.2
Deferred income taxes	287.2
Accrued pension liabilities	37.7
Other liabilities	10.0
Total liabilities assumed	474.5
Net assets acquired	$	1,249.5

The excess of the purchase price over the fair value of net assets acquired of $408.8 million was recorded as goodwill in the consolidated condensed balance sheets and has been assigned to the Performance Group and Lifestyle Group reportable operating segments as follows:

(In millions)
Performance Group	$	82.5
Lifestyle Group	326.3
Total	$	408.8

The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of PLG. Substantially all of the goodwill is not amortizable for income tax purposes.

Intangible assets acquired in the PLG acquisition were valued as follows:

(In millions)	Intangible asset		Useful life
Trade names and trademarks	$	671.8	Indefinite
Customer lists	100.5		3-20 years
Licensing agreements	28.8		4-5 years
Developed product technology	14.9		3-5 years
Backlog	5.2		6 months
Net favorable leases	0.6		10 years
Total intangible assets acquired	$	821.8

The Company assigned fair values to the identifiable intangible assets through a combination of the relief from royalty and the excess earnings methods.

At the time of the acquisition, a step-up in the value of inventory of $4.0 million was recorded in the allocation of the purchase price based on valuation estimates, all of which was charged to cost of sales in the fourth quarter of fiscal 2012 as the inventory was deemed sold. In addition, fixed assets were written up by approximately $18.8 million to their estimated fair market value based on a valuation method that included both cost and market approaches. This additional step-up in value is being depreciated over the estimated remaining useful lives of the assets.