Acquisition Acquisition

12 Months Ended

Jan. 28, 2017

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

2.    ACQUISITION

Allen Edmonds

On December 13, 2016, the Company entered into a Stock Purchase Agreement (the "Purchase Agreement") with Apollo Investors, LLC (the "Seller") and Apollo Buyer Holding Company, Inc. (the "Holding Company"), pursuant to which the Company acquired all outstanding capital stock of Allen Edmonds ("Allen Edmonds"). The aggregate purchase price for the Allen Edmonds stock was $259.9 million, net of cash received of $0.7 million. The purchase was funded with cash and funds available under the Company's revolving credit agreement. Refer to Note 10 to the consolidated financial statements for additional information regarding the revolving credit agreement. The operating results of Allen Edmonds since December 13, 2016 have been included in the Company’s consolidated financial statements within the Brand Portfolio segment.

Allen Edmonds, founded in 1922, is a U.S.-based retailer and wholesaler of premium men’s footwear, apparel, leather goods and accessories with a strong manufacturing heritage. The acquisition increased the Company's exposure in men’s footwear, solidifying a new revenue stream to drive overall growth.

The Company incurred acquisition and integration costs of $5.8 million ($5.0 million on an after-tax basis, or $0.11 per diluted share) in 2016, which were recorded as a component of restructuring and other special charges, net. Of the $5.8 million, $5.2 million was reflected within the Other category and $0.6 million was reflected within the Brand Portfolio segment. In addition, the Brand Portfolio segment recognized $1.2 million in cost of goods sold in 2016 related to the amortization of the inventory fair value adjustment required for purchase accounting. Refer to Note 4 to the consolidated financial statements for additional information related to the acquisition and integration costs.

The assets and liabilities of Allen Edmonds were recorded at their estimated fair values, and the excess of the purchase price over the fair value of the assets acquired and liabilities assumed, including identified intangible assets, was recorded as goodwill. The Company has preliminarily allocated the purchase price as of the acquisition date, December 13, 2016 as follows: 

($ thousands)	December 13, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	668
Receivables	6,273
Inventories	51,836
Prepaid expense and other current assets	2,353
Total current assets	61,130
Other assets	1,060
Goodwill	113,144
Intangible assets	103,420
Property and equipment	32,243
Total assets	$	310,997
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable	$	12,256
Other accrued expenses	12,692
Total current liabilities	24,948
Deferred income taxes	25,098
Other liabilities	351
Total liabilities	50,397
Net assets	$	260,600

The allocation of the purchase price is based on certain preliminary valuations and analysis that have not been completed as of the date of this filing. Any subsequent changes in the estimated fair values assumed upon the finalization of more detailed analysis within the measurement period will change the allocation of the purchase price and will be adjusted during the period in which the amounts are determined. The Company’s purchase price allocation contains uncertainties because it required management to make assumptions and to apply judgment to estimate the fair value of the acquired assets and liabilities. A single estimate of fair value results from a complex series of judgments about future events and uncertainties and relies heavily on estimates and assumptions. The judgments the Company used in estimating the fair values assigned to each class of the acquired assets and assumed liabilities could materially affect the results of its operations. Management estimated the fair value of the assets and liabilities based upon quoted market prices, the carrying value of the acquired assets and widely accepted valuation techniques, including discounted cash flows. Unanticipated events or circumstances may occur, which could affect the accuracy of the Company’s fair value estimates, including assumptions regarding industry economic factors and business strategies.

A third-party valuation specialist assisted the Company with its fair value estimates for inventory, property and equipment, and intangible assets other than goodwill. The Company estimated the fair value of inventories based on the estimated selling price of the work-in-process and finished goods acquired at the closing date, less the sum of the costs to complete the work-in-process, the costs of disposal and a reasonable profit allowance for the completion and post-transaction selling effort based on profit for similar finished goods. The book value of the raw materials acquired was considered a reasonable representation of fair value. With respect to other acquired assets and liabilities, the Company used all available information to make its best estimate of fair values at the acquisition date.

Goodwill and intangible assets reflected above were determined to meet the criteria for recognition apart from tangible assets acquired and liabilities assumed. The goodwill recognized is primarily attributable to non-separable retail customer relationships, synergies and an assembled workforce and is not deductible for tax purposes. Refer to Note 9 to the consolidated financial statements for additional information regarding goodwill and intangible assets.

During the period from the acquisition date through January 28, 2017, Allen Edmonds contributed $24.3 million of net sales and had an immaterial impact on the Company's earnings.