Business Combinations

9 Months Ended

Oct. 29, 2016

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note 6. Business Combinations

On October 17, 2016, the Company completed the purchase of all of the issued and outstanding shares of etailz, Inc. (“etailz”), an innovative and leading digital marketplace retail expert. The Company paid $38.1 million in cash and issued 5.7 million shares of TWMC stock at closing to the shareholders of etailz as consideration for their shares. Based on the fair value of $3.56 per share on the acquisition date, the shares had a value of $20.4 million. An earn-out of up to a maximum of $14.6 million will be payable in fiscal 2018 and fiscal 2019 subject to the achievement by etailz of $6 million in operating income in fiscal 2017 and $7.5 million in fiscal 2018. In connection with the acquisition, The Company assumed the liability for etailz’s employee retention bonus plan, of which $1.9 million was due and payable at closing and the remaining $2.3 million will be earned over a two year service period. The acquisition and related costs were funded primarily from the Company’s cash on hand and short term borrowings under its revolving credit facility. The acquisition was accounted for using the purchase method of accounting. As of the date of filing this quarterly report on Form 10-Q, the preliminary purchase accounting has not yet been finalized due primarily to the proximity of the closing date of the transaction to the filing date of this quarterly report and the pending receipt of the final valuation for certain assets, including identifiable intangible assets.

The acquisition date fair value of the consideration for the above transaction consisted of the following as of October 17, 2016 (in thousands):

Cash consideration	$	38,100
Fair value of stock consideration		20,415
Fair value of contingent consideration		10,381
Fair value of purchase consideration	$	68,896

The excess of purchase consideration paid over the fair value of identifiable intangible assets acquired was recorded as goodwill. The goodwill recognized is not deductible for income tax purposes.

The following table summarizes the preliminary allocation of the aggregate purchase price to the estimated fair value of the net assets acquired:

	($ in thousands)
	October 17, 2016
Assets Acquired
Cash and Cash Equivalents	$	1,800
Accounts receivable		1,533
Prepaid expenses and other current assets		6,603
Inventory		14,669
Property and equipment, net		649
Other long term-assets		12
Acquired intangible assets:
Trade names		3,200
Technology		6,700
Vendor relationships		19,000
Unfavorable lease valuation		(125	)
Goodwill		39,800
Total assets acquired	$	93,841
Liabilities Assumed
Accounts payable	$	4,227
Debt		5,289
Other current liabilities		7,927
Deferred taxes		7,502
Total liabilities assumed	$	24,945
Net assets acquired	$	68,896

The Company recognized total acquisition related costs of $2.2 million for the thirteen and thirty-nine weeks ended October 29, 2016. These costs are included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

The results of operations of etailz will be reported in the Company’s etailz segment and has been included in the consolidated results of operations of the Company from the date of acquisition. The following unaudited pro forma financial information for the thirteen weeks and thirty-nine weeks ended October 29, 2016, and October 31, 2015, presents consolidated information as if the etailz acquisition had occurred on February 1, 2015. Because of different fiscal period ends, and in order to present results for comparable periods, the unaudited pro forma financial information for the thirty-nine weeks ended October 29, 2016, combines (i) the Company’s historical statement of operations for the thirty-nine weeks ended October 29, 2016, and (ii) etailz historical statement of income for the period from January 1, 2016 through August 31, 2016 and October 1, 2016 through October 16, 2016. The unaudited pro forma financial information for the thirteen weeks ended October 29, 2016, combines (i) the Company’s historical statement of operations for the thirteen weeks ended October 29, 2016; and (ii) etailz historical statement of income for the period from July 1, 2016 through August 31, 2016 and October 1, 2016 through October 16, 2016. The unaudited pro forma financial information for the thirty-nine weeks and thirteen weeks ended October 31, 2015, combines (i) the Company’s historical statement of operations for the thirty-nine weeks and thirteen weeks ended October 31, 2015, and (ii) etailz historical statement of income for the nine months and three months ended October 31, 2015. The unaudited pro forma financial information is presented after giving effect to certain adjustments for acquisition-related costs, depreciation, amortization of definite lived intangible assets, interest expense on acquisition financing, and related income tax effects. The unaudited pro forma financial information is based upon currently available information and upon certain assumptions that the Company believes are reasonable under the circumstances. The unaudited pro forma financial information does not purport to present what the Company’s results of operations would actually have been if the aforementioned transaction had in fact occurred on such date or at the beginning of the period indicated, nor does it project the Company’s financial position or results of operations at any future date or for any future period.

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	October 29,			October 31,			October 29,			October 31,
	2016			2015			2016			2015
Pro forma total revenue	$	90,655		$	90,942		$	287,060		$	278,862
Pro forma net loss		(6,945	)		(5,441	)		(13,513	)		(10,074	)
Pro forma basic and diluted loss per share	$	(0.19	)	$	(0.15	)	$	(0.37	)	$	(0.27	)
Pro forma weighted average number of common shares outstanding – basic and diluted		36,157			36,838			36,257			36,871