Acquisition of BAM Labs, Inc. (Notes)

12 Months Ended

Jan. 02, 2016

Acquisition of BAM Labs, Inc. [Abstract]

Business Combination Disclosure [Text Block]

Acquisition of BAM Labs, Inc.

In September 2015, we completed the acquisition of BAM Labs, Inc. (now operating as SleepIQ LABS), the leading provider of biometric sensor and sleep monitoring for data-driven health and wellness. The addition of SleepIQ LABS strengthens Sleep Number’s leadership in sleep innovation, adjustability and individualization. The acquisition broadens and deepens electrical, biomedical, software and backend capabilities - API (application program interface) and bio-signal analysis. Our ownership and control of biometric data advances smart, connected products that empower our customers with the knowledge to adjust for their best sleep.

We previously held a $6.0 million minority equity investment in BAM Labs, Inc. based on the cost method (see Note 4, Investments, for further details). In connection with the acquisition, our equity investment was remeasured to a fair value of $12.9 million. We acquired the remaining capital stock of BAM Labs, Inc. for $57.1 million for a total enterprise value of $70.0 million. Our consolidated statement of operations included $3.3 million of SleepIQ LABS research and development expenses for the year ended January 2, 2016. The acquisition of SleepIQ LABS did not have a significant impact on our consolidated results of operations, operating cash flows or financial position for the year ended January 2, 2016.

The following table summarizes the fair value of the net assets acquired as of the acquisition date (in thousands):

Accounts receivable	$	105
Deferred income taxes - ST	83
Prepaid expenses	98
Property and equipment	91
Deferred income taxes - LT	2,671
Goodwill	55,083
Intangible assets	13,619
Total assets acquired	71,750
Accounts payable	269
Compensation and benefits	322
Other long-term liabilities	1,141
Total liabilities acquired	1,732
Net assets acquired	$	70,018

Intangible assets of $13.6 million consisted of developed technologies with an estimated useful life of eight years. The definite-lived intangible assets will be deductible for income tax purposes over 15 years on a straight-line basis. The goodwill will not be deductible for income tax purposes.