Business Combinations

6 Months Ended

Jun. 30, 2017

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note 2. Business Combinations

Acquisition of OGIO International, Inc.

On January 11, 2017, the Company acquired all of the outstanding shares of capital stock of OGIO International, Inc. (“OGIO”), a leading manufacturer of high quality bags, accessories and apparel in the golf and lifestyle categories, in a cash transaction pursuant to the terms of a Share Purchase Agreement, by and among the Company, OGIO, and each of the shareholders and option holders of OGIO. The primary reason for the acquisition was to enhance the Company's presence in golf while also providing a platform for future growth in the lifestyle category.

The purchase price of the acquisition was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition in accordance with ASC Topic 820, "Fair Value Measurement." The excess between the purchase price and the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed was allocated to goodwill. The Company determined the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The Company may adjust the purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as it obtains more information as to facts and circumstances existing as of the acquisition date.

The acquired trade names/trademarks, customer and distributor relationships, inventory and non-compete agreements are subject to fair value measurements that were based primarily on significant inputs not observable in the market and thus represent Level 3 measurements (see Note 13). The fair value of furniture, fixtures, office equipment, leasehold improvements, computer equipment and warehouse equipment were all valued at their replacement cost, which the Company determined was the net book value of the assets on the date of the acquisition. Inventory was valued using the net realizable value approach, which was based on the estimated selling price in the ordinary course of business less reasonable disposal costs. The customer and distributor relationships were valued under the income approach based on the present value of future earnings. The trade name was valued under the royalty savings income approach method, which is equal to the present value of the after-tax royalty savings attributable to owning the trade name as opposed to paying a third party for its use. For this valuation the Company used a royalty rate of 7.5%, which is reflective of royalty rates paid in market transactions, and a discount rate of 14.0% on the future cash flows generated by the net after-tax savings. The goodwill of $5,543,000 arising from the acquisition consists largely of the synergies expected from combining the operations of the Company and OGIO. The acquisition is treated as an asset purchase for tax purposes. As such, the Company expects to deduct all of the intangible assets for income tax purposes. All of the goodwill was assigned to the gear, accessories and other operating segment.

At the acquisition date, the total purchase price was valued at approximately $66,032,000. Due to the subsequent measurement of liabilities assumed in the acquisition, the purchase price was reduced to $65,951,000 as of June 30, 2017. The Company incurred transaction costs of approximately $3,052,000, of which $1,805,000 was recognized in general and administrative expenses during the six months ended June 30, 2017. The remainder was recognized in 2016.

The pro-forma effects of this acquisition would not have been material to the Company's results of operations in 2016 and are therefore not presented. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the acquisition date based on the purchase price allocation (in thousands):

	At January 11, 2017
Assets Acquired
Cash		$	8,061
Accounts receivable		8,038
Inventory		7,092
Other current assets		328
Property and equipment		2,369
Intangibles - trade name		49,700
Intangibles - customer lists		1,500
Intangibles - non-compete agreements		150
Goodwill		5,543
Total assets acquired		82,781
Liabilities Assumed
Accounts Payable and accrued liabilities		16,830
Net assets acquired		$	65,951