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Acquisition Of NinetyFive 5 LLC
 12 Months Ended
Aug. 31, 2015
Acquisition Of NinetyFive 5 LLC [Abstract]  
Acquisition Of NinetyFive 5 LLC

 

 

18. – ACQUISITION OF NINETY FIVE 5, LLC

 

On March 11, 2013 we acquired substantially all of the assets of Ninety Five 5, an entity which provides sales success training services that complement our existing sales performance content.  Ninety Five 5 is currently a key component of our Sales Performance practice.  The purchase price was $4.2 million in cash, payable in four installments through December 6, 2013, plus contingent earn out payments up to a maximum of $8.5 million, based on cumulative earnings before interest, income taxes, depreciation, and amortization (EBITDA) as set forth in the purchase agreement.  We reassess the fair value of expected contingent earn out consideration and the corresponding liability resulting from the acquisition of Ninety Five 5 at the end of each fiscal quarter.  The estimated fair value of the contingent earn out liability at August 31, 2015 was $2.6 million (Note 10).

 

The following table summarizes the estimated fair values of the assets acquired, liabilities assumed, and separately identifiable intangible assets at the acquisition date (in thousands):

 

 

 

 

 

 

 

 

Computer equipment

 

$
14 

Intangible assets

 

 
3,989 

Goodwill

 

 
4,728 

Loss on reacquired license arrangement

 

 
950 

Purchase price payable and unearned revenue

 

 
(2,651)

Contingent earn-out liability (long-term liabilities)

 

 
(4,109)

Gain on equity ownership interest

 

 
(971)

Cash paid

 

$
1,950 

 

Based on the allocation of the initial purchase price, we acquired the following intangible assets, which are being amortized over the indicated estimated useful lives (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Category of

 

 

 

 

Estimated Useful

Intangible Asset

 

Amount

 

Life

 

 

 

 

 

 

Internally developed software

 

$
2,049 

 

3 years

Customer list

 

 
1,574 

 

5 years

Trade name

 

 
242 

 

5 years

Non-compete agreements

 

 
124 

 

5 years

 

 

$
3,989 

 

 

 

To complete the purchase transaction, we incurred $0.1 million of acquisition costs, which were recorded as selling, general, and administrative expenses in our consolidated income statements.  The acquisition of Ninety Five 5 had an immaterial impact on our consolidated income statements for the fiscal year ended August 31, 2013 and the acquisition of Ninety Five 5 was determined to be insignificant as defined by Regulation S-X.  Ninety Five 5 had total sales of $8.7 million (unaudited) and net income of $1.9 million (unaudited) for the year ended December 31, 2012.

 

Prior to the acquisition date, Ninety Five 5 operated under an agreement that granted them a worldwide, non-exclusive, and royalty-free license to use specified Company content.  As consideration for this license agreement, we obtained an equity interest in Ninety Five 5 and we owned 10.5 percent of Ninety Five 5 at the acquisition date.  We were also entitled to receive ownership distributions, which were immaterial to our consolidated income statements in the periods received.  In connection with the acquisition of Ninety Five 5, and in accordance with Accounting Standards Codification 805, Business Combinations, we revalued our ownership interest to fair value at the acquisition date and determined the fair value of the reacquired license rights.  In accordance with the valuation of our ownership interest, we recognized a gain from the purchase transaction for the amount by which the fair value of our equity interest exceeded its carrying value.  We then considered whether the reacquired license rights were favorable or unfavorable to the terms of a current market transaction to determine the need to recognize a settlement gain or loss.  Based on the valuation of the reacquired license rights, we recognized a settlement loss.  The gain from our ownership interest in Ninety Five 5 and the loss from the reacquired license rights consisted of the following amounts, which were recorded as other income, net in our consolidated income statements for the fiscal year ended August 31, 2013 (in thousands).

 

 

 

 

 

 

 

 

Gain on equity ownership interest

 

$
971 

Loss on reacquired license arrangement

 

 
(950)

Other income, net

 

$
21