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ACQUISITIONS AND GOODWILL
 9 Months Ended
Oct. 04, 2014
ACQUISITIONS AND GOODWILL  
ACQUISITIONS AND GOODWILL

2. ACQUISITIONS AND GOODWILL

 

Fossil Spain Acquisition. On August 10, 2012, the Company’s joint venture company, Fossil, S.L. (“Fossil Spain”), entered into a Framework Agreement (the “Framework Agreement”) with several related and unrelated parties, including General De Relojeria, S.A. (“General De Relojeria”), the Company’s joint venture partner. Pursuant to the Framework Agreement, Fossil Spain was granted the right to acquire the outstanding 50% of its shares owned by General De Relojeria upon the expiration of the joint venture agreement on December 31, 2015. Upon the acquisition of these shares, Fossil Spain will become a wholly-owned subsidiary of the Company.

 

Effective January 1, 2013, pursuant to the Framework Agreement, the Company assumed control over the board of directors and the day-to-day management of Fossil Spain. As a result of this change, the Company now controls Fossil Spain and began consolidating it in accordance with ASC 810, Consolidation, instead of treating it as an equity method investment.

 

In accordance with ASC 805, Business Combinations, the Company re-measured its preexisting investment in Fossil Spain to fair value as of January 1, 2013, resulting in a gain of $6.5 million, which was recorded in other income-net on the Company’s condensed consolidated statements of income and comprehensive income. The results of Fossil Spain’s operations have been included in the Company’s condensed consolidated financial statements since January 1, 2013. The Company recorded approximately $10.6 million of goodwill related to the acquisition.

 

The purchase price for the shares has a fixed and variable component. The fixed portion is based on 50% of the net book value of Fossil Spain as of December 31, 2012. The fixed portion was measured at 5.2 million euros (approximately $6.8 million at the purchase date). The Company recorded a contingent consideration liability of 5.9 million euros (approximately $7.8 million at the purchase date) related to the variable portion of the purchase price as of January 1, 2013. The variable portion will be determined based on Fossil Spain’s aggregated results of operations with a minimum annual variable price of 2.0 million euros (approximately $2.6 million at the purchase date) and a maximum annual variable price of 3.5 million euros (approximately $4.6 million at the purchase date) for each of the calendar years 2013, 2014, and 2015. See “Note 11 — Fair Value Measurements” for additional information about the contingent consideration liability for Fossil Spain.

 

Of the total consideration for Fossil Spain, 4.5 million euros (approximately $5.6 million) relating to the contingent consideration for calendar years 2013 and 2014 was recorded in accrued expenses — other, and 6.4 million euros (approximately $8.1 million) of the total consideration was recorded in other long-term liabilities in the condensed consolidated balance sheets at October 4, 2014.

 

Bentrani Watches, LLC Acquisition. On December 31, 2012, the Company purchased substantially all of the assets of Bentrani Watches, LLC (“Bentrani”). Bentrani was a distributor of watch products in 16 Latin American countries and was based in Miami, Florida. Bentrani was the Company’s largest third-party distributor and had partnered with the Company for ten years. The purchase price was $26.6 million, comprised of $19.3 million in cash and $7.3 million in forgiveness of a payable to the Company. The Company recorded approximately $8.9 million of goodwill related to the acquisition. The results of Bentrani’s operations have been included in the Company’s condensed consolidated financial statements since the acquisition date. On June 28, 2013, the Company also obtained control of Bentrani Chile SpA (“Bentrani Chile”), and the results of Bentrani Chile’s operations have been included in the Company’s condensed consolidated financial statements since that date. The terms of the Bentrani Chile acquisition were not significant.

 

Goodwill is the excess of the cost of an acquired entity over the net of the amounts assigned to assets acquired and liabilities assumed. The changes in the carrying amount of goodwill, which is not subject to amortization, were as follows (in thousands):

 

 

 

North America
Wholesale

 

Europe
Wholesale

 

Asia Pacific
Wholesale

 

Total

 

Balance at December 28, 2013

 

$

118,147

 

$

77,217

 

$

11,590

 

$

206,954

 

Foreign currency changes

 

(46

)

(5,910

)

(25

)

(5,981

)

Balance at October 4, 2014

 

$

118,101

 

$

71,307

 

$

11,565

 

$

200,973