XML 20 R11.htm IDEA: XBRL DOCUMENT

Acquisition

3 Months Ended

May 01, 2022

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

3. Acquisition

In accordance with FASB Accounting Standards Codification Topic 805, “Business Combinations” (“ASC 805”), the Acquisition has been accounted for using the acquisition method of accounting. We recorded assets acquired, including identifiable intangible assets, and liabilities assumed, from Sunset West at their respective fair values at the date of completion of the Acquisition. The excess of the purchase price over the net fair value of such assets and liabilities was recorded as goodwill.

The following table summarizes the preliminary estimates of the fair values of the identifiable assets acquired and liabilities assumed in the Acquisition as of May 1, 2022. The preliminary estimates of fair value of identifiable assets acquired and liabilities assumed are subject to revision, which may result in adjustments to the preliminary values presented below, when management’s appraisals and estimates are finalized. Normal post-closing contingencies remain to be resolved, including the final working capital adjustment and any changes due to deviations from the seller’s representations and warranties at closing.

Fair Value Estimates of Assets Acquired and Liabilities Assumed

The consideration and components of our initial fair value allocation of the purchase price paid at closing and in the subsequent Net Working Capital Adjustment consisted of the following:

Purchase price consideration

Fair value estimates of assets acquired and liabilities assumed
Purchase price consideration
Cash paid for assets acquired		$	23,909
Escrow			2,003
Fair value of earnout			766
Total purchase price		$	26,678

Accounts receivable		$	1,560
Inventory			2,577
Prepaid expenses and other current assets			90
Property and equipment			82
Intangible assets			11,451
Goodwill			15,026
Customer deposits			(3,276	)
Accounts payable			(816	)
Accrued expenses			(16	)
Total purchase price		$	26,678

Property and equipment were recorded at fair value and primarily consist of computer software and hardware and equipment. Property and equipment will be amortized over their estimated useful lives.

Goodwill is calculated as the excess of the purchase price over the net assets acquired. The goodwill recognized is attributable to growth opportunities and expected synergies. All goodwill is expected to be deductible for income tax purposes.

Intangible assets, consist of two separately identified assets:

■

Sunset West customer relationships, which are definite-lived intangible assets with an aggregate fair value of $10.4 million. The customer relationships are amortizable and will be amortized over a period of 10 years; and

■

The Sunset West trade name, which is definite-lived intangible asset with fair value of $1.1 million. The trade name is amortizable and will be amortized over a period of 12 years.

■

The total weighted average amortization period for these assets is 10.2 years.

We incurred approximately $414,000 in Acquisition-related costs in fiscal 2022. These expenses were included in the “Selling and administrative expenses” line of our fiscal 2022 condensed consolidated statements of operations. Sunset West’s results are included in the Domestic Upholstery segment’s results beginning with the fiscal 2023 first quarter, which include $7.9 million in net sales and $861,000 of operating income, including $282,000 in intangible amortization expense.