NOTE B — ACQUISITIONS

Fred^® & Friends

On December 20, 2012, the Company acquired the Fred^® & Friends (“F&F”) business from Easy Aces, Inc., a Rhode Island corporation, for $21.4 million consideration, comprised of $14.5 million cash, 143,568 shares of common stock with a value of $1.5 million and $5.4 million of contingent consideration. F&F, which reported net sales of approximately $16.6 million for the year ended December 31, 2011, designs and distributes novelty housewares under the Fred^® brand directly to retailers throughout the United States and Canada. The assets, liabilities and operating results of F&F have been reflected in the Company’s consolidated financial statements in accordance with ASC Topic No. 805, Business Combinations, commencing from the acquisition date and did not significantly impact the Company’s consolidated financial results for the year ended December 31, 2012.

The purchase price has been determined as follows (in thousands):


Cash paid	$	14,500
Common stock issued		1,507
Value of contingent consideration		5,370

Total purchase price	$	21,377

The cash portion of the purchase price was funded by borrowings under the Company’s credit facility (“Revolving Credit Facility”). The value of contingent consideration is comprised of the present value of estimated contingent payments of $4.0 million related to the attainment of certain gross contribution targets for the years 2013 through 2016 and the present value of the contractual holdback amount of $1.4 million, which serves as security for payments in satisfaction of any claim. The maximum undiscounted deferred and contingent consideration to be paid under the agreement is $7.7 million.

The purchase price has been preliminarily allocated based on management’s estimate of the fair value of the assets acquired and liabilities assumed, as follows (in thousands):


	Purchase Price Allocation

Accounts receivable⁽¹⁾	$	5,003
Inventory		3,941
Other assets		360
Other liabilities		(1,519	)
Goodwill and other intangibles		13,592

Total allocated value	$	21,377

Note:

(1)	The fair value of accounts receivable approximated the gross contractual amounts receivable.

On the basis of estimated fair values, the excess of the purchase price over the net assets acquired of $13.6 million has been allocated as follows: $7.2 million for customer relationships, $3.9 million for trade names and $2.5 million for goodwill. The goodwill recognized results from such factors as an assembled workforce and the value of other synergies expected from combining operations with the Company. The total amount of goodwill is expected to be deductible for tax purposes. All of the goodwill and other intangibles are included in the Wholesale segment. Customer relationships and trade names are amortized on a straight-line basis over their estimated useful lives (see Note D).

Creative Tops

On November 4, 2011, the Company acquired 100% of the share capital of each of Creative Tops Holdings Limited and Creative Tops Far East Limited (collectively, “Creative Tops”), for £14.8 million ($23.7 million) of consideration, comprised of cash in the amount of £12.9 million ($20.6 million) and 255,908 shares of common stock with a value of £1.9 million ($3.1 million). Creative Tops, which reported net sales of approximately £26.3 million ($42.3 million) for its fiscal year ended March 31, 2011, is a leading UK-based supplier of private label and branded tabletop and kitchenware products. The purpose of this acquisition was to expand the Company’s sale of products into Europe including growth in the sales of the traditional products of Creative Tops and new branded product offerings. The assets, liabilities and operating results of Creative Tops are reflected in the Company’s consolidated financial statements in accordance with ASC Topic No. 805, Business Combinations, commencing from the acquisition date and did not significantly impact the Company’s consolidated financial results for the year ended December 31, 2011.

The purchase price was determined as follows (in thousands):


Cash paid, net of cash acquired	$	20,584
Common stock issued		3,100

Total purchase price	$	23,684

The cash portion of the purchase price was funded by borrowings under the Revolving Credit Facility. Cash paid is reflected net of cash acquired of £0.1 million ($0.2 million).

The purchase price was allocated based on management’s estimate of the fair value of the assets acquired and liabilities assumed, as follows (in thousands):


	Purchase Price Allocation

Accounts receivable⁽¹⁾	$	8,559
Inventory		5,228
Other current assets		508
Property and equipment		844
Goodwill and other intangibles		16,892
Accounts payable		(1,250	)
Accrued expenses		(2,351	)
Other liabilities		(1,191	)
Deferred tax liability		(3,555	)

Total allocated value	$	23,684

(1)	The fair value of accounts receivable approximated the gross contractual amounts receivable.

On the basis of estimated fair values, the excess of the purchase price over the net assets acquired of $13.3 million was allocated as follows: $10.6 million for customer relationships, $3.6 million for trade names, $2.7 million for non-tax-deductible goodwill, net of a deferred tax liability related to amortizable intangibles of $3.6 million. The goodwill recognized results from such factors as an assembled workforce and the value of other synergies expected from combining operations with the Company. Customer relationships and trade names are amortized on a straight-line basis over their estimated useful lives (see Note D).