Business Acquisition

12 Months Ended

Dec. 31, 2017

BUSINESS ACQUISITION

On December 31, 2015, we acquired all of the outstanding capital stock of OF Holdings, Inc., sole parent of Octane Fitness, LLC ("Octane") for an aggregate base purchase price of $115.0 million, plus net adjustments for working capital and cash acquired on the closing date. We funded the acquisition through an $80.0 million term loan and cash on hand. Based in Brooklyn Park, Minnesota, Octane is a leader in zero-impact training with a line of fitness equipment focused on Retail specialty and commercial channels. The acquisition of Octane strengthened and diversified our brand portfolio, broadened our distribution and deepened our talent pool. Octane's business is highly complementary to our existing business from both product and channel perspectives.

Purchase Price Allocation

Acquired assets and liabilities were recorded at estimated fair value as of the acquisition date, and subsequently adjusted and finalized during 2016. The excess of the purchase price over the fair value of identifiable net assets resulted in the recognition of goodwill of $59.7 million, all of which was assigned to the Retail segment. The goodwill is not deductible for income tax purposes.

The following table summarizes the fair values of the net assets acquired and liabilities assumed as of the acquisition date, including all measurement period adjustments (in thousands):



	Final valuation at December 31, 2016
Cash	$	7,759
Accounts receivable	12,476
Inventories	13,134
Prepaid expenses	885
Deferred tax assets	1,303
Property, plant and equipment	3,372
Intangible assets	63,100
Total assets acquired	102,029

Accounts payable	6,497
Accrued liabilities	2,968
Warranty obligations	5,550
Deferred tax liabilities, non-current	21,033
Other non-current liabilities	390
Total liabilities assumed	36,438

Net identifiable assets acquired	65,591
Goodwill	59,705
Net assets acquired	$	125,296

Summary of Unaudited Pro Forma Information

The following table reflects the unaudited pro forma consolidated results of operations for the periods presented, as though the acquisition of Octane had occurred on January 1, 2014 (in thousands, except per share amounts):



		(unaudited)
		Year Ended December 31,
		2016		2015
Net sales		$	406,039	$	400,078
Net income		35,683		29,352
Net income per share:
	Basic	$	1.15	$	0.94
	Diluted	1.14		0.93

The unaudited pro forma financial information is presented for illustrative purposes only and is not indicative of the results of operations that would have been realized if the acquisition had been completed on the date indicated, nor is it indicative of future operating results. The pro forma results do not include, for example, the effects of anticipated synergies from combining the two companies.