NOTE 3 – ACQUISITIONS AND DISPOSITIONS

Sale of Strawberry Shortcake

On February 2, 2015, the Corporation entered into an agreement to sell its Strawberry Shortcake property and related intangible assets and license agreements for $105,000 cash with the expectation that the sale would close by no later than March 31, 2015. As such, at February 28, 2015, the assets and liabilities related to Strawberry Shortcake, which are included in the Corporation’s non-reportable operating segment, were classified as held for sale. See Note 20 for further information.

The major classes of assets and liabilities held for sale included in the Corporation’s Consolidated Statement of Financial Position as of February 28, 2015 were as follows:


	Assets
Prepaid expenses and other	$	229
Other assets		35,300

	$	35,529


	Liabilities
Accrued liabilities	$	500
Deferred revenue		1,212

	$	1,712

Character Property Rights Acquisition

On December 18, 2014, the Corporation, in order to secure complete control and ownership over the rights in certain character properties, including the Strawberry Shortcake property, that the Corporation previously granted to a third party (the “Character Property Rights”), paid $37,700 to purchase these rights, and recorded the rights as indefinite-lived intangible assets. As of February 28, 2015, the majority of these assets were classified as “Assets held for sale” on the Consolidated Statement of Financial Position. In addition to the $37,700 paid for these rights, in the event of a future sale of these Character Property Rights and the associated character properties, the Corporation would be required, depending on the proceeds of such sale, to pay up to an additional $4,000 of the proceeds that it receives from any such sale. Subsequent to year-end, in March 2015, the Corporation made an additional payment in the amount of $2,800.

Sale of AGI In-Store

On August 29, 2014, the Corporation completed the sale of its wholly-owned display fixtures business, AGI In-Store, to Rock-Tenn Company for $73,659 in cash, subject to closing date working capital adjustments. Subsequent to the end of the fiscal year, in March 2015, the working capital adjustments were finalized and a payment of $3,200 was made to the buyer. A gain of $35,004, which includes the final working capital adjustments, has been recognized from the sale and is included in “Other operating income – net” on the Consolidated Statement of Income. AGI In-Store, which is included in the non-reportable segment, had operating income of $53 in 2015 through the date of sale and $18,707 of operating income in 2014. In connection with the sale of AGI In-Store, the Corporation entered into a long-term supply agreement whereby the Corporation is committed to purchase a significant portion of its North American display fixtures requirements from Rock-Tenn Company. The supply agreement has an initial term of five years. The Corporation is committed to purchase $180,000 of display fixture related products, accessories and/or services over the initial term of the agreement.

Sale of World Headquarters

On July 1, 2014, the Corporation sold its current world headquarters location and entered into an operating lease arrangement with the new owner of the building. The Corporation expects to remain in this current location until the completion of the new world headquarters, which the Corporation anticipates will occur in calendar year 2016. Net of transaction costs, the Corporation received $13,535 in cash from the sale, and recorded a non-cash loss on disposal of $15,544 in the Corporation’s second fiscal quarter, which loss is included in “Other operating income – net” on the Consolidated Statement of Income.

Clinton Cards Acquisition

During the first quarter of 2013, the Corporation acquired all of the outstanding senior secured debt of Clinton Cards for $56,560 (£35,000) through Lakeshore Lending Limited (“Lakeshore”), a wholly-owned subsidiary of the Corporation organized under the laws of the UK. Subsequently, on May 9, 2012, Clinton Cards was placed into administration, a procedure similar to Chapter 11 bankruptcy in the United States. Prior to entering into administration, Clinton Cards had approximately 750 stores and annual revenues of approximately $600,000 across its two primary retail brands, Clinton Cards and Birthdays. The legacy Clinton Cards business had been an important customer to the Corporation’s international business for approximately forty years and was one of the Corporation’s largest customers.

As part of the administration process, the administrators (“Administrators”) of Clinton Cards and certain of its subsidiaries (the “Sellers”) conducted an auction of certain assets of the business of the Sellers that they believed constituted a viable ongoing business. Lakeshore bid $37,168 (£23,000) for certain of these remaining assets. The bid took the form of a “credit bid,” where the Corporation used a portion of the outstanding senior secured debt owed to Lakeshore by Clinton Cards to pay the purchase price for the assets. The bid was accepted by the Administrators and on June 6, 2012 the Corporation entered into an agreement with the Sellers and the Administrators for the purchase of certain assets and the related business of the Sellers.

Under the terms of the agreement, the Corporation acquired 388 stores from the Sellers, including lease assignments with the landlords, the associated inventory and overhead, as well as the Clinton Cards and related brands. See Note 13 for further information regarding long-term lease obligations.

The stores and assets not acquired by the Corporation were liquidated through the administration process and the proceeds were used to repay the creditors of the Sellers. Through this process, which was completed in 2015, the Corporation fully recovered the non-credit bid portion of its investment in the senior secured debt. Net of other administration expenses, cash distributions received from the Administrators in 2015 and 2014 totaled $11,926 and $7,644, respectively. The cash distributions received in 2015 include $2,507 of accumulated interest that was previously not expected to be received. This interest is included in “Interest income” in 2015 on the Consolidated Statement of Income. See Note 4 for further information.

In 2013, charges associated with the aforementioned acquisition totaled $35,730 and are reflected on the Consolidated Statement of Income as follows:


	Contract asset impairment		Bad debt expense		Legal and advisory fees		Impairment of debt purchased		Total
Net sales	$	3,981	$	—	$	—	$	—	$	3,981
Administrative and general expenses		—		16,514		7,129		—		23,643
Other operating (income) expense – net		—		—		—		8,106		8,106

	$	3,981	$	16,514	$	7,129	$	8,106	$	35,730

These charges are reflected in the Corporation’s reportable segments as follows:


	Contract asset impairment		Bad debt expense		Legal and advisory fees		Impairment of debt purchased		Total
International Social Expression Products	$	3,981	$	16,514	$	—	$	—	$	20,495
Unallocated		—		—		7,129		8,106		15,235

	$	3,981	$	16,514	$	7,129	$	8,106	$	35,730

The fair value of the consideration given has been allocated to the assets acquired and the liabilities assumed based upon their fair values at the date of acquisition. The following represents the final purchase price allocation:


Purchase price (in millions):
Credit bid	$	37.2
Effective settlement of pre-existing relationships with the legacy Clinton Cards business		6.4
Cash acquired		(0.6	)

	$	43.0

Allocation (in millions):
Inventory	$	5.5
Property, plant and equipment		18.4
Indefinite-lived intangible assets		22.5
Current liabilities assumed		(3.4	)

	$	43.0

The financial results of this acquisition are included in the Corporation’s consolidated results from the date of acquisition. Pro forma results of operations have not been presented because the effect of this acquisition was not deemed material at the date of acquisition. The acquired business is included in the Corporation’s Retail Operations segment.