Acquisitions and Goodwill

On March 29, 2012, GCPI SR LLC (“GCPI”) made a $10.0 million strategic investment in Running Specialty. The Company remained majority owner. GCPI has the right to “put” and the Company has the right to “call” after March 4, 2017, under certain circumstances, GCPI’s interest in Running Specialty at an agreed upon price approximating fair value. Also, as part of the transaction, GCPI issued to the Company a $4.0 million related-party promissory note (the “Promissory Note”), which is collateralized with GCPI’s interest in Running Specialty, due March 31, 2021 or earlier depending on certain stipulated events in the control of GCPI. The Promissory Note calls for interest payments based in part on a fixed rate and in part on participation in the value of other investments held by GCPI. The balance of the Promissory Note and related accrued interest was $4.1 million and $4.0 million at March 1, 2014 and March 2, 2013, respectively, and has been netted against the redeemable noncontrolling interest on the consolidated balance sheets.

The redeemable noncontrolling interest is classified as mezzanine equity and measured at the greater of estimated fair value at the end of each reporting period or the historical cost basis of the redeemable noncontrolling interest, net of the Promissory Note and related accrued interest and adjusted for cumulative earnings or loss allocations. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges against retained earnings, or in the absence of retained earnings, additional paid-in capital. As of March 1, 2014 and March 2, 2013 the redeemable noncontrolling interest was measured at historical cost basis. The loss allocations for 2014 and 2013 were $1.9 million and $2.3 million, respectively.

During 2014, the Company completed four individually immaterial acquisitions for total consideration of $13.0 million, net of cash acquired, which were funded through the Company’s existing cash. In addition to cash consideration, the transactions included aggregate contingent consideration with an estimated fair value of $0.5 million, which is included within other long-term liabilities. The Company determined the estimated fair value based on discounted cash flow analyses and estimates made by management. The entities acquired operated fifteen specialty running stores in Ohio, Kentucky, Indiana, Colorado and Virginia. In connection with these acquisitions, the Company recorded goodwill of $11.6 million during 2014. Goodwill is deductible for U.S. federal income tax purposes.

The Company allocated the aggregated preliminary purchase price based upon the tangible and intangible assets acquired, net of liabilities. The allocation of the preliminary purchase price for 2014 acquisitions is detailed below (in thousands):



	Allocation of Purchase Price
Goodwill	$	11,608
Tangible assets, net of liabilities	1,832
Contingent consideration	(450		)
Total purchase price	$	12,990

During 2013, the Company completed two individually immaterial acquisitions for total consideration of $4.2 million, net of cash acquired, which were funded through the Company’s existing cash. The Company determined the estimated fair value based on discounted cash flow analyses and estimates made by management. The entities acquired operated six specialty running shops in Texas and Virginia. In connection with these acquisitions, the Company recorded goodwill of $5.4 million during 2013.

The Company allocated the aggregated purchase price based upon the tangible and intangible assets acquired, net of liabilities. The allocation of the purchase price for 2013 acquisitions is detailed below (in thousands):



	Allocation of Purchase Price
Goodwill	$	5,385
Tangible assets, net of liabilities	299
Contingent consideration	(1,453		)
Total purchase price	$	4,231

The following table provides a reconciliation of the Company’s goodwill for each of the following years (in thousands):



	2014		2013
Beginning balance	$	13,888	$	8,503
Acquisitions	11,608		5,385
Other	112		—
Ending balance	$	25,608	$	13,888