Acquisition Of Ninetyfive 5 LLC

9 Months Ended

Jun. 01, 2013

Acquisition Of Ninetyfive 5 LLC [Abstract]

Acquisition Of Ninetyfive 5 LLC

NOTE 2 – ACQUISITION OF NINETYFIVE 5 LLC

On March 11, 2013 we acquired substantially all of the assets of NinetyFive 5 LLC (NinetyFive 5).  NinetyFive 5 provides sales success training services that complement our existing sales performance curriculum and we expect NinetyFive 5 to become a key component of our Sale Performance Practice in future periods.  The purchase price was $4.2 million in cash, payable in four installments through December 6, 2013, plus contingent earnout payments up to a maximum of $8.5million, based on cumulative earnings before interest, income taxes, depreciation, and amortization (EBITDA) as set forth in the purchase agreement. 

The following table summarizes the preliminary estimated fair values of the assets acquired, liabilities assumed, and separately identifiable intangible assets at the acquisition date (in thousands):

Computer equipment	$	14
Intangible assets		3,989
Goodwill		4,717
Loss on content license		951
Purchase price payable (accrued liabilities)		(3,475)
Contigent earn-out liability (long-term liabilities)		(4,100)
Gain on equity interest		(971)
Cash paid	$	1,125

The final purchase price allocation is subject to further analysis of various items, including the fair value calculations related to identified intangible assets, contingent acquisition payments, and gains and losses associated with our ownership interest and previously existing contractual arrangements.  To date, we have incurred $0.1 million of acquisition costs, which were recorded as selling, general, and administrative expenses in our consolidated income statements.  The acquisition of NinetyFive 5 had an immaterial impact on our consolidated income statements for the quarter and three quarters ended June 1, 2013 and the acquisition of NinetyFive 5 was determined to be insignificant as defined by Regulation S-X.  NinetyFive 5 had total sales of $8.7million (unaudited) for the year ended December 31, 2012.

Prior to the acquisition date, NinetyFive 5 operated under an agreement that granted them a worldwide, non-exclusive, and royalty-free license to use specifiedCompanycontent.  As consideration for this license agreement, we obtained an equity interest in NinetyFive 5 and we owned 10.5 percent of NinetyFive 5 at the acquisition date.  We were also entitled to receive ownership distributions, which were immaterial to our consolidated income statements in the periods received.  In connection with the acquisition of NinetyFive 5, and in accordance with Accounting Standards Codification 805, Business Combinations,  we revalued our ownership interest to fair value at the acquisition date and determined the fair value of the reacquired license rights.  In accordance with the preliminary valuation of our ownership interest, we recognized a $1.0 million gain from the purchase transaction for the amount by which the fair value of our equity interest exceeded its carrying value.  We then considered whether the reacquired license rights were favorable or unfavorable to the terms of a current market transaction to determine the need to recognize a settlement gain or loss.  Based on the preliminary valuation of the reacquired license rights, we recognized a $1.0million settlementloss.  The combination of the preliminary gain from our ownership interest in NinetyFive 5 and the preliminary loss from the reacquired license rights resulted in an insignificant gain, which was recorded as other income on our consolidated income statements for the quarter and three quarters ended June 1, 2013.

Based on the preliminary purchase allocation, acquired intangible assets are being amortized over a weighted average life of four years and are comprised of the following (in thousands).

Category of			Estimated Useful
Intangible Asset	Amount		Life
Internally developed software	$	2,049	3 years
Customer relationships		1,574	5 years
Tradename		242	5 years
Non-compete agreements		124	5 years
	$	3,989

The goodwill generated by the transaction is primarily attributable to the organization, methodologies, and related processes developed by NinetyFive 5 that complement our existing sales performance curriculum.  We expect the acquisition of NinetyFive 5 and its integration into our Sales Performance Practice will be highly synergistic for our clients.  All of the goodwill generated from the acquisition of NinetyFive 5 is anticipated to be deductible for income tax purposes.  A reconciliation of our consolidated goodwill from August 31, 2012 to June 1, 2013 is as follows (in thousands).

		Goodwill Amount
Balance at August 31, 2012	$	9,172
Acquisition of NinetyFive 5		4,717
CoveyLink acquisition contingent
earnout payment		2,235
Impairments		-
Balance at June 1, 2013	$	16,124