Acquisition Of Boston Proper

9 Months Ended

Oct. 29, 2011

Acquisition Of Boston Proper [Abstract]

Acquisition Of Boston Proper

Note 3. Acquisition of Boston Proper

On September 19, 2011, we acquired all of the outstanding equity of Boston Proper, Inc. ("Boston Proper"), a privately held direct-to-consumer ("DTC") retailer of distinctive women's apparel and accessories. Total cash consideration was approximately $213 million, $205 million for the common stock, stock options and certain transaction related expenses and approximately $8 million for incremental working capital generated after the signing of the merger agreement and prior to closing of the transaction. This incremental working capital is subject to adjustment by December 2, 2011. The cash paid at closing was funded by available cash balances. An escrow in the aggregate amount of $15 million of the merger consideration was established at the closing to secure the indemnification and other obligations of Boston Proper shareholders and certain covenants under the merger agreement.

We incurred certain acquisition and integration costs totaling approximately $5.0 million, consisting of professional service fees and employee-related benefit costs, which are reflected as a separate line item on the accompanying consolidated statements of income. We expect to incur additional acquisition and integration costs in future periods as we integrate the Boston Proper business into our corporate structure.

We believe that the acquisition provides us with the potential to grow both our DTC business and market share. The results of operations for Boston Proper are included in the consolidated statements of income beginning September 20, 2011. The impact of the acquisition to our results of operations, as if the acquisition had been completed as of the beginning of the periods presented, is not significant.

We allocated the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. None of the goodwill acquired is deductible for tax purposes.

Intangible assets not subject to amortization consist of $51.2 million related to the Boston Proper tradename. Intangible assets subject to amortization consist of $43.6 million in customer relationships and are being amortized, on a straight-line basis, over a period of 10 years. Amortization expense for both the thirteen and thirty-nine weeks ended October 29, 2011 was approximately $0.5 million. For fiscal 2011, we expect to record total amortization expense of approximately $1.6 million. For fiscal years 2012 through 2016, we expect to record annual amortization expense of approximately $4.4 million in each fiscal year.

The purchase price was allocated as follows as of September 19, 2011:

Current assets	$    22,379
Current liabilities	(12,737)
Non-current assets
Goodwill	142,178
Intangibles- tradename	51,200
Intangibles-customer relationships	43,580
Other	1,874
Non-current deferred tax liabilities	(35,741)
Total purchase price	$ 212,733

The allocation of the purchase price to assets acquired and liabilities assumed is preliminary pending finalization of management's analysis.