|9 Months Ended|
Jun. 30, 2018
|Business Combinations [Abstract]|
On March 9, 2018, our Art Gun, LLC subsidiary purchased substantially all of the assets of Teeshirt Ink, Inc. d/b/a DTG2Go, a premium provider of direct-to-garment digital printed products. In connection with the transaction, we changed the name of Art Gun, LLC to DTG2Go, LLC and now market the consolidated digital print business under the DTG2Go name. We believe the DTG2Go acquisition makes us a clear leader in the direct-to-garment digital print and fulfillment marketplace and accelerated our geographic expansion plans for this business. The integrated business operates from two locations in Florida and a location in Nevada serving the western United States. In addition, in May we opened a facililty on our Soffe campus in North Carolina to service the northeastern region. With this acquisition, DTG2Go nearly doubled its revenue and capacity, broadened its product line into posters and stickers, and further enhanced service levels with quicker delivery capabilities in the United States and to over 100 countries worldwide.
We have included the financial results of the acquired entity, since the date of the acquisition, in our basics segment. It is not practicable to disclose the revenue and income of DTG2Go since the acquisition date, as we have integrated the DTG2Go and Art Gun businesses together during the current period.
The DTG2Go acquisition purchase price consisted of $16.4 million in cash and additional payments contingent on the combined business’s achievement of certain performance targets related to sales and earnings before interest, taxes, depreciation and amortization ("EBITDA") for the period from April 1, 2018, through September 29, 2018, as well as for our fiscal years 2019, 2020, 2021 and 2022. At June 30, 2018, we had $5.9 million provisionally accrued in contingent consideration. The cash portion of the purchase price included: (i) a payment at closing of $11.4 million, less the amount of any indebtedness of the sellers with respect to any assets included in the transaction, and (ii) two additional payments of $2.5 million, with the first payment subject to post-closing net working capital adjustments, due July 1, 2018, and the second due September 9, 2018. We have provisionally calculated the post–closing working capital adjustment of $0.3 million and recorded this amount in the interim Condensed Consolidated Balance Sheets as of June 30, 2018. The below table represents the consideration paid:
The preliminary allocation of consideration to the assets and liabilities are noted in the table below as well as the measurement-period adjustments recorded in our Condensed Consolidated Balance Sheets as of June 30, 2018. The adjustments are related to additional information obtained on conditions that existed at the acquisition date. The Company is in the process of finalizing its valuations of the intangible assets acquired, assets held for sale and liabilities; thus, the preliminary measurements of intangible assets, goodwill, assets held for sale and liabilities are subject to change. The total amount of goodwill is expected to be deductible for tax purposes.
We accounted for the DTG2Go acquisition pursuant to ASC 805, Business Combinations, with the purchase price allocated provisionally based upon fair value. Assets held for sale include property, plant, and equipment of $5.0 million that were acquired as part of the DTG2Go acquisition. Subsequently, a capital lease arrangement was entered into to finance the purchase of the equipment. The capital lease is for $5.0 million and the lease term is thirty-six months. No gain or loss was recorded in conjunction with this lease transaction.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://www.xbrl.org/2003/role/presentationRef