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Note 7 - Acquisition
 3 Months Ended
Jun. 29, 2025
Notes to Financial Statements  
Business Combination [Text Block]

Note 7 – Acquisition

 

On July 19, 2024 (the “Closing Date”), NoJo Baby & Kids, Inc., a wholly-owned subsidiary of the Company acquired substantially all of the assets, and assumed certain specified liabilities, of Baby Boom Consumer Products, Inc. (“Baby Boom”) (the “Acquisition”), for a purchase price of $18.0 million in cash, subject to a working capital adjustment. The Acquisition was funded by the Company using the proceeds of an $8.0 million term loan from The CIT Group/Commercial Services, Inc. (“CIT”) and additional borrowings under the Company’s revolving line of credit with CIT.

 

The Acquisition has been accounted for in accordance with FASB ASC Topic 805, Business Combinations. The identifiable assets acquired were recorded at their estimated fair value, which has been preliminarily determined based on available information and the use of multiple valuation approaches. The estimated useful lives of the identifiable intangible assets acquired were determined based upon the remaining time that these assets are expected to directly or indirectly contribute to the future cash flow of the Company. The Company considers the measurement period to have ended as of June 25, 2025 and further considers all measurement period adjustments to be final.

 

The acquisition cost paid on the Closing Date amounted to $16.3 million, which included net working capital adjustment. The following table represents the Company’s allocation of the acquisition cost (in thousands) to the identifiable assets acquired and the liabilities assumed based on their respective estimated fair values as of the Closing Date. The excess of the acquisition cost over the estimated fair value of the identifiable net assets acquired is reflected as goodwill.

 

Tangible assets:

    

Accounts receivable

 $3,764 

Inventories

  1,989 

Prepaid expenses and other current assets

  354 

Total tangible assets

  6,107 

Amortizable intangible assets:

    

Tradename

  350 

Licensing relationships

  4,600 

Total amortizable intangible assets

  4,950 

Goodwill

  5,840 

Total acquired assets

  16,897 
     

Liabilities assumed:

    

Accounts payable

  601 

Total liabilities assumed

  601 

Net acquisition cost

 $16,296 

 

Based upon the initial allocation of the acquisition cost, the Company recognized $5.3 million of goodwill as of the Closing Date, the entirety of which was assigned to the reporting unit of the Company that produces and markets infant and toddler bedding and diaper bags, and the entirety of which is expected to be deductible for income tax purposes. The goodwill recognized primarily consists of synergies expected from combining operations of Baby Boom and the Company and intangible assets acquired that do not qualify for separate recognition. The following table represents adjustments made to the amount of goodwill during the fiscal year ended March 30, 2025 (in thousands):

 

Amount of goodwill recognized based upon the preliminary allocation of the acquisition cost

 $5,319 

Adjustments made during the fiscal year ended March 30, 2025:

    

Increase to pre-acquisition accounts payable

  10 

Decrease to tradename as of the Closing Date

  70 

Decrease to licensing relationships as of the Closing Date

  500 

Settlement of working capital adjustment

  (59)

Net adjustments made during the fiscal year ended March 30, 2025

  521 
     

Amount of goodwill recognized as of March 30, 2025

 $5,840 

 

The assets acquired in the Acquisition generated net sales of $2.1 million of bedding and diaper bag products for the three-month period ended June 29, 2025. Amortization expense associated with the acquired amortizable intangible assets was $88,000 for the three months ended June 29, 2025, which is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of operations. Amortization is calculated using the straight-line method over the estimated useful lives of the assets, which are 15 years for the tradename, 14 years for the customer and licensing relationships and 14 years on a weighted-average basis for the grouping taken together.