Annual report pursuant to Section 13 and 15(d)

Acquisition

v2.4.0.6
Acquisition
 12 Months Ended
Dec. 31, 2011
Acquisition [Abstract]  
Acquisition

NOTE B – ACQUISITION

     On August 16, 2010, the Company indirectly acquired 100% of BabyCare Ltd., a limited liability company incorporated under the laws of the PRC, for the purchase price of $62,716, which consisted of $45,000 cash paid and $17,716 common stock issued (400,000 shares of USANA common stock at $44.29).

     BabyCare is a direct selling company in China that is principally engaged in developing, manufacturing and selling nutritional products for the entire family, with an emphasis on infant nutrition, through both a distributor sales force and a chain of retail centers. This acquisition was accomplished in the following simultaneous transactions. The Company acquired Pet Lane, Inc., a Delaware corporation ("Pet Lane"), which is the record owner of BabyCare in China, for a purchase price of $700. Simultaneously, the Company entered into and closed a share purchase agreement (the "Purchase Agreement") by and among the Company and the following parties: Pet Lane; Yaolan Ltd., an exempted company organized under the laws of the Cayman Islands ("Yaolan"); and BabyCare Holdings, Ltd., an exempted company organized under the laws of the Cayman Islands ("BabyCare Holdings"). Pursuant to the Purchase Agreement, the Company, through its acquisition entity Pet Lane, acquired all of the issued and outstanding shares of BabyCare Holdings (the "Shares") from Yaolan. Goodwill of $700 was recognized in connection with the acquisition of Pet Lane. BabyCare Holdings is the beneficial owner of BabyCare. As a result of its acquisition of Pet Lane and BabyCare Holdings, the Company, indirectly, has acquired both record and beneficial ownership of BabyCare.

     The acquisition was accounted for as a business combination and, as such, the results of operations for BabyCare have been included in the consolidated financial statements since the effective date of acquisition. This acquisition contributed $7,384 in net sales and a net loss of $1,154 for the year ended January 1, 2011. Unaudited supplemental pro forma information had the acquisition occurred at the beginning of each period is as follows:

    2009   2010
 
Net sales $ 451,353 $ 527,266
Net earnings   28,326   43,173

 

 

The assets acquired and liabilities assumed were recorded at estimated fair values as of the date of the acquisition.

The purchase price allocation for BabyCare is as follows:

  August 16,
2010
 
Assets Acquired and Liabilities Assumed      
Cash and cash equivalents $ 3,006  
Inventories   1,702  
Prepaid expenses and other current assets   4,663  
Property and equipment   1,517  
Goodwill   10,540  
Intangible assets   41,000  
Other assets   3,375  
Accounts payable   (2,552 )
Other current liabilities   (535 )
  $ 62,716  

 

     Goodwill of $10,540 was recognized for the excess of consideration transferred over the acquisition-date fair value of net assets acquired. In accordance with accounting standards governing the subsequent measurement of goodwill, goodwill will not be amortized, but will be tested at least annually for impairment. The fair value of intangible assets acquired in the amount of $41,000 was derived using various methodologies applied within the income approach. For further information on intangible assets, see Note G to these consolidated financial statements. For tax purposes, $52,323 of goodwill and other intangible assets will be deducted over a period of 15 years in computing the Company's United States tax obligation. The anticipated benefits associated with the acquired goodwill and other intangibles include facilitating our expansion and growth in China. The most significant intangible asset is a direct selling license held by BabyCare from the Chinese government to engage in direct selling activities in the Municipality of Beijing. This direct selling license allows BabyCare to engage non-employee distributors to sell their products away from fixed retail locations.

     The costs related to the acquisition of BabyCare totaled $1,992, which included; advisory, legal, accounting, valuation, and other professional fees. These costs were expensed as incurred in the periods in which services were received and recognized in the consolidated statements of earnings in Selling, General and Administrative expenses.