Acquisitions

12 Months Ended

Feb. 26, 2021

ACQUISITIONS

Orangebox

In 2019, we acquired Orangebox, a manufacturer of task seating, architectural pods, privacy solutions and collaborative furniture based in the U.K. The transaction included the purchase of all of the outstanding capital stock of Orangebox for $78.9 (or £60.0) less an adjustment for working capital of $0.5 in an all-cash transaction. Up to an additional $3.9 (or £3.0) is payable to one of the sellers over three years, contingent upon the achievement of certain business performance obligations. The acquisition was funded by borrowings under our global committed bank facility. The goodwill resulting from the acquisition relates to the expected ability to provide customers with a broader range of furniture designed to boost collaboration at work and provide us with additional capability to develop innovative products.

Tangible assets and liabilities of Orangebox were valued as of the acquisition date using a market analysis and intangible assets were valued using a discounted cash flow analysis, which represents a Level 3 measurement. On the acquisition date, we recorded $42.2 related to identifiable intangible assets, $23.4 related to goodwill and $16.7 related to tangible assets. The tangible assets mainly consisted of working capital (primarily accounts receivable, inventory and current liabilities), property, plant and equipment (primarily the land, building and equipment of two manufacturing locations in the U.K.) and deferred tax liabilities. Goodwill was recorded in EMEA and the Americas segments in the amounts of $18.8 and $4.6, respectively. The goodwill is not deductible for U.K. or U.S. income tax purposes. In 2021, we recorded a goodwill impairment charge related to Orangebox U.K. See Note 11 for additional information. Intangible assets are principally related to dealer relationships, the Orangebox trade name and internally-developed know-how and designs, which are being amortized over periods ranging between 9 to 11 years from the date of the acquisition. The purchase price allocation for the Orangebox acquisition was completed during 2020.

The following table summarizes the acquired identified intangible assets and the respective fair value and useful life of each asset at the date of acquisition:


Other Intangible Assets	Weighted Average Useful Life (Years)	Fair Value

Dealer relationships	10.9	$	23.0
Trademark	9.0	13.2
Know-how/designs	9.0	5.0
Other	0.2	1.0
		$	42.2

The fair value of the acquired intangible assets will be amortized on a straight-line basis over the remaining useful lives. The estimated amortization expense for the next five years is as follows:


Fiscal Year Ending in February	Amount
2022	$	4.1
2023	4.1
2024	4.1
2025	4.2
2026	4.1
	$	20.6

Smith System

In 2019, we acquired Smith System, a Texas-based manufacturer of desking, seating and storage for the pre-K-12 education market. The transaction included the purchase of all of the outstanding capital stock of Smith System for $140.0, payable in cash, plus a net adjustment for working capital of $8.4. In addition, we funded $5.0 to a third-party escrow account, which was to be paid to the seller at the end of two years after the sale based on continued employment. We paid this amount to the seller in 2021. The acquisition was funded through a combination of domestic cash on-hand and short-term borrowings under our global credit facility.

Smith System is an industry leader in the U.S. pre-K-12 education market. The acquisition is expected to advance our growth strategy in the education and office markets particularly as it relates to learning environments and collaborative spaces. The goodwill resulting from the acquisition is primarily related to the growth potential of Smith System as we offer their products through our distribution network.

Tangible assets and liabilities of Smith System were valued as of the acquisition date using a market analysis and intangible assets were valued using a discounted cash flow analysis, which represents a Level 3 measurement. On the acquisition date, we recorded $44.1 related to identifiable intangible assets, $79.3 related to goodwill and $25.0 related to tangible assets, mainly consisting of working capital items such as accounts receivable, inventory and current liabilities. The entire amount recorded to goodwill is deductible for U.S. income tax purposes and is recorded in the Americas segment. Intangible assets are principally related to internally-developed know-how and designs, dealer relationships and the Smith System trade name, which are being amortized over periods ranging between 9 to 11 years from the date of the acquisition. The purchase price allocation for the Smith System acquisition was completed during 2020.

The following table summarizes the acquired identified intangible assets and the respective fair value and useful life of each asset at the date of acquisition:


Other Intangible Assets	Weighted Average Useful Life (Years)	Fair Value

Know-how/designs	9.0	$	16.0
Dealer relationships	11.0	12.0
Trademark	9.0	12.0
Other	0.9	4.1
		$	44.1

The fair value of the acquired intangible assets will be amortized on a straight-line basis over the remaining useful lives. The estimated amortization expense for the next five years is as follows:


Fiscal Year Ending in February	Amount
2022	$	4.2
2023	4.2
2024	4.2
2025	4.3
2026	4.2
	$	21.1