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KARL LAGERFELD ACQUISITION | 3 Months Ended
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Apr. 30, 2023
KARL LAGERFELD ACQUISITION [Abstract] |
KARL LAGERFELD ACQUISITION | NOTE 6 – KARL LAGERFELD ACQUISITION ​ On April 29, 2022, the Company entered into a share purchase agreement (the “Purchase Agreement”) with a group of investors pursuant to which the Company agreed to acquire, on the terms set forth and subject to the conditions set forth in the Purchase Agreement, the remaining 81% interest in KLH that it did not already own, for an aggregate consideration of €193.4 million (approximately $207.6 million) in cash, after taking into account certain adjustments. The acquisition closed on May 31, 2022. The Company funded the purchase price from cash on hand. ​ On May 31, 2022, the effective date of the acquisition, the Company’s previously held 19% investment in KLH and 49% investment in KLNA were remeasured at fair value using a market approach based on the purchase price of the acquisition and a discount for lack of control related to the Company’s previously held minority investment in KLH. As a result of this remeasurement, a non-cash gain of $27.1 million was recorded as of the effective date of the acquisition. ​ The addition of KLH to the Company’s portfolio of owned brands advances several of its strategic initiatives, including increasing its direct ownership of brands and their licensing opportunities and further diversifying its global presence. This acquisition offers additional opportunities to expand the Company’s international growth by further developing its European-based brands, which also include Vilebrequin and Sonia Rykiel. The Company believes that KLH’s existing digital channel presence provides an opportunity for the Company to enhance its omni-channel business and further accelerate its digital initiatives. ​ Purchase Price Consideration ​ The purchase price of $207.6 million, after taking into account certain adjustments, was paid from cash on hand. The purchase price has been revised to include adjustments in accordance with the Purchase Agreement. ​ The initial purchase price and the valuation of the prior minority ownership for the acquisition of KLH is as follows (in thousands): ​
​ | ​ | ​ | ​
Cash disbursed for the acquisition of KLH | ​ | $ | 168,592
Plus: cash acquired | ​ | ​ | 38,499
Plus: aggregate adjustments to purchase price | ​ | ​ | 516
Initial purchase price | ​ | ​ | 207,607
Plus: fair value of prior minority ownership | ​ | ​ | 102,858
Total consideration | ​ | $ | 310,465
​ Allocation of the Purchase Price Consideration ​ The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition: ​
​ | ​ | ​ | ​
(In thousands) | ​ | ​ | ​
Cash and cash equivalents | ​ | $ | 38,499
Accounts receivable, net | ​ | ​ | 28,449
Inventories | ​ | ​ | 33,489
Prepaid income taxes | ​ | ​ | 1,100
Prepaid expenses and other current assets | ​ | ​ | 3,347
Property, plant and equipment, net | ​ | ​ | 11,545
Operating lease assets | ​ | ​ | 55,753
Goodwill | ​ | ​ | 84,336
Trademarks | ​ | ​ | 178,823
Customer relationships | ​ | ​ | 4,294
Deferred income taxes | ​ | ​ | 5,131
Other long-term assets | ​ | ​ | 2,237
Total assets acquired | ​ | $ | 447,003
Notes payable | ​ | ​ | 3,606
Accounts payable | ​ | ​ | 9,175
Accrued expenses | ​ | ​ | 15,261
Operating lease liabilities | ​ | ​ | 58,942
Income taxes payable | ​ | ​ | 2,099
Deferred income taxes | ​ | ​ | 42,222
Other long-term liabilities | ​ | ​ | 5,233
Total liabilities assumed | ​ | $ | 136,538
Total fair value of acquisition consideration | ​ | $ | 310,465
​ During the year ended January 31, 2023, the Company recorded adjustments to the fair values of assets acquired and liabilities assumed at the date of acquisition based on additional information obtained. The Company recorded an additional $36.9 million in both total assets and total liabilities, primarily related to goodwill, deferred tax assets and liabilities, operating lease assets, inventories, accounts receivable, net, accounts payable, customer relationships and operating lease liabilities. ​ The Company recognized goodwill of approximately $84.3 million in connection with the acquisition of KLH. The goodwill was assigned to the Company’s wholesale operations reporting unit. The Company intends to make an election under Internal Revenue Code Section 338(g) to amortize the total goodwill and intangible assets over a 15 year period for income tax purposes in the United States. ​ The fair values assigned to identifiable intangible assets acquired were based on assumptions and estimates made by management using unobservable inputs reflecting the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability based on the best information available. The fair values of the trademarks were determined using the relief from royalty method and the fair value of the customer relationships were determined using an income approach. The Company classifies these intangibles as Level 3 fair value measurements. Identifiable intangible assets acquired include the following (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Weighted Average
​ | ​ | Fair Value | ​ | Amortization Period
Trademarks | ​ | $ | 178,823 | ​ | ​ | —
Customer relationships | ​ | ​ | 4,294 | ​ | ​ | 8
​ | ​ | $ | 183,117 | ​ | ​ | —
​ The Company recognized approximately $5.6 million of acquisition related costs that were expensed in fiscal 2023 and fiscal 2022. The fiscal 2023 and fiscal 2022 acquisition and integration costs were recorded within selling, general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive income for the fiscal years ended January 31, 2023 and 2022, respectively. ​ The estimates of fair value of assets acquired and liabilities assumed are preliminary and subject to change based on completion of certain working capital adjustments and the tax implications of the Company’s purchase price allocation. The purchase price allocation for acquired companies can be modified for up to one year from the date of acquisition. ​

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- Definition 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). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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