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Acquisitions | 3 Months Ended
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Aug. 31, 2024
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | ACQUISITIONS 9 Story Acquisition On June 20, 2024, the Company completed the acquisition of 100% of the economic interests in the form of non-voting shares and 25% of the voting shares of 9 Story Media Group Inc. ("9 Story"), a leading independent creator, producer and distributor of premium children’s content based in Toronto, Canada, with studios or offices in New York, United States, Dublin, Ireland and Bali, Indonesia. The aggregate purchase price was $193.9, subject to further adjustment based on the final determination of purchase price adjustments, and was funded through borrowings under the U.S. credit agreement incurred during the first quarter of fiscal 2025. The acquisition of 9 Story further enhances the Company's development, production and licensing interests, expanding opportunities to leverage its brand and best-selling publishing and global children's franchises across print, screen and merchandising. Pursuant to ASC Topic 810, Consolidation, 9 Story was determined to be a variable interest entity (VIE) and the Company was determined to be its primary beneficiary and therefore obtained control over 9 Story. Accordingly, 9 Story has been consolidated into the Company's financial results. 9 Story met the definition of a business pursuant to ASC 805, Business Combinations, and the acquisition was accounted for as a business combination under the acquisition method of accounting. The Company estimated the preliminary fair value of acquired assets and liabilities as of the date of acquisition based on currently available information. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period. The following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and liabilities assumed at the date of acquisition:
Cash and cash equivalents | $ | 17.5 |  |  |  |  |  |  |  |
Accounts receivable |  | 15.9 |  |  |  |  |  |  |  |
Investment in film and television programs |  | 42.9 |  |  |  |  |  |  |  |
Property, plant and equipment (1) |  | 6.0 |  |  |  |  |  |  |  |
Operating lease right-of-use assets |  | 5.8 |  |  |  |  |  |  |  |
Other Intangible assets: |  |  |  |  |  |  |  |  |
Existing content/IP |  | 16.0 |  |  |  |  |  |  |  |
Customer contracts/relationships |  | 51.5 |  |  |  |  |  |  |  |
Tradenames |  | 16.5 |  |  |  |  |  |  |  |
Internally developed software |  | 1.3 |  |  |  |  |  |  |  |
Other assets (2) |  | 35.9 |  |  |  |  |  |  |  |
Total assets acquired |  | 209.3 |  |  |  |  |  |  |  |
Accounts payable |  | 2.3 |  |  |  |  |  |  |  |
Other accrued expenses |  | 16.4 |  |  |  |  |  |  |  |
Deferred revenue |  | 10.9 |  |  |  |  |  |  |  |
Film related obligations |  | 34.9 |  |  |  |  |  |  |  |
Operating lease liabilities |  | 7.8 |  |  |  |  |  |  |  |
Other liabilities |  | 13.2 |  |  |  |  |  |  |  |
Total liabilities assumed |  | 85.5 |  |  |  |  |  |  |  |
Preliminary fair value of net assets acquired |  | 123.8 |  |  |  |  |  |  |  |
Goodwill |  | 70.1 |  |  |  |  |  |  |  |
Preliminary purchase price consideration | $ | 193.9 |  |  |  |  |  |  |  |
(1) Includes a preliminary step-up adjustment of $1.8. (2) Includes $31.9 of receivables related to government tax incentives. The intangible assets acquired include intellectual property related to 9 Story's existing and recognized program titles, customer contracts/relationships related to licensing, distribution and service arrangements, the trade names associated with 9 Story and Brown Bag Films, its animation studio, and internally developed software. The intellectual property and customer contracts/relationships were valued using the multi-period excess earnings valuation method and are being amortized over 10 years, with the exception of contracts/relationships for service arrangements which are being amortized over 5 years. The trade names were valued using the relief-from-royalty valuation method and are being amortized over 10 years. The internally developed software was valued using the replacement cost method and is being amortized over 3 years. The Company classified these fair value measurements as Level 3 due to the significant unobservable inputs used in the analyses, such as internally-developed discounted cash flow forecasts. The difference between the purchase price over the net identifiable tangible and intangible assets acquired was allocated to goodwill, which is not deductible for tax purposes. The goodwill balance is primarily attributable to the expected synergies from the business combination and acquired workforce. The goodwill and intangible assets acquired were allocated to the Entertainment segment. The financial results of 9 Story, since the date of acquisition, were included in the Company's Condensed Consolidated Financial Statements as of August 31, 2024. 9 Story contributed total revenue of $16.0 and net income of $0.1 from the date of acquisition on June 20, 2024 through August 31, 2024. The operations of 9 Story are reported in the Entertainment segment. The following table summarizes the unaudited pro-forma consolidated results of operations for the three months ended August 31, 2024 and 2023 as if the acquisition had occurred on June 1, 2023, the beginning of fiscal 2024:
| Three months ended |
| August 31, |
| 2024 | 2023 |  |
Revenues | $ | 242.9 |  |  | $ | 248.3 |  |  |  |  |  |  |  |
Net income (loss) |  | (64.3) |  |  |  | (78.9) |  |  |  |  |  |  |  |
The unaudited pro-forma consolidated results above are based on the historical financial statements of the Company and 9 Story and are not necessarily indicative of the results of operations that would have been achieved if the acquisition was completed at the beginning of fiscal 2024 and are not indicative of the future operating results of the combined entities. The financial information for 9 Story prior to the acquisition includes certain adjustments to 9 Story's historical consolidated financial statements to align with U.S. GAAP and the Company's accounting policies. The pro-forma consolidated results of operations also include the effects of purchase accounting adjustments, including amortization charges related to the finite-lived intangible assets acquired, fair value adjustments relating to leases and fixed assets, and the related tax effects assuming that the business combination occurred on June 1, 2023. The Company incurred acquisition‑related costs of $1.7 which were included in Selling, general and administrative costs in the Condensed Consolidated Statement of Operations for the three months ended August 31, 2024. Purchase of Noncontrolling Interest On June 1, 2023, the Company acquired the remaining shares of Make Believe Ideas Limited, a UK-based children's book publishing company for $2.1, increasing the Company's total ownership from 95.0% to 100%. The acquisition was accounted for as an equity transaction as there was no change in control. The carrying value of the noncontrolling interest at the acquisition date was $1.6. The difference between the fair value of consideration paid and the carrying value was recognized as an adjustment to Additional paid-in capital of $0.5.

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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://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//805/tableOfContent + Details
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