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Hydro Flask Acquisition | 12 Months Ended
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Feb. 28, 2019
Business Combinations [Abstract] |
Hydro Flask Acquisition | Hydro Flask Acquisition On March 18, 2016, we completed the acquisition of all membership units of Steel Technology, LLC, doing business as Hydro Flask. Hydro Flask is a leading designer, distributor and marketer of high performance insulated stainless steel food and beverage containers for active lifestyles. The aggregate purchase price for the transaction was approximately $209.3 million, net of cash acquired. Significant assets acquired include receivables, inventory, prepaid expenses, property and equipment, trade names, technology assets, customer relationships, and goodwill. We accounted for the acquisition as the purchase of a business and recorded the excess purchase price as goodwill, which is not expected to be deductible for income tax purposes. We completed our analysis of the economic lives of the assets acquired and determined the appropriate fair values of the acquired assets. We assigned $59.0 million to trade names with indefinite economic lives. We assigned $10.3 million to technology assets and $14.2 million to customer relationships and are amortizing these assets over expected lives of 10 and 24 years, respectively. For technology assets, we considered the average life cycle of the underlying products, which range from 7 -15 years, and the overall average life of the associated patent portfolio. For the customer relationships, we used historical attrition rates to assign an expected life. The following schedule presents the net assets of Hydro Flask recorded at the acquisition date of March 18, 2016, excluding cash acquired:
(in thousands) |
Assets: |  |
Receivables | $ | 7,955 |
Inventory | 6,243 |
Prepaid expenses and other current assets | 336 |
Property and equipment | 1,108 |
Goodwill | 116,053 |
Trade names - indefinite | 59,000 |
Technology assets - definite | 10,300 |
Customer relationships - definite | 14,200 |
Subtotal - assets | 215,195 |
Liabilities: |  |
Accounts payable | 2,275 |
Accrued expenses | 3,662 |
Subtotal - liabilities | 5,937 |
Net assets recorded | $ | 209,258 |
The fair values of the above assets acquired and liabilities assumed were estimated by applying income and market approaches. Key assumptions include various discount rates based upon a 12.3% weighted average cost of capital; royalty rates used in the determination of trade names and technology asset values of 6% and 2%, respectively; and a customer attrition rate used in the determination of customer relationship values of approximately 4% per year. The impact of the Hydro Flask acquisition on our consolidated statements of income for fiscal 2017 is as follows:
March 18, 2016 (acquisition date) through February 28, 2017 (in thousands, except earnings per share data) | Fiscal Year Ended February 28, 2017
Sales revenue, net | $ | 107,005 |
Net income | 27,902 |
Earnings per share: |
Basic | $ | 1.01 |
Diluted | $ | 1.00 |
The following supplemental unaudited pro forma information presents our financial results as if the Hydro Flask acquisition had occurred as of the beginning of the fiscal periods presented. This supplemental pro forma information has been prepared for comparative purposes and would not necessarily indicate what may have occurred if the acquisition had been completed on March 1, 2015, and this information is not intended to be indicative of future results. HYDRO FLASK - PRO FORMA IMPACT ON CONSOLIDATED STATEMENTS OF INCOME (unaudited)
As if the acquisition had been completed on March 1, 2015 (in thousands, except earnings per share data) | Fiscal Years Ended the Last Day of February
2017 |  | 2016
Sales revenue, net | $ | 1,410,171 |  |  | $ | 1,450,530 |
Net income | 144,947 |  |  | 105,669 |
Earnings per share: |  |  |  |  |
Basic | $ | 5.27 |  |  | $ | 3.74 |
Diluted | $ | 5.20 |  |  | $ | 3.68 |

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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 http://asc.fasb.org/topic&trid=2303972 + Details
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