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Acquisition of Drybar Products | 12 Months Ended
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Feb. 28, 2021
Business Combinations [Abstract] |
Acquisition of Drybar Products | Note 8 - Acquisition of Drybar Products On January 23, 2020, we completed the acquisition of Drybar Products LLC (“Drybar Products”) for approximately $255.9 million in cash. Acquisition-related expenses incurred during fiscal 2020 were approximately $2.5 million before tax. The purchase price was funded by borrowings under the Company's revolving credit agreement. Drybar is an innovative, trend setting prestige hair care and styling brand in the multibillion-dollar beauty industry. As part of the transaction, we granted a worldwide license to Drybar Holdings LLC, which has subsequently been assumed by WellBiz Brands, Inc., as successor owner of Drybar blowout salons, to use the Drybar trademark in relation to the franchising and operation of Drybar salons. The salons exclusively use, promote, and sell Drybar products globally. We accounted for the acquisition as a purchase of a business and recorded the excess purchase price as goodwill. We completed our analysis of the economic lives of the assets acquired and determined the appropriate fair values of the acquired assets. We assigned $30.0 million to trade names and are amortizing over a 15 year expected life. We assigned $17.0 million to customer relationships and are amortizing over a 14.5 year expected life. We used historical attrition rates to assign the expected life. We assigned $10.0 million to a consulting agreement and $6.0 million to a non-compete provision, and we are amortizing these assets over expected lives of 5 and 10 years, respectively. The following table presents the net assets recorded upon acquisition of Drybar Products at January 23, 2020:
(in thousands) |
Assets: |
Receivables | $ | 7,710 |
Inventory | 16,603 |
Prepaid expenses and other current assets | 190 |
Property and equipment | 1,472 |
Goodwill | 172,933 |
Trade names - definite | 30,000 |
Other intangible assets - definite | 33,000 |
Subtotal - assets | 261,908 |
Liabilities: |
Accounts payable | 1,948 |
Accrued expenses | 4,099 |
Subtotal - liabilities | 6,047 |
Net assets recorded | $ | 255,861 |
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 12.6% weighted average cost of capital; royalty rates used in the determination of trade names and customer relationship asset values of 5.0% and 3.0%, respectively; and a customer attrition rate used in the determination of customer relationship values of 6.7% per year. The impact of the acquisition of Drybar Products on our consolidated statements of income for fiscal 2020 is as follows:
January 23, 2020 (acquisition date) through February 29, 2020 (in thousands, except earnings per share data) | Fiscal Year Ended February 29, 2020
Sales revenue, net | $ | 6,039 |
Income from continuing operations | 1,483 |
EPS from continuing operations: |
Basic | $ | 0.06 |
Diluted | $ | 0.06 |
The following supplemental unaudited pro forma information presents our financial results as if the acquisition of Drybar Products had occurred on March 1, 2018. This supplemental pro forma information has been prepared for comparative purposes and would not necessarily indicate what may have occurred as if the acquisition had been completed on March 1, 2018, and this information is not intended to be indicative of future results:
| Fiscal Years Ended the Last Day of February,
(in thousands, except earnings per share data) | 2020 |  | 2019
Sales revenue, net | $ | 1,773,592 |  |  | $ | 1,621,117 |
Income from continuing operations | 162,114 |  |  | 179,550 |
EPS from continuing operations: |  |  |
Basic | $ | 6.45 |  |  | $ | 6.89 |
Diluted | $ | 6.40 |  |  | $ | 6.83 |

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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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