Acquisitions

12 Months Ended

Feb. 28, 2022

Note 7 - Acquisitions

Osprey

On December 29, 2021, we completed the acquisition of Osprey, a longtime U.S. leader in technical and everyday packs. Osprey is highly respected in the outdoor industry with a product lineup that includes a wide range of backpacks and daypacks for hiking, mountaineering, skiing, climbing, mountain biking, trail running, commuting, and school, as well as rugged adventure travel packs, wheeled luggage, and travel accessories. The total purchase consideration, net of cash acquired, was $410.9 million in cash, including the impact of a preliminary $9.1 million favorable customary closing net working capital adjustment. The acquisition was funded with cash on hand and borrowings under our existing revolving credit facility. We incurred pre-tax acquisition-related expenses of $2.4 million during fiscal 2022, which were recognized in SG&A within our consolidated statements of income.

We accounted for the acquisition as a purchase of a business and recorded the excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed as goodwill. The goodwill recognized is attributable primarily to expected synergies including leveraging our information systems, shared service capabilities and international footprint. The goodwill is not expected to be deductible for income tax purposes. We have provisionally determined the appropriate fair values of the acquired intangible assets and completed our analysis of the economic lives of the assets acquired. We assigned $170.0 million to trade names which were determined to have an indefinite life. We assigned $22.0 million to customer relationships and are amortizing over a 4.5 year expected life, based on historical attrition rates.

The following table presents the preliminary net assets recorded upon acquisition of Osprey at December 29, 2021:


(in thousands)
Assets:

Receivables	$	11,758
Inventory	30,056
Prepaid expenses and other current assets	3,699
Income taxes receivable	4,197
Property and equipment	11,386
Goodwill	208,972
Trade names - indefinite	170,000
Customer relationships - definite	22,000
Operating lease assets	2,155
Total assets	464,223
Liabilities:
Accounts payable	4,487
Accrued expenses and other current liabilities	7,345
Lease liabilities, non-current	1,719
Deferred tax liabilities, net	39,792
Total liabilities	53,343
Net assets recorded	$	410,880

The fair value of receivables acquired is $11.8 million, with the gross contractual amount being $11.9 million and $0.1 million expected to be uncollectible.

The impact of the acquisition of Osprey on our consolidated statements of income for fiscal 2022 is as follows:


December 29, 2021 (acquisition date) through February 28, 2022 (in thousands, except earnings per share data)	Fiscal Year Ended February 28, 2022
Sales revenue, net	$	24,373
Net income	696

EPS:
Basic	$	0.03
Diluted	$	0.03

The following supplemental unaudited pro forma information presents our financial results as if the acquisition of Osprey had occurred on March 1, 2020. 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, 2020, 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)	2022		2021
Sales revenue, net	$	2,361,906	$	2,224,196
Net income	202,507		259,311

EPS:
Basic	$	8.39	$	10.38
Diluted	$	8.30	$	10.29

These amounts have been calculated after applying our accounting policies and adjusting the results of Osprey to reflect the effect of definite-lived intangible assets recognized as part of the business combination on amortization expense as if the acquisition had occurred on March 1, 2020.

Drybar Products

On January 23, 2020, we completed the acquisition of Drybar Products for approximately $255.9 million in cash. The purchase price was funded by borrowings under the Company's revolving credit agreement. We accounted for the acquisition as a purchase of a business and recorded the excess of the purchase price over the estimated fair value of the assets acquired and liabilities assumed as goodwill. Acquisition-related expenses incurred during fiscal 2020 were approximately $2.5 million before tax.

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.

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 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
Net income	1,483

EPS:
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:


(in thousands, except earnings per share data)	Fiscal Year Ended February 29, 2020
Sales revenue, net	$	1,773,592
Net income	162,114

EPS:
Basic	$	6.45
Diluted	$	6.40