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Acquisitions | 3 Months Ended
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May 31, 2022
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Note 4 - Acquisitions Curlsmith On April 22, 2022, we completed the acquisition of Recipe Products Ltd., a producer of innovative prestige hair care products for all types of curly and wavy hair under the Curlsmith brand. Curlsmith's products are a category leader in the market for prestige haircare products for curly hair and include conditioners, shampoos and co-washes purposefully designed for the unique joys and challenges of all types of curls and textured hair. The Curlsmith brand and products were added to the Beauty segment. The total purchase consideration was $149.7 million in cash, net of a preliminary net working capital adjustment of $0.3 million and cash acquired. The acquisition was funded with cash on hand and borrowings under our existing revolving credit facility. We incurred pre-tax acquisition expenses of $2.7 million during the first quarter of fiscal 2023, which were recognized in SG&A within our condensed consolidated statement 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 Beauty segment's existing marketing and sales structure, as well as our global sourcing, distribution, shared service, and international go-to-market capabilities. 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 $21.0 million to trade names and are amortizing over a 20 year expected life. We assigned $12.0 million to customer relationships and are amortizing over a 19.5 year expected life, based on historical attrition rates. The following table presents the preliminary estimated fair values of assets acquired and liabilities assumed at the acquisition date:
(in thousands) |
Assets: |
Receivables | $ | 3,874 |
Inventory | 7,890 |
Prepaid expenses and other current assets | 119 |
Property and equipment | 212 |
Goodwill | 118,529 |
Trade names - definite | 21,000 |
Customer relationships - definite | 12,000 |
Deferred tax assets, net | 395 |
Total assets | 164,019 |
Liabilities: |
Accounts payable | 1,335 |
Accrued expenses and other current liabilities | 1,854 |
Income taxes payable | 2,947 |
Deferred tax liabilities, net | 8,187 |
Total liabilities | 14,323 |
Net assets recorded | $ | 149,696 |
Both the fair value and gross contractual amount of receivables acquired was $3.9 million, as an immaterial amount is expected to be uncollectible. The impact of the acquisition of Curlsmith on our condensed consolidated statement of income for the first quarter of fiscal 2023 was as follows:
April 22, 2022 (acquisition date) through May 31, 2022 (in thousands, except earnings per share data) | Three Months Ended May 31, 2022
Sales revenue, net | $ | 3,246 |
Net income | 439 |
EPS: |
Basic | $ | 0.02 |
Diluted | $ | 0.02 |
The following supplemental unaudited pro forma information presents our financial results as if the acquisition of Curlsmith had occurred on March 1, 2021. 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, 2021, and this information is not intended to be indicative of future results:
| Three Months Ended May 31,
(in thousands, except earnings per share data) | 2022 |  | 2021
Sales revenue, net | $ | 515,170 |  |  | $ | 550,857 |
Net income | 26,508 |  |  | 55,104 |
EPS: |  |  |
Basic | $ | 1.11 |  |  | $ | 2.26 |
Diluted | $ | 1.10 |  |  | $ | 2.24 |
These amounts have been calculated after applying our accounting policies and adjusting the results of Curlsmith 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, 2021. 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 Osprey brand and products were added to the Home & Outdoor segment. The total purchase consideration, net of cash acquired, was $409.3 million in cash, including the impact of a final $10.7 million favorable 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 $0.1 million during the first quarter of fiscal 2023, which were recognized in SG&A within our condensed consolidated statement 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. During the first quarter of fiscal 2023, we finalized the net working capital adjustment, which resulted in a $1.6 million reduction to the total purchase consideration and we reduced the provisional accounts payable liability by $0.7 million, both with a corresponding decrease to goodwill totaling $2.3 million. The following table presents the preliminary estimated fair values of assets acquired and liabilities assumed at the acquisition date:
(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 | 206,680 |
Trade names - indefinite | 170,000 |
Customer relationships - definite | 22,000 |
Operating lease assets | 2,155 |
Total assets | 461,931 |
Liabilities: |
Accounts payable | 3,780 |
Accrued expenses and other current liabilities | 7,345 |
Lease liabilities, non-current | 1,719 |
Deferred tax liabilities, net | 39,792 |
Total liabilities | 52,636 |
Net assets recorded | $ | 409,295 |

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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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