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Acquisition of Curlsmith | 9 Months Ended
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Nov. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
Acquisition of Curlsmith | Note 4 - Acquisition of 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 prestige market 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 & Wellness segment. The total purchase consideration was $147.9 million in cash, net of a final net working capital adjustment of $2.1 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-related expenses of $2.7 million during the nine months ended November 30, 2022, 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 & Wellness 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 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. During fiscal 2023, we made adjustments to provisional asset and liability balances, which resulted in a corresponding net increase to goodwill of $0.1 million. We also finalized the net working capital adjustment during fiscal 2023, which resulted in a $1.8 million reduction to the total purchase consideration and goodwill. During the first quarter of fiscal 2024, we made final adjustments to provisional liability balances, which resulted in a corresponding increase to goodwill of $0.3 million. The following table presents the estimated fair values of assets acquired and liabilities assumed at the acquisition date:
(in thousands) |
Assets: |
Receivables | $ | 4,211 |
Inventory | 7,890 |
Prepaid expenses and other current assets | 119 |
Property and equipment | 212 |
Goodwill | 117,108 |
Trade names - definite | 21,000 |
Customer relationships - definite | 12,000 |
Deferred tax assets, net | 360 |
Total assets | 162,900 |
Liabilities: |
Accounts payable | 1,401 |
Accrued expenses and other current liabilities | 2,813 |
Income taxes payable | 2,572 |
Deferred tax liabilities, net | 8,187 |
Total liabilities | 14,973 |
Net assets recorded | $ | 147,927 |
Both the fair value and gross contractual amount of receivables acquired was $4.2 million, as an immaterial amount was expected to be uncollectible. The impact of the acquisition of Curlsmith on our condensed consolidated statements of income for the periods presented was as follows:
(in thousands, except earnings per share data) | Three Months Ended November 30, 2022 (1) |  | Nine Months Ended November 30, 2022 (1) (2)
Sales revenue, net | $ | 13,091 |  |  | $ | 26,544 |
Net income | 2,077 |  |  | 3,953 |
EPS: |  |  |
Basic | $ | 0.09 |  |  | $ | 0.17 |
Diluted | $ | 0.09 |  |  | $ | 0.16 |
(1)Net income and EPS amounts include allocations for corporate expenses, interest expense and income tax expense. (2)Represents approximately thirty-two weeks of operating results from Curlsmith, acquired April 22, 2022. 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 does 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.
(in thousands, except earnings per share data) | Three Months Ended November 30, 2022 |  |  |  | Nine Months Ended November 30, 2022 |  |
Sales revenue, net | $ | 558,606 |  |  |  |  | $ | 1,595,176 |  |  |
Net income | 51,826 |  |  |  |  | 109,006 |  |  |
EPS: |  |  |  |  |  |  |
Basic | $ | 2.16 |  |  |  |  | $ | 4.55 |  |  |
Diluted | $ | 2.15 |  |  |  |  | $ | 4.53 |  |  |
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.

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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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