|9 Months Ended|
Sep. 28, 2023
|Business Combination and Asset Acquisition [Abstract]|
As part of the Company’s continued expansion into commercial flooring, the Company acquired commercial flooring and installation supplies distributor Salesmaster Associates, Inc. (“Salesmaster”) on June 7, 2023 (“acquisition date”). Total estimated consideration for the acquisition was $20.1 million, including $17.4 million of cash and contingent consideration with an estimated fair value of $2.8 million (refer to Note 8, “Fair Value Measurements” for additional information regarding the contingent consideration). The acquisition was accounted for in accordance with ASC 805, Business Combinations, and, accordingly, Salesmaster’s results of operations, financial position, and cash flows have been consolidated in the Company’s condensed consolidated financial statements since the date of acquisition. Net sales and net earnings for fiscal 2023 attributable to Salesmaster since the completion of the acquisition were immaterial. Results of operations would not be materially different as a result of the acquisition and therefore pro forma information is not presented. Acquisition-related costs totaling $0.9 million were expensed as incurred and recognized within general and administrative expenses within the Condensed Consolidated Statements of Operations and Comprehensive Income during the thirty-nine weeks ended September 28, 2023. No acquisition-related costs were incurred during the thirteen weeks ended September 28, 2023.
In accordance with ASC 805, the Company provisionally recorded the following assets and liabilities at their preliminary estimated acquisition date fair values: $12.1 million of net working capital consisting primarily of inventory and receivables, $6.0 million of lease right-of-use assets and fixed assets, $5.0 million of customer relationships, $2.5 million of goodwill, and $5.5 million of operating lease liabilities. The preliminary fair value of the customer relationships was determined with assistance from a third-party valuation specialist using the multi-period excess earnings method and included significant assumptions such as the amount and timing of projected cash flows, growth rates, customer attrition rates, and discount rates, resulting in a Level 3 classification within the fair value hierarchy. The customer relationships will be amortized over an estimated useful life of 12 years.
The goodwill arising from the acquisition is primarily attributable to operational synergies and acceleration of growth strategies. The goodwill and intangible assets from the Salesmaster acquisition are fully deductible for U.S. federal and state tax purposes.
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).
Reference 1: http://www.xbrl.org/2003/role/disclosureRef