Annual report pursuant to Section 13 and 15(d)

ACQUISITION

v3.6.0.2
ACQUISITION
12 Months Ended
Jan. 28, 2017
ACQUISITION  
ACQUISITION

2.  ACQUISITION

On June 18, 2014, we acquired 100% of the outstanding common stock of Jos. A. Bank, a men’s specialty apparel retailer, for approximately $1.8 billion. The acquisition was funded primarily by a $1.1 billion term loan facility, the issuance of $600.0 million in senior unsecured notes and borrowings under an asset-based credit facility (see Note 6).

We incurred integration and other costs related to Jos. A. Bank totaling $8.8 million, $18.7 million and $40.4 million for fiscal years 2016, 2015 and 2014, respectively. Integration and other costs for fiscal 2016 include $2.1 million recorded in cost of sales with the remainder recorded in SG&A.  Integration and other costs for fiscal 2015 include $0.9 million recorded in cost of sales with the remainder recorded in SG&A. Integration and other costs for fiscal 2014 include $10.6 million recorded in cost of sales with the remainder recorded in SG&A. For fiscal 2016 and 2015, we did not incur any acquisition-related costs. For fiscal 2014, we incurred acquisition-related costs for Jos. A. Bank totaling $54.6 million.

In addition, we recorded losses on extinguishment of debt totaling $12.7 million and $2.2 million for 2015 and 2014, respectively, which is included as a separate line in the consolidated statements of earnings (loss).  Lastly, we incurred deferred financing costs of $51.1 million, which is amortized over the contractual term of each financing arrangement, as discussed in Note 6. 

The following table summarizes the final allocation of fair values of the identifiable assets acquired and liabilities assumed in the Jos. A. Bank acquisition (amounts in millions):

 

 

 

 

 

Cash

    

$

328.9

 

Accounts receivable

 

 

8.3

 

Inventories

 

 

328.0

 

Other current assets

 

 

56.4

 

Property and equipment

 

 

165.3

 

Goodwill

 

 

769.0

 

Intangible assets

 

 

622.2

 

Accounts payable, accrued expenses and other current liabilities

 

 

(155.0)

 

Other liabilities (mainly deferred income taxes)

 

 

(302.8)

 

Total purchase price

 

 

1,820.3

 

Less: Cash acquired

 

 

(328.9)

 

Total purchase price, net of cash acquired

 

$

1,491.4

 

Within the measurement period which closed during the second quarter of 2015, we made purchase accounting adjustments primarily related to deferred income taxes.   None of these measurement period adjustments had a material impact on the purchase price allocation.  Goodwill is calculated as the excess of the purchase price over the net assets acquired.  The goodwill recognized was attributable to growth opportunities and expected synergies.  All of the goodwill was assigned to our retail reporting segment and is non-deductible for tax purposes.  

Intangible assets consist of four separately identified assets.  First, we identified the Jos. A. Bank tradename as an indefinite-lived intangible asset with a fair value of $539.1 million.  The Jos. A. Bank tradename is not subject to amortization but is evaluated at least annually for impairment.  Second, we identified a customer relationship intangible asset with a fair value of $54.0 million which was to be amortized on a straight line basis over a useful life of seven years. Third, we recognized an intangible asset of $24.4 million for favorable Jos. A. Bank leases (as compared to prevailing market rates) which was to be amortized over the remaining lease terms, including assumed renewals, resulting in a weighted-average amortization period of 11.5 years.  Lastly, we recognized an intangible asset related to the Jos. A. Bank franchise store agreements of $4.7 million which we expect to amortize over 25 years. See Notes 3 and 4 for information concerning impairment of Jos. A. Bank’s goodwill and intangible assets incurred in fiscal 2015. 

The results of operations of Jos. A. Bank are included in our results of operations from the acquisition date.  From June 18, 2014 through January 31, 2015, Jos. A. Bank generated net sales of $684.0 million and net earnings of $3.5 million, including $14.6 million of pre-tax integration costs, primarily contract termination and severance related, and $38.9 million of pre-tax purchase accounting adjustments, primarily consisting of the step up of inventory recognized as additional cost of sales and amortization of intangible assets.

The following table presents unaudited pro forma consolidated financial information as if the closing of our acquisition of Jos. A. Bank had occurred on February 3, 2013 (in thousands, except per share data):

 

 

 

 

 

 

Fiscal Year

 

    

2014

Total net sales

 

$

3,596,820

Net earnings attributable to common shareholders

 

$

50,439

Net earnings per common share attributable to common shareholders:

 

 

 

Basic

 

$

1.05

Diluted

 

$

1.04

The pro forma financial information presented above has been prepared by combining our historical results and the historical results of Jos. A. Bank and further reflects the effect of purchase accounting adjustments and the elimination of transaction costs, among other items.  This pro forma information is not necessarily indicative of the results of operations that actually would have resulted had the Jos. A. Bank acquisition occurred on the date indicated above or that may result in the future and does not reflect potential synergies.  Material non-recurring adjustments included in the pro forma financial information above includes $34.5 million of integration costs.