Business Combinations

9 Months Ended

Nov. 24, 2023

ACQUISITION

HALCON

In Q2 2023, we acquired Halcon Furniture LLC ("HALCON"), a Minnesota-based designer and manufacturer of precision-tailored wood furniture for the workplace. The transaction included the purchase of all the outstanding membership interests of HALCON for $127.5 less customer deposits of $24.3, plus an adjustment of $1.9 for working capital. The acquisition was funded using a combination of cash on-hand and borrowings under our global committed bank facility. An additional $2.0 is payable to a seller based upon continued employment over a three-year period, which is being expensed over the service period on a straight-line basis.

Tangible assets and liabilities of HALCON were valued as of the acquisition date using a market analysis, and intangible assets were valued using a discounted cash flow analysis, which represents a Level 3 measurement. On the acquisition date, we recorded $51.8 related to identifiable intangible assets, $36.6 related to goodwill and $16.7 related to tangible assets. The tangible assets mainly consisted of property, plant and equipment of $30.6, working capital (primarily inventory of $12.8) and customer deposits of $24.3. The goodwill was recorded in the Americas segment and is deductible for U.S. income tax purposes. The goodwill resulting from the acquisition is primarily related to the growth potential of HALCON expected to be driven by new product development, geographic expansion and the integration of HALCON products into our dealer network. Intangible assets are principally related to dealer relationships, the HALCON trade name and internally developed know-how and designs, which are being amortized over periods ranging from 9 to 10 years from the date of acquisition. We also acquired a backlog of orders which shipped throughout 2023. The purchase accounting for the HALCON acquisition was completed during the current year.

The following table summarizes the purchased identified intangible assets and the respective fair value and useful life of each asset at the date of acquisition:


Other Intangible Assets	Useful Life (Years)	Fair Value

Dealer relationships	10.0	$	21.5
Trademark	9.0	14.0
Know-how and designs	9.0	12.0
Backlog	0.7	4.3
		$	51.8

The fair values of the purchased intangible assets are being amortized on a straight-line basis over their useful lives. The following table summarizes the estimated future amortization expense for the next five years as of November 24, 2023:


Fiscal Year Ending in February	Amount
2024	$	1.3
2025	5.1
2026	5.0
2027	5.0
2028	5.0
	$	21.4