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Acquisition

6 Months Ended

Jul. 30, 2022

2. Acquisitions

In 2021, we acquired WSS and atmos, two businesses that will allow us to further differentiate our product offerings, as well as our customer base, and diversify our retail store and omnichannel portfolio.

WSS

During the twenty-six weeks ended July 30, 2022, we paid an additional $4 million upon the finalization of the value of net assets acquired, with a corresponding increase to goodwill as compared with the amounts presented in the most recent annual report. The aggregate purchase price for the acquisition has increased to $811 million ($741 million, net of cash acquired). There were no additional payments or changes to the value of net assets acquired in the thirteen weeks ended July 30, 2022.

2. Acquisitions (continued)

The following table represents the final allocation of the purchase price for WSS.


($ in millions)
Assets acquired:
Cash and cash equivalents	$	70
Merchandise inventories		82
Other current assets		10
Property and equipment, net		133
Operating lease right-of-use assets		143
Tradenames		296
Customer relationships		13
Other assets		4
Liabilities assumed:
Accounts payable	$	(58)
Current portion of obligations under finance leases		(3)
Current portion of lease obligations		(19)
Long-term portion of obligations under finance leases		(50)
Long-term lease obligations		(127)
Deferred taxes		(84)
Other liabilities		(4)

Goodwill		405
Total purchase price	$	811

atmos

During the thirteen and twenty-six weeks ended July 30, 2022, we paid an additional $5 million and $8 million, respectively, in connection with the finalization of certain post-closing conditions. The aggregate purchase price for the acquisition has increased to $368 million, subject to adjustment for the finalization of the value of net assets acquired and other post-closing matters. The preliminary purchase price includes contingent consideration initially measured at $35 million, which can reach up to $111 million based on achieving certain revenue growth and EBITDA performance targets. The fair value of the contingent consideration has not changed from the initial measurement. The preliminary purchase price does not yet reflect the finalization of the net working capital provisions and other post-closing adjustments. At closing, we placed $30 million in escrow, and an additional $6 million will be payable if certain post-closing conditions are satisfied. We expect to finalize the remaining amounts by the end of this fiscal year.

The following table represents the preliminary allocation of the purchase price for atmos and includes fair value adjustments to certain assets and liabilities since our most recent annual report. Changes to amounts reported at year end and the previous quarter included an $8 million increase in goodwill due to the additional purchase price, revised downward valuation of the tradenames and the addition of the customer list intangible. The adjustments did not have a significant effect on the consolidated results of operations. We determined that the atmos tradenames will have an indefinite life and will not be amortized.

We are assessing the tax deductibility of the goodwill related to the acquisition.

2. Acquisitions (continued)

The following table represents the preliminary allocation of the purchase price for atmos.


($ in millions)
Assets acquired:
Cash and cash equivalents	$	6
Merchandise inventories		22
Other current assets		12
Property and equipment, net		7
Operating lease right-of-use assets		44
Tradenames		130
Customer relationships		9
Other assets		6
Liabilities assumed:
Accounts payable	$	(10)
Current portion of lease obligations		(10)
Other current liabilities		(8)
Long-term lease obligations		(35)
Deferred taxes		(44)
Other liabilities		(8)

Goodwill ⁽¹⁾		247
Total purchase price ⁽²⁾	$	368

(1)	Goodwill represented on this table is at the exchange rate in effect as of the date of acquisition.

(2)	Total purchase price consists of $333 million in cash and $35 million of contingent consideration.