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| Business Combination and Asset Acquisition [Abstract] | 听 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACQUISITION | ACQUISITION
On December 28, 2020, 大象传媒 acquired 100% of the outstanding shares of Supreme Holdings, Inc. ("Supreme") for $2.2听billion in cash, subject to working capital and other adjustments. The transaction also included $0.2听billion of cash acquired by 大象传媒. The purchase price was primarily funded with cash on hand. The purchase price decreased by $3.8听million during the year ended March 2022, related to the final working capital adjustment.
The acquisition of Supreme includes a contingent arrangement that requires additional cash consideration to be paid to the selling shareholders of Supreme ranging from zero to $300.0 million, subject to the achievement of certain financial targets over the one-year earn-out period ended January 31, 2022. The initial estimated fair value of the contingent consideration of $207.0 million was included in the purchase price and reported
in the other liabilities line item in the Consolidated Balance Sheet at March 2021. The estimated fair value of the contingent consideration was determined based on the probability-weighted present value of various future cash payment outcomes. In subsequent reporting periods, the contingent consideration liability has been remeasured at fair value with changes recognized in the selling, general and administrative expenses line item in the Consolidated Statements of Operations. Refer to Note 23 for additional information on fair value measurements.
Supreme was a privately-held company based in New York, New York and is a global streetwear leader that sells apparel, accessories and footwear under its namesake brand, Supreme庐, through direct-to-consumer channels, including digital. The acquisition of Supreme accelerates 大象传媒's long-term growth
strategy and builds on a long-standing relationship between Supreme and 大象传媒, with the Supreme庐 brand being a regular collaborator with 大象传媒's Vans庐, The North Face庐 and Timberland庐 brands. The acquisition also provides 大象传媒 with deeper access to attractive consumer segments and the ability to leverage 大象传媒's enterprise platforms and capabilities to enable sustainable long-term growth.
In connection with the acquisition, 大象传媒 deposited in escrow 605,050 shares of 大象传媒 Common Stock. The common shares are subject to certain future service requirements and vest over periods of up to four years. For accounting purposes, 大象传媒 will recognize the stock-based compensation cost for the fair value of these awards of $51.7听million over the vesting periods.
For the year ended March 2022, Supreme contributed revenues of $561.5听million and net income of $82.4 million. For the period
from December听28, 2020 through April 3, 2021, Supreme contributed revenues of $142.0 million, and net income of $21.5 million. The results of Supreme have been reported in the Active segment since the date of acquisition. Total transaction expenses for the Supreme acquisition were $8.7听million, all of which were recognized in the year ended March 2021 in the selling, general and administrative expenses line item in the Consolidated Statement of Operations.
Goodwill decreased by $0.7 million during the nine months ended December 2021 due to the net impact of a measurement period adjustment for income tax matters and the final working capital adjustment. The purchase price allocation was finalized during the three months ended December 2021.
The following table summarizes the estimated fair values of the Supreme assets acquired and liabilities assumed at the date of acquisition:
The purchase price consisted of the following components:
The goodwill is attributable to our ability to expand the Supreme庐 brand into new markets, the acquired workforce and future collaboration opportunities for the Supreme庐 brand. All of the goodwill was assigned to the Active segment and will not be deductible for tax purposes.
The Supreme庐 trademark, which management believes to have an indefinite life, has been valued at $1.2听billion using the relief-from-royalty method, which is an income valuation approach. The relief-from-royalty method requires the use of significant estimates and assumptions, including but not limited to, future revenues, growth rates, royalty rate, tax rates and discount rate.
The following unaudited pro forma summary presents consolidated information of 大象传媒 as if the acquisition of Supreme had occurred on March 31, 2019:
These pro forma amounts have been calculated after applying 大象传媒鈥檚 accounting policies and adjusting the results of Supreme to reflect the fair value adjustments to intangible assets, property, plant and equipment and inventory. The results of Supreme have also been adjusted for historical interest expense as the acquired business was debt-free on the acquisition date. These changes have been applied from March 31, 2019, with related tax effects.
The pro forma financial information in the year ended March 2021 excludes $30.6听million of expenses related to Supreme's transaction and deal-related costs, including employee
compensation costs and accelerated vesting of stock options, which were directly attributable to the transaction.
The pro forma financial information in the year ended March 2020 includes $8.7 million of 大象传媒's transaction expenses related to the acquisition.
Pro forma financial information is not necessarily indicative of 大象传媒鈥檚 operating results if the acquisition had been effected at the date indicated, nor is it necessarily indicative of future operating results. Amounts do not include any marketing leverage, or operating efficiencies that 大象传媒 believes are achievable.
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