The Merger

9 Months Ended

Dec. 29, 2012

The Merger

The Merger

2. The Merger

As discussed in Note 1, the Merger was completed on January 13, 2012 and was financed by:

· Borrowings consisting of (i) a $175 million, 5-year asset-based revolving credit facility (as amended, the “ABL Facility”), of which $10 million was drawn at closing of the Merger and was fully repaid in February 2012 and (ii) a $525 million, 7-year term loan credit facility (as amended, the “First Lien Term Loan Facility” and, together with the ABL Facility, the “Credit Facilities”);

· Issuance of $250 million principal amount of 11% senior notes due 2019 (the “Senior Notes”); and

· Equity contributions of $635.9 million from the Sponsors and the Rollover Investors.

The Merger was accounted for as a business combination whereby the purchase price paid to effect the Merger was allocated to recognize the acquired assets and liabilities at fair value.  The Merger and the allocation of the purchase price of $1.6 billion have been recorded as of January 14, 2012.  The sources and uses of funds in connection with the Merger are summarized in the following table (in thousands):

Sources:
Proceeds from First Lien Term Loan Facility	$	525,000
Proceeds from Senior Notes	250,000
Proceeds from ABL Facility	10,000
Proceeds from equity contributions	535,900
Rollover equity from the Rollover Investors	100,000
Cash on hand	212,575
Total sources	$	1,633,475
Uses:
Equity purchase price	$	1,577,563
OID and other debt issuance costs	41,911
Cash to balance sheet	14,001
Total uses	$	1,633,475

Acquisition Accounting

In connection with the purchase price allocation, estimates of the fair values of long-lived and intangible assets were determined based upon assumptions related to the future cash flows, discount rates and asset lives using information available at the acquisition date, and in some cases, valuation results from independent valuation specialists.  Purchase accounting adjustments were recorded to: (i) increase the carrying value of property and equipment, (ii) establish intangible assets for trade names, vendor relations and favorable lease commitments, and (iii) revalue lease-related liabilities.

The allocation of purchase price was as follows (in thousands):

Purchase price	$	1,577,563
Less: net assets acquired	741,017
Excess of purchase price over book value of net assets acquired	$	836,546
Write up (down) of tangible assets:
Property and equipment	$	87,863
Land and buildings	63,549
Assets held for sale	(933		)
Deferred rent	(425		)
Leasing commission	(5,224		)
Acquisition-related intangible assets:
Trade name (indefinite life)	$	410,000
Trademarks (20 year life)	1,822
Bargain Wholesale customer relationships	20,000
Fair market value of favorable leases	46,723
Acquisition-related intangibles	478,545
Write down/(up) of liabilities:
Deferred rent and lease incentive revaluation	10,742
Fair market value of unfavorable leases	(19,836		)
Deferred income taxes:
Deferred income taxes	$	(249,485	)
Residual goodwill (1)	$	471,750
Total allocated excess purchase price	$	836,546

(1) The Company does not expect any of the residual goodwill to be tax deductible.  Goodwill is considered to have an indefinite life and is not amortized, but rather reviewed annually for impairment or more frequently if indicators of impairment exist.

As a result of the Merger, the Company recognized one-time legal, financial advisory, accounting, and other merger related costs of $10.6 million for the period January 15, 2012 to March 31, 2012 and $15.2 million for the period April 3, 2011 to January 14, 2012.