On August 30, 2021, the Company completed the acquisition of certain assets and assumption of certain liabilities of L&M Bag & Supply Co., Inc. (“L&M”) in a transaction valued up to $60 million, subject to working capital adjustments (the “L&M Acquisition”). L&M is a specialized supplier of geotextile fabrics and geogrids, as well as silt fences, turbidity barriers and safety fences, weed control fabric and sod staples. The transaction price was funded with cash on hand.

On August 9, 2021, the Company completed the acquisition of all of the outstanding shares of Pacific Pipe Company, Inc. (“Pacific Pipe”) in a transaction valued up to $103 million, subject to working capital adjustments (the “Pacific Pipe Acquisition”). Pacific Pipe has four branch locations and serves municipalities and contractors in the water, wastewater, storm drainage and irrigation industries throughout Hawaii with a broad product offering. The transaction price was funded with cash on hand.

During the three months ended May 1, 2022, the Company completed the acquisition of certain assets and liabilities in transactions valued at $7 million, subject to working capital adjustments (the “2022 Acquisitions”). Given the lack of significance of these transactions, a full purchase price allocation has not been presented. However, a substantial portion of the aggregate purchase price was allocated to customer relationships, goodwill and net working capital.

In the above transactions, to the extent applicable, the excess of purchase price over net tangible and intangible assets acquired resulted in goodwill, which represents the assembled workforce and anticipated long-term growth in new markets, customers and products. Goodwill associated with the L&M Acquisition and the 2022 Acquisitions are fully deductible by the Company for U.S. income tax purposes.

The following table represents the allocation of the transaction price to the fair value of identifiable assets acquired and liabilities assumed in the acquisitions during fiscal 2021. Preliminary values of the fiscal 2021 acquisitions are not yet finalized pending the final purchase price allocations and are subject to change once additional information is obtained.


	L&M Acquisition		Pacific Pipe Acquisition
Cash	$	—	$	2
Accounts receivable	7		10
Inventories	16		17
Intangible assets	19		47
Goodwill	18		41
Operating lease right-of-use assets	2		17
Other assets, current and non-current	5		6
Total assets acquired	67		140
Accounts payable	3		5
Deferred income taxes	—		12

Operating lease liabilities	2		17

Net assets acquired	$	62	$	106


	L&M Acquisition		Pacific Pipe Acquisition
Total consideration, net of cash	$	62	$	104


Plus: Cash acquired in acquisition	—		2



Net assets acquired; investing cash outflow	$	62	$	106

The following pro forma information presents a summary of the results of operations for the periods indicated as if the Pacific Pipe and L&M acquisitions had been completed as of February 3, 2020. The pro forma financial information is based on the historical financial information for the Company and Pacific Pipe and L&M, along with certain pro forma adjustments. These pro forma adjustments consist primarily of:

•Reclassification of direct acquisition transaction costs, retention bonuses and inventory fair value adjustments from the period incurred to periods these expenses would have been recognized given the assumed transaction dates identified above; and

The following pro forma information has been prepared for comparative purposes only and is not necessarily indicative of the results of operations as they would have been had the Pacific Pipe and L&M acquisitions occurred on the assumed dates, nor is it necessarily an indication of future operating results. In addition, the pro forma information does not reflect the cost of any integration activities, benefits from any synergies that may be derived from the Pacific Pipe and L&M acquisitions or revenue growth that may be anticipated.

As a result of integration of the Pacific Pipe and L&M acquisitions, including the consolidation of certain acquired and existing branches, it is impracticable to identify the explicit financial performance associated with the Pacific Pipe and L&M acquisitions. As such, the Company has not presented the post-acquisition net sales and net income for the Pacific Pipe and L&M acquisitions.

For the Pacific Pipe and L&M acquisitions discussed above, the Company valued intangible assets acquired, which included customer relationships and trademarks.

The customer relationship intangible assets represent the value associated with those customer relationships in place at the date of the Pacific Pipe and L&M acquisitions. The Company valued the customer relationships using an excess earnings method using various inputs such as customer attrition rate, revenue growth rate, gross margin percentage and discount rate. Cash flows associated with the existing relationships are expected to diminish over time due to customer turnover. The Company reflected this expected diminishing cash flow through the utilization of an annual customer attrition rate assumption and in its method of amortization.

The trademark intangible asset represents the value associated with the brand names in place at the date of the Pacific Pipe and L&M acquisitions.

A summary of the intangible assets acquired and assumptions utilized in the valuation for the Pacific Pipe and L&M acquisitions are as follows:


	Intangible Asset Amount		Amortization Period	Discount Rate		Attrition Rate
L&M Acquisition
Customer relationships	$	19	10 years	15.5	%	15.0	%

Pacific Pipe Acquisition
Customer relationships	$	46	10 years	11.5	%	10.0	%
Trademark	1		2 years	11.5	%	N/A