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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 02, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-39667

 

LESLIE’S, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

20-8397425

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2005 East Indian School Road

Phoenix, AZ

85016

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (602) 366-3999

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

LESL

 

The Nasdaq Global Select Market

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YesNo

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

As of May 2, 2022, the Registrant had 182,838,623 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


Table of Contents

Table of Contents

 

 

 

Page

PART I

FINANCIAL INFORMATION

 

Item 1.

Financial Statements

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Stockholders’ Deficit

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

26

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

27

Item 3.

Defaults Upon Senior Securities

27

Item 4.

Mine Safety Disclosures

27

Item 5.

Other Information

27

Item 6.

Exhibits

28

 

 

 

Signatures

 

29

 

i


Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. Actual results or outcomes could differ materially from those indicated in these forward-looking statements for a variety of reasons, including, among others:

our ability to execute on our growth strategies;
our ability to maintain favorable relationships with suppliers and manufacturers;
competition from mass merchants and specialty retailers;
impacts on our business from the sensitivity of our business to weather conditions, changes in the economy, and the housing market;
our ability to implement technology initiatives that deliver the anticipated benefits, without disrupting our operations;
our ability to attract and retain senior management and other qualified personnel;
regulatory changes and development affecting our current and future products;
our ability to obtain additional capital to finance operations;
commodity price inflation and deflation;
impacts on our business from the COVID-19 pandemic;
impacts on our business from cyber incidents and other security threats or disruptions; and
other risks and uncertainties, including those listed in the section titled “Risk Factors” in our filings with the United States Securities and Exchange Commission.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended October 2, 2021, and elsewhere in this Quarterly Report on Form 10-Q, and in our other filings with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results or outcomes could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q and while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q are based on events or circumstances as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

1


Table of Contents

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

LESLIE’S, INC.

CONDENSED Consolidated Balance Sheets

(Amounts in Thousands, Except Share and Per Share Amounts)

 

 

 

April 2, 2022

 

 

October 2, 2021

 

 

April 3, 2021

 

 

 

(Unaudited)

 

 

(Audited)

 

 

(Unaudited)

 

Assets

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

51,971

 

 

$

343,498

 

 

$

88,732

 

Accounts and other receivables, net

 

 

33,619

 

 

 

38,860

 

 

 

41,733

 

Inventories

 

 

345,046

 

 

 

198,789

 

 

 

277,860

 

Prepaid expenses and other current assets

 

 

41,240

 

 

 

20,564

 

 

 

40,001

 

Total current assets

 

 

471,876

 

 

 

601,711

 

 

 

448,326

 

Property and equipment, net

 

 

70,547

 

 

 

70,335

 

 

 

63,632

 

Operating lease right-of-use assets

 

 

208,531

 

 

 

212,284

 

 

 

181,581

 

Goodwill and other intangibles, net

 

 

146,865

 

 

 

129,020

 

 

 

127,851

 

Deferred tax assets

 

 

2,429

 

 

 

3,734

 

 

 

15,293

 

Other assets

 

 

29,947

 

 

 

25,148

 

 

 

20,632

 

Total assets

 

$

930,195

 

 

$

1,042,232

 

 

$

857,315

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

268,475

 

 

$

233,597

 

 

$

262,266

 

Operating lease liabilities

 

 

61,612

 

 

 

61,071

 

 

 

55,395

 

Income taxes payable

 

 

 

 

 

6,945

 

 

 

 

Current portion of long-term debt

 

 

8,100

 

 

 

8,100

 

 

 

8,100

 

Total current liabilities

 

 

338,187

 

 

 

309,713

 

 

 

325,761

 

Operating lease liabilities, noncurrent

 

 

149,818

 

 

 

160,037

 

 

 

130,496

 

Revolving credit facility

 

 

45,000

 

 

 

 

 

 

 

Long-term debt, net

 

 

782,921

 

 

 

786,125

 

 

 

789,339

 

Other long-term liabilities

 

 

 

 

 

3,915

 

 

 

2,729

 

Total liabilities

 

 

1,315,926

 

 

 

1,259,790

 

 

 

1,248,325

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 1,000,000,000 shares authorized and 182,784,211, 189,821,011, and 186,884,621 issued and outstanding as of April 2, 2022, October 2, 2021, and April 3, 2021, respectively.

 

 

183

 

 

 

190

 

 

 

187

 

Additional paid in capital

 

 

83,074

 

 

 

204,711

 

 

 

194,605

 

Retained deficit

 

 

(468,988

)

 

 

(422,459

)

 

 

(585,802

)

Total stockholders’ deficit

 

 

(385,731

)

 

 

(217,558

)

 

 

(391,010

)

Total liabilities and stockholders’ deficit

 

$

930,195

 

 

$

1,042,232

 

 

$

857,315

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

2


Table of Contents

LESLIE’S, INC.

CONDENSED Consolidated Statements of Operations

(Amounts in Thousands, Except Per Share Amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

April 2, 2022

 

 

April 3, 2021

 

 

April 2, 2022

 

 

April 3, 2021

 

Sales

 

$

228,072

 

 

$

192,441

 

 

$

412,896

 

 

$

337,447

 

Cost of merchandise and services sold

 

 

142,443

 

 

 

120,758

 

 

 

259,951

 

 

 

214,049

 

Gross profit

 

 

85,629

 

 

 

71,683

 

 

 

152,945

 

 

 

123,398

 

Selling, general and administrative expenses

 

 

89,618

 

 

 

70,374

 

 

 

169,403

 

 

 

147,863

 

Operating (loss) income

 

 

(3,989

)

 

 

1,309

 

 

 

(16,458

)

 

 

(24,465

)

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

6,949

 

 

 

8,126

 

 

 

13,812

 

 

 

19,642

 

Loss on debt extinguishment

 

 

 

 

 

1,888

 

 

 

 

 

 

9,169

 

Other expenses, net

 

 

161

 

 

 

1,057

 

 

 

550

 

 

 

1,057

 

Total other expense

 

 

7,110

 

 

 

11,071

 

 

 

14,362

 

 

 

29,868

 

Loss before taxes

 

 

(11,099

)

 

 

(9,762

)

 

 

(30,820

)

 

 

(54,333

)

Income tax benefit

 

 

(3,659

)

 

 

(3,310

)

 

 

(8,929

)

 

 

(17,624

)

Net loss

 

$

(7,440

)

 

$

(6,452

)

 

$

(21,891

)

 

$

(36,709

)

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

 

$

(0.03

)

 

$

(0.12

)

 

$

(0.20

)

Diluted

 

$

(0.04

)

 

$

(0.03

)

 

$

(0.12

)

 

$

(0.20

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

182,678

 

 

 

186,810

 

 

 

185,592

 

 

 

181,900

 

Diluted

 

 

182,678

 

 

 

186,810

 

 

 

185,592

 

 

 

181,900

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

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Table of Contents

LESLIE’S, INC.

CONDENSED Consolidated Statements of Stockholders’ Deficit

(Amounts in Thousands)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid in
Capital

 

 

Retained

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

(Deficit)

 

 

Deficit

 

 

Deficit

 

Balance, January 2, 2021

 

 

186,619

 

 

$

187

 

 

$

192,753

 

 

$

(579,350

)

 

$

(386,410

)

Issuance of common stock upon initial public offering, net of offering costs

 

 

 

 

 

 

 

 

(99

)

 

 

 

 

 

(99

)

Issuance of common stock under the Plan

 

 

266

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,951

 

 

 

 

 

 

1,951

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,452

)

 

 

(6,452

)

Balance, April 3, 2021

 

 

186,885

 

 

$

187

 

 

$

194,605

 

 

$

(585,802

)

 

$

(391,010

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2022

 

 

182,497

 

 

$

182

 

 

$

80,062

 

 

$

(461,548

)

 

$

(381,304

)

Issuance of common stock under the Plan

 

 

287

 

 

 

1

 

 

 

228

 

 

 

 

 

 

229

 

Equity-based compensation

 

 

 

 

 

 

 

 

2,784

 

 

 

 

 

 

2,784

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,440

)

 

 

(7,440

)

Balance, April 2, 2022

 

 

182,784

 

 

$

183

 

 

$

83,074

 

 

$

(468,988

)

 

$

(385,731

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid in
Capital

 

 

Retained

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

(Deficit)

 

 

Deficit

 

 

Deficit

 

Balance, October 3, 2020

 

 

156,500

 

 

$

157

 

 

$

(278,063

)

 

$

(549,093

)

 

$

(826,999

)

Issuance of common stock upon initial public offering, net of offering costs

 

 

30,000

 

 

 

30

 

 

 

458,557

 

 

 

 

 

 

458,587

 

Issuance of common stock under the Plan

 

 

385

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity-based compensation

 

 

 

 

 

 

 

 

14,111

 

 

 

 

 

 

14,111

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(36,709

)

 

 

(36,709

)

Balance, April 3, 2021

 

 

186,885

 

 

$

187

 

 

$

194,605

 

 

$

(585,802

)

 

$

(391,010

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, October 2, 2021

 

 

189,821

 

 

$

190

 

 

$

204,711

 

 

$

(422,459

)

 

$

(217,558

)

Issuance of common stock under the Plan

 

 

463

 

 

 

1

 

 

 

328

 

 

 

 

 

 

329

 

Equity-based compensation

 

 

 

 

 

 

 

 

5,535

 

 

 

 

 

 

5,535

 

Repurchase and retirement of common stock

 

 

(7,500

)

 

 

(8

)

 

 

(127,500

)

 

 

(24,638

)

 

 

(152,146

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(21,891

)

 

 

(21,891

)

Balance, April 2, 2022

 

 

182,784

 

 

$

183

 

 

$

83,074

 

 

$

(468,988

)

 

$

(385,731

)

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

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Table of Contents

LESLIE’S, INC.

CONDENSED Consolidated Statements of Cash Flows

(Amounts in Thousands)

(Unaudited)

 

 

 

Six Months Ended

 

 

 

April 2, 2022

 

 

April 3, 2021

 

Operating Activities

 

 

 

 

 

 

Net loss

 

$

(21,891

)

 

$

(36,709

)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

15,817

 

 

 

12,858

 

Equity-based compensation

 

 

5,535

 

 

 

14,111

 

Amortization of deferred financing costs and debt discounts

 

 

986

 

 

 

1,134

 

Provision for doubtful accounts

 

 

418

 

 

 

64

 

Deferred income taxes

 

 

1,305

 

 

 

(8,711

)

Loss (gain) on disposition of assets

 

 

118

 

 

 

(1,753

)

Loss on debt extinguishment

 

 

 

 

 

9,169

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts and other receivables

 

 

4,823

 

 

 

(10,316

)

Inventories

 

 

(132,358

)

 

 

(127,814

)

Prepaid expenses and other current assets

 

 

(20,306

)

 

 

(17,095

)

Other assets

 

 

(4,922

)

 

 

(6,150

)

Accounts payable and accrued expenses

 

 

26,588

 

 

 

64,007

 

Income taxes payable

 

 

(6,945

)

 

 

(1,857

)

Operating lease assets and liabilities, net

 

 

(5,925

)

 

 

(2,728

)

Net cash used in operating activities

 

 

(136,757

)

 

 

(111,790

)

Investing Activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(14,322

)

 

 

(9,490

)

Business acquisitions, net of cash acquired

 

 

(29,988

)

 

 

(6,040

)

Proceeds from disposition of fixed assets

 

 

407

 

 

 

2,404

 

Net cash used in investing activities

 

 

(43,903

)

 

 

(13,126

)

Financing Activities

 

 

 

 

 

 

Borrowings on revolving credit facility

 

 

45,000

 

 

 

 

Repayment of long-term debt

 

 

(4,050

)

 

 

(392,085

)

Issuance of long-term debt

 

 

 

 

 

907

 

Payment of deferred financing costs

 

 

 

 

 

(9,562

)

Proceeds from options exercised

 

 

329

 

 

 

 

Repurchase and retirement of common stock

 

 

(152,146

)

 

 

 

Proceeds from issuance of common stock upon initial public offering, net

 

 

 

 

 

458,587

 

Net cash (used in) provided by financing activities

 

 

(110,867

)

 

 

57,847

 

Net decrease in cash and cash equivalents

 

 

(291,527

)

 

 

(67,069

)

Cash and cash equivalents, beginning of period

 

 

343,498

 

 

 

155,801

 

Cash and cash equivalents, end of period

 

$

51,971

 

 

$

88,732

 

Supplemental Information:

 

 

 

 

 

 

Interest

 

$

13,325

 

 

$

27,081

 

Income taxes, net of refunds received

 

 

7,358

 

 

 

3,998

 

 

See accompanying notes which are an integral part of these condensed consolidated financial statements.

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Table of Contents

LESLIE’S, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business and Operations

Leslie’s, Inc. (“Leslie’s,” “we,” “our,” “us,” “its,” or the “Company”) is the leading direct-to-consumer pool and spa care brand. We market and sell pool and spa supplies and related products and services, which primarily consist of maintenance items such as chemicals, equipment and parts, and cleaning accessories, as well as safety, recreational, and fitness-related products. We currently market our products through 965 company-operated locations in 38 states and e-commerce websites.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

We prepared the accompanying interim condensed consolidated financial statements following United States generally accepted accounting principles (“GAAP”). The financial statements include all normal and recurring adjustments that are necessary for a fair presentation of our financial position and operating results. The interim condensed consolidated financial statements include the accounts of Leslie’s, Inc. and our subsidiaries. All significant intercompany accounts and transactions have been eliminated. These interim condensed consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended October 2, 2021.

Fiscal Periods

We operate on a fiscal calendar that results in a fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to September 30th. In a 52-week fiscal year, each quarter contains 13 weeks of operations; in a 53-week fiscal year, each of the first, second and third quarters includes 13 weeks of operations and the fourth quarter includes 14 weeks of operations. References to the three months ended April 2, 2022 and the three months ended April 3, 2021 refer to the 13 weeks ended April 2, 2022 and April 3, 2021, respectively. References to the six months ended April 2, 2022 and the six months ended April 3, 2021 refer to the 26 weeks ended April 2, 2022 and April 3, 2021, respectively.

Use of Estimates

To prepare financial statements that conform to GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Our most significant estimates relate to sales returns, inventory obsolescence reserves, lease assumptions, vendor rebate programs, income taxes, self-insurance, valuation of intangible assets and goodwill, and intangible asset impairment evaluations. We continually review our estimates and make adjustments as necessary, but actual results could be significantly different from what we expected when we made these estimates.

Prior Period Reclassifications

Reclassifications of certain immaterial prior period amounts have been made to conform to current period presentation.

Fair Value Measurements

We use fair value measurements to record fair value of certain assets and to estimate fair value of financial instruments not recorded at fair value but required to be disclosed at fair value.

As of April 2, 2022 and October 2, 2021, we held no assets that are required to be measured at fair value on a recurring basis.

The fair value of our amended and restated term loan credit agreement (“Term Loan”) due in 2028 (see Note 9—Long-Term Debt, Net) was determined to be $790.9 million and $802.9 million as of April 2, 2022 and October 2, 2021, respectively. These fair value estimates, determined to be Level 2, are subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the short-term maturity of these instruments.

There were no transfers between levels in the fair value hierarchy during the three and six months ended April 2, 2022 and April 3, 2021, respectively.

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Table of Contents

Seasonality

Our business is highly seasonal. In general, sales and earnings are highest during our third and fourth fiscal quarters, being April through September, and represent the peak months of swimming pool use. Sales are substantially lower during our first and second fiscal quarters.

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes (“Topic 740”): Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions related to intraperiod tax allocations, foreign subsidiaries and interim reporting that are present within existing GAAP rules. The ASU also provides updated guidance regarding the tax treatment of certain franchise taxes, goodwill and nontaxable entities, among other items. In addition, ASU 2019-12 clarifies that the effect of a change in tax laws or rates should be reflected in the annual effective tax rate computation during the interim period that includes the enactment date. We adopted ASU 2019-12 as of October 3, 2021, (as of the beginning of the current annual period) and its adoption did not have a material impact on our consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (“Topic 805”): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which includes certain amendments to improve, simplify, and provide consistency for recognition and measurement of acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments require that an acquirer recognize and measure such contract assets and contract liabilities under Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts. The amendments also allow for election of certain practical expedients, which are applied on an acquisition-by-acquisition basis. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including for any interim period, and if elected, the amendments are applied retrospectively for any acquisitions that occurred in the fiscal year of interim adoption. We adopted ASU 2021-08 during the second quarter of fiscal 2022 and its adoption did not have a material impact on our consolidated financial statements.

Note 3—Business Combinations

The following acquisitions did not have a material impact on our financial position or results of operations. Our condensed consolidated financial statements include the results of operations of these acquisitions from the date of acquisition. The total purchase consideration was allocated to the tangible and intangible assets acquired and the liabilities assumed at their estimated fair values as of each acquisition date, with the excess recorded to goodwill. The goodwill resulting from these acquisitions is expected to be deductible for income tax purposes. During the measurement periods, which will not exceed one year from each closing, we will continue to obtain information to assist us in finalizing the acquisition date fair values. Any qualifying changes to our preliminary estimates will be recorded as adjustments to the respective assets and liabilities, with any residual amounts allocated to goodwill.

Fiscal 2022 Acquisitions

During the six months ended April 2, 2022, we acquired two businesses for an aggregate purchase price of $30.0 million. These acquisitions expanded our pool and spa footprint and added 14 new retail locations. We are in the process of obtaining third-party valuations of certain intangible assets and inventories; thus, the provisional measurement of inventories, intangible assets and goodwill are subject to change. The following table sets forth the preliminary allocation of these acquisitions in the aggregate (in thousands):

 

Total purchase consideration, net of cash acquired

 

$

29,988

 

Less fair value of assets acquired and liabilities assumed:

 

 

 

Inventory