lululemon athletica inc

Note 3. Acquisition

On September 10, 2024, the Company acquired the lululemon branded retail locations and operations run by a third party in Mexico. The Company had previously granted the third party the right to operate retail locations and to sell lululemon products in Mexico.

The following table summarizes the fair value of the consideration transferred, as well as the calculation of goodwill based on the excess of consideration over the provisional fair value of net assets acquired.

The purchase price allocation remains provisional as the Company is still obtaining all the information necessary to finalize the fair value of acquired intangibles, deferred taxes, certain contingencies, and the resulting amount of goodwill as of the date of acquisition. Goodwill relates to the assembled workforce and benefits expected as a result of the acquisition and has been allocated to the Americas segment. None of the goodwill is expected to be deductible for income tax purposes.

Reacquired franchise rights were valued using the future expected cash flows of the remaining contractual franchise period until November 2026. These intangible assets have a fair value of $15.5 million, which is expected to be amortized until

November 2026. Contingent consideration of $15.0 million relates to performance related conditions from the acquisition date to December 31, 2025, and has been recognized at fair value.

Of the net cash paid to shareholders, $131.0 million was paid during the third quarter of 2024, and $23.1 million was paid subsequent to October 27, 2024.

The Company has not disclosed pro forma information of the combined business as the transaction is not material to net revenue or net earnings.

During the first three quarters of 2024, the Company recognized $2.5 million in acquisition-related expenses within selling, general and administrative expenses primarily related to legal, accounting, valuation, and other professional services.