GOODWILL AND OTHER INTANGIBLE ASSETS
|12 Months Ended|
Feb. 02, 2019
|GOODWILL AND INTANGIBLE ASSETS|
|Goodwill and Other Intangible Assets||
8. GOODWILL AND INTANGIBLE ASSETS
Goodwill allocated to our reportable segments and changes in the net carrying amount of goodwill for the years ended February 2, 2019 and February 3, 2018 are as follows (in thousands):
In fiscal 2017, the goodwill of acquired business resulted from an immaterial acquisition by our UK-based operations. During the fourth quarter of 2017, based on an indicator of the fair value of the business, we recorded a goodwill impairment charge of $1.5 million for MW Cleaners, which related to our retail segment.
Third Quarter 2018 Corporate Apparel Impairment Test
During the third quarter of 2018, sales, profitability and cash flow of our corporate apparel reporting unit underperformed in comparison to our forecast. The performance of our corporate apparel business was and continues to be impacted by increasing uncertainty surrounding Brexit, which is resulting in lower replenishment demand from existing accounts in the UK. In addition, in the third quarter of 2018, we received notification from a significant U.S. customer of their decision not to renew their existing agreement with us in 2019. As a result of the continued uncertainty surrounding Brexit and the notification from our U.S. customer, we lowered our forecast of sales, profitability and cash flow for the corporate apparel reporting unit for the fourth quarter of 2018 and future years.
As a result of the factors above, we determined that a triggering event occurred during the third quarter of 2018 and an interim goodwill impairment test for our corporate apparel reporting unit was required. We concluded that the reporting unit’s goodwill was fully impaired and recorded a non-cash goodwill impairment charge of $24.0 million during the third quarter of 2018.
Consistent with the procedures followed in our annual impairment test, we estimated the fair value of the reporting unit using a combined income and market comparable approach. Our income approach uses projected future cash flows that are discounted using a weighted‑average cost of capital analysis that reflects current market conditions. The market comparable approach primarily considers market price multiples of comparable companies and applies those price multiples to certain key drivers of the reporting unit. We believe these two approaches are appropriate valuation techniques and we weighted the two values equally as an estimate of reporting unit fair value for the purposes of our impairment testing.
Management judgment is a significant factor in the goodwill impairment evaluation process. The computations require management to make estimates and assumptions. Critical assumptions used in the interim impairment test for the corporate apparel reporting unit included:
Estimating future cash flows requires management to make assumptions and to apply judgment, including forecasting future sales, costs and useful lives of assets. Significant judgment is also involved in selecting the appropriate discount rate to be applied in determining the estimated fair value of an asset. Changes to our key assumptions related to future performance, market conditions and other economic factors can significantly affect our impairment evaluation and may trigger the need for future impairment tests possibly resulting in future impairment charges related to intangible assets of the corporate apparel reporting unit.
We are committed to an ongoing evaluation of our portfolio of businesses and maximizing value for our shareholders. Such an evaluation may result in the consideration of a range of options related to our corporate apparel business, some of which could result in additional non-cash losses in future periods.
As of February 2, 2019 and February 3, 2018, accumulated goodwill impairment totaled $804.0 million and $780.0 million, respectively. As of February 2, 2019, $780.0 million related to our retail segment and $24.0 million related to our corporate apparel segment.
The gross carrying amount and accumulated amortization of our identifiable intangible assets are as follows (in thousands):
The pre-tax amortization expense associated with intangible assets subject to amortization totaled approximately $3.9 million, $4.2 million and $4.8 million for fiscal 2018, 2017 and 2016, respectively. Pre-tax amortization expense associated with intangible assets subject to amortization at February 2, 2019 is estimated to be approximately $3.6 million for fiscal year 2019, $3.5 million for fiscal year 2020, $3.4 million for fiscal year 2021, $2.1 million for fiscal year 2022 and $0.9 million for fiscal year 2023.
The entire disclosure for goodwill and intangible assets.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef