Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Other Intangible Assets

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Goodwill and Other Intangible Assets
9 Months Ended
Nov. 02, 2019
GOODWILL AND INTANGIBLE ASSETS  
Goodwill and Other Intangible Assets

15.  Goodwill and Other Intangible Assets

Goodwill

Changes in the net carrying amount of goodwill for the nine months ended November 2, 2019 are as follows (in thousands):

    

Total

 

Balance at February 2, 2019

$

79,491

Translation adjustment

 

(99)

Balance at November 2, 2019

$

79,392

Goodwill is evaluated for impairment at least annually. A more frequent evaluation is performed if events or circumstances indicate that impairment could have occurred. Such events or circumstances could include, but are not limited to, new significant negative industry or economic trends, unanticipated changes in the competitive environment, decisions to significantly modify or dispose of operations and a significant sustained decline in the market price of our stock.  During the third quarter of 2019, we determined that a triggering event occurred as a result of the sustained decline in the market price of our stock and performed an interim goodwill impairment test, which indicated no goodwill impairment at this time.

We estimated the fair values of each of our reporting units 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 earnings multiples of comparable companies and applies those multiples to certain key drivers of the reporting unit.  We believe these two approaches are appropriate valuation techniques and we weighted the two approaches equally as an estimate of reporting unit fair value for the purposes of our impairment testing.  In addition, we compared the total fair values of our reporting units to our market capitalization and noted that the implied control premium was within what we consider to be a reasonable range.  

If the current market price of our stock further decreases, or if other events or circumstances change that would more likely than not reduce the fair value of our reporting units below their respective carrying values, all or a portion of our goodwill may be impaired in future periods and such an impairment charge could have a material effect on our results of operations and financial condition.  

Intangible Assets

The gross carrying amount and accumulated amortization of our identifiable intangible assets are as follows (in thousands):

    

November 2,

    

November 3,

February 2,

    

2019

    

2018

    

2019

 

Amortizable intangible assets:

Carrying amount:

Trademarks, tradenames and franchise agreements

$

13,506

$

13,506

$

13,506

Favorable leases

12,695

11,844

Total carrying amount

 

13,506

 

26,201

 

25,350

Accumulated amortization:

Trademarks, tradenames and franchise agreements

 

(9,816)

 

(9,628)

 

(9,677)

Favorable leases

(5,629)

(5,162)

Total accumulated amortization

 

(9,816)

 

(15,257)

 

(14,839)

Total amortizable intangible assets, net

 

3,690

 

10,944

 

10,511

Indefinite-lived intangible assets:

Trademarks and tradename

 

143,200

 

143,200

 

143,200

Total intangible assets, net

$

146,890

$

154,144

$

153,711

The elimination of favorable leases is due to the adoption of ASC 842, effective February 3, 2019.  Please see Note 14 for additional information.  In addition, the decrease in trademarks, tradenames and franchise agreements and the elimination of customer relationships is due to the sale of our corporate apparel business.  Please see Note 2 for additional information.

During the third quarter of 2019, based on the recent performance of the Jos. A. Bank brand, we determined that a triggering event occurred related to our Jos. A. Bank tradename, an indefinite-lived intangible asset.  As a result, we completed an interim impairment test, which indicated no impairment at this time.

We estimated the fair value of the Jos. A. Bank tradename based on an income approach using the relief-from-royalty method.  This approach is dependent upon a number of factors, including estimates of future growth and trends, royalty rates, discount rates and other variables.

If events or circumstances change that would more likely than not reduce the fair value of our indefinite-lived intangible assets below their respective carrying values, we may be required to record an impairment charge, which could have a material effect on our results of operations and financial condition.  

Amortization expense associated with intangible assets subject to amortization totaled less than $0.1 million and $0.1 million for the three and nine months ended November 2, 2019, respectively. Amortization expense associated with

intangible assets subject to amortization totaled $0.4 million and $1.1 million for the three and nine months ended November 3, 2018, respectively. Amortization expense associated with intangible assets subject to amortization at November 2, 2019 is estimated to be less than $0.1 million for the remainder of fiscal 2019 and $0.2 million each year for fiscal years 2020-2024.