Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Other Intangible Assets

v3.3.1.900
Goodwill and Other Intangible Assets
9 Months Ended
Oct. 31, 2015
Goodwill and Other Intangible Assets  
Goodwill and Other Intangible Assets

 

 

12.  Goodwill and Other Intangible Assets

 

Goodwill

 

Goodwill allocated to our reportable segments and changes in the net carrying amount of goodwill for the nine months ended October 31, 2015 are as follows (in thousands):

 

 

 

Retail

 

Corporate
Apparel

 

Total

 

Balance at January 31, 2015

 

$

861,180

 

$

26,756

 

$

887,936

 

Adjustments to purchase price allocation of acquired businesses

 

3,062

 

 

3,062

 

Translation adjustment

 

(608

)

601

 

(7

)

 

 

 

 

 

 

 

 

Balance at October 31, 2015

 

$

863,634

 

$

27,357

 

$

890,991

 

 

 

 

 

 

 

 

 

 

 

 

 

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.

 

Based on Jos. A. Bank’s results, as well as the recent significant decline in our market capitalization, we concluded that a triggering event occurred that required an interim goodwill impairment test.  During the third quarter of 2015, Jos. A. Bank’s results were impacted by significantly lower than forecasted revenue results primarily due to a greater than expected decline in traffic resulting from our transition away from the historical promotional strategy at Jos. A. Bank.  While the short term decline is greater than we expected, we have implemented several strategies that we expect to offset the decline in revenues resulting in a stable profit model to generate cash flows over the long-term.  Based on the results of our interim goodwill impairment test, as of October 31, 2015, we concluded that our goodwill was not impaired.  However, if we determine we are not likely to meet our projections of future cash flows or if our market capitalization remains at current levels, among other factors, it is possible our annual impairment test in the fourth quarter of 2015 could result in a material impairment of the Jos. A. Bank goodwill.  As of October 31, 2015, goodwill associated with the Jos. A. Bank reporting unit totaled $769.0 million.

 

Intangible Assets

 

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

 

 

 

October 31,
2015

 

November 1,
2014

 

January 31,
2015

 

 

 

 

 

 

 

 

 

Amortizable intangible assets:

 

 

 

 

 

 

 

Carrying amount:

 

 

 

 

 

 

 

Trademarks and tradenames

 

$

16,516

 

$

16,628

 

$

16,448

 

Favorable leases

 

24,118

 

24,400

 

24,400

 

Customer relationships

 

85,515

 

86,699

 

84,788

 

 

 

 

 

 

 

 

 

Total carrying amount

 

126,149

 

127,727

 

125,636

 

 

 

 

 

 

 

 

 

Accumulated amortization:

 

 

 

 

 

 

 

Trademarks and tradenames

 

(9,679

)

(9,261

)

(9,331

)

Favorable leases

 

(4,025

)

(1,130

)

(1,883

)

Customer relationships

 

(24,507

)

(14,659

)

(16,468

)

 

 

 

 

 

 

 

 

Total accumulated amortization

 

(38,211

)

(25,050

)

(27,682

)

 

 

 

 

 

 

 

 

Total amortizable intangible assets, net

 

87,938

 

102,677

 

97,954

 

 

 

 

 

 

 

 

 

Indefinite-lived intangible assets:

 

 

 

 

 

 

 

Trademarks and tradename, gross

 

570,333

 

570,380

 

570,305

 

Impairment of Jos. A. Bank tradename

 

(90,100

)

 

 

 

 

 

 

 

 

 

 

Trademarks and tradename, net

 

480,233

 

570,380

 

570,305

 

 

 

 

 

 

 

 

 

Total intangible assets, net

 

$

568,171

 

$

673,057

 

$

668,259

 

 

 

 

 

 

 

 

 

 

 

 

 

As discussed above, during the third quarter of 2015, we concluded that a triggering event occurred that required an interim impairment test for the Jos. A. Bank tradename.  The fair value of the Jos. A. Bank tradename was estimated using a relief from royalty method, which calculates the present value of savings resulting from the right to sell products without having to pay a royalty fee.  Critical assumptions that are used in this method include future sales projections, an estimated royalty rate and a discount rate.  Based on our analysis, we concluded the Jos. A. Bank tradename was impaired and recorded a non-cash impairment charge of $90.1 million, which is included as a separate line in the condensed statement of (loss) earnings, and relates to our retail segment.  In addition, should the downward revenue trend accelerate during the fourth quarter of 2015 from what we expect or if other valuation inputs such as the royalty rate or discount rate change, it is possible our annual impairment test in the fourth quarter of 2015 could result in an additional impairment charge for the Jos. A. Bank tradename.  As of October 31, 2015, after giving effect to the impairment charge, the book value of the Jos. A. Bank tradename was $449.0 million.

 

The pre-tax amortization expense associated with intangible assets subject to amortization totaled $3.4 million and $10.5 million for the three and nine months ended October 31, 2015, respectively.  The pre-tax amortization expense associated with intangible assets subject to amortization totaled $3.5 million and $6.5 million for the three and nine months ended November 1, 2014, respectively.  Pre-tax amortization associated with intangible assets subject to amortization at October 31, 2015 is estimated to be $3.9 million for the remainder of fiscal year 2015, $13.7 million for fiscal year 2016, $13.2 million for fiscal year 2017, $12.8 million for fiscal year 2018 and $12.6 million for fiscal year 2019.

 

For further information on our goodwill and tradename analysis, see the discussion in Management’s Discussion and Analysis in the “Executive Overview” section beginning on page 27 and the “Critical Accounting Policies and Estimates” section beginning on page 40, of this Form 10-Q.