Annual report pursuant to Section 13 and 15(d)

GOODWILL AND INTANGIBLE ASSETS

v3.20.1
GOODWILL AND INTANGIBLE ASSETS
12 Months Ended
Feb. 01, 2020
GOODWILL AND INTANGIBLE ASSETS  
GOODWILL AND INTANGIBLE ASSETS

5. GOODWILL AND INTANGIBLE ASSETS

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

February 1, 2020

Weighted

Average

Remaining

Accumulated

Amortization

Amortization

Gross

Amortization/

Net

Period

Period

Carrying

Impairment

Carrying

(in years)

(in years)

Amount

Charges (1)

Value

Definite-lived intangible assets:

Customer relationships

15-18

14.81

$

61,610

$

(6,309)

$

55,301

Proprietary product designs

7

3,400

(3,400)

Other intangible assets

3-19

5.74

10,540

(4,249)

6,291

75,550

(13,958)

61,592

Indefinite-lived intangible assets:

Product tradenames

13,725

(8,900)

4,825

Total intangible assets

$

89,275

$

(22,858)

$

66,417

February 2, 2019

Weighted

Average

Remaining

Accumulated

Amortization

Amortization

Gross

Amortization/

Net

Period

Period

Carrying

Impairment

Carrying

(in years)

(in years)

Amount

Charges (1)

Value

Definite-lived intangible assets:

Customer relationships

16-18

14.95

$

5,600

$

(1,789)

$

3,811

Proprietary product designs

7

3.99

3,400

(2,633)

767

Other intangible assets

4-21

11.71

4,229

(2,794)

1,435

13,229

(7,216)

6,013

Indefinite-lived intangible assets:

Product tradenames

13,725

(2,500)

11,225

Total intangible assets

$

26,954

$

(9,716)

$

17,238

(1) In fiscal 2019, impairment charges of $6.4 million and $4.1 million were recorded on indefinite-lived and definite-lived intangible assets, respectively. In fiscal 2018, impairment charges of $2.5 million and $0.5 million were recorded on indefinite-lived and definite-lived intangible assets, respectively (see Note 1 for further explanation).

In fiscal 2019, fiscal 2018 and fiscal 2017, we recognized amortization expense of $1.7 million, $1.6 million and $1.9 million, respectively, related to definite-lived intangible assets. As of February 1, 2020, the amortization expense related to our definite-lived intangible assets for the next five years will be approximately $4.0 million to $5.0 million each year.

On November 22, 2019, the Company acquired certain intangible assets from A.C. Moore Incorporated for $62.1 million, including customer relationships and tradenames totaling $56.0 million and $5.2 million, respectively. In connection with the transaction, we also leased a distribution facility in New Jersey and 19 store locations. The fair values of the intangible assets acquired were determined by using the income approach. The income approach indicates value for a subject based on the present value of cash flows expected to be generated by the asset. Projected cash flows are discounted at a market rate of return that reflects the relative risk of achieving the cash flows and the time value of money.

As of February 1, 2020 and February 2, 2019, goodwill totaled $94.3 million and $112.1 million, respectively.  As a result of our impairment testing in fiscal 2019, we fully impaired goodwill of $17.8 million related to our Darice wholesale business (see Note 1 for further explanation). The remaining goodwill balance as of February 1, 2020 is related to our Michaels brand.