Goodwill and Other Intangible Assets

9 Months Ended

Mar. 27, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

Interim Impairment Assessment

The Company performs its annual impairment assessment of goodwill as well as brand intangibles at the beginning of the fourth quarter of each fiscal year or if an event occurs that would more likely than not reduce the fair value below its carrying amount.

No events occurred during the three months ended March 27, 2021 that would more likely than not reduce the fair value below its carrying value.

During the three months ended March 28, 2020, profitability trends continued to decline from those that were expected for the Stuart Weitzman brand. This reduction in cash flows for the three months ended March 28, 2020 and expected future cash flows was exacerbated by the Covid-19 pandemic, which resulted in a decline in sales driven by full and partial closures of a significant portion of our stores globally. As a result of these macroeconomic conditions, the Company concluded that a triggering event had occurred during the third quarter of fiscal year 2020, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Stuart Weitzman reporting unit and indefinite-lived brand intangible assets. The assessment concluded that the fair values of the Stuart Weitzman reporting unit and indefinite-lived brand intangible asset as of March 28, 2020 did not exceed their respective carrying values.

Accordingly, during the three months ended March 28, 2020, the Company recorded a goodwill impairment charge of $210.7 million related to the Stuart Weitzman reporting unit, resulting in a full impairment. The Company also recorded an impairment charge of $267.0 million related to the Stuart Weitzman indefinite-lived brand, resulting in a full impairment. The goodwill and brand intangible impairment charges were recorded within total SG&A expenses on the Company's Condensed Consolidated Statement of Operations for the three and nine months ended March 28, 2020.

The estimated fair value of the Stuart Weitzman reporting unit was based on a weighted average of the income and market approaches. The income approach is based on estimated discounted future cash flows, while the market approach is based on earnings multiples of selected guideline companies. The approach, which qualifies as level 3 in the fair value hierarchy, incorporated a number of significant assumptions and judgments, including, but not limited to, estimated future cash flows, discount rates, income tax rates, terminal growth rates and valuation multiples derived from comparable publicly traded companies. In considering the excess of the fair value over its carrying value for the Coach and Kate Spade reporting units and indefinite-lived brand intangibles, management did not perform an interim assessment for these reporting units during the three months ended March 28, 2020.

Goodwill

The change in the carrying amount of the Company’s goodwill by segment is as follows:


	Coach		Kate Spade		Stuart Weitzman(1)		Total
	(millions)
Balance at June 27, 2020	$	661.7	$	639.4	$	—	$	1,301.1

Foreign exchange impact	(2.5)		1.6		—		(0.9)


Balance at March 27, 2021	$	659.2	$	641.0	$	—	$	1,300.2

(1) Amount is net of accumulated goodwill impairment charges of $210.7 million as of March 27, 2021 and June 27, 2020.

Intangible Assets

Intangible assets consist of the following:


	March 27, 2021						June 27, 2020
	Gross Carrying Amount		Accum. Amort.		Net		Gross Carrying Amount		Accum. Amort.		Net
	(millions)
Intangible assets subject to amortization:
Customer relationships	$	100.5	$	(35.7)	$	64.8	$	100.6	$	(31.0)	$	69.6



Intangible assets not subject to amortization:
Trademarks and trade names	1,309.9		—		1,309.9		1,309.8		—		1,309.8
Total intangible assets	$	1,410.4	$	(35.7)	$	1,374.7	$	1,410.4	$	(31.0)	$	1,379.4

As of March 27, 2021, the expected amortization expense for intangible assets is as follows:


	Amortization Expense
	(millions)
Remainder of fiscal 2021	$	1.7
Fiscal 2022	6.5
Fiscal 2023	6.5
Fiscal 2024	6.5
Fiscal 2025	6.5
Fiscal 2026	6.5
Fiscal 2027 and thereafter	30.6
Total	$	64.8

The expected amortization expense above reflects remaining useful lives ranging from approximately 9.1 to 11.3 years for customer relationships.