XML 113 R22.htm IDEA: XBRL DOCUMENT
v3.19.2

Goodwill and intangibles | 6 Months Ended
--- | ---
Aug. 03, 2019
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and intangibles | Goodwill and intangibles Goodwill and other indefinite-lived intangible assets, such as indefinite-lived trade names, are evaluated for impairment annually. Additionally, if events or conditions were to indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may not be recoverable, the Company would evaluate the asset for impairment at that time. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. When the carrying amount of the reporting unit or other intangible assets exceeds its fair value, an impairment charge is recorded. Due to a sustained decline in the Company’s market capitalization during the 13 weeks ended May 5, 2018, the Company determined a triggering event had occurred that required an interim impairment assessment for all of its reporting units and indefinite-lived intangible assets. As part of the assessment, it was determined that an increase in the discount rate applied in the valuation was required to align with market-based assumptions and company-specific risk. This higher discount rate, in conjunction with revised long-term projections associated with finalizing certain initial aspects of the Company’s Path to Brilliance transformation plan, resulted in lower than previously projected long-term future cash flows for the reporting units which negatively affected the valuation compared to previous valuations. As a result of the interim impairment assessment, the Company recognized pre-tax impairment charges totaling $448.7 million in the 13 weeks ended May 5, 2018. Due to a continued decline in the Company’s market capitalization during the 13 weeks ended February 2, 2019, the Company determined a triggering event had occurred that required additional interim impairment assessments for its reporting units and indefinite-lived intangible assets. The Company recognized additional pre-tax impairment charges totaling $286.7 million during the 13 weeks ended February 2, 2019 primarily related to revised long-term projections and a higher discount rate associated with James Allen. Goodwill During the first quarter of Fiscal 2019, the Company compared the fair value of each of its reporting units using a combination of discounted cash flow and guideline public company methodologies with their carrying value and concluded that a deficit existed. Accordingly, in the 13 weeks ended May 5, 2018, the Company recognized pre-tax impairment charges in operations of $308.8 million within its North America segment. Due to the second triggering event in the 13 weeks ended February 2, 2019 and using similar methodologies as the initial impairment assessment, the Company recognized additional pre-tax impairment charges in operations of $208.8 million and $3.6 million within its North America and Other segments, respectively. During the 13 weeks ended August 3, 2019, a non-cash immaterial out-of-period adjustment of $47.7 million, with $35.2 million related to Zales goodwill and $12.5 million related to R2Net goodwill, was recognized within goodwill and intangible impairments on the condensed consolidated statements of operations related to an error in the calculation of goodwill impairments during Fiscal 2019. The following table summarizes the Company’s goodwill by reportable segment:
(in millions) |  | North America |  | Other |  | Total
Balance at February 3, 2018 |  | $ | 818.1 |  |  | $ | 3.6 |  |  | $ | 821.7 |
Impairment |  | (517.6 | ) |  | (3.6 | ) |  | (521.2 | )
Impact of foreign exchange and other adjustments (1) |  | (3.9 | ) |  | — |  |  | (3.9 | )
Balance at February 2, 2019 |  | 296.6 |  |  | — |  |  | 296.6 |
Impairment(2) |  | (47.7 | ) |  | — |  |  | (47.7 | )
Impact of foreign exchange and other adjustments |  | (0.1 | ) |  | — |  |  | (0.1 | )
Balance at August 3, 2019 |  | $ | 248.8 |  |  | $ | — |  |  | $ | 248.8 |
(1) | During Fiscal 2019, other adjustments include a purchase price accounting adjustment of $2.6 million related to a revised valuation of acquired intangible assets from the R2Net acquisition.
(2) | During the 26 weeks ended August 3, 2019, an immaterial out-of-period adjustment was recognized related to an error in the calculation of goodwill impairment losses during Fiscal 2019.
Intangibles Definite-lived intangible assets include trade names and favorable lease agreements. Indefinite-lived intangible assets include trade names. Both definite and indefinite-lived assets are recorded within intangible assets, net on the consolidated balance sheets. Intangible liabilities, net is comprised of unfavorable lease agreements and contracts and is recorded within other liabilities on the consolidated balance sheets. In conjunction with the interim goodwill impairment tests during Fiscal 2019, the Company reviewed its indefinite-lived intangible assets for potential impairment by calculating the fair values of the assets using the relief from royalty method and comparing the fair value to their respective carrying amounts. The interim impairment tests resulted in the determination that the fair values of indefinite-lived intangible assets related to certain Zales trade names were less than their carrying value. Accordingly, in the 13 weeks ended May 5, 2018, the Company recognized pre-tax impairment charges in operations of $139.9 million within its North America segment. Additionally, in conjunction with the interim goodwill impairment tests associated with the second triggering event in the fourth quarter of Fiscal 2019, the Company determined that the fair values of indefinite-lived intangible assets related to trade names, primarily James Allen, were less than their carrying value. Accordingly, in the 13 weeks ended February 2, 2019, the Company recognized pre-tax impairment charges in operations of $74.3 million within its North America segment. The following table provides additional detail regarding the composition of intangible assets and liabilities:
|  | August 3, 2019 |  | February 2, 2019 |  | August 4, 2018
(in millions) |  | Gross carrying amount |  | Accumulated amortization(1) |  | Net carrying amount |  | Gross carrying amount |  | Accumulated amortization(1) |  | Net carrying amount |  | Gross carrying amount |  | Accumulated amortization(1) |  | Net carrying amount
Intangible assets, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Definite-lived intangible assets |  | $ | 53.2 |  |  | $ | (50.7 | ) |  | $ | 2.5 |  |  | $ | 53.3 |  |  | $ | (50.1 | ) |  | $ | 3.2 |  |  | $ | 53.4 |  |  | $ | (48.6 | ) |  | $ | 4.8 |
Indefinite-lived intangible assets |  | 475.9 |  |  | (214.1 | ) |  | 261.8 |  |  | 475.9 |  |  | (214.1 | ) |  | 261.8 |  |  | 476.2 |  |  | (139.7 | ) |  | 336.5 |
Total intangible assets, net |  | $ | 529.1 |  |  | $ | (264.8 | ) |  | $ | 264.3 |  |  | $ | 529.2 |  |  | $ | (264.2 | ) |  | $ | 265.0 |  |  | $ | 529.6 |  |  | $ | (188.3 | ) |  | $ | 341.3 |
Intangible liabilities, net |  | $ | (113.8 | ) |  | $ | 95.3 |  |  | $ | (18.5 | ) |  | $ | (113.9 | ) |  | $ | 92.5 |  |  | $ | (21.4 | ) |  | $ | (114.0 | ) |  | $ | 88.8 |  |  | $ | (25.2 | )
(1) | Accumulated amortization amounts related to the indefinite-lived intangible assets represents accumulated impairment losses recorded to date.
During the second quarter of Fiscal 2020, the Company performed its annual evaluation of its indefinite-lived intangible assets, including goodwill and trade names identified in the Zale acquisition, for impairment indicators. Additionally, due to a continued decline in the Company’s market capitalization during the second quarter of Fiscal 2020, the Company determined a triggering event requiring interim impairment assessments for its remaining reporting units and indefinite-lived intangible assets had occurred. Using methodologies similar to the assessments performed in Fiscal 2019 described above, the Company determined no additional impairment charges were required to be recognized during Fiscal 2020 related to the annual evaluation or interim assessment. As a result of the impairment of goodwill and tradenames during the fourth quarter of Fiscal 2019, goodwill of $77.8 million associated with the R2Net acquisition and the Company’s tradenames within the North America segment continue to approximate their respective fair values and could be at risk for future impairments. Subsequent to the second quarter of Fiscal 2020, the Company has observed a continuing decline in the market valuation of its common shares which could impact the assumptions used to perform an evaluation of its indefinite-lived intangible assets, including goodwill and trade names. The Company will continue to monitor sales trends, interest rates, and other key inputs to the estimates of fair value. A further decline in the key inputs utilized in the valuation of goodwill and trade names may result in an impairment charge.

X
- References No definition available. + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration