XML 48 R27.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Goodwill and intangibles | 12 Months Ended
--- | ---
Jan. 29, 2022
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and intangibles | Goodwill and intangiblesGoodwill and other indefinite-lived intangible assets, such as indefinite-lived trade names, are evaluated for impairment annually and more frequently if events or conditions are identified indicating the carrying value of a reporting unit or an indefinite-lived intangible asset may not be recoverable. In evaluating goodwill and indefinite-lived trade names for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value. If the Company concludes that it is not more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value, then no further testing is required. However, if the Company concludes that it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value, then an impairment test is performed to identify a potential impairment and measure the amount of impairment to be recognized, if any. When the carrying amount of the reporting unit or an indefinite-lived intangible assets exceeds its fair value, an impairment charge is recorded. The impairment test for goodwill involves estimating the fair value of the reporting unit through either estimated discounted future cash flows or market-based methodologies. The impairment test for other indefinite-lived intangible assets involves estimating the fair value of the asset, which is typically performed using the relief from royalty method for indefinite-lived trade names. Fiscal 2020 During Fiscal 2020, the Company performed its annual evaluation of its indefinite-lived intangible assets, including goodwill and trade names identified in the Zales and R2Net acquisition, for impairment indicators. The Company noted that no impairment indicators existed at the date of the annual evaluation. 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 had occurred requiring interim impairment assessments for its remaining reporting units with goodwill and indefinite-lived intangible assets. Using a combination of discounted cash flow and guideline public company methodologies, the Company compared the fair value of each of its reporting units with their carrying value. The Company determined no additional impairment charges were required to be recognized during Fiscal 2020 related to the annual evaluation or interim assessment. During the second quarter of Fiscal 2020, 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 consolidated statements of operations related to an error in the calculation of goodwill impairments during Fiscal 2019. Fiscal 2021 During Fiscal 2021, the Company performed its annual evaluation of its indefinite-lived intangible assets, including goodwill and trade names identified in the Zales and R2Net acquisitions, for impairment indicators. The Company noted that no impairment indicators existed at the date of the annual evaluation. Additionally, due to various impacts of COVID-19 to the Company’s business during the first quarter Fiscal 2021, 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 rates were required to reflect the prevailing uncertainty inherent in the forecasts due to current market conditions and potential COVID-19 impacts. This higher discount rate, in conjunction with revised long-term projections associated with certain aspects of the Company’s forecast, resulted in lower than previously projected long-term future cash flows for the reporting units and indefinite-lived intangible assets which negatively affected the valuation compared to previous valuations. As a result of the interim impairment assessment, during the first quarter of Fiscal 2021, the Company recognized pre-tax impairment charges related to goodwill of $10.7 million in the consolidated statement of operations within its North America reportable segment related to R2Net and Zales Canada goodwill. In conjunction with the interim impairment tests noted above, during the first quarter of Fiscal 2021 the Company determined that the fair values of indefinite-lived intangible assets related to certain Zales trade names were less than their carrying value. Accordingly, in the first quarter of Fiscal 2021, the Company recognized pre-tax impairment charges within asset impairments on the consolidated statements of operations of $83.3 million within its North America reportable segment. Fiscal 2022 In the second quarter of Fiscal 2022, the annual testing date of R2Net was changed from the last day of the fiscal year to the last day of the fourth period of each fiscal year. R2Net represents a reporting unit within the Company’s North America reportable segment. The new impairment testing date is preferable, as this date corresponds with the testing date for all other North America reporting units. This will allow information and assumptions to be applied consistently to all reporting units. In connection with the acquisition of Rocksbox on March 29, 2021, the Company recognized $11.6 million of definite-lived intangible assets and $4.7 million of goodwill, which are reported in the North America reportable segment. The weighted-average amortization period of the definite-lived intangibles assets acquired is eight years. Refer to Note 4 for additional information. In connection with the acquisition of Diamonds Direct on November 17, 2021, the Company recognized $126.0 million of indefinite-lived intangible assets related to the Diamonds Direct trade name and $241.9 million of goodwill, which are reported in the North America reportable segment. Refer to Note 4 for additional information. During Fiscal 2022, the Company did not identify any events or conditions that would indicate that it was more likely than not that the carrying values of the reporting units and indefinite-lived intangible assets exceed their fair values. Goodwill The following table summarizes the Company’s goodwill by reportable segment:
(in millions) | North America |  |  |  |  |  |
Balance at February 1, 2020 | $ | 248.8 |  |  |  |  |  |  |
Impairment | (10.7) |  |  |  |  |  |  |
Impact of foreign exchange | (0.1) |  |  |  |  |  |  |
Balance at January 30, 2021 (1) | $ | 238.0 |  |  |  |  |  |  |
Acquisitions | 246.6 |  |  |  |  |  |  |
Balance at January 29, 2022 (1) | $ | 484.6 |  |  |  |  |  |  |
(1) The carrying amount of goodwill is presented net of accumulated impairment losses of $576.0 million as of January 29, 2022 and January 30, 2021. Intangibles Definite-lived intangible assets include trade names, technology, customer relationship and favorable lease agreements. All indefinite-lived intangible assets consist of trade names. Both definite and indefinite-lived assets are recorded within intangible assets, net on the consolidated balance sheets. Intangible liabilities, net consists of unfavorable contracts and is recorded within accrued expense and other current liabilities and other liabilities (non-current) on the consolidated balance sheets. The following table provides additional detail regarding the composition of intangible assets and liabilities:
|  | January 29, 2022 |  | January 30, 2021
(in millions) |  | Gross carrying amount |  | Accumulated amortization |  |  |  | Net carrying amount |  | Gross carrying amount |  | Accumulated amortization |  |  |  | Net carrying amount
Intangible assets, net: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Definite-lived intangible assets |  | $ | 15.8 |  |  | $ | (5.3) |  |  |  |  | $ | 10.5 |  |  | $ | 5.6 |  |  | $ | (4.2) |  |  |  |  | $ | 1.4 |
Indefinite-lived intangible assets (1) |  | 303.7 |  |  | $ | — |  |  |  |  | 303.7 |  |  | 177.6 |  |  | $ | — |  |  |  |  | 177.6 |
Total intangible assets, net |  | $ | 319.5 |  |  | $ | (5.3) |  |  |  |  | $ | 314.2 |  |  | $ | 183.2 |  |  | $ | (4.2) |  |  |  |  | $ | 179.0 |
Intangible liabilities, net |  | $ | (38.0) |  |  | $ | 30.8 |  |  |  |  | $ | (7.2) |  |  | $ | (38.0) |  |  | $ | 27.5 |  |  |  |  | $ | (10.5) |
(1) The change in the indefinite-lived intangible asset balances during the periods presented was due to the addition of Diamonds Direct trade name of $126.0 million and the impact of foreign currency translation. Amortization expense relating to intangible assets was $1.1 million in Fiscal 2022 (Fiscal 2021: $0.9 million; Fiscal 2020: $0.9 million). The unfavorable contracts are classified as liabilities and recognized over the term of the underlying contract. Amortization relating to intangible liabilities was $3.3 million in Fiscal 2022 (Fiscal 2021: $5.4 million; Fiscal 2020: $5.5 million). Expected future amortization for intangible assets and intangible liabilities recorded at January 29, 2022 follows:
(in millions) | Intangible assets amortization |  | Intangible liabilities amortization
Fiscal 2023 | $ | 2.4 |  |  | $ | (1.8) |
Fiscal 2024 | 1.9 |  |  | (1.8) |
Fiscal 2025 | 1.3 |  |  | (1.8) |
Fiscal 2026 | 1.2 |  |  | (1.8) |
Fiscal 2027 | 1.2 |  |  | — |
Thereafter | 2.5 |  |  | — |
Total | $ | 10.5 |  |  | $ | (7.2) |

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: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration