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ACQUISITIONS AND INTANGIBLES
 12 Months Ended
Jan. 31, 2014
Business Combinations [Abstract]  
ACQUISITIONS AND INTANGIBLES

NOTE D – ACQUISITIONS AND INTANGIBLES

 

Acquisition of Vilebrequin

 

In August 2012, the Company acquired all of the outstanding shares of Vilebrequin for aggregate consideration consisting of (i) €70.5 million (approximately $87.6 million) in cash and (ii) €15.0 million (approximately $18.6 million) of unsecured promissory notes due December 31, 2017, with interest payable at the rate of 5% per year. In addition to the aggregate consideration paid at closing, the purchase agreement provides for contingent consideration of up to €22.5 million (approximately $27.9 million) based upon achieving certain performance objectives related to the growth of the Vilebrequin business over the three years ending December 31, 2015. As of the acquisition date, the estimated contingent consideration payable was $5.4 million. The dollar equivalents to the amounts in Euro set forth in this paragraph are based on the exchange rate on the date of acquisition (€1.000 equal to USD $1.242).

 

Vilebrequin is a premier provider of status swimwear, resort wear and related accessories. Vilebrequin sells its products in over 50 countries around the world through a network of company owned and franchised specialty retail stores and shops, as well as through select wholesale distribution.

 

The total consideration paid for Vilebrequin was approximately $111.7 million, including the estimated fair value of the contingent consideration at the time of acquisition. The purchase price has been allocated to the tangible assets, liabilities and identifiable intangible assets acquired based on their estimated fair values. The fair value of the contingent consideration was estimated as of the acquisition date based on the present value of the expected contingent payments, which are determined using weighted probabilities of possible payments. On January 31, 2014, the contingent consideration was reduced by approximately $490,000 as a result of a revision of the assumptions initially used to calculate the earnout payment. The allocation resulted in goodwill and intangible assets in the aggregate amount of $95.6 million related to the acquisition of Vilebrequin.

 

The following table (in thousands) summarizes the components of the purchase price allocation, which was finalized in the quarter ended July 31, 2013, for the acquisition of Vilebrequin:

 

 

Purchase price:        
Cash paid   $ 87,573  
Notes issued     18,633  
Fair value of contingent consideration     5,452  
    $ 111,658  
Allocation:        
Current assets   $ 25,793  
Property, plant and equipment     5,724  
Identifiable intangible assets     68,847  
Other non-current assets, net     15,274  
Assumed liabilities     (12,938 )
Deferred income taxes     (17,820 )
Goodwill     26,778  
    $ 111,658

 

The fair values assigned to identifiable intangible assets acquired were based on assumptions and estimates made by management using unobservable inputs reflecting the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability based on the best information available. The fair values of these identifiable intangible assets were determined using the discounted cash flow method, and the Company classifies these intangibles as Level 3 fair value measurements. The final purchase price allocation resulted in an increase of other non-current assets of $10.7 million and a decrease in deferred income taxes of $5.3 million resulting in a decrease in goodwill of $5.4 million. Identifiable intangible assets acquired include trademarks valued at $58.7 million with an indefinite life, franchise agreements valued at $7.5 million with an estimated useful life of 14 years and customer relationships valued at $2.6 million with an estimated useful life of 8 years. The goodwill represents the future economic benefits expected to arise that could not be individually identified and separately recognized, including use of the Company’s existing infrastructure to expand sales of Vilebrequin products.

 

Acquisition of G.H. Bass

 

On November 4, 2013, G-III Apparel Group, Ltd. and its indirect wholly-owned subsidiary, AM Retail Group, Inc (“AM Retail Group”) entered into an asset purchase agreement, with PVH Retail Stores LLC, PVH Corp. and PVH of Puerto Rico, Inc., providing for the sale to AM Retail Group of substantially all of the assets of the G.H. Bass & Co (“G.H. Bass”) business, including approximately 160 G.H. Bass & Co. outlet stores. The purchase price was $49.2 million in cash.

 

G.H. Bass & Co. is a well-known heritage brand that embodies classic American style. The Company sells G.H. Bass & Co. footwear, apparel and accessories primarily through approximately 160 outlet stores located in the United States. The Company also licenses the brand for the wholesale distribution of men's and women's footwear and men’s sportswear.

 

The following table (in thousands) summarizes the components of the purchase price allocation for the acquisition of G.H. Bass:

 
Purchase price:        
Cash paid   $ 49,236  
    $ 49,236  
Allocation:        
Current assets   $ 42,967  
Property, plant and equipment     2,788  
Identifiable intangible assets - Trademarks     2,490  
Other non-current assets, net     975  
Assumed liabilities     (700 )
Goodwill     716  
    $ 49,236  
 
The trademarks were assigned an indefinite useful life. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of G.H. Bass with the other businesses of our retail operations segment.

 

Intangible assets balances

 

Intangible assets consist of:

        January 31,  
    Estimated Life   2014     2013  
        (In thousands)  
Gross carrying amounts                    
Licenses   14 years   $ 20,779     $ 20,432  
Trademarks   8 - 12 years     2,194       2,193  
Customer relationships   8 - 15 years     8,741       8,620  
Other   3 – 10 years     2,912       1,994  
Subtotal         34,626       33,239  
Accumulated amortization                    
Licenses         13,394       12,798  
Trademarks         1,816       1,595  
Customer relationships         3,696       2,995  
Other         1,415       1,393  
Subtotal         20,321       18,781  
Net                    
Licenses         7,385       7,634  
Trademarks         379       598  
Customer relationships         5,044       5,625  
Other         1497       601  
Subtotal         14,305       14,458  
Unamortized intangible assets                    
Goodwill         55,604       60,396  
Trademarks         80,707       75,464  
Subtotal         136,311       135,860  
Total intangible assets, net       $ 150,616     $ 150,318

 

Intangible amortization expense amounted to approximately $1.6 million, $1.2 million and $0.9 million for the years ended January 31, 2014, 2013 and 2012, respectively.

 

The estimated intangible amortization expense for the next five years is as follows:

 

Year Ending January 31,            Amortization Expense  
    (In thousands)  
2015   $ 1,821  
2016     1,683  
2017     1,639  
2018     1,612  
2019     1,365

 

Goodwill represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method. The Company reviews and tests its goodwill and intangible assets with indefinite lives for impairment at least annually, or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may be impaired. We perform our test in the fourth fiscal quarter of each year using a combination of a discounted cash flow analysis and a market approach. The discounted cash flow approach requires that certain assumptions and estimates be made regarding industry economic factors and future profitability. The market approach estimates the fair value based on comparisons with the market values and market multiples of earnings and revenues of similar public companies.

 

Trademarks and customer relationships having finite lives are amortized over their estimated useful lives and measured for impairment when events or circumstances indicate that the carrying value may be impaired.

 

Goodwill has been allocated to the reporting segments based upon the relative fair values of the licenses (licensed products segment) and trademarks acquired. For the year ended January 31, 2014, the carrying amount of goodwill was $26.1 million, $28.8 million and $0.7 million in the licensed products, non-licensed products and retail operations segments, respectively, including $1.5 million in exchange differences arising during the period. For the year ended January 31, 2013, the carrying amount of goodwill was $26.1 million and $34.3 million in the licensed products and non-licensed products segments, respectively.