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ACQUISITIONS AND INTANGIBLES | 12 Months Ended
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Jan. 31, 2018
Business Combinations [Abstract] |
ACQUISITIONS AND INTANGIBLES | NOTE D — ACQUISITIONS AND INTANGIBLES Acquisition of Donna Karan International Inc. On December 1, 2016, G-III acquired all of the outstanding capital stock of DKI from LVMH, pursuant to a Stock Purchase Agreement (the “Purchase Agreement”), dated July 22, 2016, by and between the Company and LVMH, for a total purchase price, including adjustments, of  $674.4 million. DKI owns Donna Karan and DKNY, two of the world’s most iconic and recognizable power brands. DKI sells its products through department stores, specialty retailers and online retailers worldwide, as well as through company-owned retail stores, e-commerce sites and distribution agreements. The acquisition of DKI strengthens and diversifies the Company’s brand portfolio and offers additional opportunities to expand G-III’s business through the development of the DKNY and Donna Karan brands and product categories. The results of DKI have been included in the Company’s consolidated financial statements since the date of acquisition. Purchase price consideration The purchase price, after taking into account certain adjustments, was paid by a combination of  (i) cash, (ii) 2,608,877 newly issued shares of the Company’s common stock valued at $75.0 million and (iii) a note (the “LVMH Note”) issued to LVMH in the principal amount of  $125.0 million. The cash portion of the purchase price was paid from the proceeds of a term loan facility and revolving credit facility. The purchase price has been revised to include adjustments in accordance with the Purchase Agreement. The total consideration paid for the acquisition of DKI is as follows (in thousands):
| Initial Purchase Price |  |  |  | $ | 650,000 |  |
| plus: 338(h)(10) tax election adjustment |  |  |  |  | 38,100* |  |
| plus: aggregate adjustments to purchase price |  |  |  |  | 26,278 |  |
| Minus: LVMH Note discount |  |  |  |  | (40,000) |  |
| Total consideration |  |  |  | $ | 674,378 |  |
* Includes the final 338(h)(10) tax election adjustment. Allocation of the purchase price consideration The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition:
(In thousands) |  |
Cash and cash equivalents |  |  |  | $ | 44,375 |  |
Accounts receivable |  |  |  |  | 18,652 |  |
Inventories |  |  |  |  | 13,727 |  |
Prepaid expenses & other current assets |  |  |  |  | 22,907 |  |
Property, plant and equipment |  |  |  |  | 15,414 |  |
Goodwill |  |  |  |  | 211,675 |  |
Tradenames |  |  |  |  | 370,000 |  |
Other intangibles |  |  |  |  | 40,000 |  |
Other long-term assets |  |  |  |  | 3,052 |  |
Total assets acquired |  |  |  |  | 739,802 |  |
Accounts payable |  |  |  |  | (21,096) |  |
Accrued expense |  |  |  |  | (35,582) |  |
Income taxes payable |  |  |  |  | (3,661) |  |
Other long-term liabilities |  |  |  |  | (5,085) |  |
Total liabilities assumed |  |  |  |  | (65,424) |  |
Total fair value of acquisition consideration (net of $40 million imputed debt discount) |  |  |  | $ | 674,378 |  |
Under ASC 805 — Business Combinations, a company may adjust preliminary amounts recognized at the acquisition date to their subsequently determined final fair values during the measurement period. The measurement period is the period after the acquisition date during which the acquirer may adjust the balance sheet amounts recognized for a business combination (generally up to one year from the date of acquisition). During the year ended January 31, 2018, the Company reduced goodwill by $9.0 million, net due to certain adjustments related to unrecorded indemnification obligations from LVMH, asset reserves, fixed assets and the section 338(h)(10) tax election adjustment. The Company recognized goodwill of  $211.7 million in connection with the acquisition of DKI. Goodwill was assigned to the Company’s wholesale operations segment as the wholesale operations segment is expected to benefit from the synergies of the combination and from the future growth of DKI. Subsequent to the acquisition, DKI’s wholesale operations were integrated into G-III’s credit and collection operating system and both entities share several processes such as information technology, finance, logistics, human resources, sourcing and overseas quality control. The Company and LVMH have made an election under Internal Revenue Code Section 338(h)(10). Accordingly, the book and tax basis of the acquired domestic assets and liabilities are the same as of the purchase date and the goodwill is deductible for tax purposes over a 15-year period. 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 Company recorded other intangible assets of $410.0 million within the wholesale operations segment, which included customer relationships of $40.0 million (17-year life), as well as tradenames of $370.0 million, which have an indefinite life. The Company recognized $736,000 and $7.8 million of acquisition-related costs that were expensed in fiscal 2018 and fiscal 2017. These costs have been included in selling, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income. The following table represents the reconciliation of the cash paid for the acquisition of DKI with the fair value of the acquisition consideration (in thousands):
| Purchase price |  |  |  | $ | 674,378 |  |
| Minus cash acquired and non-cash consideration |  |  |  |  |  |  |
| Cash acquired |  |  |  |  | (44,375) |  |
| Note issued to LVMH, net of discount |  |  |  |  | (85,000) |  |
| 338(h)(10) election tax election adjustment – paid in fiscal 2019 |  |  |  |  | (4,600) |  |
| Common Stock issued to LVMH |  |  |  |  | (75,000) |  |
| Cash disbursed for the acquisition of DKI as of January 31, 2018 |  |  |  | $ | (465,403) |  |
Intangible assets balances Intangible assets consist of:
|  |  |  |  |  | January 31, |
|  |  | Estimated Life |  |  | 2018 |  |  | 2017 |
|  |  |  |  |  | (In thousands) |
Finite-lived intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Licenses |  |  | 14 years |  |  |  | $ | 19,714 |  |  |  |  | $ | 18,846 |  |
Trademarks |  |  | 8 – 12 years |  |  |  |  | 2,194 |  |  |  |  |  | 2,194 |  |
Customer relationships |  |  | 15 – 17 years |  |  |  |  | 48,371 |  |  |  |  |  | 48,071 |  |
Other |  |  | 5 – 10 years |  |  |  |  | 5,876 |  |  |  |  |  | 4,387 |  |
Subtotal |  |  |  |  |  |  |  | 76,155 |  |  |  |  |  | 73,498 |  |
Accumulated amortization |  |  |  |  |  |  |  | (29,750) |  |  |  |  |  | (24,940) |  |
Total finite-lived intangible assets |  |  |  |  |  |  |  | 46,405 |  |  |  |  |  | 48,558 |  |
Indefinite-lived intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  |  |  |  |  |  | 262,710 |  |  |  |  |  | 269,262 |  |
Trademarks |  |  |  |  |  |  |  | 442,265 |  |  |  |  |  | 435,414 |  |
Total indefinite-lived intangible assets |  |  |  |  |  |  |  | 704,975 |  |  |  |  |  | 704,676 |  |
Total intangible assets, net |  |  |  |  |  |  | $ | 751,380 |  |  |  |  | $ | 753,234 |  |
Amortization expense Amortization expense with respect to finite-lived intangibles amounted to $4.5 million, $2.5 million and $1.9 million for the years ended January 31, 2018, 2017 and 2016, respectively. The estimated amortization expense with respect to intangibles for the next five years is as follows:
Year Ending January 31, |  |  | Amortization Expense |
|  |  | (In thousands) |
2019 |  |  |  |  | 4,453 |  |
2020 |  |  |  |  | 4,426 |  |
2021 |  |  |  |  | 3,903 |  |
2022 |  |  |  |  | 3,102 |  |
2023 |  |  |  |  | 3,057 |  |
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. Change in Goodwill Changes in the amounts of goodwill for each of the years ended January 31, 2018 and 2017 are summarized by reportable segment as follows (in thousands):
|  |  | Wholesale |  |  | Retail |  |  | Total |
January 31, 2016 |  |  |  | $ | 48,721 |  |  |  |  | $ | 716 |  |  |  |  | $ | 49,437 |  |
DKI acquisition |  |  |  |  | 220,649 |  |  |  |  |  | — |  |  |  |  |  | 220,649 |  |
Currency translation |  |  |  |  | (824) |  |  |  |  |  | — |  |  |  |  |  | (824) |  |
January 31, 2017 |  |  |  |  | 268,546 |  |  |  |  |  | 716 |  |  |  |  |  | 269,262 |  |
Adjustments to acquired goodwill |  |  |  |  | (8,973) |  |  |  |  |  | — |  |  |  |  |  | (8,973) |  |
Goodwill impairment |  |  |  |  | — |  |  |  |  |  | (716) |  |  |  |  |  | (716) |  |
Currency translation |  |  |  |  | 3,137 |  |  |  |  |  | — |  |  |  |  |  | 3,137 |  |
January 31, 2018 |  |  |  | $ | 262,710 |  |  |  |  | $ | — |  |  |  |  | $ | 262,710 |  |
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. The Company performs the 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. In fiscal 2018, the Company reduced goodwill recorded in connection with the acquisition of DKI by $9.0 million due to certain adjustments related to unrecorded indemnification obligations from LVMH, asset reserves, fixed assets and the section 338(h)(10) tax election adjustment. The Company also wrote off the goodwill associated with the retail operations segment of  $716,000 as a result of the retail operations segment performance.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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