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Goodwill and Intangible Assets | 3 Months Ended
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May 31, 2017
Goodwill and Intangible Assets |
Goodwill and Intangible Assets | Note 8 – Goodwill and Intangible Assets Impairments in the First Quarter of Fiscal 2018 – We continue to evaluate strategic alternatives for our Nutritional Supplements business, which could include a transaction to divest the business, investments in online interface and e-commerce platforms, restructuring or realignment programs, and consolidating our operations and functions. We believe that over the longer-term, these alternatives are designed to enhance revenue growth and profitability; however, over the short-term, certain of these alternatives may have a disproportionate impact on our income relative to the cost savings or generate other charges or losses. During the first quarter of 2018, we received information regarding the potential fair value of our Nutritional Supplements business that we concluded should be considered when determining if impairments of our long-lived assets, including goodwill, had occurred. Consequently, we performed interim impairment testing to determine whether our long-lived assets, including goodwill, associated with our Nutritional Supplements segment were impaired. As a result of our testing, we recorded non-cash asset impairment charges totaling $32.0 million ($19.6 million after tax), consisting of $6.0 million ($3.7 million after tax) to the segment’s indefinite-lived trademarks, and $26.0 million ($15.9 million after tax) to the segment’s goodwill. The fair values used in our impairment tests were determined using a weighted average of various valuation methods including estimated future discounted cash flows and other market data. The valuation techniques utilized assumptions we believed to be appropriate in the circumstances; however, future circumstances attributable to a strategic change in the Nutritional Supplements segment, such as those mentioned in previous paragraph, could result in changes to those assumptions and other charges or losses relating to the segment may be recorded and could be material. For example, if we determine that a divestiture is the probable outcome of our strategic review, we expect to perform additional impairment tests with updated assumptions. We are unable to project what, if any, expense, charges or losses will be in future periods. In our Beauty segment, we performed interim impairment testing in the first quarter of fiscal 2018 for a certain brand as a result of a revised financial projection. As a result of our testing, we recorded a non-cash impairment charge of $4.0 million ($3.5 million after tax). Impairment Testing in Fiscal 2017 – Our annual impairment testing for goodwill and indefinite-lived intangible assets had historically occurred in the first quarter of our fiscal year. In December 2016, we elected to change our annual impairment testing to the fourth quarter of our fiscal year. Accordingly, for fiscal 2017 we completed impairment tests during the first and fourth fiscal quarters. As a result of our testing of indefinite-lived trademarks in the fourth quarter, we recorded non-cash asset impairment charges of $5.0 million ($3.2 million after tax). As a result of our testing of indefinite-lived trademarks in the first quarter, we recorded non-cash asset impairment charges of $7.4 million ($5.1 million after tax). The charges in both quarters were related to certain brand assets and trademarks in our Beauty and Nutritional Supplements segments, which were written down to their estimated fair values, determined on the basis of our estimated future discounted cash flows using the relief from royalty valuation method. Due to recent declines in revenue associated with our Nutritional Supplements segment, our annual impairment testing of goodwill and other intangible assets for the segment reflected a fair value that was in excess of the carrying value by a smaller margin than occurred in previous impairment tests. In addition, the fair value of the indefinite-lived brand asset was determined to be less than the carrying value and impairments of $9.5 million were recorded during fiscal 2017. The fair values used for our impairment testing in fiscal 2017 were estimated using a weighted average approach, which heavily weighted a valuation derived from a discounted cash flow model based on the Company’s estimates of future cash flows and based on management’s intentions with respect to the business. The following table summarizes the carrying amounts and associated accumulated amortization for all intangible assets by operating segment as of the end of the periods shown: GOODWILL AND INTANGIBLE ASSETS
|  | May 31, 2017 |  | February 28, 2017
|  | Gross |  | Cumulative |  |  |  |  |  |  |  | Gross |  | Cumulative |  |  |  |  |  |
|  | Carrying |  | Goodwill |  | Accumulated |  | Net Book |  | Carrying |  | Goodwill |  | Accumulated |  | Net Book
(in thousands) |  | Amount |  | Impairments |  | Amortization |  | Value |  | Amount |  | Impairments |  | Amortization |  | Value
Housewares: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  | $ | 282,056 |  | $ | - |  | $ | - |  | $ | 282,056 |  | $ | 282,056 |  | $ | - |  | $ | - |  | $ | 282,056
Trademarks - indefinite |  |  | 134,200 |  |  | - |  |  | - |  |  | 134,200 |  |  | 134,200 |  |  | - |  |  | - |  |  | 134,200
Other intangibles - finite |  |  | 40,481 |  |  | - |  |  | (16,123) |  |  | 24,358 |  |  | 40,393 |  |  | - |  |  | (15,476) |  |  | 24,917
Total Housewares |  |  | 456,737 |  |  | - |  |  | (16,123) |  |  | 440,614 |  |  | 456,649 |  |  | - |  |  | (15,476) |  |  | 441,173
Health & Home: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  | 284,913 |  |  | - |  |  | - |  |  | 284,913 |  |  | 284,913 |  |  | - |  |  | - |  |  | 284,913
Trademarks - indefinite |  |  | 54,000 |  |  | - |  |  | - |  |  | 54,000 |  |  | 54,000 |  |  | - |  |  | - |  |  | 54,000
Licenses - finite |  |  | 15,300 |  |  | - |  |  | (15,300) |  |  | - |  |  | 15,300 |  |  | - |  |  | (15,300) |  |  | -
Licenses - indefinite |  |  | 7,400 |  |  | - |  |  | - |  |  | 7,400 |  |  | 7,400 |  |  | - |  |  | - |  |  | 7,400
Other intangibles - finite |  |  | 117,091 |  |  | - |  |  | (68,813) |  |  | 48,278 |  |  | 116,982 |  |  | - |  |  | (66,027) |  |  | 50,955
Total Health & Home |  |  | 478,704 |  |  | - |  |  | (84,113) |  |  | 394,591 |  |  | 478,595 |  |  | - |  |  | (81,327) |  |  | 397,268
Nutritional Supplements: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  | 96,609 |  |  | (26,000) |  |  | - |  |  | 70,609 |  |  | 96,609 |  |  | - |  |  | - |  |  | 96,609
Brand assets - indefinite |  |  | 50,020 |  |  | - |  |  | - |  |  | 50,020 |  |  | 56,020 |  |  | - |  |  | - |  |  | 56,020
Other intangibles - finite |  |  | 52,180 |  |  | - |  |  | (18,553) |  |  | 33,627 |  |  | 44,180 |  |  | - |  |  | (16,715) |  |  | 27,465
Total Nutritional Supplements |  |  | 198,809 |  |  | (26,000) |  |  | (18,553) |  |  | 154,256 |  |  | 196,809 |  |  | - |  |  | (16,715) |  |  | 180,094
Beauty: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill |  |  | 81,841 |  |  | (46,490) |  |  | - |  |  | 35,351 |  |  | 81,841 |  |  | (46,490) |  |  | - |  |  | 35,351
Trademarks - indefinite |  |  | 41,854 |  |  | - |  |  | - |  |  | 41,854 |  |  | 45,854 |  |  | - |  |  | - |  |  | 45,854
Trademarks - finite |  |  | 150 |  |  | - |  |  | (93) |  |  | 57 |  |  | 150 |  |  | - |  |  | (92) |  |  | 58
Licenses - indefinite |  |  | 10,300 |  |  | - |  |  | - |  |  | 10,300 |  |  | 10,300 |  |  | - |  |  | - |  |  | 10,300
Licenses - finite |  |  | 13,696 |  |  | - |  |  | (11,928) |  |  | 1,768 |  |  | 13,696 |  |  | - |  |  | (11,849) |  |  | 1,847
Other intangibles - finite |  |  | 46,402 |  |  | - |  |  | (41,262) |  |  | 5,140 |  |  | 46,402 |  |  | - |  |  | (39,929) |  |  | 6,473
Total Beauty |  |  | 194,243 |  |  | (46,490) |  |  | (53,283) |  |  | 94,470 |  |  | 198,243 |  |  | (46,490) |  |  | (51,870) |  |  | 99,883
Total goodwill and intangible assets |  | $ | 1,328,493 |  | $ | (72,490) |  | $ | (172,072) |  | $ | 1,083,931 |  | $ | 1,330,296 |  | $ | (46,490) |  | $ | (165,388) |  | $ | 1,118,418
The following table summarizes the amortization expense attributable to intangible assets recorded in SG&A in the consolidated condensed statements of income for the periods shown below, as well as our estimated amortization expense for fiscal 2018 through 2023. AMORTIZATION OF INTANGIBLE ASSETS
Aggregate Amortization Expense (in thousands) |  |  |
For the three months ended
May 31, 2017 |  | $ | 6,685
May 31, 2016 |  | $ | 7,204
Estimated Amortization Expense (in thousands) |  |  |
Fiscal 2018 |  | $ | 25,965
Fiscal 2019 |  | $ | 21,025
Fiscal 2020 |  | $ | 19,910
Fiscal 2021 |  | $ | 17,349
Fiscal 2022 |  | $ | 6,841
Fiscal 2023 |  | $ | 4,700

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- Definition The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16373-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16265-109275 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16323-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13816-109267 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13854-109267 + Details
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