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Goodwill and Intangible Assets

12 Months Ended

Feb. 28, 2018

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Note 9 – Goodwill and Intangibles

We do not record amortization expense for goodwill or other intangible assets that have indefinite useful lives.  Amortization expense is recorded for intangible assets with definite useful lives.  Some of our goodwill is held in jurisdictions that allow deductions for tax purposes, however, in some of those jurisdictions we have no tax basis for the associated goodwill recorded for book purposes. Accordingly, the majority of our goodwill is not deductible for tax purposes.  We perform annual impairment testing each fiscal year and interim impairment testing, if necessary.  We write down any asset deemed to be impaired to its fair value.  

Our impairment test methodology uses primarily estimated future discounted cash flow models (“DCF Models”).  The DCF Models use a number of assumptions including expected future cash flows from the assets, volatility, risk free rate, and the expected life of the assets, the determination of which require significant judgments from management.  In determining the assumptions to be used, we consider the existing rates on Treasury Bills, yield spreads on assets with comparable expected lives, historical volatility of our common stock and that of comparable companies, and general economic and industry trends, among other considerations.  When stock market or other conditions warrant, we expand our traditional impairment test methodology to give weight to other methods that provide additional observable market information in order to better reflect the current risk level being incorporated into market prices and in order to corroborate the fair values of each of our reporting units.  Management will place increased reliance on these additional methods in conjunction with its DCF Models in the event that the total market capitalization of its stock drops below its consolidated stockholders’ equity balance for a sustained period.

Considerable management judgment is necessary in reaching a conclusion regarding the reasonableness of fair value estimates, evaluating the most likely impact of a range of possible external conditions, considering the resulting operating changes and their impact on estimated future cash flows, determining the appropriate discount factors to use, and selecting and weighting appropriate comparable market level inputs.

Impairment Testing in Fiscal 2018 - As a result of our annual and interim testing of indefinite-lived trademarks, we recorded non-cash asset impairment charges totaling $15.4 million ($13.8 million after tax) during fiscal 2018. The charges were related to trademarks in our Beauty segment, 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.

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 our business could result in changes to those assumptions and other charges or losses relating our segments may be recorded and could be material. We are unable to project the amount of any expense, charge or loss that may be incurred in future periods.

Impairment Testing in Fiscal 2017 - As a result of our testing of indefinite-lived trademarks, we recorded non-cash asset impairment charges of $2.9 million ($2.5 million after tax) during fiscal 2017.  The charges were related to trademarks in our Beauty segment, 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.

Impairment Testing in Fiscal 2016 - As a result of our testing of indefinite-lived trademarks, we recorded non-cash impairment charges of $6.0 million ($5.3 million after tax) during fiscal 2016.  The charges were related to certain trademarks in our Beauty segment, which were written down to fair value, determined on the basis of future discounted cash flows using the relief from royalty valuation method.

The following tables summarize the changes in our goodwill and intangible assets by segment for fiscal 2018 and 2017:

GOODWILL AND INTANGIBLE ASSETS

				Balances at															Balances at
		Weighted		February 28, 2017						Year Ended February 28, 2018									February 28, 2018
		Average		Gross			Cumulative									Acquisition			Gross			Cumulative
		Life		Carrying			Goodwill									and Retirement			Carrying			Goodwill			Accumulated			Net Book
(in thousands)		(Years)		Amount			Impairments			Additions			Impairments			Adjustments			Amount			Impairments			Amortization			Value
Housewares:
Goodwill				$	282,056		$	-		$	-		$	-		$	-		$	282,056		$	-		$	-		$	282,056
Trademarks - indefinite					134,200			-			-			-			-			134,200			-			-			134,200
Other intangibles - finite		10.7			40,393			-			607						(173)			40,828			-			(17,530)			23,298
Subtotal					456,649			-			607			-			(173)			457,084			-			(17,530)			439,554
Health & Home:
Goodwill					284,913			-			-			-			-			284,913			-			-			284,913
Trademarks - indefinite					54,000			-			-			-			-			54,000			-			-			54,000
Licenses - finite					15,300			-			-			-			-			15,300			-			(15,300)			-
Licenses - indefinite					7,400			-			-			-			-			7,400			-			-			7,400
Other Intangibles - finite		4.0			116,982			-			605			-						117,586			-			(77,128)			40,458
Subtotal					478,595			-			605			-			-			479,199			-			(92,428)			386,771
Beauty:
Goodwill					81,841			(46,490)			-			-			-			81,841			(46,490)			-			35,351
Trademarks - indefinite					45,854			-			-			(15,447)			-			30,407			-			-			30,407
Trademarks - finite		10.6			150			-			-			-			-			150			-			(97)			53
Licenses - indefinite					10,300			-			-			-			-			10,300			-			-			10,300
Licenses - finite		4.8			13,696			-			-			-			-			13,696			-			(12,166)			1,530
Other intangibles - finite		0.2			46,402			-			-			-			-			46,402			-			(45,133)			1,269
Subtotal					198,243			(46,490)			-			(15,447)			-			182,796			(46,490)			(57,396)			78,910
Total				$	1,133,487		$	(46,490)		$	1,212		$	(15,447)		$	(173)		$	1,119,079		$	(46,490)		$	(167,354)		$	905,235

				Year Ended															Year Ended
		Weighted		February 29, 2016						Year Ended February 28, 2017									February 28, 2017
		Average		Gross			Cumulative									Acquisition			Gross			Cumulative
		Life		Carrying			Goodwill									and Retirement			Carrying			Goodwill			Accumulated			Net Book
(in thousands)		(Years)		Amount			Impairments			Additions			Impairments			Adjustments			Amount			Impairments			Amortization			Value
Housewares:
Goodwill				$	166,132		$	-		$	116,053		$	-		$	(129)		$	282,056		$	-		$	-		$	282,056
Trademarks - indefinite					75,200			-			59,000			-			-			134,200			-			-			134,200
Other intangibles - finite		11.6			15,448			-			25,040			-			(95)			40,393			-			(15,476)			24,917
Subtotal					256,780			-			200,093			-			(224)			456,649			-			(15,476)			441,173
Health & Home:
Goodwill					284,913			-			-			-			-			284,913			-			-			284,913
Trademarks - indefinite					54,000			-			-			-			-			54,000			-			-			54,000
Licenses - finite					15,300			-			-			-			-			15,300			-			(15,300)			-
Licenses - indefinite					7,400			-			-			-			-			7,400			-			-			7,400
Other Intangibles - finite		5.0			116,575			-			472			-			(65)			116,982			-			(66,027)			50,955
Subtotal					478,188			-			472			-			(65)			478,595			-			(81,327)			397,268
Beauty:
Goodwill					81,841			(46,490)			-			-			-			81,841			(46,490)			-			35,351
Trademarks - indefinite					48,754			-			-			(2,900)			-			45,854			-			-			45,854
Trademarks - finite		11.6			150			-			-			-			-			150			-			(92)			58
Licenses - indefinite					10,300			-			-			-			-			10,300			-			-			10,300
Licenses - finite		5.8			13,696			-			-			-			-			13,696			-			(11,849)			1,847
Other intangibles - finite		1.2			46,402			-			-			-			-			46,402			-			(39,929)			6,473
Subtotal					201,143			(46,490)			-			(2,900)			-			198,243			(46,490)			(51,870)			99,883
Total				$	936,111		$	(46,490)		$	200,565		$	(2,900)		$	(289)		$	1,133,487		$	(46,490)		$	(148,673)		$	938,324

The following table summarizes the amortization expense attributable to intangible assets recorded in SG&A in the consolidated statements of income for fiscal 2018, 2017 and 2016, as well as estimated amortization expense for fiscal 2019 through 2023:

Aggregate Amortization Expense (in thousands)
Fiscal 2018		$	18,854
Fiscal 2017		$	22,024
Fiscal 2016		$	21,514

Estimated Amortization Expense (in thousands)
Fiscal 2019		$	14,018
Fiscal 2020		$	12,428
Fiscal 2021		$	10,384
Fiscal 2022		$	4,078
Fiscal 2023		$	3,995

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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
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-Section 50
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-URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16265-109275

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
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-Section 50
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-URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16323-109275

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-Publisher FASB
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-Name Accounting Standards Codification
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-Section 50
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