Goodwill and Intangible Assets

9 Months Ended

Nov. 30, 2017

Note 5 – Goodwill and Intangible Assets

Impairment Testing in Fiscal 2018

Nutritional Supplements

During the third quarter of fiscal 2018, we continued to evaluate strategic alternatives for our Nutritional Supplements segment, including a transaction to divest the business. 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 third quarter of fiscal 2018, we received new information regarding the potential fair value of our Nutritional Supplements segment 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. As a result of our testing, we recorded pre-tax non-cash asset impairment charges totaling $82.2 million, consisting of $70.6 million to the segment’s goodwill and $11.6 million to the segment’s indefinite-lived brand assets.

During the second quarter of fiscal 2018, we performed additional impairment testing for our Nutritional Supplements segment due to a revised financial projection. As a result of our testing, we recorded pre-tax non-cash asset impairment charges totaling $18.1 million to the segment’s indefinite-lived brand assets.

During the first quarter of fiscal 2018, we received information regarding the potential fair value of our Nutritional Supplements segment 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. As a result of our testing, we recorded pre-tax non-cash asset impairment charges totaling $32.0 million, consisting of $6.0 million to the segment’s indefinite-lived brand assets and $26.0 million to the segment’s goodwill.

Beauty

In our Beauty segment, we performed interim impairment testing in the first quarter of fiscal 2018 for a certain brand due to a revised financial projection. As a result of our testing, we recorded a pre-tax non-cash asset impairment charge of $4.0 million.

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. For example, if we determine that a divestiture is a probable outcome of our strategic reviews, we may need to perform additional impairment tests that may include future offer values. 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

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. 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


	November 30, 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		40,751		-		(17,074)		23,677		40,393		-		(15,476)		24,917
Total Housewares		457,007		-		(17,074)		439,933		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		117,473		-		(74,400)		43,073		116,982		-		(66,027)		50,955
Total Health & Home		479,086		-		(89,700)		389,386		478,595		-		(81,327)		397,268

Nutritional Supplements:
Goodwill		96,609		(96,609)		-		-		96,609		-		-		96,609
Brand assets - indefinite		20,432		-		-		20,432		56,020		-		-		56,020
Other intangibles - finite		52,180		-		(22,095)		30,085		44,180		-		(16,715)		27,465
Total Nutritional Supplements		169,221		(96,609)		(22,095)		50,517		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		-		(96)		54		150		-		(92)		58
Licenses - indefinite		10,300		-		-		10,300		10,300		-		-		10,300
Licenses - finite		13,696		-		(12,087)		1,609		13,696		-		(11,849)		1,847
Other intangibles - finite		46,402		-		(43,885)		2,517		46,402		-		(39,929)		6,473
Total Beauty		194,243		(46,490)		(56,068)		91,685		198,243		(46,490)		(51,870)		99,883
Total goodwill and intangible assets	$	1,299,557	$	(143,099)	$	(184,937)	$	971,521	$	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 operations 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
November 30, 2017	$	6,430
November 30, 2016		7,199

Aggregate Amortization Expense (in thousands)
For the nine months ended
November 30, 2017	$	19,578
November 30, 2016		21,625


Estimated Amortization Expense (in thousands)
Fiscal 2018	$	26,095
Fiscal 2019		20,604
Fiscal 2020		19,516
Fiscal 2021		16,926
Fiscal 2022		6,450
Fiscal 2023		4,280

- 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.

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