NOTE 9 – INTANGIBLE ASSETS AND GOODWILL

During the fiscal 2017 first quarter, we recorded both non-amortizable and amortizable intangible assets as a result of the Acquisition. The Acquisition-related trade names, customer relationships and order backlog were assigned fair values based on third party appraisal reports.

Our goodwill and trademarks and trade names have indefinite useful lives and, consequently, are not subject to amortization for financial reporting purposes but are tested for impairment annually, or more frequently if events or circumstances indicate that the asset might be impaired.

Our non-amortizable intangible assets consist of:

§	Goodwill and trademarks and tradenames related to the Acquisition;

§	Trademarks and tradenames related to the acquisitions of Bradington-Young and Sam Moore; and

§	The URL for Homeware.com, the value of which was written off in the 2017 fourth quarter, due to the winding down of Homeware’s operations.

We review goodwill annually for impairment or more frequently if events or circumstances indicate that it might be impaired. In accordance with current accounting guidance, Goodwill & Other, the goodwill impairment test consists of a two-step process, if necessary. However, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test outlined in ASC Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality of events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary and our goodwill is considered to be unimpaired. However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed with performing the quantitative assessment. The quantitative assessment involves estimating the fair value of our goodwill using projected future cash flows that are discounted using a weighted average cost of capital analysis that reflects current market conditions. Management judgment is a significant factor in the goodwill impairment evaluation process. The computations require management to make estimates and assumptions, the most critical of which are the potential future cash flows and an appropriate discount rate. Based on our qualitative assessment as described above, we have concluded that our goodwill is not impaired as of January 29, 2017.

In conjunction with our evaluation of the cash flows generated by the Home Meridian, Bradington-Young and Sam Moore reporting units, we evaluated the carrying value of trademarks and trade names using the relief from royalty method, which values the trademark/trade name by estimating the savings achieved by ownership of the trademark/trade name when compared to licensing the mark/name from an independent owner. The inputs used in the trademark/trade name analyses are considered Level 3 fair value measurements. At January 29, 2017, the fair values of our Bradington-Young, Home Meridian and Sam Moore trade names exceeded their carrying values by approximately $1.4 million, $660,000 and $619,000, respectively.

Details of our non-amortizable intangible assets are as follows:

		January 29,		January 31,
Non-amortizable Intangible Assets	Segment	2017		2016
Goodwill	Home Meridian	$	23,187	$	-
Trademarks and trade names - Home Meridian	Home Meridian		11,400		-
Trademarks and trade names - Bradington-Young	Upholstery		861		861
Trademarks and trade names - Sam Moore	Upholstery		396		396
URL- Homeware.com	All Other		-		125
Total non-amortizable assets			35,844		1,382

All of our amortizable intangible assets are recorded in our Home Meridian segment. The carrying amounts and changes therein of those amortizable intangible assets were as follows:

	Amortizable Intangible Assets
	Customer
	Relationships			Backlog			Trademarks			Totals

Balance at January 31, 2016	$	-		$	-		$	-		$	-
Intangibles- the Acquisition		14,400			1,800			200			16,400
Accumulated amortization		(1,309	)		(1,800	)		(25	)		(3,134	)
Balance at January 29, 2017	$	13,091		$	-		$	175		$	13,266

The weighted-average amortization period for all amortizable intangible assets is 9.8 years. The weighted-average amortization period for customer relationships is 9.7 years and is less than one year for our backlog and trademarks.

The estimated amortization expense associated with our amortizable intangible assets is expected to be as follows:

Fiscal Year	Amount

2018		1,334
2019		1,334
2020		1,334
2021		1,334
2022		1,334
Thereafter		6,596
	$	13,266