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NOTE 8 - INTANGIBLE ASSETS AND GOODWILL | 12 Months Ended
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Jan. 28, 2018
Disclosure Text Block [Abstract] |
Intangible Assets Disclosure [Text Block] | NOTE 8 – INTANGIBLE ASSETS AND GOODWILL During the fiscal 2018 third quarter, we recorded both non-amortizable and amortizable intangible assets as a result of the Shenandoah acquisition. The Shenandoah acquisition-related trade names and trademarks, customer relationships and order backlog were assigned fair values based on third party appraisal reports. Our goodwill, some 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 Home Meridian and Shenandoah acquisitions; and
§ | Trademarks and tradenames related to the acquisitions of Bradington-Young (acquired in 2002), Sam Moore (acquired in 2007) and Shenandoah.
We review goodwill annually for impairment or more frequently if events or circumstances indicate that it might be impaired. In accordance with ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, 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 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 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 is performed by comparing the carrying amount of the reporting unit to its fair value. If the fair value of the reporting unit is less than the carrying amount of the reporting unit, the goodwill impairment charge would be equal to the amount of such difference. The quantitative assessment involves estimating the fair value of the reporting unit 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 28, 2018. 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 28, 2018, the fair values of our Home Meridian, Bradington-Young and Sam Moore trade names exceeded their carrying values by approximately $4.3 million, $1.1 million and $1.6 million respectively. Details of our non-amortizable intangible assets are as follows:
|  |  |  | January 28, |  |  | January 29, |
|  | Segment |  | 2018 |  |  | 2017 |
Non-amortizable Intangible Assets |  |  |  |  |  |  |  |
Goodwill |  | Home Meridian |  | $ | 23,187 |  |  | $ | 23,187 |
Goodwill |  | All Other |  |  | 16,871 |  |  |  | - |
Total Goodwill |  |  |  |  | 40,058 |  |  |  | 23,187 |
Trademarks and trade names - Home Meridian |  | Home Meridian |  |  | 11,400 |  |  |  | 11,400 |
Trademarks and trade names - Bradington-Young |  | All Other |  |  | 861 |  |  |  | 861 |
Trademarks and trade names - Sam Moore |  | All Other |  |  | 396 |  |  |  | 396 |
Total Trademarks and trade names |  |  |  | $ | 12,657 |  |  | $ | 12,657 |
Total non-amortizable assets |  |  |  | $ | 52,715 |  |  | $ | 35,844 |
The following table is a rollforward of goodwill for the 2018 and 2017 fiscal years:
Segment |  | January 31, 2016 |  |  | Acquisition |  |  | January 29, 2017 |  |  | Acquisition |  |  | January 28, 2018 |
Home Meridian |  | $ | - |  |  | $ | 23,187 |  |  | $ | 23,187 |  |  | $ | - |  |  | $ | 23,187 |
All Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16,871 |  |  |  | 16,871 |
|  | $ | - |  |  | $ | 23,187 |  |  | $ | 23,187 |  |  | $ | 16,871 |  |  | $ | 40,058 |
Our amortizable intangible assets are recorded in the Home Meridian and in All Other. 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- HMI acquisition |  |  | 14,400 |  |  |  | 1,800 |  |  |  | 200 |  |  |  | 16,400 |
Amortization |  |  | (1,309 | ) |  |  | (1,800 | ) |  |  | (25 | ) |  |  | (3,134 | )
Balance at January 29, 2017 |  | $ | 13,091 |  |  | $ | - |  |  | $ | 175 |  |  | $ | 13,266 |
Intangibles- Shenandoah acquisition |  |  | 13,200 |  |  |  | 400 |  |  |  | 700 |  |  |  | 14,300 |
Amortization |  |  | (1,647 | ) |  |  | (400 | ) |  |  | (37 | ) |  |  | (2,084 | )
Balance at January 28, 2018 |  | $ | 24,644 |  |  | $ | - |  |  | $ | 838 |  |  | $ | 25,482 |
The weighted-average amortization period for all amortizable intangible assets is 11.3 years. The weighted-average amortization period for customer relationships is 10.8 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 |
2019 |  |  | 2,384 |
2020 |  |  | 2,384 |
2021 |  |  | 2,384 |
2022 |  |  | 2,384 |
2023 |  |  | 2,384 |
Thereafter |  |  | 13,562 |
|  | $ | 25,482 |
Gross intangible assets and total accumulated amortization for each major class of intangible assets is as follows:
|  | January 28, 2018 |  |  | January 29, 2017 |
Trademarks and tradenames |  | $ | 900 |  |  | $ | 200 |
Accumulated amortization |  |  | (62 | ) |  |  | (25 | )
Trademarks and tradenames, net |  |  | 838 |  |  |  | 175 |
Customer relationships |  |  | 27,600 |  |  |  | 14,400 |
Accumulated amortization |  |  | (2,956 | ) |  |  | (1,309 | )
Customer relationships, net |  |  | 24,644 |  |  |  | 13,091 |
Backlog |  |  | 2,200 |  |  |  | 1,800 |
Accumulated amortization |  |  | (2,200 | ) |  |  | (1,800 | )
Backlog, net |  |  | - |  |  |  | - |
Total intangible assets, net |  | $ | 25,482 |  |  | $ | 13,266 |

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