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INTANGIBLE ASSETS AND GOODWILL | 12 Months Ended
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Jan. 29, 2023
Goodwill and Intangible Assets Disclosure [Abstract] |
Intangible Assets Disclosure [Text Block] | NOTE 10 – INTANGIBLE ASSETS AND GOODWILL 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 related to the Shenandoah and Sunset West acquisitions; and
| ■ | Trademarks and tradenames related to the acquisitions of Bradington-Young (acquired in 2002), Sam Moore (acquired in 2007) and Home Meridian (acquired in 2016).
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 perform our annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. 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 potential future cash flows and the appropriate discount rate. 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. The adverse economic effects brought on by the COVID-19 pandemic, including reductions in our sales, earnings and market value, as well as other changing market dynamics, required that we perform a valuation of our intangible assets in the 2021 first quarter. The calculation methodology for the fair value of our Home Meridian segment’s and the Shenandoah division of our Domestic Upholstery segment’s goodwill included three approaches: the Discounted Cash Flow Method (DCF) which was given the largest weighting, the Guideline Public Company Method (GPCM) based on the consideration of the facts of the Company’s peer competitors and the Guideline Transaction Method (GTM) based on consideration of transactions with varying risk profiles, geographies and market conditions. The income approach, specifically the relief from royalty method, was used as the valuation methodology for our trade names and trademarks, based on cash flow projections and growth rates for each trade name for five years in the future provided by management, and a royalty rate benchmark for companies with similar activities. As a result of our intangible asset valuation analysis, in the first quarter of fiscal 2021, we recorded $44.3 million non-cash impairment charges including $23.2 million to Home Meridian goodwill, $16.4 million to Shenandoah goodwill and $4.8 million to certain of Home Meridian segment’s trade names. During the fiscal 2023, we recorded both non-amortizable and amortizable intangible assets because of the Sunset Acquisition. Based on our internal analyses at January 29, 2023, the fair values of our non-amortizable trademarks and trade names exceeded their carrying values and we concluded that Shenandoah and Sunset West goodwill in the Domestic Upholstery segment is not impaired. Details of our non-amortizable intangible assets are as follows:
Non-amortizable Intangible Assets |  | Goodwill |  |  | Trademarks and trade names |  |  |  |  |
Segment |  | Home Meridian |  |  | Domestic Upholstery |  |  | Total |  |  | Home Meridian |  |  | Domestic Upholstery |  |  | Total |  |  | Total non-amortizable assets |
|  |  |  |  |  | Shenandoah |  |  | Sunset West |  |  |  |  |  |  |  |  |  |  | Bradington-Young |  |  | Sam Moore |  |  |  |  |  |  |
Balance at February, 2020 |  | $ | 23,187 |  |  | $ | 16,871 |  |  | $ | - |  |  | $ | 40,058 |  |  | $ | 11,400 |  |  | $ | 861 |  |  | $ | 396 |  |  | $ | 12,657 |  |  | $ | 52,715 |
Impairment Charges |  |  | (23,187 | ) |  |  | (16,381 | ) |  |  | - |  |  |  | (39,568 | ) |  |  | (4,750 | ) |  |  |  |  |  |  |  |  |  |  | (4,750 | ) |  |  | (44,318 | )
Balance at January 31, 2021 |  |  | - |  |  |  | 490 |  |  |  | - |  |  |  | 490 |  |  |  | 6,650 |  |  |  | 861 |  |  |  | 396 |  |  |  | 7,907 |  |  |  | 8,397 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | - |
Balance at January 30, 2022 |  |  | - |  |  |  | 490 |  |  |  | - |  |  |  | 490 |  |  |  | 6,650 |  |  |  | 861 |  |  |  | 396 |  |  |  | 7,907 |  |  |  | 8,397 |
Acquisition |  |  | - |  |  |  | - |  |  |  | 14,462 |  |  |  | 14,462 |  |  |  | - |  |  |  |  |  |  |  |  |  |  |  | - |  |  |  | 14,462 |
Balance at January 29, 2023 |  | $ | - |  |  | $ | 490 |  |  | $ | 14,462 |  |  | $ | 14,952 |  |  | $ | 6,650 |  |  | $ | 861 |  |  | $ | 396 |  |  | $ | 7,907 |  |  | $ | 22,859 |
Our amortizable intangible assets are recorded in the Home Meridian and in Domestic Upholstery segments. In fiscal 2023, we wrote off $12,500 representing the remaining value of the Right2Home trade name in the Home Meridian segment due to the decision to exit of the ACH business unit in the fourth quarter of fiscal 2023. The carrying amounts and changes therein of those amortizable intangible assets were as follows:
|  | Amortizable Intangible Assets |
|  | Customer |  |  |  |  |  |  |  |  |
|  | Relationships |  |  | Trademarks |  |  | Totals |
Balance at January 30, 2022 |  | $ | 15,348 |  |  | $ | 598 |  |  | $ | 15,946 |
Acquisition |  |  | 10,401 |  |  |  | 1,050 |  |  |  | 11,451 |
Amortization |  |  | (3,364 | ) |  |  | (148 | ) |  |  | (3,512 | )
Impairment |  |  | - |  |  |  | (13 | ) |  |  | (13 | )
Balance at January 29, 2023 |  | $ | 22,385 |  |  | $ | 1,487 |  |  | $ | 23,872 |
The estimated amortization expense associated with our amortizable intangible assets is expected to be as follows:
Fiscal Year |  | Amount |
2024 |  |  | 3,500 |
2025 |  |  | 3,487 |
2026 |  |  | 3,487 |
2027 |  |  | 3,487 |
2028 |  |  | 2,178 |
2029 and thereafter |  |  | 7,733 |
|  | $ | 23,872 |

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