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GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2017

GOODWILL AND INTANGIBLE ASSETS

NOTE E — GOODWILL AND INTANGIBLE ASSETS

The Company’s intangible assets, all of which are included in the U.S. Wholesale and International segments, consist of the following (in thousands):

		Year Ended December 31,
		2017												2016
		Gross				Accumulated Amortization				Net				Gross				Accumulated Amortization				Net
Goodwill		$	15,772			$	—			$	15,772			$	14,201			$	—			$	14,201
Indefinite-lived intangible assets:
Trade names			7,616				—				7,616				7,616				—				7,616
Finite-lived intangible assets:
Licenses			15,847				(9,375	)			6,472				15,847				(8,919	)			6,928
Trade names			33,368				(11,109	)			22,259				31,150				(8,286	)			22,864
Customer relationships			52,961				(16,966	)			35,995				49,372				(12,188	)			37,184
Other			1,165				(800	)			365				1,266				(840	)			426
Total		$	126,729			$	(38,250	)		$	88,479			$	119,452			$	(30,233	)		$	89,219

A summary of the activities related to the Company’s intangible assets for the years ended December 31, 2017, 2016 and 2015 consists of the following (in thousands):

		Intangible Assets				Goodwill				Total Intangible Assets and Goodwill
Goodwill and Intangible Assets, December 31, 2014		$	85,496			$	18,101			$	103,597
Amortization			(7,004	)			—				(7,004	)
Goodwill and Intangible Assets, December 31, 2015			78,492				18,101				96,593
Acquisition of trade names			5,159				—				5,159
Acquisition of customer relationships			8,878				—				8,878
Acquisition of other intangible assets			50				—				50
Foreign currency translation adjustment			(11,400	)			(3,900	)			(15,300	)
Amortization			(6,161	)			—				(6,161	)
Goodwill and Intangible Assets, December 31, 2016			75,018				14,201				89,219
Acquisition of goodwill			—				434				434
Acquisition of trade names			1,134				—				1,134
Acquisition of customer relationships			563				—				563
Foreign currency translation adjustment			2,823				1,137				3,960
Amortization			(6,831	)			—				(6,831	)
Goodwill and Intangible Assets, December 31, 2017		$	72,707			$	15,772			$	88,479

The weighted-average amortization periods for the Company’s finite-lived intangible assets as of December 31, 2017 are as follows:

		Years
Trade names			14
Licenses			33
Customer relationships			13
Other			12

Estimated amortization expense for each of the five succeeding fiscal years is as follows (in thousands):

Year ending December 31,
2018		$	7,096
2019			7,096
2020			7,081
2021			6,604
2022			6,604

Amortization expense for the years ended December 31, 2017, 2016 and 2015 was $6.8 million, $6.2 million and $7.0 million, respectively.

Annual indefinite-lived trade name impairment test

In 2017, the Company performed quantitative impairment test for its indefinite-lived trade names which involved the assessment of the fair market values of the Company’s indefinite-lived trade names based on Level 3 unobservable inputs, using a relief from royalty approach, assuming a discount rate of 16.9-17.7% and an average long term growth rate of 2.5%-3%. The result of the impairment assessment of the Company’s indefinite-lived trade names indicated that the fair values of the trade names exceeded their carrying values as of October 1, 2017.

For the Company’s 2016 and 2015 annual impairment tests for its indefinite-lived trade names as of October 1, 2016 and 2015, the Company elected to first perform a qualitative assessment to determine if it was more likely than not that the fair values of the Company’s indefinite-lived trade names were less than the carrying values. The Company considered events and circumstances that could affect the significant inputs used to determine the fair values of the indefinite-lived trade names. Based on the qualitative assessment, the Company determined it was not more likely than not that the fair values of the Company’s indefinite-lived trade names were less than the carrying values as of October 1, 2016 and 2015.

Annual goodwill impairment test

The Company bypassed the optional qualitative impairment analysis for its three reporting units with goodwill for its October 1, 2017 impairment test. Accordingly, the first step of the two step goodwill impairment test, as described above, was performed. Under the first step, the estimated fair value of each of the reporting units was determined using the income approach and market approach. The significant assumptions used under the income approach, or discounted cash flow method, are projected net sales, projected earnings before interest, tax, depreciation and amortization (“EBITDA”), terminal growth rates, and the cost of capital. Projected net sales, projected EBITDA and terminal growth rates were determined to be significant assumptions because they are three primary drivers of the projected cash flows in the discounted cash flow fair value model. Cost of capital was also determined to be a significant assumption as it is the discount rate used to calculate the current fair value of those projected cash flows. Under the income approach, the resultant estimated fair value of the three reporting units exceeded their carrying value as of October 1, 2017.

As of October 1, 2016, the fair value of the Creative Tops reporting unit, which carried goodwill of $2.1 million, was approximately 3% below its carrying value. In 2016 the Company performed the second step of the impairment test by estimating the fair value of the assets and liabilities to determine the implied fair value of goodwill. The implied fair value of goodwill was determined to be greater than the carrying value and no impairment charge was recorded. Also, as of October 1, 2016, the excess of fair value of the Kitchen Craft reporting unit, which carried goodwill of $9.7 million, was approximately 3% over its carrying value.

As of October 1, 2017, the fair values of the Creative Tops and Kitchen Craft reporting units both exceeded their respective carrying values. Management’s projections used to estimate the cash flows included increasing net sales and operational improvements designed to reduce costs at the Company’s international reporting units. The excess fair value calculated in 2017 was driven by realized cost savings and, to a larger extent, future cost savings from the combination of the operations expected to be completed in the near term. The planned cost savings are in line with that of a market participant. Changes in any of the significant assumptions used in the valuation of the Company’s reporting units can materially affect the expected cash flows, and such impacts can result in the requirement to proceed to the second step of the test and potentially a material non-cash impairment charge could result. The Company is not currently aware of any negative changes in its assumptions that could lead to the fair value of the reporting unit being less than the carrying value.

As of December 31, 2017, the Company assessed the carrying value of goodwill and determined based on qualitative factors, no impairment existed.

X

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-URI http://asc.fasb.org/topic&trid=2144416

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