GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Nov. 10, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

In connection with the PCA Acquisition, the Company recorded goodwill in the excess of the purchase price over the fair value of assets acquired and liabilities assumed in accordance with SFAS No. 141, “Business Combinations” (“SFAS No. 141”). Under SFAS No. 141, goodwill is not amortized and instead is periodically evaluated for impairment.

The following table summarizes the Company’s goodwill:



in thousands	November 10, 2012		February 4, 2012
PCA Acquisition	$	—	$	9,613
Translation impact on foreign balances	—		159

Balance, end of period	$	—	$	9,772

Historically, the Company has performed its annual goodwill impairment test at the end of its second quarter, or more frequently if circumstances indicate the potential for impairment. In view of declining operating results over the past year, the Company has performed interim goodwill impairment tests during each of its fiscal quarters. The key item of consideration was the Company's estimates of future cash flows, the most significant assumption being the Company's expectation of future PMPS studio sales levels, and other relevant factors.

In the fourth fiscal quarter of 2011, the Company performed a goodwill impairment test as of its fiscal year ended February 4, 2012, and determined the carrying amounts of goodwill in its PMPS and SPS reporting units exceeded their fair value. As such, the Company performed the second step and determined that the goodwill recorded was impaired by approximately $12.1 million at that time. As of February 4, 2012, the Company had remaining goodwill recorded in its PMPS reporting unit of approximately $9.8 million.

At the end of its 2012 first fiscal quarter, the Company considered possible impairment triggering events and concluded that no goodwill impairment was indicated at that date. At the end of the Company's 2012 second fiscal quarter, the Company completed its annual impairment test and concluded that the carrying amount of goodwill in its PMPS reporting unit exceeded its fair value. Key items of consideration in the annual impairment test included the Company's estimates of future cash flows and the Second Amendment to the Credit Agreement (see Note 8), which requires the Company to be marketed for sale. The Company then performed the second step of the goodwill impairment test and determined that the remaining goodwill recorded was fully impaired and recorded a charge of $9.7 million, which was recorded in the Impairments line in the Interim Consolidated Statements of Operations for the 40 weeks ended November 10, 2012.

In connection with the PCA Acquisition, the Company also acquired intangible assets related to the host agreement with Walmart and the customer list. These assets were recorded in accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Other” (“ASC Topic 350”). The host agreement with Walmart and the customer list are being amortized over their useful lives of 21.5 years using the straight-line method and 6 years using an accelerated method, respectively. During fiscal year 2010, in connection with the acquisition of certain assets of Kiddie Kandids, LLC in an auction approved by the United States Bankruptcy Court for the District of Utah (the “Kiddie Kandids asset acquisition”) and the Bella Pictures® Acquisition, the Company also acquired a customer list and tradename, respectively. These assets were recorded in accordance with ASC Topic 350. The customer list and tradename are being amortized over their useful lives of 5.5 years using an accelerated method and 10 years using the straight-line method, respectively.

The following table summarizes the Company’s amortized intangible assets as of November 10, 2012:



in thousands	Net Balance at Beginning of Year		Impairments			Accumulated Amortization			Translation Impact of Foreign Balances			Net Balance at End of Period
Acquired host agreement	$	29,958	$	(11,898	)	$	(1,263	)	$	(51	)	$	16,746
Acquired customer lists	202		(132		)	(69		)	(1		)	—
Acquired tradename	276		(259		)	(17		)	—			—

	$	30,436	$	(12,289	)	$	(1,349	)	$	(52	)	$	16,746

The Company reviews its intangible assets with definite useful lives, consisting primarily of the PMPS host agreement, under ASC Topic 360, which requires the Company to review for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of intangible assets with definite useful lives is measured by a comparison of the carrying amount of the asset to the estimated future undiscounted cash flows expected to be generated by such assets. If such assets are considered to be impaired, the impairment is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets, which is determined on the basis of discounted cash flows.

As of July 21, 2012, the Company determined that possible impairment triggering events under ASC Topic 360 had occurred, particularly in light of the Second Amendment to the Credit Agreement (see Note 8), which requires the Company to be marketed for sale. By themselves, the cash flows generated through the expected date of sale do not recover the assets; however, the Company also included the estimated future cash flows resulting from the sale of its business. Upon analysis, the Company determined that the carrying amounts of the PMPS host agreement and Kiddie Kandids customer list exceeded their fair value, and accordingly recognized impairment charges of $8.8 million and $47,000, respectively, in the second fiscal quarter of 2012. In addition, the Company determined that the carrying amount of the Bella Pictures® tradename was fully impaired and recorded a charge of $259,000 in the second fiscal quarter of 2012. The impairment charges are recorded in the Impairments line in the Interim Consolidated Statements of Operations for for the 40 weeks ended November 10, 2012.

As of November 10, 2012, the Company again determined that possible impairment triggering events under ASC Topic 360 had occurred. Information gathered during the sale process caused the Company to reevaluate the estimated future cash flows resulting from the sale of its business. As a result, the Company determined that the carrying amount of the PMPS host agreement exceeded its fair value, and accordingly recognized an impairment charge of $3.1 million in the third fiscal quarter of 2012. In addition, the Company determined that the carrying amounts of the PMPS and Kiddie Kandids customer lists were fully impaired and recorded charges totaling $85,000 in the third fiscal quarter of 2012. The impairment charges are recorded in the Impairments line in the Interim Consolidated Statements of Operations for for the 16 and 40 weeks ended November 10, 2012.

The Company's estimates of future sale value contained several subjective assumptions. Should the estimated sale values used to determine future cash flows change by 5%, the value of the PMPS host agreement would be impacted by $1.0 million.

- 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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