GOODWILL AND OTHER INTANGIBLE ASSETS |
GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amount of goodwill, by segment (please see Note 19, “Segment Data,” for a further discussion of the Company’s reportable segments), were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (In millions) | Calvin Klein North America | | Calvin Klein International | | Tommy Hilfiger North America | | Tommy Hilfiger International | | Heritage Brands Wholesale | | Heritage Brands Retail | | Total | Balance as of February 1, 2015 | | | | | | | | | | | | | | Goodwill, gross | $ | 705.4 |
| | $ | 859.6 |
| | $ | 204.4 |
| | $ | 1,251.4 |
| | $ | 238.3 |
| | $ | 11.9 |
| | $ | 3,271.0 |
| Accumulated impairment losses | — |
| | — |
| | — |
| | — |
| | — |
| | (11.9 | ) | | (11.9 | ) | Goodwill, net | 705.4 |
| | 859.6 |
| | 204.4 |
| | 1,251.4 |
| | 238.3 |
| | — |
| | 3,259.1 |
| Contingent purchase price payments to Mr. Calvin Klein | 31.2 |
| | 20.5 |
| | — |
| | — |
| | — |
| | — |
| | 51.7 |
| Currency translation and other | (8.6 | ) | | (38.6 | ) | | — |
| | (43.0 | ) | | (1.3 | ) | | — |
| | (91.5 | ) | Balance as of January 31, 2016 | | | | | | | | | | | | | | Goodwill, gross | 728.0 |
| | 841.5 |
| | 204.4 |
| | 1,208.4 |
| | 237.0 |
| | 11.9 |
| | 3,231.2 |
| Accumulated impairment losses | — |
| | — |
| | — |
| | — |
| | — |
| | (11.9 | ) | | (11.9 | ) | Goodwill, net | 728.0 |
| | 841.5 |
| | 204.4 |
| | 1,208.4 |
| | 237.0 |
| | — |
| | 3,219.3 |
| Contingent purchase price payments to Mr. Calvin Klein | 31.3 |
| | 21.3 |
| | — |
| | — |
| | — |
| | — |
| | 52.6 |
| TH China acquisition | — |
| | — |
| | — |
| | 258.6 |
| | — |
| | — |
| | 258.6 |
| Mexico deconsolidation | (20.5 | ) | | — |
| | — |
| | — |
| | (1.0 | ) | | — |
| | (21.5 | ) | Currency translation and other | 0.6 |
| | 1.7 |
| | — |
| | (41.2 | ) | | (0.2 | ) | | — |
| | (39.1 | ) | Balance as of January 29, 2017 | | | | | | | | | | | | | | Goodwill, gross | 739.4 |
| | 864.5 |
| | 204.4 |
| | 1,425.8 |
| | 235.8 |
| | 11.9 |
| | 3,481.8 |
| Accumulated impairment losses | — |
| | — |
| | — |
| | — |
| | — |
| | (11.9 | ) | | (11.9 | ) | Goodwill, net | $ | 739.4 |
| | $ | 864.5 |
| | $ | 204.4 |
| | $ | 1,425.8 |
| | $ | 235.8 |
| | $ | — |
| | $ | 3,469.9 |
|
The Company is required to make contingent purchase price payments to Mr. Calvin Klein in connection with the Company’s acquisition in 2003 of all of the issued and outstanding stock of Calvin Klein, Inc. and certain affiliated companies (collectively, “Calvin Klein”). Such payments are based on 1.15% of total worldwide net sales, as defined in the acquisition agreement (as amended), of products bearing any of the CALVIN KLEIN brands and are required to be made with respect to sales made through February 12, 2018. A significant portion of the sales on which the payments to Mr. Klein are made are wholesale sales by the Company and its licensees and other partners to retailers. The Company’s intangible assets consisted of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | January 29, 2017 | | January 31, 2016 | (In millions) | Gross Carrying Amount | | Accumulated Amortization | | Net | | Gross Carrying Amount | | Accumulated Amortization | | Net | Intangible assets subject to amortization: | | | | | | | | | | | | Customer relationships (1) (2) | $ | 296.7 |
| | $ | (130.8 | ) | | $ | 165.9 |
| | $ | 291.9 |
| | $ | (108.7 | ) | | $ | 183.2 |
| Order backlog (1) | 24.6 |
| | (24.6 | ) | | — |
| | — |
| | — |
| | — |
| Reacquired license rights (1) (2) | 524.7 |
| | (78.1 | ) | | 446.6 |
| | 494.8 |
| | (47.7 | ) | | 447.1 |
| Total intangible assets subject to amortization | 846.0 |
| | (233.5 | ) | | 612.5 |
| | 786.7 |
| | (156.4 | ) | | 630.3 |
| | | | | | | | | | | | | Indefinite-lived intangible assets: | | | | | | | | | | | | Tradenames | 2,783.4 |
| | — |
| | 2,783.4 |
| | 2,802.6 |
| | — |
| | 2,802.6 |
| Perpetual license rights | 203.9 |
| | — |
| | 203.9 |
| | 203.1 |
| | — |
| | 203.1 |
| Reacquired perpetual license rights | 10.2 |
| | — |
| | 10.2 |
| | 10.4 |
| | — |
| | 10.4 |
| Total indefinite-lived intangible assets | 2,997.5 |
| | — |
| | 2,997.5 |
| | 3,016.1 |
| | — |
| | 3,016.1 |
| Total intangible assets | $ | 3,843.5 |
| | $ | (233.5 | ) | | $ | 3,610.0 |
| | $ | 3,802.8 |
| | $ | (156.4 | ) | | $ | 3,646.4 |
|
The gross carrying amount and accumulated amortization of certain intangible assets include the impact of changes in foreign currency exchange rates. | | (1) | The change from January 31, 2016 to January 29, 2017 primarily related to intangible assets recorded in connection with the TH China acquisition. The intangible assets as of the acquisition date amounted to $110.6 million and included reacquired license rights of $72.0 million, order backlog of $26.2 million and customer relationships of $12.4 million, which are subject to amortization on a straight-line basis over 2.7 years, 0.8 years and 10.0 years, respectively, and exchange rate fluctuations after the acquisition date. |
| | (2) | The change from January 31, 2016 to January 29, 2017 included decreases to customer relationships and reacquired license rights for the net amounts of $3.3 million and $44.1 million, respectively, in connection with the Mexico deconsolidation. |
Amortization expense related to the Company’s amortizable intangible assets was $86.2 million and $40.3 million for 2016 and 2015, respectively.
Assuming constant foreign currency exchange rates and no change in the gross carrying amount of the intangible assets, amortization expense for the next five years related to the Company’s amortizable intangible assets as of January 29, 2017 is expected to be as follows:
| | | | | | (In millions) | | | Fiscal Year | | Amount | 2017 | | $ | 63.3 |
| 2018 | | 60.8 |
| 2019 | | 38.4 |
| 2020 | | 38.3 |
| 2021 | | 38.1 |
|
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