MOVADO GROUP INC Goodwill & Intangibles Disclosure
NOTE 6 – GOODWILL AND INTANGIBLE ASSETS
As previously disclosed, the Company performs its annual impairment assessment of goodwill as well as brand intangibles at the beginning of the fourth quarter of each fiscal year or if an event occurs that would more likely than not reduce the fair value below its carrying amount.
During the three months ended April 30, 2020, in light of the COVID-19 pandemic that resulted in the closing of the Company’s stores and of the vast majority of the stores of the Company’s wholesale customers (resulting in a decrease in revenues and gross margin), a decrease in customer spending and decline in the Company’s market capitalization, the Company concluded that a triggering event had occurred during the first quarter of fiscal 2021, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Olivia Burton, MVMT and Company Stores’ long-lived assets as well as the Watch and Accessory Brands reporting unit.
As a result of its recoverability tests, the Company concluded that the carrying amounts of the long-lived assets of Olivia Burton and the Company Stores were recoverable and that the fair values of MVMT’s tradenames and customer relationships did not exceed their carrying values. As a result, the Company recorded impairment charges in the Watch and Accessory Brands segment totaling $22.2 million in the first quarter of fiscal 2021, decreasing MVMT’s trade name to $2.4 million and MVMT’s customer relationships to zero.
After adjusting the carrying value of MVMT’s intangible assets, the Company completed an interim quantitative impairment test of goodwill as of April 30, 2020, in which the Company compared the fair value of the Watch and Accessory Brands reporting unit to its respective carrying value. The excess of the Watch and Accessory Brands unit’s carrying value over the estimate of the fair value was recorded in the Watch and Accessory Brands segment in the first quarter of 2021, totaling $133.7 million which resulted in zero goodwill remaining.
During the fourth quarter of fiscal 2023, the Company concluded that a triggering event occurred resulting in a need to perform a quantitative interim impairment assessment over the Olivia Burton and MVMT long-lived assets and concluded that the assets were recoverable. There were no triggering events during fiscal 2022.
The changes in the carrying amount of other intangible assets during the fiscal years ended January 31, 2023, 2022 and 2021 are as follows (in thousands):
|
|
Trade names |
|
|
Customer |
|
|
Other (1) |
|
|
Total |
|
||||
Weighted Average Amortization Period (in years) |
|
10 |
|
|
6 |
|
|
10 |
|
|
|
|
||||
Balance at January 31, 2020 |
|
$ |
31,075 |
|
|
$ |
10,154 |
|
|
$ |
1,130 |
|
|
$ |
42,359 |
|
|
|
(18,595 |
) |
|
|
(3,570 |
) |
|
|
— |
|
|
|
(22,165 |
) |
|
Additions |
|
|
|
|
|
|
|
|
164 |
|
|
|
164 |
|
||
Amortization |
|
|
(1,888 |
) |
|
|
(1,656 |
) |
|
|
(295 |
) |
|
|
(3,839 |
) |
Foreign exchange impact |
|
|
268 |
|
|
|
240 |
|
|
|
54 |
|
|
|
562 |
|
Balance at January 31, 2021 |
|
|
10,860 |
|
|
|
5,168 |
|
|
|
1,053 |
|
|
|
17,081 |
|
Additions |
|
|
|
|
|
|
|
|
291 |
|
|
|
291 |
|
||
Amortization |
|
|
(1,633 |
) |
|
|
(1,685 |
) |
|
|
(258 |
) |
|
|
(3,576 |
) |
Foreign exchange impact |
|
|
(127 |
) |
|
|
(134 |
) |
|
|
(28 |
) |
|
|
(289 |
) |
Balance at January 31, 2022 |
|
|
9,100 |
|
|
|
3,349 |
|
|
|
1,058 |
|
|
|
13,507 |
|
Additions |
|
|
— |
|
|
|
— |
|
|
|
202 |
|
|
|
202 |
|
Amortization |
|
|
(1,487 |
) |
|
|
(1,503 |
) |
|
|
(250 |
) |
|
|
(3,240 |
) |
Foreign exchange impact |
|
|
(710 |
) |
|
|
(118 |
) |
|
|
1 |
|
|
|
(827 |
) |
Balance at January 31, 2023 |
|
$ |
6,903 |
|
|
$ |
1,728 |
|
|
$ |
1,011 |
|
|
$ |
9,642 |
|
The estimated future amortization expense during each of the next five fiscal years is as follows:
For the fiscal year ending January 31, |
|
(in thousands) |
|
|
2024 |
|
$ |
2,607 |
|
2025 |
|
|
1,848 |
|
2026 |
|
|
1,806 |
|
2027 |
|
|
1,797 |
|
2028 |
|
|
1,061 |
|
Thereafter |
|
|
523 |
|
Total estimated future amortization expense |
|
$ |
9,642 |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Mar 23, 2023 | Showing above |
| 2022 | Mar 24, 2022 | |
| 2021 | Mar 25, 2021 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.