Intangible Assets and Goodwill

6 Months Ended

Jul. 28, 2012

Note 3 – Intangible Assets and Goodwill

In the second quarter of 2011 the Company revised certain financial projections due to underperformance in certain retail businesses. These revisions indicated a potential impairment of certain indefinite lived tradenames and, as such, required an assessment of the fair value of these indefinite-lived tradenames to determine if their book value exceeded their fair value. This assessment indicated that the book value of certain indefinite-lived tradenames exceeded their fair value and the Company recognized $31.1 million of pre-tax impairment charges in cost of sales. Of the $31.1 million pre-tax impairment charge, $23.5 million was in the PLG Wholesale reporting segment and $7.6 million was in the Payless Domestic reporting segment.

The following is a summary of the Company’s intangible assets other than goodwill:


(dollars in millions)	July 28, 2012			July 30, 2011			January 28, 2012
Intangible assets subject to amortization:

Favorable lease rights:
Gross carrying amount	$	20.6		$	23.3		$	20.5
Less: accumulated amortization		(18.2	)		(19.4	)		(17.6	)

Carrying amount, end of period		2.4			3.9			2.9

Customer relationships:
Gross carrying amount		74.2			74.2			74.2
Less: accumulated amortization		(57.2	)		(49.5	)		(53.7	)

Carrying amount, end of period		17.0			24.7			20.5

Trademarks and other intangible assets:
Gross carrying amount		40.1			39.0			39.9
Less: accumulated amortization		(14.7	)		(11.3	)		(13.0	)

Carrying amount, end of period		25.4			27.7			26.9

Carrying amount of intangible assets subject to amortization		44.7			56.3			50.3

Indefinite-lived trademarks		334.4			334.4			334.4

Total intangible assets	$	379.2		$	390.7		$	384.7

Amortization expense on intangible assets is as follows:


	13 Weeks Ended				26 Weeks Ended
(dollars in millions)	July 28, 2012		July 30, 2011		July 28, 2012		July 30, 2011
Amortization expense on intangible assets	$	2.7	$	3.1	$	5.4	$	6.5

The Company expects amortization expense for the remainder of 2012 and the following four years to be as follows (dollars in millions):


Year	Amount
Remainder of 2012	$	5.7
2013		9.8
2014		8.5
2015		6.1
2016		2.0

The following presents the carrying amount of goodwill, by reporting segment and reporting unit (dollars in millions):


Reporting Segment	Reporting Unit	July 28, 2012		July 30, 2011		January 28, 2012
PLG Wholesale	PLG Wholesale	$	239.6	$	239.6	$	239.6
Payless Domestic	Collective Licensing		30.2		30.2		30.2

Total ⁽¹⁾		$	269.8	$	269.8	$	269.8

⁽¹⁾	Cumulative goodwill impairment charges total $52.0 million, of which $42.0 million relates to the PLG Retail reporting segment and $10.0 million relates to the Payless Domestic reporting segment.

As a result of the May 1, 2012 announcement of the proposed sale of the Company to a consortium of buyers including Wolverine World Wide, Inc., Blum Strategic Partners IV, L.P. and Golden Gate Capital Opportunity Fund, L.P., a triggering event occurred requiring an assessment of goodwill and indefinite-lived tradenames. During this assessment, the Company determined that the fair value of its reporting units and indefinite-lived tradenames exceeded its book value and, as such, there was no impairment charge recorded.

In the second quarter of 2011, as a result of underperformance of certain retail businesses, the Company revised its financial projections related to its reporting units. These revisions indicated a potential impairment of goodwill and, as such, the fair value of the Company’s reporting units were assessed to determine if their book value exceeded their fair value. As a result of this assessment, the Company determined that the book value of goodwill exceeded its fair value and recognized $10.0 million of pre-tax goodwill impairment charges in the Payless Domestic reporting segment.

- 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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