Goodwill, Trade Names and Other Intangible Assets, Net
Goodwill
The following table provides the rollforward of goodwill for the fiscal years ended February 1, 2014 and February 2, 2013:
|
| | | | | | | | | | | | | | | |
| Victoria’s Secret | | Bath & Body Works | | Other | | Total |
| (in millions) |
Balance as of January 28, 2012 | $ | 690 |
| | $ | 628 |
| | $ | 12 |
| (a) | $ | 1,330 |
|
Impairment | — |
| | — |
| | (12 | ) | | (12 | ) |
Balance as of February 2, 2013 | 690 |
| | 628 |
| | — |
| | 1,318 |
|
Current period changes | — |
| | — |
| | — |
| | — |
|
Balance as of February 1, 2014 | $ | 690 |
| | $ | 628 |
| | $ | — |
| | $ | 1,318 |
|
________________
(a) Balance is presented net of a $189 million and $119 million La Senza impairment recognized in the fourth quarter of 2008 and the fourth quarter of 2011, respectively.
The Company tests for goodwill impairment at the reporting unit level. The Company's reporting units with goodwill balances at February 1, 2014 were Victoria's Secret Stores, Victoria's Secret Direct and Bath & Body Works. Goodwill associated with the La Senza reporting unit was fully impaired at February 2, 2013.
Intangible Assets—Indefinite Lives
Intangible assets with indefinite lives represent the Victoria’s Secret and Bath & Body Works trade names which are included in Trade Names and Other Intangible Assets, Net on the Consolidated Balance Sheets. The following table provides additional detail regarding the composition of trade names as of February 1, 2014 and February 2, 2013:
|
| | | | | | | |
| February 1, 2014 | | February 2, 2013 |
| (in millions) |
Victoria's Secret | $ | 246 |
| | $ | 246 |
|
Bath & Body Works | 165 |
| | 165 |
|
Intangible Assets - Trade Names | $ | 411 |
| | $ | 411 |
|
Intangible Assets—Finite Lives
Intangible assets with finite lives represent certain trademarks and customer relationships. These assets totaled $1 million as of February 2, 2013 and were included in Trade Names and Other Intangible Assets, Net on the February 2, 2013 Consolidated Balance Sheets. These assets were fully amortized in 2013. Amortization expense was $1 million for 2013, $3 million for 2012 and $4 million for 2011.
Impairment Charges
La Senza
In conjunction with the January 2007 acquisition of La Senza, the Company recognized goodwill, intangible assets with indefinite lives and intangible assets with finite lives. These assets were included in the La Senza reporting unit which is included in Other in the Company's segment reporting.
2008
In the fourth quarter of 2008, the Company completed its annual impairment testing. During the latter half of 2008, La Senza's operating results were negatively impacted by the global economic downturn and the resulting impact on the Canadian retail environment as well as other factors. As part of the annual impairment evaluation, the Company assessed the recoverability of goodwill using a discounted cash flow methodology. The Company concluded that the carrying value of the La Senza goodwill exceeded the implied fair value based on the estimated fair value of the La Senza reporting unit. Accordingly, the Company recorded a goodwill impairment charge of $189 million. Prior to completing the goodwill impairment evaluation, the Company performed its annual impairment analysis for indefinite-lived trade names. Based on its evaluation using a relief from royalty and other discounted cash flow methodologies, the Company concluded that certain La Senza trade name assets were impaired. Accordingly, the Company recorded an impairment charge of $25 million to reduce the carrying value of these assets to their estimated fair values. The Company also recognized a $1 million impairment charge related to a finite lived trade name asset.
2009
In the fourth quarter of 2009, the Company made the decision to exit the La Senza Girl business and recorded an impairment charge of $3 million to write-off the La Senza Girl trade name and other minor trade names.
2011
In the fourth quarter of 2011, the Company completed its annual impairment testing. During 2011, La Senza’s operating results failed to meet the Company's expectations, as both comparable store sales and gross profit were below the Company's beginning of year expectations especially in the critical fourth quarter holiday period. As part of the annual impairment evaluation, the Company assessed the recoverability of goodwill using a discounted cash flow methodology. The Company concluded that the carrying value of the La Senza goodwill exceeded the implied fair value based on the estimated fair value of the La Senza reporting unit. Accordingly, the Company recorded a goodwill impairment charge of $119 million. The goodwill impairment charge is included in Impairment of Goodwill and Other Intangible Assets on the 2011 Consolidated Statement of Income.
Prior to completing the goodwill impairment evaluation, the Company performed its annual impairment analysis for its indefinite-lived trade name. Based on its evaluation using relief from royalty and other discounted cash flow methodologies, the Company concluded that the La Senza trade name asset was impaired. Accordingly, the Company recorded an impairment charge of $112 million to reduce the carrying value of the trade name asset to its estimated fair value. The Company also recognized a $1 million impairment charge related to a lease-related intangible asset. These impairment charges are included in Impairment of Goodwill and Other Intangible Assets on the 2011 Consolidated Statement of Income.
2012
In the fourth quarter of 2012, the Company completed its annual impairment testing. During 2012, La Senza’s operating results again failed to meet the Company's expectations, as both comparable store sales and gross profit were below our beginning of year expectations. As part of the annual impairment evaluation, the Company assessed the recoverability of goodwill using a discounted cash flow methodology. The Company concluded that the carrying value of the La Senza goodwill exceeded the implied fair value based on the estimated fair value of the La Senza reporting unit. Accordingly, the Company recorded a goodwill impairment charge of $12 million which fully impaired La Senza's remaining goodwill. The goodwill impairment charge is included in Impairment of Goodwill and Other Intangible Assets on the 2012 Consolidated Statement of Income.
Prior to completing the goodwill impairment evaluation, the Company performed its annual impairment analysis for its indefinite-lived trade name. Based on its evaluation using relief from royalty and other discounted cash flow methodologies, the Company concluded that the La Senza trade name asset was impaired. Accordingly, the Company recorded an impairment charge of $75 million to reduce the carrying value of the trade name asset to zero. The Company also recognized a $6 million impairment charge related to certain finite-lived customer relationship intangible assets. These impairment charges are included in Impairment of Goodwill and Other Intangible Assets on the 2012 Consolidated Statement of Income.
