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Goodwill and Intangible Assets | 9 Months Ended
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Sep. 28, 2024
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets | E. Goodwill and Intangible Assets The Company has recorded intangible assets with indefinite lives and goodwill for which impairment testing is required at least annually or more frequently if events or circumstances indicate that these assets might be impaired. The Company performs its annual impairment tests and re-evaluates the useful lives of other intangible assets with indefinite lives at the annual impairment test measurement date in the third quarter of each fiscal year or when circumstances arise that indicate a possible impairment or change in useful life might exist. Goodwill. The guidance for goodwill impairment testing allows an entity to assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the estimated fair value of a reporting unit, of which the Company has one, is less than its carrying amount or to proceed directly to performing a quantitative impairment test. Under the quantitative assessment, the estimated fair value of the Company’s reporting unit is compared to its carrying value, including goodwill. The estimate of fair value of the Company’s reporting unit is generally calculated based on an income approach using the discounted cash flow method supplemented by the market approach which considers the Company’s market capitalization and enterprise value. If the estimated fair value of the Company’s reporting unit is less than the carrying value of its reporting unit, a goodwill impairment will be recognized. In estimating the fair value of the Company’s reporting unit, management must make assumptions and projections regarding such items as future cash flows, future revenues, future earnings, cost of capital, and other factors. The assumptions used in the estimate of fair value are based on historical trends and the projections and assumptions that are used in the latest operating plans. These assumptions reflect management’s estimates of future economic and competitive conditions and are, therefore, subject to change as a result of changing market conditions. If these estimates or their related assumptions change in the future, the Company may be required to recognize an impairment loss for the Company’s goodwill which could have a material adverse impact on the Company’s financial statements. No impairment of goodwill was recorded in any period. Intangible assets. The Company’s intangible assets consist primarily of a trademark and customer relationships obtained through the Company’s Dogfish Head acquisition. Customer relationships are amortized over their estimated useful lives. As of the September 28, 2024, the Dogfish Head trademark which was determined to have an indefinite useful life was not amortized. The guidance for indefinite lived intangible asset impairment testing allows an entity to assess qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that the indefinite lived intangible asset is impaired or to proceed directly to performing the quantitative impairment test. Under the quantitative assessment, the trademark is evaluated for impairment by comparing the carrying value of the trademark to its estimated fair value. The estimated fair value of the trademark is calculated based on an income approach using the relief from royalty method. If the estimated fair value is less than the carrying value of the trademark, then an impairment charge is recognized to reduce the carrying value of the trademark to its estimated fair value. The Company's annual impairment testing date is September 1st of each fiscal year. In 2024, this testing resulted in an impairment of the Company's Dogfish Head, Coney Island, and Angel City trademark assets of $41.2 million, $1.0 million, and $0.4 million respectively. In 2023, this testing resulted in an impairment of the Company's Dogfish Head and Coney Island trademark assets of $15.8 million and $0.6 million, respectively. The Company evaluated the negative trends of the Dogfish Head brand including the brands off-plan performance through the thirty-nine weeks ended September 28, 2024, which was attributable to continued sales declines in the brand's beer products, the overall declines in the craft beer industry sector, and lower than forecasted sales in its canned cocktails products due to increased competition. The Company updated its projections for the Dogfish Head brand including the forecasted revenue and royalty rate assumptions utilized in the determination of the fair value of the Dogfish Head trademark which included further reductions in revenues stemming from the foregoing factors as well as a reduction in the royalty rate assumption due to decreased profitability expected to be generated from the trademark. As a result of performing this assessment, the Dogfish Head trademark asset with a carrying value of $55.6 million was written down to its estimated fair value of $14.4 million. The negative craft beer trends impacting the Company’s Dogfish Head brand have also had a negative impact on the Company’s Coney Island and Angel City trademark assets. The Coney Island trademark asset with a carrying value of $1.0 million was written down to zero and the Angel City trademark asset with a carrying value of $0.4 million was written down to zero, resulting in a total impairment of $42.6 million which was recorded during the thirteen weeks and thirty-nine weeks ended September 28, 2024. The Company’s intangible assets as of September 28, 2024 and December 30, 2023 were as follows:
|  | As of September 28, 2024 |  | As of September 28, 2024 |  |  | As of December 30, 2023 |
|  | Estimated Useful |  | Gross Carrying |  |  | Accumulated |  |  | Net Book |  |  | Gross Carrying |  |  | Accumulated |  |  | Net Book |
|  | Life (Years) |  | Value |  |  | Amortization |  |  | Value |  |  | Value |  |  | Amortization |  |  | Value |
|  |  |  |  |  |  |  |  |  | (in thousands) |  |  |  |  |  |  |  |  |  |
Trademarks |  | Indefinite |  | $ | 14,400 |  |  | $ | — |  |  | $ | 14,400 |  |  | $ | 56,984 |  |  | $ | — |  |  | $ | 56,984 |
Customer relationships |  | 15 |  |  | 3,800 |  |  |  | (1,330 | ) |  |  | 2,470 |  |  |  | 3,800 |  |  |  | (1,140 | ) |  |  | 2,660 |
Total intangible assets, net |  |  |  | $ | 18,200 |  |  | $ | (1,330 | ) |  | $ | 16,870 |  |  | $ | 60,784 |  |  | $ | (1,140 | ) |  | $ | 59,644 |
Beginning in the fourth quarter of 2024, the Company will change the indefinite useful life Dogfish Head trademark asset and begin amortizing the remaining $14.4 million balance over an estimated useful life of 10 years. Amortization expense in the thirte en and thirty-nine weeks ended September 28, 2024 was approximately $63,000 and $189,000, respectively. The Company expects to record future amortization expense, including the amortization of the remaining Dogfish Head trademark asset, as follows:
Fiscal Year |  | Amount (in thousands) |
Remainder of 2024 |  | $ | 423 |
2025 |  |  | 1,693 |
2026 |  |  | 1,693 |
2027 |  |  | 1,693 |
2028 |  |  | 1,693 |
2029 |  |  | 1,693 |
Thereafter |  |  | 7,982 |
Total amortization expense |  | $ | 16,870 |

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- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 350 -SubTopic 30 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/350-30/tableOfContent Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 350 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/350-20/tableOfContent + Details
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