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Note 5 - Goodwill and Other Intangible Assets | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Goodwill Disclosure [Text Block] |
5. | GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill Goodwill represents the excess of the purchase price and related acquisition costs over the fair value assigned to the net tangible and other intangible assets acquired in a business acquisition. At December 31, 2024 and 2023, the Company's reportable operating segments were as follows:
| • | Power Solutions and Protection: includes the 2012 acquisition of Powerbox Italia, the 2014 acquisition of ABB's Power Solutions business, the 2019 acquisition of the majority of CUI Inc.'s power products business, the 2021 acquisition of EOS, the 2023 equity method investment in innolectric, the 2024 acquisition of Enercon, in addition to sales and an estimated allocation of expenses related to power products manufactured at Bel sites that are not product group specific.
| • | Connectivity Solutions: includes the 2010 acquisition of Cinch Connectors, the 2012 acquisitions of Fibreco Limited and GigaCom Interconnect, the 2013 acquisition of Array Connector, the 2014 acquisition of Emerson Network Power Connectivity Solutions, the 2021 acquisition of rms Connectors, in addition to sales and an estimated allocation of expenses related to connectivity products manufactured at Bel sites that are not product group specific.
| • | Magnetic Solutions: includes the 2013 acquisition of TE Connectivity's Coil Wound Magnetics business, our Signal Transformer business, in addition to sales and an estimated allocation of expenses related to Bel's ICM and discrete magnetic products that are manufactured at Bel sites that are not product group specific.
The changes in the carrying value of goodwill classified by our segment reporting structure for the year ended December 31, 2024 are as noted in the table below.
|  | Total |  |  | Power Solutions & Protection |  |  | Connectivity Solutions |  |  | Magnetic Solutions |
Balance at January 1, 2023: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill, gross |  | $ | 25,099 |  |  | $ | 18,152 |  |  | $ | 6,947 |  |  | $ | - |
Goodwill, net |  | $ | 25,099 |  |  | $ | 18,152 |  |  | $ | 6,947 |  |  | $ | - |
Foreign currency translation |  |  | 1,543 |  |  |  | 471 |  |  |  | 1,072 |  |  |  | - |
Balance at December 31, 2023: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill, gross |  | $ | 26,642 |  |  | $ | 18,623 |  |  | $ | 8,019 |  |  | $ | - |
Goodwill, net |  | $ | 26,642 |  |  | $ | 18,623 |  |  | $ | 8,019 |  |  | $ | - |
Goodwill allocation related to acquisition |  | $ | 182,905 |  |  | $ | 182,905 |  |  | $ | - |  |  | $ | - |
Foreign currency translation |  |  | (1,511 | ) |  |  | (1,441 | ) |  |  | (70 | ) |  |  | - |
Balance at December 31, 2024: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill, gross |  | $ | 208,036 |  |  | $ | 200,087 |  |  | $ | 7,949 |  |  | $ | - |
Goodwill, net |  | $ | 208,036 |  |  | $ | 200,087 |  |  | $ | 7,949 |  |  | $ | - |
The addition of $182.9 million of goodwill during the year ended December 31, 2024 related to the Company's acquisition of Enercon, as further discussed in Note 3, "Acquisition and Divestiture". The Company has accumulated impairment charges totaling $137.5 million, which were incurred under a former segment and reporting unit structure which was in place prior to October 1, 2019. As discussed in Note 6, "Fair Value Measurements", goodwill is reviewed for impairment on a reporting unit basis annually during the fourth quarter of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. In testing goodwill for impairment, we may perform both a qualitative assessment and quantitative assessment. For the qualitative test, the assessment is based on a review of general macroeconomic conditions, industry and market conditions, changes in cost factors, overall financial performance (both actual and expected performance) and other reporting unit-specific events such as significant changes in management, customers, litigation or a change in the carrying amount of net assets. If it is determined that a potential impairment may exist, we would proceed with a quantitative assessment. In cases where we elect to perform a quantitative assessment, we estimate the fair value of these reporting units using a weighting of fair values derived from income and market approaches. Under the income approach, we determine the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the business and the projected cash flows. The market approach estimates fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit. 2024 Annual Impairment Test On October 1, 2024, the Company completed a quantitative assessment of our annual goodwill impairment test for our three existing reporting units. We concluded that the fair value of the Company's Power Solutions and Protection (excluding CUI), Connectivity Solutions, and CUI reporting units exceeded the carrying value and that there was no indication of impairment. The excess of estimated fair values over carrying value, including goodwill for each of our reporting units that had goodwill as of the 2024 annual impairment test were as follows:
Reporting Unit |  | % by Which Estimated Fair Value Exceeds Carrying Value |
Power Solutions and Protection (excluding CUI) |  | 500.5% |
Connectivity Solutions |  | 156.0% |
CUI |  | 43.6% |
2023 Annual Impairment Test Prior to October 1, 2023, the Company's reporting units were Power Europe, Connectivity Europe, CUI and EOS. On October 1, 2023, the Company completed a quantitative assessment of our annual goodwill impairment test for each of the four existing reporting units at that time. We concluded that the fair value of the Company's Connectivity Europe, Power Europe, CUI and EOS reporting units exceeded the carrying value and that there was no indication of impairment. Effective October 1, 2023, in connection with a then-recent shift in how management views and manages the business in light of the consolidation or our ERP systems, recent facility consolidations and other streamlining initiatives at the product group level, the Company changed its reporting unit structure. The Company's new reporting units are Power Solutions and Protection (excluding CUI), CUI, Connectivity Solutions and Magnetic Solutions. The Company performed a qualitative analysis (Step 0) on the new reporting units as of the October 1, 2023 testing date and concluded no impairment existed for the new reporting units at that time. As noted above, the fair value determined in connection with the goodwill impairment test completed in the fourth quarter of 202 4 exceeded the carrying value for each reporting unit. Therefore, there was no impairment of goodwill. However, if the fair value decreases in future periods, the Company may need to complete an interim goodwill impairment test and any potential goodwill impairment charge would be dependent upon the estimated fair value of the reporting unit at that time and the outcome of the impairm ent test. The fair values of the assets and liabilities of the reporting unit, including the intangible assets, could vary depending on various factors. The future occurrence of a potential indicator of impairment, such as a decrease in expected net earnings, adverse equity market conditions, a decline in current market multiples, a sustained decrease in the price of our common stock, a significant adverse change in legal factors or business climates, an adverse action or assessment by a regulator, unanticipated competition, strategic decisions made in response to economic or competitive conditions, or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of, could require an interim assessment for some or all of the reporting units before the next required annual assessment. In the event of significant adverse changes of the nature described above, it may be necessary for us to recognize an additional non-cash impairment of goodwill, which could have a material adverse effect on our consolidated financial condition and consolidated results of operations. Other Intangible Assets Other identifiable intangible assets include patents, technology, license agreements, non-compete agreements and trademarks. Amounts assigned to these intangible assets have been determined by management. Management considered a number of factors in determining the allocations, including valuations and independent appraisals. Trademarks have indefinite lives and are reviewed for impairment on an annual basis, or when there is a triggering event. Other intangible assets, excluding trademarks, are being amortized over 1 to 17 years. The Company tests indefinite-lived intangible assets for impairment using a fair value approach, the relief-from-royalty method (a form of the income approach). At December 31, 2024, the Company's indefinite-lived intangible assets related to the trademarks acquired in the Enercon, CUI, Power Solutions, Connectivity Solutions, Cinch and Fibreco acquisitions. The components of definite and indefinite-lived intangible assets are as follows:
|  | December 31, 2024 |  |  | December 31, 2023 |
|  | Gross Carrying |  |  | Accumulated |  |  | Net Carrying |  |  | Gross Carrying |  |  | Accumulated |  |  | Net Carrying |
|  | Amount |  |  | Amortization |  |  | Amount |  |  | Amount |  |  | Amortization |  |  | Amount |
Patents, licenses and technology |  | $ | 56,628 |  |  | $ | 12,589 |  |  | $ | 44,039 |  |  | $ | 19,176 |  |  | $ | 11,386 |  |  | $ | 7,790 |
Customer relationships |  |  | 186,683 |  |  |  | 36,953 |  |  |  | 149,730 |  |  |  | 56,711 |  |  |  | 32,099 |  |  |  | 24,612 |
Trademarks |  |  | 38,337 |  |  |  | 158 |  |  |  | 38,179 |  |  |  | 17,148 |  |  |  | 159 |  |  |  | 16,989 |
|  | $ | 281,648 |  |  | $ | 49,700 |  |  | $ | 231,948 |  |  | $ | 93,035 |  |  | $ | 43,644 |  |  | $ | 49,391 |
The increases in gross carrying amounts noted above as of December 31, 2024 related intangibles acquired in connection with the Enercon transaction, as further detailed in Note 3, "Acquisition and Divestiture". Amortization expense was $6.5 million, $4.7 million and $6.0 million during each of 2024, 2023 and 2022 respectively. Estimated amortization expense for intangible assets for the next five years is as follows:
December 31, |  | Amortization Expense |
2025 |  | $ | 14,760 |
2026 |  |  | 14,670 |
2027 |  |  | 14,559 |
2028 |  |  | 14,559 |
2029 |  |  | 13,515 |
2024 and 2023 Impairment Tests The Company completed its annual indefinite-lived intangible assets impairment test as of October 1, 2024 and October 1, 2023. During the October 1, 2024 testing date, it was concluded that an impairment existed related to the Company's CUI tradename given recent trade restrictions with one of its large suppliers in the PRC. In connection with the trade restriction, and the resulting loss of sales to our customers, the Company recorded a $0.4 million impairment charge related to the CUI tradename within the Company's Power Solutions and Protection segment during the year ended December 31, 2024. No indication of impairment was evident at the October 1, 2023 test date for the Company's indefinite-lived intangible assets. Management has concluded that the fair value of these trademarks exceeded the related carrying values at December 31, 2024 and December 31, 2023, with no indication of impairment at either date.

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