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Note 10 - Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Text Block]

Note 10 – Goodwill and Other Intangible Assets

Changes in the carrying value of goodwill and other intangible asset during 2023:

Historical Cost of Intangible Assets	December 31, 2022		Acquisitions		Foreign Currency			December 31, 2023
Customer relationships	$	208,593	$	-	$	(14	)	$	208,579
Technology and drawings		46,543		-		4			46,547
Other intangibles		1,997		-		-			1,997
Total finite-lived intangible assets		257,133		-		(10	)		257,123
Trade names		13,226		-		(2	)		13,224
Goodwill		257,724		-		(3	)		257,721
Total	$	528,083		-	$	(15	)	$	528,068

The major components of Goodwill and other intangible assets are:

	2023				2022
	Historical Cost		Accumulated Amortization		Historical Cost		Accumulated Amortization
Finite-lived intangible assets:
Customer relationships	$	208,579	$	23,468	$	208,593	$	13,369
Technology and drawings		46,547		8,069		46,543		5,757
Other intangibles		1,997		1,997		1,997		1,872
Total finite-lived intangible assets		257,123		33,534		257,133		20,998
Trade names and trademarks		13,224		-		13,226		-
Goodwill		257,721		-		257,724		-
Total	$	528,068	$	33,534	$	528,083	$	20,998

Amortization of intangible assets was $12.6 million, $7.6 million and $0.8 million in 2023, 2022 and 2021, respectively. The following table summarizes the future estimated amortization expense relating to our intangible assets as of December 31, 2023 (in thousands):

	2024				2025				2026				2027				2028				Thereafter				Total
	$	12,379			$	12,371			$	12,318			$	12,281			$	12,255			$	161,985			$	223,589

For 2023, the Company used a quantitative analysis for the annual goodwill impairment testing as of October 1 for its National Pump Company (“National”) and Fill-Rite reporting units. The fair values of these reporting units was estimated using both a discounted cash flow model and a market-based approach. The discounted cash flow model considered forecasted cash flows discounted at an estimated weighted-average cost of capital. The forecasted cash flows were based on the Company’s long-term operating plan and a terminal value was used to estimate the cash flows beyond the period covered by the operating plan. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. The market-based approach considers market prices of corporations engaged in the same or similar line of business. These analyses require the exercise of significant judgments, including judgements about appropriate discount rate, discrete revenue growth rates, and profitability assumptions. Sensitivity analyses were performed around these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values.

The results of these goodwill impairment tests indicated that no impairment existed at National or Fill-Rite. The Company’s annual impairment analysis performed as of October 1, 2023 concluded that the fair value of both National and Fill-Rite exceeded carrying value. Sensitivity analyses were performed for the National and Fill-Rite reporting units, assuming a hypothetical 100 basis point decrease in the expected long-term growth rate or a hypothetical 100 basis point increase in the weighted average cost of capital, and both scenarios independently yielded estimated fair values above carrying value for both the National and Fill-Rite reporting units. If National or Fill-Rite fails to experience growth or revises its long-term projections downward, they could be subject to impairment charges in the future. Goodwill relating to the National reporting unit is $13.6 million, or 1.5% of the Company’s December 31, 2023 total assets and goodwill relating to the Fill-Rite reporting unit is $230.7 million, or 25.9% of the Company’s December 31, 2023 total assets.

For 2023, for all other reporting units, the Company used a qualitative analysis for goodwill impairment testing as of October 1. This qualitative assessment included consideration of current industry and market conditions and circumstances as well as any mitigating factors that would most affect the fair value of the Company and these reporting units. Based on the assessment and consideration of the totality of the facts and circumstances, including the business environment in the fourth quarter of 2023, the Company determined that it was not more likely than not that the fair value of the Company or these reporting units is less than their respective carrying amounts. As such, no goodwill impairments for these reporting units were recorded for the year ended December 31, 2023.

Other indefinite-lived intangible assets primarily consist of trademarks and trade names. The fair value of these assets is also tested annually for impairment as of October 1, or whenever events or changes in circumstances indicate there may be a possible permanent loss of value. The fair value of these assets is determined using a royalty relief methodology similar to that employed when the associated assets were acquired, but using updated estimates of future sales, cash flows and profitability. For 2023 and 2022 the fair value of all indefinite lived intangible assets exceeded the respective carrying values.

Finite-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows estimated to be generated by such assets. Based upon our fiscal 2023 and 2022 quantitative and qualitative impairment analyses the Company was not aware of any events or changes in circumstances that indicate the carrying value of its finite-lived intangible assets may not be recoverable.