Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

As of December 31, 2022 and January 1, 2022, our intangible assets consist of goodwill and other intangible assets including customer relationships, noncompete agreements, and trade names.

Goodwill

Goodwill is the excess of the cost of an acquired entity over the fair value of tangible and intangible assets (including customer relationships, noncompete agreements, and trade names) acquired and liabilities assumed under acquisition accounting for business combinations.

Goodwill is not subject to amortization but must be tested for impairment at least annually. This test requires us to assign goodwill to a reporting unit and to determine if the fair value of the reporting unit’s goodwill is less than its carrying amount. We evaluate goodwill for impairment as of the first day of our fourth quarter, which was October 2, 2022 for fiscal 2022. We

completed our annual assessment of goodwill in the fourth quarter of fiscal 2022 using a qualitative approach. The qualitative goodwill impairment assessment requires us to evaluate factors, based on the weight of evidence, to determine whether our single reporting unit's carrying value would more likely than not exceed its fair value.

As part of our goodwill qualitative testing process for our reporting unit, we evaluate various factors that are specific to the reporting unit, as well as industry and macroeconomic factors, in order to determine whether they are reasonably likely to have a material impact on the fair value of our reporting unit. Based on the qualitative analysis performed in fiscal 2022, we concluded that there were no changes that were reasonably likely to cause the fair value of our reporting unit to be less than its carrying value and determined that there was no impairment of our goodwill.

In addition, we will evaluate the carrying value of goodwill for impairment between annual impairment tests if an event occurs or circumstances change that would indicate the carrying amounts may be impaired. Such events and indicators may include, without limitation, significant declines in the industries in which our products are used, significant changes in capital market conditions, and significant changes in our market capitalization. No such indicators were present in fiscal 2022 and fiscal 2021.

The following table provides information related to the carrying amount of our goodwill:


	Total Carrying Amount
	(In thousands)
Balance at January 2, 2021	$	47,772
Acquisitions	—
Balance at January 1, 2022	$	47,772
Acquisitions	7,600
Balance at December 31, 2022	$	55,372

Definite-Lived Intangible Assets

The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets at December 31, 2022 were as follows:


	Weighted Average Remaining Useful Lives	Gross Carrying Amounts		Accumulated Amortization(1)		Net Carrying Amounts
		(In thousands)
Customer relationships	10	$	48,500	$	(15,093)	$	33,407
Non-compete agreements	5	8,954		(8,289)		665
Trade names	3	7,826		(6,909)		917
Total		$	65,280	$	(30,291)	$	34,989

(1) Intangible assets except customer relationships are amortized on straight line basis. Certain of our customer relationships are amortized on a double declining balance method and certain others are amortized on a straight line basis.

The gross carrying amounts, accumulated amortization, and net carrying amounts of our definite-lived intangible assets at January 1, 2022 were as follows:


	Weighted Average Remaining Useful Lives	Gross Carrying Amounts		Accumulated Amortization(1)		Net Carrying Amounts
		(In thousands)
Customer relationships	8	$	25,500	$	(12,492)	$	13,008
Non-compete agreements	1	8,254		(7,659)		595
Trade names	—	6,826		(6,826)		—
Total		$	40,580	$	(26,977)	$	13,603

(1) Intangible assets except customer relationships are amortized on straight line basis. Customer relationships are amortized on a double declining balance method.

Amortization Expense

Amortization expense for the definite-lived intangible assets was $3.4 million, $5.3 million, and $7.5 million for the years ended December 31, 2022, January 1, 2022, and January 2, 2021, respectively.

Estimated annual amortization expense for definite-lived intangible assets over the next five fiscal years is as follows:


Fiscal Year Ended	Estimated Amortization
	(In thousands)
2023	$	4,232
2024	3,930
2025	3,765
2026	3,471
2027	3,340