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Goodwill and Other Intangible Assets
 12 Months Ended
Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets Goodwill and Intangible Assets
Goodwill
As a result of acquisitions of various businesses, the Company has significant intangible assets on its balance sheet that include goodwill and indefinite-lived intangibles. The Company’s goodwill and indefinite-lived intangibles are tested and reviewed for impairment annually as of March 31st or more frequently if facts and circumstances warrant by comparing the fair value of each reporting unit to its carrying value. Each of the Company’s businesses represent a reporting unit.
A reconciliation of the change in the carrying value of goodwill by segment for the years ended December 31, 2021 and 2020 are as follows (in thousands):
Balance at January 1, 2021
Acquisitions (1)
Balance at December 31, 2021
5.11$92,966 $— $92,966 
BOA254,153 — 254,153 
Ergobaby63,531 (2,083)61,448 
Lugano— 83,458 83,458 
Marucci68,170 39,685 107,855 
Velocity Outdoor30,079 — 30,079 
Altor Solutions75,369 15,474 90,843 
Arnold26,903 12,364 39,267 
Sterno55,336 — 55,336 
Total$666,507 $148,898 $815,405 
(1)    Acquisition of businesses during the year ended December 31, 2021 includes the acquisition of Lugano by the Company, and add-on acquisitions at Altor, Arnold, and Marucci.
Balance at January 1, 2020
Acquisitions (1)
Balance at December 31, 2020
5.11$92,966 $— $92,966 
BOA— 254,153 254,153 
Ergobaby61,031 2,500 63,531 
Marucci— 68,170 68,170 
Velocity Outdoor30,079 — 30,079 
ACI— — — 
Altor Solutions72,708 2,661 75,369 
Arnold26,903 — 26,903 
Sterno55,336 — 55,336 
Total$339,023 $327,484 $666,507 
(1)    Acquisition of businesses during the year ended December 31, 2020 includes the acquisitions of Marucci and BOA by the Company, and add-on acquisitions at Altor and Ergobaby.
Approximately $223.3 million of goodwill is deductible for income tax purposes at December 31, 2021.
2021 Annual Impairment Testing
The Company uses a qualitative approach to test goodwill for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform quantitative goodwill impairment testing. We determined that the Arnold reporting unit required additional quantitative testing because we could not conclude that the fair value of the reporting unit exceeded its carrying value based on qualitative factors alone. For the reporting units that were tested only on a qualitative basis for the 2021 annual impairment testing, the results of the qualitative analysis indicated that it is more likely than not that the fair value exceeded the carrying value of these reporting units.
The quantitative test of Arnold was performed using an income approach to determine the fair value of the reporting unit. The discount rate used in the income approach was 13.0% and the results of the quantitative impairment testing indicated that the fair value of the Arnold reporting unit exceeded the carrying value by 272%.
2020 Annual Impairment Testing
The Company uses a qualitative approach to test goodwill for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform quantitative goodwill impairment testing. We determined that the Ergobaby, Altor Solutions and Velocity reporting units required additional quantitative testing because we could not conclude that the fair value of the reporting unit exceeded its carrying value based on qualitative factors alone. For the reporting units that were tested only on a qualitative basis for the 2020 annual impairment testing, the results of the qualitative analysis indicated that it is more likely than not that the fair value exceeded the carrying value of these reporting units.
The quantitative tests of Ergobaby, Altor Solutions and Velocity were performed using an income approach to determine the fair value of the reporting units. For Ergobaby, the discount rate used in the income approach was 15.9% and the results of the quantitative impairment testing indicated that the fair value of the Ergobaby reporting unit exceeded the carrying value by 14.0%. For Altor, the discount rate used in the income approach was 13.3%, and the results of the quantitative impairment testing indicated that the fair value of the Altor reporting unit exceeded the carrying value by 3.8%. For Velocity, the discount rate used in the income approach was 12.8%, and the results of the quantitative impairment testing indicated that the fair value of the Velocity reporting unit exceeded the carrying value by 16.4%.
2019 Interim Impairment Testing
Velocity Outdoor
The Company performed interim quantitative impairment testing of Velocity Outdoor at September 30, 2019. As a result of operating results below forecasts in the current period as well as a re-forecast of the Velocity business in which planned earnings and revenue fell below the forecasts of prior periods, the Company determined that a triggering event occurred in the third quarter of 2019 and performed an interim impairment test of goodwill as of September 30, 2019. The Company used an income approach for the impairment test, whereby we estimate the fair value of the reporting unit based on the present value of future cash flows. Cash flow projections are based on management's estimate of revenue growth rates and operating margins, and take into consideration industry and market conditions as well as company specific economic factors. The Company used a weighted average cost of capital of 12.2% in the income approach. The discount rate used was based on the weighted average cost of capital adjusted for the relevant risk associated with business specific characteristics and Velocity's ability to execute on the projected cash flows. Based on the results of the impairment test, the fair value of Velocity did not exceed the carrying value, indicating that the goodwill at Velocity is impaired. The difference between the carrying value and fair value of the Velocity business was $32.9 million, which the Company has recorded as impairment expense in the accompanying consolidated statement of operations for the year December 31, 2019.
2019 Annual Impairment Testing
The Company uses a qualitative approach to test goodwill for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform quantitative goodwill impairment testing. All of the Company's reporting units except Liberty were tested qualitatively at March 31, 2019. We determined that the Liberty reporting unit required additional quantitative testing because we could not conclude that the fair value of the reporting unit exceeded its carrying value based on qualitative factors alone. We used an income approach and market approach for the quantitative impairment test that was performed of the Liberty business at March 31, 2019, with equal weighting assigned to each. The discount rate used in the income approach was 14.8%. The results of the quantitative impairment testing indicated that the fair value of the Liberty reporting unit exceeded the carrying value. For the reporting units that were tested qualitatively for the 2019 annual impairment testing, the results of the qualitative analysis indicated that it is more likely than not that the fair value exceeded their carrying value.
The following is a summary of the net carrying amount of goodwill at December 31, 2021 and 2020 (in thousands):
December 31, 2021December 31, 2020
Goodwill - gross carrying amount$873,150 $724,252 
Accumulated impairment losses(57,745)(57,745)
Goodwill - net carrying amount$815,405 $666,507 
Intangible Assets
Intangible assets are comprised of the following (in thousands):
December 31, 2021December 31, 2020
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted
Average
Useful Lives
Customer relationships$566,805 $(180,581)$386,224 $505,657 $(148,599)$357,058 13
Technology and patents153,124 (49,898)103,226 145,392 (25,552)119,840 12
Trade names, subject to amortization411,100 (87,178)323,922 357,978 (64,478)293,500 16
Non-compete agreements4,617 (3,502)1,115 3,378 (3,159)219 4
Other contractual intangible assets1,960 (735)1,225 210 (210)— 4
1,137,606 (321,894)815,712 1,012,615 (241,998)770,617 
Trade names, not subject to amortization56,965 — 56,965 56,965 — 56,965 
In-process research and development (1)
— — — 6,500 — 6,500 
Total intangibles, net$1,194,571 $(321,894)$872,677 $1,076,080 $(241,998)$834,082 
(1) In-process research and development is considered indefinite lived until the underlying technology becomes viable, at which point the intangible asset will be amortized over the expected useful life. The Company determined that the in-process research and development technology asset acquired in the BOA acquisition achieved viability in the second quarter of 2021, and will be amortized over a ten-year period.
The Company’s amortization expense of intangible assets for the years ended December 31, 2021, 2020 and 2019 totaled $80.3 million, $61.7 million and $53.6 million, respectively.
Estimated charges to amortization expense of intangible assets over the next five years, is as follows, (in thousands):
2022$76,799 
2023$75,067 
2024$73,683 
2025$68,566 
2026$65,836