XML 25 R14.htm IDEA: XBRL DOCUMENT v3.24.1.u1
Goodwill and Other Intangible Assets
 3 Months Ended
Mar. 31, 2024
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Disclosure
Note G — Goodwill and Other Intangible Assets
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.
Goodwill
Annual Impairment Testing
The Company uses a qualitative approach to test goodwill and indefinite lived intangible assets 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.
2024 Annual Impairment Testing
For our annual impairment testing at March 31, 2024, we performed a qualitative assessment of our reporting units. The results of the qualitative analysis indicated that it was more-likely-than-not that the fair value of each of our reporting units except Velocity exceeded their carrying value. Based on our analysis, we determined that the Velocity operating segment required quantitative testing because we could not conclude that the fair value of this reporting unit significantly exceeded the carrying value based on qualitative factors alone. We performed a quantitative test of Velocity and the results of the testing indicated that the fair value of Velocity did not exceed the carrying value, resulting in goodwill impairment expense of $8.2 million as of March 31, 2024.
2023 Annual Impairment Testing
The Company determined that the Velocity 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 2023 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 Velocity was performed using an income approach to determine the fair value of the reporting unit. The discount rate used in the income approach was 15% and the results of the quantitative impairment testing indicated that the fair value of the Velocity reporting unit exceeded the carrying value by 21%.
Interim Impairment Testing
2023 Interim Impairment Testing
PrimaLoft - The Company performed an interim impairment test of goodwill at PrimaLoft as of December 31, 2023. As a result of operating results that were below forecast amounts that were used as the basis for the purchase price allocation performed when PrimaLoft was acquired as well as the failure of certain financial covenants in the intercompany credit agreement as of December 31, 2023, the Company determined that a triggering event had occurred. The Company performed the quantitative impairment test using both an income approach and a market approach. The prospective information used in the income approach considers macroeconomic data, industry and reporting unit specific facts and circumstances and is our best estimate of operational results and cash flows for the
PrimaLoft reporting unit as of the date of our impairment testing. The discount rate used in the income approach was 11.3%. The results of the quantitative impairment testing indicated that the fair value of the PrimaLoft reporting unit did not exceed its carrying value, resulting in goodwill impairment expense of $57.8 million in the year ended December 31, 2023.
Velocity Outdoor - The Company performed interim quantitative impairment testing of goodwill at Velocity at August 31, 2023. As a result of operating results that were below the forecast that we used in the quantitative impairment test of Velocity Outdoor at March 31, 2023, the Company determined that a triggering event had occurred at Velocity in the third quarter of 2023 and performed an interim impairment test as of August 31, 2023. 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 17% 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 projected cash flows. Based on the results of the impairment test, the fair value of Velocity did not exceed its carrying value. The Company recorded goodwill impairment of $31.6 million during the year ended December 31, 2023.
The following is a summary of the net carrying amount of goodwill at March 31, 2024 and December 31, 2023, is as follows (in thousands):
March 31, 2024December 31, 2023
Goodwill - gross carrying amount$1,198,903 $1,069,125 
Accumulated impairment losses (1)
(175,879)(167,697)
Goodwill - net carrying amount$1,023,024 $901,428 
(1) Includes accumulated goodwill impairment expense of $20.6 million recorded at Ergobaby, $72.7 million at Velocity, $24.9 million at Arnold and $57.8 million at PrimaLoft. During the three months ended March 31, 2024, the Company recorded $8.2 million of goodwill impairment expense at Velocity. In the year ended December 31, 2023, the Company recorded $31.6 million of goodwill impairment expense at Velocity and $57.8 million of goodwill impairment expense at PrimaLoft.
The following is a reconciliation of the change in the carrying value of goodwill for the three months ended March 31, 2024 by operating segment (in thousands):
Balance at January 1, 2024Acquisitions/Measurement Period AdjustmentsGoodwill ImpairmentBalance at March 31, 2024
5.11$92,966 $— $— $92,966 
BOA254,153 — — 254,153 
Ergobaby41,521 — — 41,521 
Lugano86,337 — — 86,337 
PrimaLoft232,536 — — 232,536 
The Honey Pot Co.— 128,135 — 128,135 
Velocity Outdoor8,182 — (8,182)— 
Altor91,130 1,643 — 92,773 
Arnold 39,267 — — 39,267 
Sterno55,336 — — 55,336 
Total$901,428 $129,778 $(8,182)$1,023,024 
Long lived assets
Annual indefinite lived impairment testing
The Company used a qualitative approach to test indefinite lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite lived intangible asset is impaired as a basis for determining whether it is necessary to perform quantitative impairment testing. The Company evaluated the qualitative factors of each indefinite lived intangible asset in connection with the annual impairment testing for 2024 and 2023. Results of the qualitative analysis indicate that it is more likely than not that the fair value of the reporting units that maintain indefinite lived intangible assets exceeded the carrying value.
Other intangible assets are comprised of the following at March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024December 31, 2023
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Customer relationships$794,624 $(309,206)$485,418 $772,423 $(294,628)$477,795 
Technology and patents203,503 (69,776)133,727 202,898 (66,035)136,863 
Trade names, subject to amortization600,525 (132,506)468,019 375,507 (124,648)250,859 
Non-compete agreements4,638 (4,145)493 4,638 (4,082)556 
Other contractual intangible assets1,960 (1,643)317 1,960 (1,593)367 
Total1,605,250 (517,276)1,087,974 1,357,426 (490,986)866,440 
Trade names, not subject to amortization56,965 — 56,965 56,965 — 56,965 
In-process research and development (1)
500 — 500 500 — 500 
Total intangibles, net$1,662,715 $(517,276)$1,145,439 $1,414,891 $(490,986)$923,905 
(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.
Amortization expense related to intangible assets was $26.3 million for the three months ended March 31, 2024, and $24.0 million for the three months ended March 31, 2023.
Estimated charges to amortization expense of intangible assets for the remainder of 2024 and the next four years, is as follows (in thousands):
20242025202620272028
$81,376 $103,304 $97,005 $86,271 $84,140