Goodwill and Intangible Asset Impairment

$ 19,762

$ 64,586

$ 0

Goodwill and Intangible Assets Disclosure [Text Block]

Note 6. Goodwill and Intangible Assets

The following table presents goodwill by segment and the related change in the net carrying amount:

					*Gourmet*
	*Consumer*				*Foods &*
	*Floral &*				*Gift*
	*Gifts*		*BloomNet*		*Baskets*			*Total*
	(in thousands)

Balance at July 3, 2022	$	151,600	$	-	$	61,687		$	213,287
Measurement period adjustment for Vital Choice Acquisition		-		-		600			600
Measurement period adjustment for Alice's Table Acquisition		112		-		-			112
Acquisition of Things Remembered		1,664		-		-			1,664
Goodwill impairment		-		-		(62,287	)		(62,287	)
Balance at July 2, 2023	$	153,376	$	-	$	-		$	153,376
Measurement period adjustment for Things Remembered		201		-		-			201
Acquisition of Card Isle		-		2,960		-			2,960
Balance at June 30, 2024	$	153,577	$	2,960	$	-		$	156,537

The Company’s other intangible assets consist of the following:

		*June 30, 2024*						*July 2, 2023*
		*Gross*						*Gross*
	*Amortization*	*Carrying*		*Accumulated*				*Carrying*		*Accumulated*
	*Period (1)*	*Amount*		*Amortization*		*Net*		*Amount*		*Amortization*		*Net*
	(in years)	(in thousands)
Intangible assets with determinable lives

Investment in licenses	14 - 16	$	7,420	$	6,674	$	746	$	7,420	$	6,569	$	851
Customer lists	3 - 10		29,647		25,932		3,715		29,071		21,611		7,460
Other	5 - 14		2,946		2,664		282		2,946		2,604		342
Total intangible assets with determinable lives			40,013		35,270		4,743		39,437		30,784		8,653

Trademarks with indefinite lives			111,473		-		111,473		131,235		-		131,235

Total identifiable intangible assets		$	151,486	$	35,270	$	116,216	$	170,672	$	30,784	$	139,888

(1)

The amortization of intangible assets for the years ended June 30, 2024, July 2, 2023 and July 3, 2022 was $4.4 million, $4.2 million and $3.9 million, respectively. Future estimated amortization expense is as follows: 2025 - $2.1 million, 2026 - $1.4 million, 2027 -$0.6 million, 2028 -$0.3 million, 2029 -$0.2 million, and thereafter -$0.1 million.

During the year ended July 3, 2022, the Company experienced a sustained decline in its share price and a resulting decrease in its market capitalization, primarily due to the overall macroeconomic environment. Inflationary cost increases, which began during the first half of the fiscal year, were exacerbated by geopolitical events, further pressuring the Company’s gross margin and operating expenses. Due to this overall market decline and the Company’s operating performance, the Company completed impairment assessments of the goodwill and intangible assets of its three reporting units. The quantitative impairment tests as of July 3, 2022, did not indicate an impairment.

Although originally projected to be transitory, through the nine months ended April 2, 2023, the trend of adverse macroeconomic conditions and geopolitical pressures continued, and there was a sustained decline in the Company’s market capitalization. As the expected duration of these factors changed during the three months ended April 2, 2023, the Company made downward projections to its business forecasts, and therefore determined a triggering event had occurred that required an interim impairment assessment of the goodwill, intangibles and other long-lived assets of the Gourmet Foods & Gift Baskets reporting unit as of April 2, 2023.

The Company performed its goodwill impairment test by comparing the fair value of its Gourmet Foods & Gift Baskets reporting unit to its respective carrying value. The Company estimated the fair value of the Gourmet Foods & Gift Baskets reporting unit using an equal weighting of the income and market approaches, and a discount rate of 13%. The Company used industry accepted valuation models and set criteria that were reviewed and approved by various levels of management. Under the income approach, the Company used a discounted cash flow methodology which required management to make significant estimates and assumptions related to forecasted revenues, gross profit margins, operating income margins, working capital cash flow, perpetual growth rates, and long-term discount rates, among others. For the market approach, the Company used the guideline public company method. Under this method, the Company utilized information from comparable publicly traded companies with similar operating and investment characteristics as the reporting units, to create valuation multiples that were applied to the operating performance of the reporting unit being tested, in order to obtain their respective fair values. The Company also reconciled the aggregate fair values of its reporting units to its current market capitalization.

The Company’s impairment test for indefinite-lived intangible assets encompassed calculating a fair value of the indefinite-lived intangible asset and comparing that result to its carrying value. To determine fair value of indefinite-lived intangible assets, the Company used an income approach, the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. Indefinite-lived intangible assets’ fair values require significant judgments in determining both the assets’ estimated cash flows as well as the appropriate discount and royalty rates applied to those cash flows to determine fair value.

The Company’s impairment test for definite-lived intangibles was performed through a recoverability test, comparing projected undiscounted cash flows from the use and eventual disposition of the asset or asset group to its carrying value.

Based on the impairment assessment performed during the quarter ended April 2, 2023, the Company recorded a non-cash goodwill and intangible impairment charge against its Gourmet Foods & Gift Baskets reporting unit of $64.6 million, comprised of $62.3 million, which was attributable to goodwill, and $2.3 million, which was attributable to certain tradenames within the same reporting unit. The Company concluded that the definite-lived and other long-lived assets of the reporting unit were not impaired.

As of its annual impairment testing date during the fourth quarter of Fiscal 2023, the Company completed a step 0 analysis of its Consumer Floral & Gift reporting unit, the only reporting unit with goodwill at that time, and its indefinite-lived intangibles and concluded that it was not “more likely than not” that the fair values were less than their carrying values.

During its quarterly assessment in the second quarter of fiscal year 2024, as a result of a decline in the actual and projected revenue for the Company’s PersonalizationMall tradename (an indefinite-lived intangible asset), as well as a higher discount rate resulting from the higher interest rate environment, the Company determined that an impairment assessment was required for this tradename. The Company’s impairment test for its PersonalizationMall tradename encompassed calculating the fair value of the asset and comparing that result to its carrying value. To determine fair value the Company used an income approach, the relief-from-royalty method. As discussed above, this method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. This assessment resulted in the Company recording a non-cash impairment charge of $19.8 million to reduce the recorded carrying value of the PersonalizationMall tradename.

During the fourth quarter of fiscal year 2024, the Company performed a Step 0 analysis for its Consumer Floral & Gift and BloomNet reporting units, the only reporting units with goodwill, and its indefinite-lived intangible assets, excluding its PersonalizationMall tradename, and determined that it was not “more likely than not” that the fair values were less than their carrying amounts. For the Company’s PersonalizationMall tradename, the Company performed a quantitative test, which determined that the estimated fair value of the Company's intangible asset exceeded its respective carrying value.

Income Statement [Abstract]