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Note 7 - Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2024

Goodwill and Intangible Assets Disclosure [Text Block]

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and indefinite-lived intangibles are tested for impairment at least annually by comparing the estimated fair values of our reporting units and indefinite-lived intangible assets to their respective carrying values. For goodwill, we estimated the fair value of each reporting unit by weighing the results of the income and market approaches. These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, discount rates, and comparable multiples from publicly traded companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of our business. When performing the income approach, we utilize the present value of cash flows to estimate fair value. The future cash flows for our reporting units were projected based on our estimates, at that time, of future revenues, EBITDA, and other factors (such as working capital and capital expenditures). The discount rates used were based on a weighted-average cost of capital determined from relevant market comparisons and take into consideration the risk and nature of the respective reporting unit's cash flows. For the market approach, we use the guideline public company method which relies upon valuation multiples derived from stock prices and enterprise values of publicly traded companies that are comparable to the reporting unit being evaluated. To further confirm fair value, we compare the aggregate fair value of our reporting units to our total market capitalization. After completing our annual goodwill impairment test for our Wholesale and Retail reporting units during the fourth quarter of 2024 and 2023, we concluded there was no impairment in either of these years.

The fair value of our indefinite-lived intangibles, which consist of trademarks, was determined based on the income approach using the relief from royalty method. This method requires us to estimate the future revenues for the related brands, the appropriate royalty rate, and the weighted-average cost of capital. In the fourth quarter of 2024, after completing our annual impairment test for our indefinite-lived intangible assets, we recognized a $4.0 million impairment charge related to the Muck trademark. The impairment charge for the Muck trademark was due to a reduction in the assigned royalty rate as a result of changes in projected revenue growth. There was no impairment charge for indefinite-lived intangible assets recorded during the year end December 31, 2023.

We consider the assumptions used in our determination of the estimated fair value of our reporting units and indefinite-lived intangible assets to be reasonable and comparable to those that would be used by other third-party marketplace participants; however, actual events and results could differ substantially from the estimates used in our valuations. These assumptions include, among other things, estimating future cash flows, including projected revenue and operating results, as well as selecting appropriate discount rates, pricing multiples, and an assumed royalty rate. If an event occurs that would cause us to revise our estimates and assumptions used in analyzing the fair value of our goodwill and other intangible assets, the revision could result in a non-cash impairment charge that could have a material impact on our financial results.

Estimates utilized in the projected cash flows include consideration of macroeconomic conditions, expected growth rates, cost containment and margin expansion, business plans, market position, and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances such as supply chain disruptions and the loss of key customers could negatively affect key assumptions used for the recent fair value test and potentially result in goodwill and/or intangible assets impairment.

The changes in the carrying amount of goodwill are as follows:

($ in thousands)	2024		2023
Goodwill balance at beginning of the year⁽¹⁾	$	47,844	$	50,246
Sale of Business⁽²⁾		-		(2,402	)
Goodwill balance at end of the year⁽¹⁾	$	47,844	$	47,844

⁽¹⁾ As of December 31, 2024 and December 31, 2023, goodwill allocated to our Wholesale and Retail reporting segments was $23.0 million and $24.8 million, respectively. No goodwill was allocated to our Contract Manufacturing segment for either period presented.

⁽²⁾Relates to the divesture of the Servus brand during the year ended December 31, 2023, Note 3 - Sale of Servus Brand and Related Assets for additional information.

A schedule of identified intangible assets is as follows:

	December 31, 2024
	Gross		Accumulated			Accumulated			Carrying
($ in thousands)	Amount		Amortization			Impairment			Amount
Indefinite-lived intangible assets
Trademarks⁽¹⁾	$	78,654				$	(4,000	)		74,654
Intangible assets subject to amortization
Patents		895	$	(863	)		-			32
Customer relationships		41,659		(10,522	)		-			31,137
Total Intangible assets other than goodwill	$	121,208	$	(11,385	)	$	(4,000	)	$	105,823

⁽¹⁾As of December 31, 2024, the Trademark impairment related to our Wholesale and Retail reporting segments was $3.6 million and $0.4 million, respectively.

	December 31, 2023
	Gross		Accumulated			Carrying
($ in thousands)	Amount		Amortization			Amount
Indefinite-lived intangible assets
Trademarks	$	78,654				$	78,654
Intangible assets subject to amortization
Patents		895	$	(845	)		50
Customer relationships		41,659		(7,745	)		33,914
Total Intangible assets other than goodwill	$	121,208	$	(8,590	)	$	112,618

The weighted average life of patents and customer relationships is 3.1 years and 11.3 years, respectively.

Amortization expense for intangible assets subject to amortization for the twelve months ended December 31, 2024, 2023 and 2022 was $2.8 million, $2.9 million and $3.1 million, respectively.

A schedule of approximate expected remaining amortization expense related to finite-lived intangible assets for the years ending December 31 is as follows:

		Amortization
($ in thousands)	Year	Expense
	2025	$	2,790
	2026		2,788
	2027		2,785
	2028		2,781
	2029		2,779
	2030+		17,246
	Total	$	31,169