Note 6 - Goodwill and Other Intangible Assets

9 Months Ended

Aug. 29, 2020

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

6. Goodwill and Other Intangible Assets

Goodwill and other intangible assets consisted of the following:

	August 29, 2020
	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net
Intangibles subject to amortization
Customer relationships	$	3,550	$	(1,282	)	$	2,268
Technology - customized applications		834		(665	)		169
Total intangible assets subject to amortization	$	4,384	$	(1,947	)		2,437
Intangibles not subject to amortization:
Trade names							9,338
Goodwill							12,146
Total goodwill and other intangible assets						$	23,921

	November 30, 2019
	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net
Intangibles subject to amortization
Customer relationships	$	3,550	$	(1,088	)	$	2,462
Technology - customized applications		834		(575	)		259
Total intangible assets subject to amortization	$	4,384	$	(1,663	)		2,721
Intangibles not subject to amortization:
Trade names							9,338
Goodwill							14,117
Total goodwill and other intangible assets						$	26,176

We normally test the carrying amount of our goodwill on an annual basis as of the beginning of our fourth quarter, the most recent annual test having been performed as of September 1, 2019 which resulted in the full impairment of the goodwill previously allocated to our retail reporting unit. Due to the impact of the COVID-19 pandemic, we performed an interim impairment assessment of our remaining goodwill as of May 30, 2020. In accordance with ASC Topic 350, Intangibles – Goodwill & Other (“ASC Topic 350”), we first assessed qualitative factors to determine whether it was more likely than not that the fair value of our reporting units was less than their carrying amounts as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test described in ASC Topic 350. The more likely than not threshold is defined as having a likelihood of more than 50 percent. Based on our qualitative assessment as described above, we concluded that it was necessary to perform the quantitative evaluation for the wood reporting unit in the second fiscal quarter. As a result of this test, we concluded that the carrying value of our wood reporting unit exceeded its fair value by an amount in excess of the goodwill previously allocated to the reporting unit. Therefore, we recognized a goodwill impairment charge of $1,971 for the nine months ended August 29, 2020. The determination of the fair value of our wood reporting unit was primarily based on an income approach that utilized discounted cash flows for the reporting unit and other Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosure (see Note 3). Under the income approach, we determined fair value based on the present value of the most recent cash flow projections for the reporting unit as of the date of the analysis and calculated a terminal value utilizing a terminal growth rate. The significant assumptions under this approach included, among others: income projections, which are dependent on future sales, new product introductions, customer behavior, competitor pricing, operating expenses, the discount rate, and the terminal growth rate. The cash flows used to determine fair value were dependent on a number of significant management assumptions such as our expectations of future performance and the expected future economic environment, which are partly based upon our historical experience as well as our estimate of the period of time required to recover from the impact of the COVID-19 pandemic. Our estimates are subject to change given the inherent uncertainty in predicting future results, including uncertainties surrounding the continuing impact of COVID-19 upon consumer spending and our ability to keep our retail store locations open to the public. Additionally, the discount rate and the terminal growth rate are based on our judgment of the rates that would be utilized by a hypothetical market participant.

Changes in the carrying amounts of goodwill by reportable segment are as follows:

	Wholesale			Retail		Logistics		Total
Balance as of November 30, 2019	$	9,188		$	-	$	4,929	$	14,117
Goodwill impairment		(1,971	)		-		-		(1,971	)
Balance as of August 29, 2020	$	7,217		$	-	$	4,929	$	12,146

The carrying amounts of our goodwill at August 29, 2020 and November 30, 2019 included the following accumulated impairment losses:

	Wholesale		Retail		Logistics		Total
Balance as of November 30, 2019	$	-	$	1,926	$	-	$	1,926
Balance as of August 29, 2020	$	1,971	$	1,926	$	-	$	3,897

Amortization expense associated with intangible assets during the three and nine months ended August 29, 2020 and August 31, 2019 was as follows:

	Quarter Ended				Nine Months Ended
	August 29, 2020		August 31, 2019		August 29, 2020		August 31, 2019
Intangible asset amortization expense	$	95	$	95	$	284	$	284

Estimated future amortization expense for intangible assets that exist at August 29, 2020 is as follows:

Remainder of fiscal 2020	$	95
Fiscal 2021		379
Fiscal 2022		279
Fiscal 2023		259
Fiscal 2024		259
Fiscal 2025		259
Thereafter		907
Total	$	2,437