Note 8 - Goodwill and Other Intangible Assets

12 Months Ended

Nov. 25, 2023

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

8. Goodwill and Other Intangible Assets

Goodwill and other intangible assets consisted of the following:

	November 25, 2023
	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships	$	512	$	(337	)	$	175
Intangibles not subject to amortization:
Trade names							8,675
Goodwill							7,217
Total goodwill and other intangible assets						$	16,067

	November 26, 2022
	Gross Carrying Amount		Accumulated Amortization			Intangible Assets, Net
Intangibles subject to amortization:
Customer relationships	$	512	$	(280	)	$	232
Intangibles not subject to amortization:
Trade names							8,723
Goodwill							12,772
Total goodwill and other intangible assets						$	21,727

We performed the annual test for impairment of the carrying value of our goodwill as of the beginning of the fourth quarter of fiscal 2023. Based on the initial qualitative analysis performed under ASC Topic 350, we concluded that is was not more likely than not that the carrying value of our upholstery reporting unit within our wholesale segment exceeded its fair value. However, due to the actual and expected future underperformance of our Noa Home reporting unit relative to management's original expectations, we performed a strategic review of the operations as of the beginning of the fourth quarter and concluded that Noa should exit the Australian market and focus more on the North American market.  Coupled with the financial underperformance and the planned exit of Australia, we performed a quantitative test of the carrying value of the goodwill recognized as part of the 2022 acquisition of Noa Home and concluded that it was necessary to fully impair the carrying value of the Noa Home goodwill, resulting in a non-cash impairment charge of $5,409 in fiscal 2023. 

The determination of the fair value of our reporting units is based on a combination of a market approach, that considers benchmark company market multiples and comparable transactions occurring within the last two years, and an income approach, that utilizes discounted cash flows for each 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 4). The valuation of the Noa Home reporting unit was primarily based on the market approach due to signficant uncertainty in the future cash flows of Noa Home. Under the income approach, we determine fair value based on the present value of the most recent cash flow projections for each reporting unit as of the date of the analysis and calculate a terminal value utilizing a terminal growth rate. The significant assumptions under this approach include, 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 are 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. Our estimates are subject to change given the inherent uncertainty in predicting future results. 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. As part of the goodwill impairment testing, we also consider our market capitalization in assessing the reasonableness of the combined fair values estimated for our reporting units.

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

					Corporate
	Wholesale		Retail		and Other			Total
Balance as of November 27, 2021	$	7,217	$	-	$	-		$	7,217
Acquisition of Noa Home		-		-		5,715			5,715
Foreign currency translation adjustment		-		-		(161	)		(161	)
Balance as of November 26, 2022		7,217		-		5,554			12,771
Foreign currency translation adjustment		-		-		(145	)		(145	)
Full impairment of Noa Home goodwill		-		-		(5,409	)		(5,409	)
Balance as of November 25, 2023	$	7,217	$	-	$	-		$	7,217

Accumulated impairment losses were $9,306, $3,897 and $3,897 at November 25, 2023, November 26, 2022 and November 27, 2021, respectively.

The weighted average useful lives of our finite-lived intangible assets and remaining amortization periods as of November 25, 2023 are as follows:

	Useful Life in Years		Remaining Amortization Period in Years
Customer relationships		9		4

Our trade name intangible assets are associated with Noa Home and Lane Venture. Because it is our intention to maintain and grow those brands, they are considered to be indefinite-lived intangible assets. The amortization expense associated with finite-lived intangible assets during fiscal 2023, 2022 and 2021 was $57 each year and is included in selling, general and administrative expense in our consolidated statement of operations. All expense arising from the amortization of intangible assets is associated with our wholesale segment. Estimated future amortization expense for intangible assets that exist at November 25, 2023 is as follows:

Fiscal 2024	$	57
Fiscal 2025		57
Fiscal 2026		57
Fiscal 2027		4
Fiscal 2028		-
Total	$	175