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Goodwill and Other Intangible Assets
6 Months Ended
Jul. 04, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets

NOTE 8.  GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and intangible assets are as follows:

 

 

 

 

 

 

 

 

 

 

Initial

 

 

July 4,

 

 

December 28,

 

 

Useful Life

 

 

2020

 

 

2019

 

 

(in years)

 

 

(in thousands)

 

 

 

Goodwill

 

$

327,507

 

 

$

277,600

 

 

indefinite

 

 

 

 

 

 

 

 

 

 

 

Other intangible assets:

 

 

 

 

 

 

 

 

 

 

Trade names (indefinite-lived)

 

$

140,841

 

 

$

148,841

 

 

indefinite

 

 

 

 

 

 

 

 

 

 

 

Customer relationships and customer-related assets

 

 

201,547

 

 

 

200,647

 

 

<1-10

Trade name (amortizable)

 

 

22,200

 

 

 

-

 

 

15

Developed technology

 

 

5,600

 

 

 

3,000

 

 

6-10

Non-compete agreement

 

 

3,338

 

 

 

1,668

 

 

2-5

Software license

 

 

590

 

 

 

590

 

 

2

Less:  Accumulated amortization

 

 

(108,208

)

 

 

(98,784

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

125,067

 

 

 

107,121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other intangible assets, net

 

$

265,908

 

 

$

255,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill at December 28, 2019

 

$

277,600

 

 

 

 

 

 

 

Increase related to the acquisition of NewSouth

 

 

49,907

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill at July 4, 2020

 

$

327,507

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names at December 28, 2019

 

$

148,841

 

 

 

 

 

 

 

Impairment of WWS trade name

 

 

(8,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tradenames at July 4, 2020

 

$

140,841

 

 

 

 

 

 

 

 

Estimated amortization of our amortizable intangible assets for future years is as follows:

 

(in thousands)

 

Total

 

Remainder of 2020

 

$

9,429

 

2021

 

 

17,641

 

2022

 

 

16,782

 

2023

 

 

14,621

 

2024

 

 

14,575

 

Thereafter

 

 

52,019

 

 

 

 

 

 

Total

 

$

125,067

 

 

Amortization expense relating to amortizable intangible assets for the three months ended July 4, 2020, and June 29, 2019, was $4.7 million and $4.0 million, respectively. Amortization expense for relating to amortizable intangible assets for the six months ended July 4, 2020, and June 29, 2019, was $9.4 million and $8.0 million, respectively.

 

We perform our annual goodwill and indefinite-lived intangible asset impairment testing on the first day of our fiscal fourth quarter of each year, and at interim periods if needed based on occurrence of triggering events. Given the general deterioration in economic and market conditions surrounding the COVID-19 pandemic, and the narrow excess of fair value over carrying value of its WinDoor and WWS trade names as described in our 2019 Form 10-K, the Company determined it should complete interim quantitative impairment tests of its WinDoor and WWS trade names as of as of the end of the Company’s first quarter of 2020. These interim impairment tests did not indicate that impairments of those assets existed at that time.

 

 


Following an increase in net sales of 14.3% in the first quarter of 2020, compared to the first quarter of last year, net sales at our WWS reporting unit decreased 19.3% in the second quarter of 2020, compared to last year’s second quarter. As a result of this decrease in net sales, as well as continued deterioration in macro-economic conditions in our core western markets relating to the COVID-19 pandemic, we determined to complete a second interim impairment test of our WWS trade name as of July 4, 2020. For this second interim impairment test, we further decreased our modeling assumptions for net sales of our WWS reporting unit for our 2020 fiscal year based on a reassessment of our key assumptions in our modeling, including an updated assessment of macro industry growth in our WWS reporting unit’s key markets. We also decreased our 2021 growth rate assumption as we expect the challenging macro-economic conditions in our core western markets to continue during 2021. Based on our revised modeling, we concluded that the fair value of our WWS trade name was less than its carrying value, which resulted in an impairment of our WWS trade name of $8.0 million.

 

For our WWS reporting unit, our most recent annual impairment test of goodwill was a quantitative assessment. Based on this quantitative assessment, we concluded that it was not more likely than not that the carrying value of our WWS reporting unit exceeded its fair value, as the estimated fair value of our WWS reporting unit substantially exceeded the carrying value at that time. Because of the decrease in sales at our WWS reporting unit and continued deterioration in macro-economic conditions in our core western markets relating to the COVID-19 pandemic as described above, we determined to update the projections in our most recent quantitative assessment of WWS reporting unit to goodwill using the sales projections in our above WWS trade name assessment. Based on this update of the most recent quantitative assessment, the amount by which the estimated fair value of our WWS reporting unit exceeds its carrying value has decreased, but such fair value was still estimated to be approximately 10% more than its carrying value. As such, we have concluded that it continues to be not more likely than not that the carrying value of our WWS reporting unit exceeds its fair value. However, should our WWS reporting unit experience future financial results which are below our most recently updated projections, the amount by which the estimated fair value of our WWS reporting unit exceeds the carrying value would further decrease, which could result in an impairment of the goodwill of our WWS reporting unit.