GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

We perform an annual review for the potential impairment of the carrying value of goodwill in the third quarter as of September 30th, or more frequently if events or circumstances indicate a possible impairment. For purposes of evaluating goodwill for impairment, we have one reporting unit. In evaluating goodwill for impairment, we may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of the reporting unit is less than its carrying amount. If we bypass the qualitative assessment, or if we conclude that it is more likely than not that the fair value of the reporting unit is less than its carrying value, then we perform a quantitative impairment test by comparing the fair value of the reporting unit with its carrying amount.

Qualitative factors that we consider include, for example, macroeconomic and industry conditions, overall financial performance, and other relevant entity-specific events. If the qualitative assessment is not conclusive, then a quantitative impairment analysis for goodwill is performed at the reporting unit level. We may also choose to perform this quantitative impairment analysis instead of the qualitative analysis. The quantitative impairment analysis compares the fair value of the reporting unit, determined using the income, to its recorded amount. If the recorded amount exceeds the fair value, then a goodwill impairment charge is recorded for the difference up to the recorded amount of goodwill.

We performed a quantitative assessment as of September 30th that supported a conclusion that the fair value exceeded our carrying value. We calculate the estimated fair value of the reporting unit using a weighting of the income approach. For the income approach, we use internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. We base these assumptions on our historical data and experience, third party appraisals, industry projections, micro and macro general economic condition projections, and our expectations.

During the third quarter of 2023, we conducted our annual goodwill impairment test and did not record any impairment charges. The estimated fair value of our reporting unit exceeded the carrying amount at the date of their most recent estimated fair value determination.

We are changing our annual assessment date to October 1 beginning in 2023, and therefore, will be performing another annual assessment in the fourth quarter.

The changes in the carrying amount of goodwill were as follows (in thousands):


Balance as of December 31, 2021	$	80,318
Additions through acquisitions	4,692
Measurement period adjustments related to prior acquisitions	(1,550)


Balance as of December 31, 2022	83,460
Additions through acquisitions	24,743
Measurement period adjustments related to prior acquisitions	182


Balance as of September 30, 2023	$	108,385

Intangible Assets

Detail of Intangible assets was as follows:


	September 30, 2023						December 31, 2022
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Asset Value		Gross Carrying Amount		Accumulated Amortization		Net Asset Value
Amortizable intangible assets:
Manufacturer relationships	$	65,400	$	25,136	$	40,264	$	65,400	$	20,346	$	45,054
Customer relationships	10,395		4,668		5,727		10,395		3,993		6,402
Non-compete agreements	230		155		75		230		121		109
	76,025		29,959		46,066		76,025		24,460		51,565

Non-amortizable intangible assets:
Trade names and trademarks	30,100		—		30,100		30,100		—		30,100
	$	106,125	$	29,959	$	76,166	$	106,125	$	24,460	$	81,665

Amortization expense related to Intangible assets was as follows:


	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2023		2022		2023		2022
Amortization expense	$	1,834	$	1,830	$	5,501	$	5,445

Future amortization of amortizable intangible assets is as follows:


(In thousands)
Remainder of 2023	$	1,833
2024	7,332
2025	7,264
2026	6,585
2027	6,274
Thereafter	16,778
Total	$	46,066