Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The Company has two operating and reportable segments – namely AMS and EAAA. See Note 20 entitled “Segment Information” for additional information. The Company tests goodwill for impairment at least annually at the reporting unit level. The Company’s reporting units consist of (1) the Americas, (2) Europe, Middle East and Africa (“EMEA”), and (3) Asia-Pacific. The Americas reporting unit is the same as the AMS reportable segment, and the EMEA and Asia-Pacific reporting units are one level below the EAAA reportable segment.

During the fourth quarter of 2023, we performed our annual quantitative goodwill impairment testing. We focused our testing on the Americas reporting unit since it is the only reporting unit with an allocated goodwill balance. The allocated goodwill balances for our EMEA and Asia-Pacific reporting units were written off in prior years as a result of goodwill impairment charges. The Company performed limited procedures for our EMEA and Asia-Pacific reporting units during the 2023 goodwill testing to facilitate a reconciliation of market capitalization.

The annual quantitative goodwill impairment testing performed in 2023 for our Americas reporting unit was consistent with our prior year methodology. The Company prepared valuations for the Americas reporting unit on both a market comparable methodology and an income methodology, utilizing a combination of the present value of expected future cash flows and the guideline public company method to determine the estimated fair value of the reporting unit. In preparing the valuation, past, present and future expectations of performance were considered, including our expectations for the short-term and long-term impacts of macroeconomic conditions, including inflation, and our expected financial performance, including planned revenue and operating income for the Americas reporting unit. The present value model requires management to estimate future cash flows, the timing of these cash flows, and a discount rate based on a weighted average cost of capital. The discount rate used for the Americas reporting unit was 11.5% in 2023 compared to 13.5% in 2022, which fluctuated based on a risk premium assigned to estimates of expected future performance. There is inherent uncertainty associated with key assumptions and estimates used in our impairment testing, including the impact of macroeconomic conditions.

As a result of our 2023 annual goodwill impairment testing, we determined that the fair value of our Americas reporting unit exceeded its carrying value by 71% at the 2023 measurement date, and therefore no impairment was indicated. The goodwill balance of $105.4 million at December 31, 2023 is allocated to our Americas reporting unit.

During the fourth quarter of 2022, the Company performed the annual goodwill impairment test, consistent with prior years. The Company performed this test at the reporting unit level, which is an operating segment or one level below the operating segment level. In performing the impairment testing for each reporting unit, the Company prepared valuations of reporting units on both a market comparable methodology and an income methodology, and those valuations were compared with the respective carrying values of the reporting units to determine whether any goodwill impairment existed. In preparing the valuations, past, present and future expectations of performance were considered, including the ongoing impact of the COVID-19 pandemic in 2022. As a result of our 2022 testing, we determined that the carrying value of our EMEA reporting unit exceeded its fair value and that the associated goodwill was impaired at the measurement date. We recorded a goodwill impairment charge of $29.4 million in 2022 to write off all the goodwill allocated to our EMEA reporting unit, as the excess of carrying value over fair value exceeded the recorded amount of goodwill for the EMEA reporting unit. Macroeconomic factors, including inflation, foreign currency exchange rates, and the expected impact to planned revenue and operating income contributed to the lower estimated fair value of our EMEA reporting unit. Higher discount rates also contributed to the lower fair value of our reporting units. We determined that the fair value of our Americas reporting unit exceeded its carrying value by 71% at the 2022 measurement date, and therefore no impairment was indicated. The remaining goodwill balance of $102.4 million at January 1, 2023, was allocated to our Americas reporting unit. The goodwill balance allocated to our Asia-Pacific reporting unit was previously written off in connection with the 2020 goodwill impairment.

During the fourth quarter of 2021, we performed the annual goodwill impairment test consistent with prior years and the methodology described above, and all reporting units that had a goodwill balance were noted to have a fair value that exceeded their carrying value.

The ending balances and the changes in the carrying amounts of goodwill allocated to each reportable segment for the years ended December 31, 2023 and January 1, 2023 are as follows(1):

	AMS		EAAA		Total
	(in thousands)
Goodwill balance, at January 2, 2022	$	108,505	$	38,520	$	147,025
Impairment	—		(29,384)		(29,384)
Foreign currency translation(2)	(6,088)		(9,136)		(15,224)
Goodwill balance, at January 1, 2023	102,417		—		102,417
Foreign currency translation(2)	3,031		—		3,031
Goodwill balance, at December 31, 2023	$	105,448	$	—	$	105,448

(1) Goodwill balances are presented net of cumulative impairment losses of $358.5 million as of both December 31, 2023 and January 1, 2023, and $329.1 million as of January 2, 2022. The cumulative impairment losses include impairment charges recognized prior to 2020 related to discontinued operations that were allocated to the current reportable segments on a proportionate basis.

(2) A portion of the goodwill balance allocated to the AMS reportable segment is comprised of goodwill denominated in foreign currency attributable to the nora acquisition.

Other Intangible Assets

During the fourth quarter of 2023, the Company performed its annual impairment testing of the trademark and trade name intangible assets and determined that no impairment existed at the 2023 measurement date.

In the fourth quarter of 2022, we determined that the trademark and trade name intangible assets related to the acquired nora business were impaired and recognized an impairment loss of $6.3 million. The impairment loss consisted of charges of $3.6 million and $2.7 million attributable to the AMS and EAAA reportable segments, respectively.

The Company’s intangible assets other than goodwill consisted of the following as of December 31, 2023 and January 1, 2023:

	December 31, 2023								January 1, 2023
	Gross Carrying Amount		Accumulated Impairment		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Impairment		Accumulated Amortization		Net Carrying Amount
	(in thousands)
Intangible assets subject to amortization(1):
Technology	$	37,198	$	—	$	(28,845)	$	8,353	$	36,069	$	—	$	(22,854)	$	13,215
Other	734		(478)		(20)		236		764		(478)		(17)		269
Total intangible assets subject to amortization	37,932		(478)		(28,865)		8,589		36,833		(478)		(22,871)		13,484
Indefinite-lived intangible assets(1):
Trademarks and trade names	58,747		(11,081)		—		47,666		57,375		(11,081)		—		46,294
Total intangible assets	$	96,679	$	(11,559)	$	(28,865)	$	56,255	$	94,208	$	(11,559)	$	(22,871)	$	59,778

(1) Certain intangible asset balances are subject to changes attributable to foreign currency translation.

Amortization expense related to intangible assets during the years 2023, 2022 and 2021 was $5.2 million, $5.0 million and $5.6 million, respectively, and is recorded in cost of sales in the consolidated statements of operations. Amortization expense related to intangible assets is expected to be approximately $5 million for fiscal year 2024 and approximately $3 million for fiscal year 2025. The developed technology intangible asset is amortized over its estimated useful life, which ends in fiscal year 2025.