Annual report pursuant to Section 13 and 15(d)

GOODWILL AND OTHER INTANGIBLE ASSETS

v3.24.0.1
GOODWILL AND OTHER INTANGIBLE ASSETS
 12 Months Ended
Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND OTHER INTANGIBLE ASSETS
NOTE 6: GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill and other intangible assets consisted of the following (in thousands):
December 31, 2023 December 31, 2022
Gross
Accumulated
Amortization
 Net Gross
Accumulated
Amortization
 Net
Other intangible assets subject to amortization
Customer relationships (useful life of 5 to 10 years)
 $ 105,616  $ (38,074) $ 67,542  $ 105,298  $ (26,137) $ 79,161 
Tradenames (useful life of 25 years)
 174,495  (22,801) 151,694  171,013  (15,498) 155,515 
Total $ 280,111  $ (60,875) $ 219,236  $ 276,311  $ (41,635) $ 234,676 
Other intangible assets not subject to amortization
Product formulations 10,700  10,700 
Total other intangible assets, net 229,936  245,376 
Goodwill 193,610  193,139 
Total goodwill and other intangible assets $ 423,546  $ 438,515 
The Company amortizes its intangible assets subject to amortization on a straight-line basis over their respective useful lives. The remaining intangible assets subject to amortization as of December 31, 2023 have a weighted-average remaining useful life of approximately 17.0 years, including weighted-average remaining useful lives of approximately 6.3 years for customer relationships and approximately 21.8 years for tradenames. Amortization expense for intangible assets was $18.7 million, $18.6 million and $18.3 million for the years ended December 31, 2023, 2022, and 2021 respectively.
Amortization expense relating to amortizable intangible assets as of December 31, 2023 for the next five years is expected to be as follows (in thousands):
2024 $ 18,704 
2025 18,460 
2026 18,229 
2027 17,015 
2028 15,024 
The changes in the carrying amounts of goodwill during the years ended December 31, 2023 and December 31, 2022 were as follows (in thousands):
Branded CPG Flavors & Ingredients Total
Balance at December 31, 2021 $ 238,857  $ 3,804  $ 242,661 
Currency translation adjustment (2,870) (152) (3,022)
Gross balance at December 31, 2022 $ 235,987  $ 3,652  $ 239,639 
Accumulated impairment loss at December 31, 2022
 (46,500) —  (46,500)
Balance at December 31, 2022 $ 189,487  $ 3,652  $ 193,139 
Impairment (7,230) —  (7,230)
Currency translation adjustment 7,695  6  7,701 
Balance at December 31, 2023 $ 189,952  $ 3,658  $ 193,610 
Impairment of Goodwill and Other Indefinite-Lived Intangible Assets—As disclosed in Note 1, the Company reviews goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that an asset may be impaired, in accordance with ASC Topic 350.
The Company performs its annual impairment procedures for all of its reporting units and indefinite-lived intangible assets during the fourth quarter of each year. In 2023 and 2022, the Company performed a quantitative impairment test and estimated the fair values of the reporting units utilizing both the income and market approach to determine the fair values of the Company’s reporting units.
As a result of the 2023 impairment test, the Company determined that the carrying value of the IMEA reporting unit within the Branded CPG segment exceeded fair value and as a result, the Company recognized a non-cash impairment charge of $7.2 million in the fourth quarter of 2023. The impairment was primarily due to current macroeconomic conditions, including rising interest rates and higher supply chain costs and other inflationary pressures, which contributed to lower earnings forecasts for the reporting unit. The income approach incorporated estimated future cash flows and a terminal value discounted to present value using an appropriate risk-adjusted discount rate. The estimated future cash flows reflected management’s best estimate of economic and market conditions over the projected period including forecasted revenue, gross margins, tax rates, capital expenditures, depreciation and amortization, changes in working capital requirements and terminal growth rates. The market approach estimated the fair value of the IMEA reporting unit using Company specific and guideline company valuation metrics and was equally weighted with the income approach to determine the fair value of the IMEA reporting unit. After the impairment, the goodwill carrying amount of the IMEA reporting unit was $0 million.
As a result of the 2022 impairment test, the Company determined that the carrying values of the North America and LATAM reporting units within the Branded CPG segment exceeded their respective fair values and as a result, the Company recognized a non-cash impairment charge of $46.5 million in the fourth quarter of 2022, which included $42.5 million related to the North America reporting unit and $4.0 million related to the LATAM reporting unit. The impairment was primarily due to current macroeconomic conditions, including rising interest rates and continued currency devaluation in LATAM, and higher supply chain costs and other inflationary pressures which contributed to lower earnings forecasts for our North America and LATAM reporting units. The income approach incorporated estimated future cash flows and a terminal value discounted to present value using an appropriate risk-adjusted discount rate. The estimated future cash flows reflected management’s best estimate of economic and market conditions over the projected period including forecasted revenue, gross margins, tax rates, capital expenditures, depreciation and amortization, changes in working capital requirements and terminal growth rates. The market approach estimated the fair value of the North America reporting unit using Company specific and guideline company valuation metrics and was equally weighted with the income approach to determine the fair value of the North America reporting unit. The Company used the income approach to determine the fair value of the LATAM reporting unit. After the impairments, the goodwill carrying amount of the North America and LATAM reporting units was approximately $80.5 million and $0 million, respectively.
In the fourth quarter of 2021, the Company performed a quantitative impairment test and concluded that the fair values for all of its reporting units exceeded their respective carrying values and therefore, there was no impairment.