Annual report pursuant to Section 13 and 15(d)

GOODWILL AND OTHER INTANGIBLE ASSETS

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GOODWILL AND OTHER INTANGIBLE ASSETS
 12 Months Ended
Dec. 31, 2021
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, 2021 December 31, 2020
Gross
Accumulated
Amortization
 Net Gross
Accumulated
Amortization
 Net
Other intangible assets subject to amortization
Customer relationships (useful life of 5 to 10 years)
 $ 106,013  $ (14,478) $ 91,535  $ 50,877  $ (3,020) $ 47,857 
Tradenames (useful life of 25 years)
 173,522  (8,818) 164,704  128,155  (2,185) 125,970 
Total $ 279,535  $ (23,296) $ 256,239  $ 179,032  $ (5,205) $ 173,827 
Other intangible assets not subject to amortization
Product formulations 10,700  10,700 
Total other intangible assets, net 266,939  184,527 
Goodwill 242,661  153,537 
Total goodwill and other intangible assets $ 509,600  $ 338,064 
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, 2021 have a weighted-average remaining useful life of approximately 18.2 years, including weighted-average remaining useful lives of approximately 8.1 years for customer relationships and approximately 23.8 years for tradenames. The Successor’s amortization expense for intangible assets was $18.3 million for the year ended December 31, 2021 and $6.0 million for the period from June 26, 2020 through December 31, 2020. The Predecessor’s amortization expense for intangible assets was $4.9 million for the period from January 1, 2020 to June 25, 2020 and $10.7 million for the year ended December 31, 2019.
Amortization expense relating to amortizable intangible assets as of December 31, 2021 for the next five years is expected to be as follows (in thousands):
2022 $ 18,717 
2023 18,717 
2024 18,717 
2025 18,483 
2026 18,263 
The changes in the carrying amounts of goodwill during the years ended December 31, 2021 and December 31, 2020 were as follows (in thousands):
Branded CPG Flavors & Ingredients Total
Balance at December 31, 2019 (Predecessor) $ 88,849  $ 42,021  $ 130,870 
Impairment (11,100) (6,600) (17,700)
Balance at June 25, 2020 (Predecessor) $ 77,749  $ 35,421  $ 113,170 
Purchase accounting adjustments 40,779  (31,747) 9,032 
Balance at June 26, 2020 (Successor) $ 118,528  $ 3,674  $ 122,202 
Acquisition of Swerve 36,003  —  36,003 
Currency translation adjustment (4,208) (460) (4,668)
Balance at December 31, 2020 (Successor) $ 150,323  $ 3,214  $ 153,537 
Purchase accounting adjustments 2,301  —  2,301 
Acquisition of Wholesome 80,763  —  80,763 
Currency translation adjustment 5,470  590  6,060 
Balance at December 31, 2021 (Successor) $ 238,857  $ 3,804  $ 242,661 
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.
During the first quarter of 2020, the on-going macroeconomic disruption and uncertainty caused by the COVID-19 pandemic, including the impact on enterprise valuations across sectors, represented events which could indicate that the carrying value of goodwill and indefinite-lived intangible assets of the Predecessor may not be recoverable. As a result, the Predecessor performed an interim impairment assessment at March 31, 2020. In performing the quantitative assessment of indefinite-lived intangible assets, the estimated fair value was determined under an income approach using the discounted cash flow method which requires assumptions related to projected operating results and a discount rate using a market-based weighted-average cost of capital. The main assumptions supporting the cash flow projections included revenue growth, EBIT margins and discount rate. The financial projections reflected management’s best estimate of economic and market conditions over the projected period including forecasted revenue growth, EBIT margins, tax rate, capital expenditures, depreciation and amortization, changes in working capital requirements and the terminal growth rate. It was determined that the carrying value of the indefinite-lived intangible assets at Flavors & Ingredients exceeded their fair value and an impairment charge of $22.9 million was recorded in the first quarter of 2020. For the interim impairment assessment of goodwill as of March 31, 2020, the Predecessor utilized a market approach to estimate fair value based upon the then proposed purchase price of the Business Combination from a willing buyer in an active open market transaction. As a result of the interim quantitative impairment assessment, the carrying value of the Mafco Worldwide and Merisant reporting units exceeded their fair value by $6.6 million and $11.1 million, respectively, and a goodwill impairment charge of $17.7 million was recorded in the first quarter of 2020.
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 2021, the Company performed a quantitative impairment test and concluded that their fair values exceeded their respective carrying values and therefore, there was no impairment. The Company estimated the fair values of the reporting units utilizing both the income and market approach, equally weighted, to determine the fair values of the Company’s reporting units. The determination of estimated fair values requires significant judgments in estimating several factors, including, future cash flows, terminal growth rates, and discount rates. If current expectations of future cash flows are not met, if market factors outside of the Company’s control change, including those impacting discount rates, or if management’s expectations or plans otherwise change, then one or more of the Company’s reporting units might become impaired in the future. In 2020, the Company used a qualitative assessment for its impairment tests and concluded that it was more likely than not that their fair values exceeded their respective carrying values and therefore, did not result in an impairment.
The Company plans to update its assessment during the fourth quarter of 2022, or sooner if events occur or circumstances change that could more likely than not reduce the fair value of a reporting unit or indefinite-lived intangible asset below its carrying value.