Goodwill And Intangible Assets
|12 Months Ended|
Dec. 31, 2020
|Goodwill And Intangible Assets [Abstract]|
|Goodwill And Intangible Assets||
9. Goodwill and Intangible Assets
The activity in the balance of the Company’s goodwill was as follows (in thousands):
The Company recognized $8.3 million of goodwill in connection with the acquisition of Colonial Elegance during the year ended December 31, 2020 and $1.7 million of goodwill in connection with the acquisition of an operating business through a loan foreclosure during the year ended December 31, 2018. The goodwill associated with the Colonial Elegance acquisition is included in the Renin category for segment reporting.
As described in Note 2, the Company tests goodwill for potential impairment on an annual basis as of December 31 or during interim periods if impairment indicators exist. During the year ended December 31, 2020, the Company concluded that the effects of the COVID-19 pandemic, including the recessionary economic environment and the impact on certain of the Company’s operations, indicated that it was more likely than not that the fair values of certain of its reporting units with goodwill had declined below the respective carrying amounts of such reporting units as of March 31, 2020. As a result, the Company tested the goodwill associated with such reporting units for impairment by estimating the fair values of the respective reporting units as of March 31, 2020 and recognized goodwill impairment losses of $20.3 million associated with the IT’SUGAR reporting unit and $2.1 million associated with certain of its other reporting units. The Company primarily utilized a discounted cash flow methodology to estimate the fair values of these reporting units and used the relevant market approaches to support the reasonableness of its estimated fair values under the income approach. Further, on September 22, 2020, the Company deconsolidated IT’SUGAR as a result of IT’SUGAR filing the Bankruptcy Cases and derecognized the remaining IT’SUGAR goodwill balance of approximately $14.9 million as of that date.
The decline in the estimated fair values of these reporting units from December 31, 2019 primarily resulted from the effects of the COVID-19 pandemic on these businesses. In particular, the decline in the estimated fair value of IT’SUGAR during the year ended December 31, 2020 reflected the impact on the Company’s estimated future cash flows of the temporary closure of IT’SUGAR’s retail locations commencing in March 2020, including the liabilities incurred by IT’SUGAR during the shutdown, and considered scenarios in which IT’SUGAR’s business and sales volumes would stabilize following the phased reopening of its retail locations. The Company’s estimated discount rate applicable to IT’SUGAR’s cash flows was also increased to reflect, among other things, changes in market conditions, the uncertainty of the duration and severity of the economic downturn, uncertainty related to the retail environment and consumer behavior, uncertainty related to IT’SUGAR’s ability to stabilize its operations and implement its long-term strategies for its business, and the deterioration in IT’SUGAR’s financial condition as a result of the effects of the COVID-19 pandemic, including its lack of sufficient liquidity for its operations during 2020.
The Company’s assessment of IT’SUGAR’s assets for impairment, as well as its estimate of the fair value of its investment in IT’SUGAR in connection with the deconsolidation of IT’SUGAR, as further described in Note 23, required the Company to make estimates based on facts and circumstances as of each reporting date and assumptions about current and future economic and market conditions. These assumptions included the stabilization of IT’SUGAR following the phased reopening of its retail locations in 2020 and its ability to access and operate in its retail locations in spite of ongoing negotiations with the landlords of these locations related to unpaid rents. Further, the Company’s estimated fair value of its investment in IT’SUGAR at the time of its filing of the Chapter 11 Bankruptcy Cases included assumptions related to relief of pre-petition obligations and improved occupancy costs as a result of renegotiated lease agreements for its retail locations. In addition, the Company’s estimates assumed that there would not be a material permanent decline in the demand for IT’SUGAR’s products and that IT’SUGAR will ultimately in the future return to its full operations and implement its long-term strategy to reinvest in and grow its business. However, as it is difficult to predict (i) the severity, magnitude, and duration, as well as the economic consequences, of the COVID-19 pandemic, which are uncertain and rapidly changing and may involve the re-implementation of government mandated closures or operating restrictions, and (ii) the ultimate outcome of IT’SUGAR’s Bankruptcy Cases, these estimates and assumptions may change over time, which may result in the recognition of additional impairment losses related to the Company’s investment in IT’SUGAR that would be material to the Company’s financial statements. Changes in assumptions that could materially impact the Company’s estimates related to IT’SUGAR that could result in the recognition of impairment losses in future periods include, but are not limited to, IT’SUGAR’s Bankruptcy Cases being converted to Chapter 7 bankruptcy cases, IT’SUGAR not obtaining expected relief during the reorganization, a material permanent decline in demand for IT’SUGAR’s products, IT’SUGAR abandoning its long-term strategy to reinvest and grow its business as a result of changes in consumer demand, and significant additional closures following the initial reopening of locations as a result of additional outbreaks of COVID-19.
During the year ended December 31, 2019, the Company determined that its goodwill was not impaired. During the year ended December 31, 2018, the Company determined that the fair values of certain of BBX Sweet Holdings’ reporting units were below their respective carrying values as of the applicable testing dates and recognized goodwill impairment losses of $4.0 million. The decline in the fair values of these reporting units and the related recognition of goodwill impairment losses during the year ended December 31, 2018 primarily resulted from ongoing losses in these operations and various strategic initiatives related to such businesses, including the consolidation of manufacturing facilities, a reduction in corporate personnel and infrastructure, and the elimination of various unprofitable brands.
The Company’s intangible assets consisted of the following (in thousands):
Trademarks and customer relationships are amortized using the straight-line method over their expected useful lives, which range from 12 to 20 years.
On September 22, 2020, the Company deconsolidated IT’SUGAR as a result of IT’SUGAR filing the Bankruptcy Cases and derecognized $3.2 million of intangible assets related to IT’SUGAR, including the intangible asset related to its trademark.
During the years ended December 31, 2020, 2019, and 2018, the Company recognized approximately $0.7 million, $0.6 million and $0.5 million, respectively, of amortization expense related to its intangible assets which is reflected in selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive income.
The table below sets forth the estimated aggregate amortization expense of intangible assets during each of the five years subsequent to December 31, 2020 (in thousands):
As described in Note 2, the Company tests its long-lived assets, including amortizable intangible assets and asset groups that include amortizable intangible assets, for recoverability whenever events or changes in circumstances indicate that the carrying amount of such assets or assets groups may not be recoverable. Due to effects of the COVID-19 pandemic during 2020 and the ongoing losses associated with certain of BBX Sweet Holdings’ businesses in the confectionery industry and strategic initiatives related to such businesses, the Company tested certain asset groups associated with these businesses for recoverability during the years ended December 31, 2020, 2019 and 2018, and determined that the estimated undiscounted future cash flows exceeded the carrying amounts of the asset groups. Accordingly, the Company did not recognize any impairment losses associated with its intangible assets during the years ended December 31, 2020, 2019 and 2018.
The entire disclosure for goodwill and intangible assets.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef