Crown Crafts, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 3 - Goodwill, Customer Relationships and Other Intangible Assets

Note 3 - Goodwill, Customer Relationships and Other Intangible Assets

9 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note

– Goodwill

, Customer Relationships

and Other Intangible Assets

Goodwill:

Goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired in business combinations. For the purpose of presenting and measuring for the impairment of goodwill, the Company has

two

reporting units:

one

that produces and markets infant and toddler bedding, blankets and accessories and another that produces and markets infant and toddler bibs, developmental toys, bath care and disposable products

. The goodwill of the reporting units of the Company as of

April 2, 2017

amounted to

$24.0

million, which was increased by

$5.4

million and

$359,000

as a result of the Carousel Acquisition and the Sassy Acquisition, respectively, as the excess of the acquisition cost over the fair values of the identifiable tangible and intangible assets acquired. Thus, as of

December 31, 2017,

the goodwill of the reporting units of the Company amounted to

$29.8

million, which is reflected in the accompanying condensed consolidated balance sheets net of accumulated impairment charges of

$22.9

million, for a net reported balance of

$6.9

million.

As disclosed in Note

effective as of

April 3, 2017,

the Company adopted ASU

No.

2017

04,

the intent of which was to simplify the measurement of goodwill for impairment.

The Company

measures for impairment the goodwill within its reporting units annually as of the

first

day of the Company’s fiscal year. An additional interim measurement for impairment is performed during the year whenever an event or change in circumstances occurs that suggests that the fair value of either of the reporting units of the Company has more likely than

not

(defined as having a likelihood of greater than

50%

)

fallen below its carrying value. The annual or interim measurement for impairment is performed by

first

assessing qualitative factors to determine whether it is more likely than

not

that the fair value of a reporting unit is less than its carrying amount. If such qualitative factors so indicate, then the measurement for impairment is continued

by calculating an estimate of the fair value of each reporting unit and comparing the estimated fair value to the carrying value of the reporting unit. If the carrying value exceeds the estimated fair value of the reporting unit, then an impairment charge is calculated as the difference between the carrying value of the reporting unit and its estimated fair value,

not

to exceed the goodwill of the reporting unit.

April 3, 2017,

he Company performed the annual measurement for impairment of the goodwill of its reporting units and concluded that the estimated fair value of each of the Company’s reporting units substantially exceeded their carrying values, and thus the goodwill of the Company’s reporting units was

not

impaired as of that date.

Other Intangible Assets:

Other intangible assets as of

December 31, 2017

and

April 2, 2017

consisted primarily of the fair value of identifiable assets acquired in business combinations

other than tangible assets and goodwill. The gross amount and accumulated amortization of the Company’s other intangible assets as of

December 31, 2017

and

April 2, 2017

, the amortization expense for the

three

and

nine

-month periods ended

December 31, 2017

and

January 1, 2017

and the classification of such amortization expense within the accompanying unaudited condensed consolidated statements of income are as follows (in thousands):

									Amortization Expense
	Gross Amount				Accumulated Amortization				Three-Month Periods Ended				Nine-Month Periods Ended
	December 31,		April 2,		December 31,		April 2,		December 31,		January 1,		December 31,		January 1,
	2017		2017		2017		2017		2017		2017		2017		2017
Tradename and trademarks	$	3,927	$	1,987	$	1,204	$	1,066	$	50	$	33	$	138	$	100
Developed technology		1,100		-		46		-		28		-		46		-
Non-compete covenants		458		98		102		67		20		2		35		5
Patents		1,601		1,601		646		565		27		27		81		81
Customer relationships		7,374		5,534		4,712		4,394		64		127		318		380
Total other intangible assets	$	14,460	$	9,220	$	6,710	$	6,092	$	189	$	189	$	618	$	566

Classification within the accompanying unaudited condensed consolidated statements of income:
Cost of products sold									$	2	$	2	$	5	$	5
Marketing and administrative expenses										187		187		613		561
Total amortization expense									$	189	$	189	$	618	$	566

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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