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

Jan. 01, 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. The Company considers its wholly-owned subsidiaries, Crown Crafts Infant Products, Inc. (“CCIP”) and Hamco, Inc. (“Hamco”), to each be a reporting unit of the Company for the purpose of presenting and testing for the impairment of goodwill. The goodwill of the reporting units of the Company as of

January

2017

and

April

2016

amounted to

24.0

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

22.9

million, for a net reported balance of

million.

The Company

tests the fair value of the goodwill, if any, within its reporting units annually as of the

first

day of the Company’s fiscal year. An additional interim impairment test is performed during the year whenever an event or change in circumstances occurs that suggests that the fair value of the goodwill 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 impairment test 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 impairment test is continued

in a

two

-step approach. The

first

step is the estimation of the fair value of each reporting unit to ensure that its fair value exceeds its carrying value. If step

one

indicates that a potential impairment exists, then the

second

step is performed to measure the amount of an impairment charge, if any. In the

second

step, these estimated fair values are used as the hypothetical purchase price for the reporting units, and an allocation of such hypothetical purchase price is made to the identifiable tangible and intangible assets and assigned liabilities of the reporting units. The impairment charge is calculated as the amount, if any, by which the carrying value of the goodwill exceeds the implied amount of goodwill that results from this hypothetical purchase price allocation.

The annual impairment test of the fair value of the goodwill of the reporting units of the Company was performed as of

April

2016,

and the Company concluded that the fair value of the goodwill of the Company’s reporting units substantially exceeded their carrying values as of that date.

Other Intangible Assets:

Other intangible assets at

January

2017

and

April

2016

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

January

2017

and

April

2016

, the amortization expense for the

three

and

nine

-month periods ended

January

2017

and

December

27,

2015

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
	January 1,		April 3,		January 1,		April 3,		January 1,		December 27,		January 1,		December 27,
	2017		2016		2017		2016		2017		2015		2017		2015
Tradename and trademarks	$	1,987	$	1,987	$	1,033	$	933	$	33	$	33	$	100	$	99
Non-compete covenants		98		98		65		60		2		1		5		4
Patents		1,601		1,601		539		458		27		27		81		81
Customer relationships		5,534		5,534		4,267		3,887		127		127		380		375
Total other intangible assets	$	9,220	$	9,220	$	5,904	$	5,338	$	189	$	188	$	566	$	559

Classification within the accompanying unaudited condensed consolidated statements of income:
Cost of products sold									$	2	$	1	$	5	$	4
Marketing and administrative expenses										187		187		561		555
Total amortization expense									$	189	$	188	$	566	$	559

- 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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