Quarterly report pursuant to Section 13 or 15(d)

Note 2 - Goodwill, Customer Relationships and Other Intangible Assets

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Note 2 - Goodwill, Customer Relationships and Other Intangible Assets
3 Months Ended
Jul. 02, 2017
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]
Note
2
– 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
July 2, 2017
and
July 3, 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
$1.1
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 3, 2017,
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
July 2, 2017
and
July 3, 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
July 2, 2017
and
July 3, 2016
, the amortization expense for the
three
-month periods ended
July 2, 2017
and
July 3, 2016
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
 
 
 
July 2,
 
 
April 2,
 
 
July 2,
 
 
April 2,
 
 
July 2,
 
 
July 3,
 
 
 
2017
 
 
2017
 
 
2017
 
 
2017
 
 
2017
 
 
2016
 
Tradename and trademarks
  $
1,987
    $
1,987
    $
1,100
    $
1,066
    $
34
    $
34
 
Non-compete covenants
   
98
     
98
     
69
     
67
     
2
     
2
 
Patents
   
1,601
     
1,601
     
592
     
565
     
27
     
27
 
Customer relationships
   
5,534
     
5,534
     
4,520
     
4,394
     
126
     
126
 
Total other intangible assets
  $
9,220
    $
9,220
    $
6,281
    $
6,092
    $
189
    $
189
 
 
Classification within the accompanying unaudited condensed consolidated statements of income:
               
Cost of products sold
  $
2
    $
2
 
Marketing and administrative expenses
   
187
     
187
 
Total amortization expense
  $
189
    $
189