Goodwill and Intangibles |
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May 31, 2026 | |||||||||||||||||||||||||||||||
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| Goodwill and Intangibles | Note 5 - Goodwill and Intangibles We perform annual impairment testing each fiscal year and interim impairment testing, if necessary. We write down any asset deemed to be impaired to its fair value. During the first quarter of fiscal 2027, we did not identify any circumstances or conditions which suggest that the carrying value of our goodwill and other intangible assets might be impaired and did not recognize any asset impairment charges. During the first quarter of fiscal 2026, we concluded that a goodwill impairment triggering event had occurred due to a further sustained decline in our stock price, resulting in our carrying value (excluding long-term debt) exceeding the Company’s total enterprise value (market capitalization plus long-term debt). Additional factors that contributed to this conclusion included downward revisions to our internal forecasts and strategic long-term plans, which reflected the tariff policies in effect and the related macroeconomic environment at the end of our first quarter of fiscal 2026, including the corresponding impact on consumer spending and retailer orders. These factors were applicable to all of our reporting units, indefinite-lived trademark licenses and trade names and definite-lived trademark licenses, trade names and certain other intangible assets. Thus, we performed quantitative impairment testing on our goodwill and intangible assets described above during the first quarter of fiscal 2026. We estimate the fair value of our trade names and trademark licenses using the relief from royalty method income approach which is based upon projected future discounted cash flows (“DCF Model”). We estimate the fair value of our customer relationships and lists using the distributor method income approach which is based upon a DCF Model. After adjusting the carrying values of our indefinite-lived and definite-lived intangible assets, the Company completed quantitative impairment testing for goodwill. We estimate the fair value of our reporting units using an income approach based upon projected future discounted cash flows. Based on the outcome of these assessments, we recognized pre-tax asset impairment charges as follows:
(1)Asset impairment charges recognized for our Home & Outdoor segment included goodwill impairment charges of $93.3 million and $74.2 million related to our Osprey and Hydro Flask reporting units, respectively, trade name impairment charges of $37.0 million and $5.0 million related to our Hydro Flask and Osprey indefinite-lived trade names, respectively, and impairment charges of $8.8 million and $0.8 million related to our Hydro Flask customer relationships and other intangible assets, respectively. (2)Asset impairment charges recognized for our Beauty & Wellness segment included goodwill impairment charges of $87.3 million, $32.4 million and $29.7 million related to our Drybar, Curlsmith and Health & Wellness reporting units, respectively, trade name impairment charges of $6.0 million, $3.9 million and $2.8 million related to our PUR indefinite-lived trade name and Curlsmith and Drybar definite-lived trade names, respectively, and impairment charges of $19.6 million, $10.7 million and $2.8 million related to our Revlon trademark license, Drybar customer relationships and Drybar other intangible assets, respectively. During the first quarter of fiscal 2026, in connection with our annual budgeting and forecasting process, management reduced its forecasts for net sales revenue, gross margin and earnings before interest and taxes to reflect the tariff policies in effect and the related macroeconomic environment at the end of our first quarter of fiscal 2026, including the corresponding impact on consumer spending and retailer orders, as applicable. The revised forecasts also resulted in management selecting lower residual growth rates, which were also reflective of revised long-term industry growth expectations, and royalty rates, as applicable.
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