Note O - Goodwill and Intangible Assets

9 Months Ended

Jul. 02, 2022

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Components of intangible assets consist of the following (in thousands):

	June 2022							September 2021
	Cost		Accumulated Amortization			Net Value		Cost		Accumulated Amortization			Net Value		Economic Life
Goodwill	$	37,897	$	—		$	37,897	$	37,897	$	—		$	37,897	N/A
Intangibles:
Tradename/trademarks	$	16,000	$	(4,717	)	$	11,283	$	16,000	$	(4,317	)	$	11,683	20 – 30 yrs
Customer relationships		7,400		(3,028	)		4,372		7,400		(2,473	)		4,927	20 yrs
Technology		10,083		(2,385	)		7,698		9,952		(1,715	)		8237	10 yrs
License agreements		2,100		(914	)		1,186		2,100		(837	)		1,263	15 – 30 yrs
Non-compete agreements		1,657		(1,569	)		88		1,657		(1,476	)		181	4 – 8.5 yrs
Total intangibles	$	37,240	$	(12,613	)	$	24,627	$	37,109	$	(10,818	)	$	26,291

Goodwill represents the acquired goodwill net of the $0.6 million impairment losses recorded in fiscal year 2011. As of June 2022, the Delta Group segment assets include $18.0 million of goodwill, and the Salt Life segment assets include $19.9 million.

Depending on the type of intangible asset, amortization is recorded under cost of goods sold or selling, general and administrative expenses. Amortization expense for intangible assets for the June 2022 and June 2021 quarters was $0.6 million and $0.5 million, respectively. Amortization for the nine-months ended June 2022 and June 2021 was $1.8 million and 1.2 million, respectively. Amortization expense is estimated to be approximately $2.3 million for the year ended September 2022, approximately $2.2 million for the year ended September 2023, and approximately $2.2 million for the years ended September 2024, 2025 and 2026.

On June 1, 2021, DTG2Go, LLC acquired specified net assets of Fan Print Inc., which primarily included its Autoscale.ai technology as well as immaterial net working capital. The costs to acquire the net assets were $8.0 million, of which $6.6 million was paid at closing through our existing U.S. credit facility and $1.4 million will be paid in three installments, one installment in our third quarter of fiscal 2022 and two installments remaining. The acquisition qualified as an asset acquisition in accordance with ASU 2017-01, Clarifying the Definition of a Business, as substantially all of the fair value of the net assets acquired or $8.1 million were assigned to the technology intangible asset with an estimated economic life of 10 years. The acquisition cost also consists of additional payments contingent on the adjusted operating profits resulting from the Autoscale.ai technology for the period from June 1, 2021 through October 2, 2021, as well as for our fiscal years 2022 through 2026. These contingent earnout liabilities are recognized when the contingency is probable and reasonably estimable, which generally results in recognition, if earned, during the fourth quarter of each fiscal year and which would increase the value of the technology intangible asset.