Note 7 - Goodwill and Other Intangible Assets

12 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 7 — GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment. The Company  may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required. If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level. The estimation of the fair value of reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate. The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment. The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets  may have become impaired between annual impairment tests. Indicators such as adverse business conditions, economic factors and technological change or competitive activities  may signal that an asset has become impaired.

The Company identified its reporting units in conjunction with its annual goodwill impairment testing. Following the acquisition of JSI, the Company has a total of three reporting units that contain goodwill. One reporting unit is within the Lighting Segment and two reporting units are within the Display Solutions Segment. The tradename intangible assets have an indefinite life and are also tested separately on an annual basis. The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but not limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

Fiscal 2022:

As of  March 1, 2022, the Company performed its annual goodwill impairment test on the three reporting units that contain goodwill. The goodwill impairment test of the reporting unit in the Lighting Segment passed with a business enterprise value of $31.6 million or 18% above the carrying value of the reporting unit including goodwill. The goodwill impairment test of one reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $12.2 million or 1,316% above the carrying value of the reporting unit including goodwill. The goodwill impairment test of the second reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $100.4 million or 12% above the carrying value of the reporting unit including goodwill.

The Company has two indefinite-lived intangible assets. The Company also performed its annual review of indefinite-lived intangible assets as of  March 1, 2022 and determined there was no impairment. The impairment test of the first indefinite-lived intangible asset passed with a fair market value of $17.0 million or 396% above its carrying value. The impairment test of the second indefinite-lived intangible asset passed with a fair market value of and $10.6 million or 22% above its carrying value.

Fiscal 2021:

As of March 1, 2021, the Company performed its annual goodwill impairment test on the two reporting units that contain goodwill. The goodwill impairment test of the reporting unit in the Lighting Segment passed with a business enterprise value of $28.2 million or 26% above the carrying value of this reporting unit including goodwill. The goodwill impairment test of the reporting unit in the Display Solutions Segment passed with a business enterprise value of $11.4 million or 2,065% above the carrying value of the reporting unit including goodwill.

The Company also performed its annual review of its indefinite-lived intangible asset as of March 1, 2021, and determined there was no impairment. The indefinite-lived intangible impairment test passed with a fair market value that was $15.7 million or 358% above its carrying value.

The Company has performed an assessment of its goodwill and intangible assets from the date of the interim test as of March 1, 2022, through the balance sheet date for possible triggering events and has concluded that there were no triggering events that would indicate the assets are impaired.

The following table presents information about the Company's goodwill on the dates or for the periods indicated:

(In thousands)	Lighting Segment			Display Solutions Segment			Total
Balance as of June 30, 2021
Goodwill	$	70,971		$	28,690		$	99,661
Goodwill acquired		-			33,415			33,415
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of June 30, 2021	$	9,208		$	34,580		$	43,788
Balance as of June 30, 2022
Goodwill	$	70,971		$	62,105		$	133,076
Measurement period adjustment		-			1,242			1,242
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of June 30, 2022	$	9,208		$	35,822		$	45,030

In fiscal 2021, the Company wrote-off the goodwill and impairment loss for a dissolved entity. The net impact to the consolidated financial statements, including the goodwill, net balance, was zero.

The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

(In thousands)	June 30, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Amount
Amortized Intangible Assets
Customer relationships	$	62,083	$	14,400	$	47,683
Patents		268		268		-
LED technology, software		20,966		14,598		6,368
Trade name		2,658		1,049		1,609
Non-compete		260		58		202
Total Amortized Intangible Assets	$	86,235	$	30,373	$	55,862
Indefinite-lived Intangible Assets
Trademarks and trade names		12,102		-		12,102
Total indefinite-lived Intangible Assets		12,102		-		12,102
Total Other Intangible Assets	$	98,337	$	30,373	$	67,964

(In thousands)	June 30, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Amount
Amortized Intangible Assets
Customer relationships	$	62,083	$	10,967	$	51,116
Patents		268		237		31
LED technology, software		20,966		13,415		7,551
Trade name		2,658		939		1,719
Non-compete		260		6		254
Total Amortized Intangible Assets	$	86,235	$	25,564	$	60,671
Indefinite-lived Intangible Assets
Trademarks and trade names		12,102		-		12,102
Total indefinite-lived Intangible Assets		12,102		-		12,102
Total Other Intangible Assets	$	98,337	$	25,564	$	72,773

In the fiscal 2021, the Company wrote-off intangible assets’ gross carrying amount and accumulated amortization for a dissolved entity. The net impact to the consolidated financial statements, including the total other intangible assets, was zero.

(In thousands)	2022		2021
Amortization expense of other intangible assets	$	4,809	$	2,948

The Company expects to record annual amortization expense as follows:

(In thousands)
2023	$	4,808
2024	$	4,760
2025	$	4,760
2026	$	4,760
2027	$	4,754
After 2027	$	32,020