GORMAN RUPP CO Goodwill & Intangibles Disclosure

Note 10 – Goodwill and Other Intangible Assets

 

Changes in the carrying value of goodwill and other intangible asset during 2024:

 

Historical Cost of Intangible Assets		December 31, 2023				Foreign Currency				December 31, 2024
Customer relationships		$	208,579			$	(56	)		$	208,523
Technology and drawings			46,547				(8	)			46,539
Other intangibles			1,997				-				1,997
Total finite-lived intangible assets			257,123				(64	)			257,059
Trade names			13,224				-				13,224
Goodwill			257,721				(167	)			257,554
Total		$	528,068			$	(231	)		$	527,837

 

The major components of Goodwill and other intangible assets are:

 

		2024								2023
		Historical Cost				Accumulated Amortization				Historical Cost				Accumulated Amortization
Finite-lived intangible assets:
Customer relationships		$	208,523			$	33,533			$	208,579			$	23,468
Technology and drawings			46,539				10,325				46,547				8,069
Other intangibles			1,997				1,997				1,997				1,997
Total finite-lived intangible assets			257,059				45,855				257,123				33,534
Trade names and trademarks			13,224				-				13,224				-
Goodwill			257,554				-				257,721				-
Total		$	527,837			$	45,855			$	528,068			$	33,534

 

Amortization of intangible assets was $12.4 million, $12.6 million and $7.6 million in 2024, 2023 and 2022, respectively. The following table summarizes the future estimated amortization expense relating to our intangible assets as of December 31, 2024 (in thousands):

 

2025				2026				2027				2028				2029				Thereafter				Total
$	12,365			$	12,318			$	12,281			$	12,255			$	12,255			$	149,730			$	211,204

 

For 2024, the Company used a quantitative analysis for the annual goodwill impairment testing as of October 1 for its National Pump Company (“National”) and Fill-Rite reporting units. The fair values of these reporting units was estimated using both a discounted cash flow model and a market-based approach. The discounted cash flow model considered forecasted cash flows discounted at an estimated weighted-average cost of capital. The forecasted cash flows were based on the Company’s long-term operating plan and a terminal value was used to estimate the cash flows beyond the period covered by the operating plan. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. The market-based approach considers market prices of corporations engaged in the same or similar line of business. These analyses require the exercise of significant judgments, including judgements about appropriate discount rate, discrete revenue growth rates, and profitability assumptions. Sensitivity analyses were performed around these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values.

 

The results of these goodwill impairment tests indicated that no impairment existed at National or Fill-Rite. The Company’s annual impairment analysis performed as of October 1, 2024 concluded that the fair value of both National and Fill-Rite exceeded carrying value. Sensitivity analyses were performed for the National and Fill-Rite reporting units, assuming a hypothetical 100 basis point decrease in the expected long-term growth rate or a hypothetical 100 basis point increase in the weighted average cost of capital, and both scenarios independently yielded estimated fair values above carrying value for both the National and Fill-Rite reporting units. If National or Fill-Rite fails to experience growth or revises its long-term projections downward, they could be subject to impairment charges in the future. Goodwill relating to the National reporting unit is $13.6 million, or 1.6% of the Company’s December 31, 2024 total assets and goodwill relating to the Fill-Rite reporting unit is $230.7 million, or 26.9% of the Company’s December 31, 2024 total assets.

 

For 2024, for all other reporting units, the Company used a qualitative analysis for goodwill impairment testing as of October 1. This qualitative assessment included consideration of current industry and market conditions and circumstances as well as any mitigating factors that would most affect the fair value of the Company and these reporting units. Based on the assessment and consideration of the totality of the facts and circumstances, including the business environment in the fourth quarter of 2024, the Company determined that it was not more likely than not that the fair value of the Company or these reporting units is less than their respective carrying amounts. As such, no goodwill impairments for these reporting units were recorded for the year ended December 31, 2024.

 

Other indefinite-lived intangible assets primarily consist of trademarks and trade names. The fair value of these assets is also tested annually for impairment as of October 1, or whenever events or changes in circumstances indicate there may be a possible permanent loss of value. The fair value of these assets is determined using a royalty relief methodology similar to that employed when the associated assets were acquired, but using updated estimates of future sales, cash flows and profitability. For 2024 and 2023 the fair value of all indefinite lived intangible assets exceeded the respective carrying values.

 

Finite-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows estimated to be generated by such assets. The Company was not aware of any events or changes in circumstances that indicate the carrying value of its finite-lived intangible assets may not be recoverable.