Leslie's, Inc. Goodwill & Intangibles Disclosure
Note 3—Goodwill and Other Intangibles, Net
Goodwill
The following table details the changes in goodwill (in thousands):
|
|
October 4, 2025 |
|
|
September 28, 2024 |
|
||
Balance at beginning of the year |
|
$ |
180,698 |
|
|
$ |
180,698 |
|
Acquisitions, net of measurement period adjustments |
|
|
— |
|
|
|
— |
|
Impairment |
|
|
(180,698 |
) |
|
|
— |
|
Balance at the end of the year |
|
$ |
- |
|
|
$ |
180,698 |
|
Goodwill Impairment
During our review of goodwill for impairment during the fourth quarter, management identified certain continued indicators (i.e., decline in market capitalization and reduced operating performance), which required further goodwill impairment evaluation.
As a result, we a performed a quantitative impairment test for our only reporting unit under ASC 350, Intangibles - Goodwill and Other. The fair value of the reporting unit was estimated using a combined discounted cash flow model and market approach, consistent with valuation methodologies used historically.
Key assumptions of the analysis included:
During the fourth quarter of 2025, we identified a decline in market capitalization and reduced operating performance as compared to the prior year and determined that indicators of impairment existed and that a quantitative test should be performed for the one reporting unit. In determining fair value, management utilized valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The fair value technique used in this instance was classified as Level 3, where unobservable inputs are used when little or no market data was available.
In performing the quantitative test of goodwill, management primarily used the income approach method of valuation. Under the income approach, our future cash flows were estimated and present valued based on a discount rate reflecting a market participant risk-adjusted rate of return.
Significant assumptions used to determine fair value included expected sales trends, cost of sales, operating expenses, and an appropriate discount rate based on the Company's estimated cost of equity capital and after-tax cost of debt. We selected estimates used in the discounted cash flow projections using historical data as well as current and anticipated market conditions, and estimated growth rates with consideration of published industry trends. We also compared the total invested capital (including
market capitalization) to the fair value of its reporting unit to assess the reasonableness of fair value after consideration of a control premium based on observable comparable company transactions.
Based on the results of this analysis we determined that the carrying value of the reporting unit exceeded the fair value, and therefore we recorded a goodwill impairment charge of $180.7 million during fiscal 2025.
Other Intangible Assets
Other intangible assets consisted of the following as of October 4, 2025 (in thousands, except weighted average remaining useful life):
|
|
Weighted |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||
Trade name and trademarks (finite life) |
|
|
8.0 |
|
|
$ |
22,100 |
|
|
$ |
(7,366 |
) |
|
$ |
14,734 |
|
Trade name and trademarks (indefinite life) |
|
Indefinite |
|
|
|
9,350 |
|
|
|
— |
|
|
|
9,350 |
|
|
Non-compete agreements |
|
|
3.4 |
|
|
|
2,260 |
|
|
|
(1,578 |
) |
|
|
682 |
|
Consumer relationships |
|
|
5.9 |
|
|
|
15,400 |
|
|
|
(9,477 |
) |
|
|
5,923 |
|
Other intangibles |
|
|
3.1 |
|
|
|
4,000 |
|
|
|
(3,957 |
) |
|
|
43 |
|
Total |
|
|
|
|
$ |
53,110 |
|
|
$ |
(22,378 |
) |
|
$ |
30,732 |
|
|
Other intangible assets consisted of the following as of September 28, 2024 (in thousands, except weighted average remaining useful life):
|
|
Weighted |
|
|
Gross |
|
|
Accumulated |
|
|
Net |
|
||||
Trade name and trademarks (finite life) |
|
|
8.9 |
|
|
$ |
22,100 |
|
|
$ |
(5,355 |
) |
|
$ |
16,745 |
|
Trade name and trademarks (indefinite life) |
|
Indefinite |
|
|
|
9,350 |
|
|
|
— |
|
|
|
9,350 |
|
|
Non-compete agreements |
|
|
4.4 |
|
|
|
2,260 |
|
|
|
(1,368 |
) |
|
|
892 |
|
Consumer relationships |
|
|
6.6 |
|
|
|
15,400 |
|
|
|
(8,038 |
) |
|
|
7,362 |
|
Other intangibles |
|
|
4.1 |
|
|
|
4,000 |
|
|
|
(3,920 |
) |
|
|
80 |
|
Total |
|
|
|
|
$ |
53,110 |
|
|
$ |
(18,681 |
) |
|
$ |
34,429 |
|
|
Amortization expense was $3.7 million, $3.7 million, and $4.3 million in fiscal 2025, 2024, and 2023. No impairment of other intangible assets was recorded during fiscal 2025, 2024, and 2023. No impairment of goodwill was recorded in fiscal 2024 and 2023. See above for discussion of fiscal 2025 goodwill impairment.
The following table summarizes the estimated future amortization expense related to finite-lived intangible assets on our consolidated balance sheet as of October 4, 2025 (in thousands):
|
|
Amount |
|
|
2026 |
|
|
3,379 |
|
2027 |
|
|
3,262 |
|
2028 |
|
|
3,157 |
|
2029 |
|
|
2,899 |
|
Thereafter |
|
|
8,685 |
|
Total |
|
$ |
21,382 |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 18, 2025 | Showing above |
| 2024 | Nov 27, 2024 | |
| 2023 | Nov 29, 2023 | |
| 2022 | Nov 30, 2022 | |
| 2021 | Dec 10, 2021 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.