Turning Point Brands, Inc. Goodwill & Intangibles Disclosure

Note 11. Goodwill and Other Intangible Assets

 

The following table summarizes goodwill by segment:

 

		Zig-Zag				Stoker’s				Total
Balance as of December 31, 2023		$	103,660			$	32,590			$	136,250
Cumulative translation adjustment			(318	)			-				(318	)
Balance as of December 31, 2024		$	103,342			$	32,590			$	135,932
Cumulative translation adjustment			165				-				165
Balance as of December 31, 2025		$	103,507			$	32,590			$	136,097

 

The Company tests goodwill for impairment annually as of December 31, or more frequently when events or changes in circumstances indicate that the fair value is below its carrying value. The Company performed a qualitative assessment in evaluating its Zig-Zag and Stoker’s reporting units for impairment as of December 31, 2025. 

 

For the qualitative assessment, the Company considered macro and micro-economic indicators, changes in costs, overall financial performance and other relevant entity-specific events and noted no indications of impairment. The Company also considered the significant excess of fair values over carrying values as determined in the 2024 quantitative assessment. The underlying assumptions utilized during the 2024 quantitative assessment remained sufficiently similar in 2025 and in line with Company projections. Accordingly, such underlying assumptions on which the previous fair values were based had not sufficiently changed from 2024 to suggest a material difference in the 2025 fair value assessments and thus indicated that the fair values of the reporting units as of December 31, 2025 remained above their carrying amounts.

 

In 2024, the Company performed a quantitative assessment in evaluating its Zig-Zag and Stoker's reporting units.  As part of that assessment, the Company used a discounted cash flow model (income approach) utilizing Level 3 unobservable inputs. The Company’s significant assumptions for the discount cash flow model include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The Company believes the current assumptions and estimates utilized in the discounted cash flow model are both reasonable and appropriate. The Company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company’s estimates. If the Company’s ongoing estimates of future cash flows are not met or if discount rates change, the Company may have to record impairment charges in future periods. Based on the analysis performed, the Company concluded that no impairment exists for its Zig-Zag or Stoker's reporting units as of December 31, 2024. 

 

The following tables summarize information about the Company’s other intangible assets. Gross carrying amounts of indefinite-lived intangible assets are shown below:

 

		December 31, 2025												December 31, 2024
		Zig-Zag				Stoker’s				Total				Zig-Zag				Stoker’s				Total
Indefinite-lived intangible assets:
Trade names		$	-			$	8,500			$	8,500			$	-			$	8,500			$	8,500
Formulas			42,245				53				42,298				42,245				53				42,298
Total		$	42,245			$	8,553			$	50,798			$	42,245			$	8,553			$	50,798

 

In 2025, the Company performed a qualitative assessment of its indefinite-lived intangible assets. As part of this assessment, the Company evaluated whether indicators of impairment were present by considering macro and micro-economic factors, along with market and other relevant company-specific events and determined that there were no indications of impairment as of December 31, 2025.

 

In 2024, the Company performed a quantitative assessment of its indefinite-lived intangible assets and noted no indicators of impairment as of December 31, 2024. The Company’s fair value methodology for the quantitative assessment is primarily based on the relief from royalty approach. Significant assumptions in this approach include, but are not limited to, projected revenue, the weighted average cost of capital and royalty rate.

 

Amortized intangible assets consists of:

 

		Zig-Zag																Stoker’s
		December 31,								December 31,								December 31,								December 31,
		2025								2024								2025								2024
		Gross				Accumulated				Gross				Accumulated				Gross				Accumulated				Gross				Accumulated
		Carrying				Amortization				Carrying				Amortization				Carrying				Amortization				Carrying				Amortization
Amortized intangible assets:
Trade names (useful life of 15 years)		$	446			$	80			$	437			$	45			$	2,372			$	949			$	2,372			$	791
Formulas (useful life of 15 years)			9,972				1,994				9,972				1,330				-				-				-				-
Master distribution agreement (useful life of 15 years)			5,489				2,011				5,489				1,648				-				-				-				-
Total		$	15,907			$	4,085			$	15,898			$	3,023			$	2,372			$	949			$	2,372			$	791

 

 

Annual amortization expense for the next five years is estimated to be approximately $1.2 million for 2026 and $4.8 million for 2027 through 2030, assuming no additional transactions occur that require the amortization of intangible assets.