10. Goodwill and Intangible Assets

Goodwill

The activity in the balance of the Company’s goodwill was as follows (in thousands):

As described in Note 3, Altman acquired control and decision-making authority over Altman Living as of the Acquisition Date and consolidated Altman Living in its financial statements as of the Acquisition Date using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed associated with an acquiree be recognized at their fair values at the acquisition date. As a result, during the year ended December 31, 2023, the Company recognized $31.2 million of goodwill related to Altman Living based on the difference between (i) the fair values of Altman Living’s identifiable assets and liabilities at the Acquisition Date and (ii) the aggregate of the consideration transferred (measured in accordance with the acquisition method of accounting) and the fair values of the Company’s existing equity interest and any noncontrolling interests in Altman Living at the Acquisition Date. The goodwill associated with the acquisition of Altman Living is included in the Altman category for segment reporting.

The Company also previously recognized $4.1 million of goodwill in connection with Renin’s acquisition of Colonial Elegance during the year ended December 31, 2020 and $14.3 million of goodwill in connection with IT’SUGAR’s emergence from bankruptcy during the year ended December 31, 2021. The goodwill associated with these transactions is included in the Renin and BBX Sweet Holdings reportable segments, respectively.

Impairment Testing

As described in Note 2, the Company tests goodwill for potential impairment on an annual basis as of December 31 or during interim periods if impairment indicators exist. The evaluation of goodwill for impairment includes estimates, judgments and assumptions that we believe are reasonable under the circumstances. However, actual results may differ from these estimates and assumptions, particularly in light of economic trends in the U.S. and global economies, including (i) decreased consumer demand, (ii) elevated interest rates, (iii) increased economic uncertainty, (iv) inflationary pressures and higher costs, including insurance costs, to operate the Company’s businesses, which would be further impacted by the implementation of new or additional tariffs on raw materials and products sourced from Canada and other international markets, (v) disruptions in global supply chains, and (vi) a general labor shortage and increases in wages.

During the years ended December 31, 2024, 2023, and 2022, the Company determined that its goodwill was not impaired. As of December 31, 2024 and 2023, the Company estimated the fair values of the Altman Living, Renin, and IT’SUGAR reporting units. As part of these estimates, the Company applied an income approach utilizing a discounted cash flow methodology and, with respect to Renin, a market approach utilizing a guideline public company and transaction methodology to estimate the fair values of the respective reporting units, and the estimated fair values obtained from the income and market approaches, as applicable, were compared and reviewed for reasonableness to determine a best estimate of the fair value of each reporting unit. The Company’s assessment of these reporting units for impairment required the Company to make estimates based on facts and circumstances as of each applicable reporting date and assumptions about current and future economic and market conditions. With respect to the Altman Living reporting unit, these assumptions included, among other things, (i) the number of development projects expected to be originated by Altman Living on an annual basis in future periods, (ii) a recovery in the market environment in which Altman Living operates and the ability of Altman Living to ultimately execute on its business plan, and (iii) the profits and fee income expected to be generated from current and future development projects. With respect to the Renin reporting unit, these assumptions included, among other things, (i) the continued stabilization of Renin’s gross margins over time, including a return to gross margins closer to historical averages, (ii) a recovery in sales from current sales volumes over time, and (iii) the attribution of value to Renin’s current working capital levels as compared to expected normalized working capital levels. With respect to the IT’SUGAR reporting unit, these assumptions included that, among other things, (i) there will not be a material permanent decline in the demand for IT’SUGAR’s products in the future and (ii) IT’SUGAR will be able to continue to implement its long-term strategy to reinvest in and grow its business. However, as there is significant uncertainty in the current economic environment, particularly as it relates to consumer demand, and how it may evolve and the potential for a recessionary economic environment, the estimates and assumptions in the Company’s estimated value of its reporting units may change over time, which may result in the recognition of impairment losses related to the Company’s reporting units in a future period that would be material to the Company’s financial statements. Changes in assumptions that could materially impact the Company’s estimates related to its reporting units that could result in the recognition of impairment losses in future periods include, but are not limited to, (i) a decline in market valuations resulting in an increase to the discount rate applied in the income approach and/or a decrease in the multiple of earnings applied in the market approach, (ii) a material longer term or permanent decline in demand for the products and/or the product margins of the Company’s reporting units, including indications that the decline in sales related to Renin and/or IT’SUGAR related to a permanent change in consumer preferences for their products rather than a near to medium term decline attributable to market and economic conditions, (iii) the inability of Altman Living to meet its targeted number of development projects expected to be originated by Altman Living on an annual basis in future periods and the expected profits and fee income from such projects, (iv) IT’SUGAR not opening new store locations in order to grow its store portfolio and replace stores for which the related leases are expiring, and/or (v) a continuing reoccurrence of losses related to Altman Builders’ construction contracts in future periods. Further, the potential implementation of strategic alternatives related to one or more of the Company’s reporting units in light of the Company’s overall strategy and response to current market conditions could have an adverse effect on the estimated value of these reporting units and result in the recognition of impairment losses in future periods.

Intangible Assets

The Company’s intangible assets consisted of the following (in thousands):

Trademarks and customer relationships are amortized using the straight-line method over their expected useful lives, which range from 12 to 20 years. The weighted average amortization period for trademarks, customer relationships and other was 10.3 years, 9.8 years and 0.9 years, respectively, with an overall weighted average amortization period of 9.9 years as of December 31, 2024.

Amortization Expense

During each of the years ended December 31, 2024, 2023, and 2022, the Company recognized approximately $2.6 million, of amortization expense related to its intangible assets which is reflected in selling, general and administrative expenses in the Company’s consolidated statements of operations and comprehensive (loss) income.

The table below sets forth the estimated aggregate amortization expense of intangible assets during each of the five years subsequent to December 31, 2024 (in thousands):

Impairment Testing

As described in Note 2, the Company tests its long-lived assets, including amortizable intangible assets and asset groups that include amortizable intangible assets, for recoverability whenever events or changes in circumstances indicate that the carrying amount of such assets or assets groups may not be recoverable. The Company tested certain asset groups associated with certain of its businesses that included amortizable intangible assets for recoverability during the years ended December 31, 2024, 2023, and 2022, and determined that the estimated undiscounted future cash flows exceeded the carrying amounts of the asset groups. Accordingly, the Company did not recognize any impairment losses associated with its intangible assets during the years ended December 31, 2024, 2023, and 2022.