What was the loss on impairment of goodwill and tradenames for Precision Door Service in 2023?
Precision_Door_Service Franchise · 2025 FDDAnswer from 2025 FDD Document
istribution to parent | - | - | (324,718) | - | - | (324,718) | | Equity-based compensation | - | - | 4,194 | - | - | 4,194 | | Foreign currency translation adjustment | - | - | - | - | 8,527 | 8,527 | | Net loss | - | - | - | (439,076) | - | (439,076) | | Balance – | 100 | $ - | $ 2,100,435 | $ (489,405) | $ (42,956) $ | 1,568,074 | | December 31, 2023 | | | | | | |
Consolidated Statements of Cash Flows ($000's)
| For the years ended December 31, | 2023 | 2022 |
|---|---|---|
| Operating activities | ||
| Net loss | $ (439,076) $ | (35,746) |
| Adjustments to reconcile net loss to net cash provided by | ||
| operating activities: | ||
| Depreciation and amortization | 116,929 | 104,943 |
| Amortization of deferred financing costs | 4,164 | 1,447 |
| Loss on impairment of goodwill and tradenames | 428,286 | 51,454 |
| Bad debt expense | 2,812 | 2,398 |
| Notes received | (15,243) | (13,059) |
| Collections of notes receivable | 16,605 | 13,965 |
| Deferred income taxes | (44,346) | (44,898) |
| (Gain) loss on disposal of assets | - | (538) |
| Equity-based compensation | 4,194 | 3,414 |
| Changes in assets and liabilities, net of business acquisitions: | ||
| Trade accounts receivable | (1,403) | (11,523) |
| Inventories | 626 | (1,281) |
| Prepaid selling expenses and other assets | 3,722 | (3,903) |
| Trade accounts payable | (6,249) | 4,116 |
| Accrued liabilities | (8,512) | 8,264 |
| Other non-current liabilities | (275) | (203) |
| Income tax receivable | (1,519) | (1,530) |
| Change in operating lease assets and liabilities | 3,535 | 2,347 |
| Deferred revenue | 11,246 | 6,045 |
| Net cash provided by operating activities | 75,496 | 85,712 |
| Investing activities | ||
| Acquisitions, net of cash received | - | (254,373) |
| Purchase of property, equipment and other assets | (27,931) | (18,930) |
| Net cash used in investing activities | (27,931) | (273,303) |
| Financing activities | ||
| Equity contribution | - | 241,794 |
| Distributions paid | (324,718) | (431,965) |
| Deferred financing costs paid | (13,866) | (9,380) |
| Proceeds from revolver | 25,000 | - |
| Payments on principal portion of finance lease liabilities | (3,455) | (1,773) |
| Payments on long-term borrowings | (14,323) | (11,679) |
| Proceeds from long-term borrowings | 275,000 | 410,915 |
| Net cash provided by/(used in) financing activities | (56,362) | 197,912 |
| Effect of foreign currency translation on cash | (1,255) | (1,002) |
| Net increase (decrease |
Source: Item 21 — Financial Statements (FDD page 91)
What This Means (2025 FDD)
According to Precision Door Service's 2025 Franchise Disclosure Document, the loss on impairment of goodwill and tradenames for the year ending December 31, 2023, was $428,286. This figure reflects the company's assessment of the decline in value of its goodwill and tradename assets during that period. Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in acquisitions. Tradenames are the brand names and logos under which Precision Door Service operates.
Impairment occurs when the carrying amount of an asset exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. This can happen due to various factors, such as changes in market conditions, economic downturns, or declines in the performance of the acquired businesses. The impairment loss is recognized as an expense on the income statement, reducing the company's net income for the year.
For a prospective Precision Door Service franchisee, this figure indicates that the company recognized a significant loss related to the value of its goodwill and tradenames in 2023. While this doesn't directly impact the day-to-day operations of a franchise, it's a factor to consider when evaluating the overall financial health and stability of the franchisor. It's important to note that impairment charges are non-cash expenses, meaning they don't involve an actual outflow of cash. However, they can affect the company's reported earnings and potentially its ability to invest in future growth initiatives.
Franchisees should inquire about the reasons behind the impairment and the steps Precision Door Service is taking to address the underlying issues. Understanding the context behind this loss can provide valuable insights into the company's financial management and strategic direction. Additionally, prospective franchisees may want to compare this figure to those of other franchise systems in the same industry to assess Precision Door Service's relative performance.