Quarterly report pursuant to Section 13 or 15(d)

Note 7 - Goodwill and Intangible Assets

v3.21.1
Note 7 - Goodwill and Intangible Assets
6 Months Ended
Apr. 30, 2021
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

Note 7. Goodwill and Intangible Assets

 

 

The Company recognized goodwill and certain intangible assets in connection with business combinations.

 

During the second quarter of fiscal 2020, the Company identified a triggering event resulting from a sustained decline in its stock price and deterioration in general economic conditions resulting from COVID-19. As a result, the Company, with the assistance of a third party valuation specialist, performed an interim impairment test on its indefinite-lived trade name intangible assets and goodwill as of April 30, 2020.

 

The valuation methodology used to value the trade-names was based on the relief-from-royalty method which is an income based measure that derives the value from total revenue growth projected and what percentage is attributable to the trade name. As a result of the analysis, the Company identified that the fair value of its Brundage-Bone Concrete Pumping trade name was approximately 11.8% below its carrying value and as such, recorded a non-cash impairment charge of $5.0 million in intangibles impairment on April 30, 2020.

 

The goodwill impairment test was performed on the Company’s U.S. Concrete Pumping, U.S. Concrete Waste Management Services, and U.K. Operations reporting units. The valuation methodologies used to value the reporting units included the discounted cash flow method (income approach) and the guideline public company method (market approach). As a result of the goodwill impairment analysis, the Company identified that the fair values of its U.S. Concrete Pumping and U.K. Operations reporting units were approximately 6.9% and 14.8% below their carrying values, respectively. As such, the Company recorded non-cash impairment charges of $38.5 million and $14.4 million to its U.S. Concrete Pumping and U.K. Operations reporting units, respectively, in goodwill impairment on April 30, 2020.

 

The factors leading to the impairment of the Company's goodwill and intangibles were primarily due to (1) lower anticipated future net revenues and earnings in its estimate of future cash flows resulting from COVID-19 and (2) a higher discount rate applied to future cash flows as a result of uncertainties of the overall economic impact from COVID-19. There is inherent uncertainty associated with key assumptions used by the Company in its impairment analyses including the duration of the economic downturn associated with COVID-19 and the recovery period.

 

There were no triggering events during the fiscal 2021 first and second quarters. The Company will continue to evaluate its goodwill and intangible assets in future quarters. Additional impairments  may be recorded based on events and circumstances, including those related to COVID-19 discussed in Note 1.

 

The following table summarizes the composition of intangible assets at  April 30, 2021 and at  October 31, 2020:

 

   

April 30,

   

October 31,

 
   

2021

   

2020

 
   

Gross

                   

Foreign Currency

   

Net

   

Gross

                   

Foreign Currency

   

Net

 
Carrying  

Accumulated

           

Translation

   

Carrying

   

Carrying

   

Accumulated

           

Translation

   

Carrying

       

(in thousands)

 

Value

   

Impairment

   

Amortization

   

Adjustment

   

Amount

   

Value

   

Impairment

   

Amortization

   

Adjustment

   

Amount

 

Customer relationship

  $ 195,069     $ -       (78,223 )   $ (666 )   $ 116,180     $ 193,585     $ -     $ (64,676 )   $ (106 )   $ 128,803  

Trade name

    5,812       -       (1,306 )     (91 )     4,415       5,432       -       (1,020 )     (14 )   $ 4,398  

Trade name (indefinite life)

    55,500       (5,000 )     -       -       50,500       55,500       (5,000 )     -       -     $ 50,500  

Noncompete agreements

    200       -       (82 )     -       118       200       -       (62 )     -     $ 138  

Total intangibles

  $ 256,581     $ (5,000 )   $ (79,611 )   $ (757 )   $ 171,213     $ 254,717     $ (5,000 )   $ (65,758 )   $ (120 )   $ 183,839  

 

Amortization expense for the three and six-month periods ended  April 30, 2021 was $7.0 million and $13.9 million, respectively. Amortization expense for the three and six-month periods ended  April 30, 2020 was $8.6 million and $17.1 million, respectively. The estimated aggregate amortization expense for intangible assets over the next five fiscal years ending October 31 and thereafter is as follows:

 

(in thousands)

       
2021 (excluding the period from November 1, 2020 to April 30, 2021)   $ 13,168  
2022     21,747  
2023     17,292  
2024     13,892  
2025     11,245  
Thereafter     43,369  

Total

  $ 120,713  

 

The changes in the carrying value of goodwill by reportable segment for the quarter ended  April 30, 2021 are as follows:

 

(in thousands)

 

U.S. Concrete Pumping

   

U.K. Operations

   

U.S. Concrete Waste Management Services

   

Corporate

   

Total

 

Balance at October 31, 2020

  $ 147,482     $ 26,539     $ 49,133     $ -     $ 223,154  
Foreign currency translation     -       1,858       -       -       1,858  
Balance at April 30, 2021   $ 147,482     $ 28,397     $ 49,133     $ -     $ 225,012