Concrete Pumping Holdings, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 8 - Goodwill and Intangible Assets

Note 8 - Goodwill and Intangible Assets

12 Months Ended

Oct. 31, 2022

Goodwill and Intangible Assets Disclosure [Text Block]

Note 8. Goodwill and Intangible Assets

The Company has recognized goodwill and certain intangible assets in connection with prior business combinations. The Company, with the assistance of a third party valuation specialist, performed a step 1 impairment test on its indefinite-lived trade names intangible assets and goodwill as of August 31, 2022.

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 names. As a result of the analysis, the Company identified that the fair value of its Brundage-Bone Concrete Pumping, Eco-Pan and Capital Pumping trade names exceeded their carrying values by approximately 61%, 49% and 127%, respectively, and their remaining values are $37.3 million, $7.7 million and $5.5 million as of October 31, 2022, respectively.

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, U.S. Concrete Waste Management Services and U.K. Operations reporting units were approximately 7%, 82% and 32% greater than their carrying values, respectively. As such, no impairment charge was recorded.

The following table summarizes the composition of intangible assets at October 31, 2022 and at October 31, 2021:

	*October 31,*
	*2022*
	*Weighted Average*	*Gross*								*Foreign Currency*		*Net*
	*Remaining Life*	*Carrying*					*Accumulated*			*Translation*		*Carrying*
(in thousands)	*(in years)*	*Value*		*Impairment*			*Amortization*			*Adjustment*		*Amount*
Customer relationship (1)	11.0	$	193,710	$	-		$	(112,658	)	$	1,416	$	82,468
Trade name (1)	6.1		4,836		-			(2,127	)		239		2,948
Trade names (indefinite life) (2)	-		55,500		(5,000	)		-			-		50,500
Assembled workforce (1)	2.1		1,450		-			(444	)		-		1,006
Noncompete agreements (1)	4.6		1,000		-			(168	)		-		832
Total intangibles		$	256,496	$	(5,000	)	$	(115,397	)	$	1,655	$	137,754

	(1)	Intangibles subject to amortization
	(2)	Indefinite-lived intangible asset

	*October 31,*
	*2021*
	*Weighted Average*	*Gross*								*Foreign Currency*			*Net*
	*Remaining Life*	*Carrying*					*Accumulated*			*Translation*			*Carrying*
(in thousands)	*(in years)*	*Value*		*Impairment*			*Amortization*			*Adjustment*			*Amount*
Customer relationship (1)	12.2	$	195,220	$	-		$	(91,169	)	$	(539	)	$	103,512
Trade name (1)	7.1		5,748		-			(1,598	)		(71	)	$	4,079
Trade names (indefinite life) (2)	-		55,500		(5,000	)		-			-		$	50,500
Assembled workforce (1)	3.0		350		-			-			-		$	350
Noncompete agreements (1)	2.5		200		-			(102	)		-		$	98
Total intangibles		$	257,018	$	(5,000	)	$	(92,869	)	$	(610	)	$	158,539

	(1)	Intangibles subject to amortization
	(2)	Indefinite-lived intangible asset

Amortization expense for the year ended October 31, 2022 was $22.5 million. Amortization expense for the year ended October 31, 2021 was $27.1 million. The estimated aggregate amortization expense for intangible assets over the next five fiscal years ending October 31 and thereafter is as follows:

(in thousands)
2023	$	18,559
2024		14,708
2025		11,458
2026		9,308
2027		7,605
Thereafter		25,616
Total	$	87,254

The changes in the carrying value of goodwill by reportable segment for the twelve-month period ended October 31, 2022 are as follows:

(in thousands)	*U.S. Concrete Pumping*		*U.K. Operations*			*U.S. Concrete Waste Management Services*		*Total*
Balance at October 31, 2020	$	147,482	$	26,539		$	49,133	$	223,154
Foreign currency translation		-		1,546			-		1,546
Balance at October 31, 2021	$	147,482	$	28,085		$	49,133	$	224,700
Foreign currency translation		-		(4,455	)		-	$	(4,455	)
Balance at October 31, 2022	$	147,482	$	23,630		$	49,133	$	220,245