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PURCHASED INTANGIBLE ASSETS
12 Months Ended
Jan. 31, 2018
PURCHASED INTANGIBLE ASSETS  
PURCHASED INTANGIBLE ASSETS

 

NOTE 8 — PURCHASED INTANGIBLE ASSETS

 

At January 31, 2018, the goodwill balances related to the acquisitions of GPS, TRC and APC were $18.5 million, $13.8 million and $2.0 million, respectively.

 

TRC’s management completed a reforecasting of its future financial results which provided essential data for the required annual goodwill assessment of TRC as of November 1, 2017. It presents a less favorable outlook for TRC, which represents the Company’s industrial fabrication and field services reportable segment, than in the past. With this new information and using various valuation analyses, including discounted net after tax cash flow estimates, management determined that the goodwill associated with this segment was impaired. The corresponding loss of $0.6 million was recorded and included in the consolidated statement of earnings for the fiscal year ended January 31, 2018. The Company may be required to record additional impairment losses related to the goodwill of TRC in the future if the operating performance of TRC does not improve.

 

Early in the year ended January 31, 2017, construction work was suspended on APC’s largest project at that time, which represented over 90% of project backlog, and APC was incurring operating losses. In addition, it was feared that the United Kingdom, considered APC’s most promising future market, would suffer unfavorable economic consequences of its vote to leave the European Economic Union (Brexit). Given these events, the Company performed a valuation of APC which indicated that the carrying value of the reporting unit exceeded its fair value at that time. As a result, APC recorded a goodwill impairment loss of approximately $2.0 million in the year ended January 31, 2017. As the operating results and business prospects of APC have improved during the year ended January 31, 2018, no additional goodwill impairment loss for APC has been required.

 

The Company’s purchased intangible assets, other than goodwill, consisted of the following elements as of January 31, 2018.

 

 

 

 

 

2018

 

2017

 

 

 

Estimated 
Useful Life

 

Gross 
Amount

 

Accumulated 
Amortization

 

Net
Amount

 

Net 
Amount

 

Trade names -

 

 

 

 

 

 

 

 

 

 

 

GPS / TRC

 

15 years

 

$

8,142

 

$

3,357

 

$

4,785

 

$

5,328

 

SMC

 

indefinite

 

181

 

 

181

 

181

 

Process certifications -

 

 

 

 

 

 

 

 

 

 

 

TRC

 

7 years

 

1,897

 

587

 

1,310

 

1,581

 

Customer relationships -

 

 

 

 

 

 

 

 

 

 

 

TRC/APC

 

4-10 years

 

1,346

 

473

 

873

 

1,072

 

Other intangibles

 

various

 

46

 

46

 

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

Totals

 

 

 

$

11,612

 

$

4,463

 

$

7,149

 

$

8,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company determined the fair values of the trade names using a relief-from-royalty methodology. The Company believes that the useful lives of the trade names for GPS and TRC represent the number of years that such intangibles are expected to contribute to future cash flows. The useful life for the trade name of SMC is considered to be indefinite. In order to value the process certifications of TRC, the Company applied a new reproduction cost method that required the estimation of the costs to replace the assets with certifications that would have the same functionality or utility as the acquired assets. Other purchased intangible assets presented in the table above include primarily the fair values estimated for acquired project backlogs, other customer relationships and non-compete agreements. There were no additions to other purchased intangible assets during the years ended January 31, 2018 and 2017, nor were there any impairment losses related to those assets for those years.

 

The future amounts of amortization expense related to intangibles are presented below for the years ending January 31,:

 

2019

 

$

1,013

 

2020

 

954

 

2021

 

905

 

2022

 

870

 

2023

 

617

 

Thereafter

 

2,609

 

 

 

 

 

Total

 

$

6,968

 

 

 

 

 

 

 

For income tax reporting purposes, goodwill related to acquisitions in the approximate amount of $16.4 million is being amortized on a straight-line basis over periods of 15 years. The other amounts of the Company’s goodwill are not amortizable for income tax reporting purposes.