Goodwill and Intangible Assets

12 Months Ended

Apr. 30, 2020

Goodwill and Intangible Assets

Goodwill and Intangible Assets

5. Goodwill and Intangible Assets

Goodwill

The following table presents changes in the carrying amount of goodwill during the years ended April 30, 2020 and 2019:

	Carrying
	Amount
	(in thousands)
Balance as of April 30, 2018	$	427,645
Goodwill recognized from acquisitions		196,267
Purchase price adjustments from prior periods		8
Translation adjustment		(6,593)
Balance as of April 30, 2019		617,327
Impairment of goodwill		(63,074)
Goodwill recognized from acquisitions		5,291
Translation adjustment		(6,471)
Balance as of April 30, 2020	$	553,073

All goodwill relates to our geographic divisions reportable segment.

The Company recognized a $63.1 million non-cash impairment charge to write off goodwill related to its Canada reporting unit in conjunction with its annual goodwill impairment test performed in the fourth quarter of fiscal 2020. This charge was included in impairment of goodwill in the Consolidated Statement of Operations and Comprehensive Income (Loss) for the year ended April 30, 2020. The primary factors contributing to the impairment was an increase in the discount rate and a decrease in market multiples, combined with a decrease in the reporting unit’s forecasted near-term cash flows, primarily resulting from COVID-19 driven economic uncertainty. Consistent with the Company’s adoption of the new goodwill guidance in the fourth quarter of 2020, the impairment charge was equal to the excess of the reporting unit’s carrying value over its fair value. As of April 30, 2020, the Company had $120.9 million of remaining goodwill related to its Canada reporting unit. The Company’s annual impairment test during the fourth quarter of fiscal 2020 indicated the estimated fair values of its other reporting units exceeded their carrying values. The annual impairment tests during the fourth quarters of fiscal 2019 and 2018 indicated that the fair value of the Company’s reporting units exceeded their carrying values.

The Company identified seven reporting units for evaluating goodwill for the fiscal 2020 annual impairment test, which were Central, Midwest, Northeast, Southern, Southeast, Western and Canada. Each of these reporting units constitutes a business for which discrete financial information is available and segment management regularly reviews the operating results. The Company evaluates its reporting units on an annual basis.

The Company estimated the fair values of its reporting units based on weighting of the income and market approaches. These models use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Under the income approach, we calculate the fair value of the reporting unit based on the present value of estimated cash flows using a discounted cash flow method. The significant assumptions used in the discounted cash flow method included internal forecasts and projections developed by management for planning purposes, available industry/market data, discount rates and the growth rate to calculate the terminal value. Under the market approaches, the fair value was estimated using the guideline company method. The Company selected guideline companies in the industry in which each reporting unit operates. The Company primarily uses revenue and EBITDA multiples based on the multiples of the selected guideline companies.

Intangible Assets

The following tables present the components of the Company’s definite-lived intangible assets as of April 30, 2020 and 2019:

	Estimated	Weighted	April 30, 2020
	Useful	Average	Gross				Net
	Lives	Amortization	Carrying		Accumulated		Carrying
	(years)	Period	Amount		Amortization		Value
	(dollars in thousands)
Customer relationships	5 - 16	12.8	$	516,928	$	270,029	$	246,899
Definite-lived tradenames	5 - 20	16.3		55,654		10,474		45,180
Vendor agreements	8 - 10	8.3		6,644		4,567		2,077
Developed technology	5	4.9		5,036		1,963		3,073
Leasehold interests	1 - 15	7.6		3,679		2,101		1,578
Other	3 - 5	3.4		4,157		2,447		1,710
Totals			$	592,098	$	291,581	$	300,517

	Estimated	Weighted	April 30, 2019
	Useful	Average	Gross				Net
	Lives	Amortization	Carrying		Accumulated		Carrying
	(years)	Period	Amount		Amortization		Value
	(dollars in thousands)
Customer relationships	5 - 16	12.8	$	520,703	$	214,044	$	306,659
Definite-lived tradenames	5 - 20	16.3		56,018		6,993		49,025
Vendor agreements	8 - 10	8.3		6,644		3,761		2,883
Developed technology	5	4.9		5,209		971		4,238
Leasehold interests	1 - 15	7.6		3,707		1,502		2,205
Other	3 - 5	3.4		4,118		1,182		2,936
Totals			$	596,399	$	228,453	$	367,946

Definite-lived intangible assets are amortized over their estimated useful lives. The Company amortizes its customer relationships using an accelerated method to match the estimated cash flow generated by such assets, and amortizes its other definite-lived intangibles using the straight-line method because a pattern to which the expected benefits will be consumed or otherwise used up could not be reliably determined. Amortization expense related to definite-lived intangible assets was $65.2 million, $71.0 million and $41.5 million during the years ended April 30, 2020, 2019 and 2018, respectively, and is recorded in depreciation and amortization expense in the Consolidated Statements of Operations and Comprehensive Income (Loss).

Based on the current amount of definite-lived intangible assets, the Company expects to record amortization expense of $55.2 million, $46.1 million, $38.3 million, $31.2 million, $25.7 million and $104.0 million during the years ending April 30, 2021, 2022, 2023, 2024, 2025 and thereafter, respectively. Actual amortization expense to be reported in future periods could differ materially from these estimates as a result of acquisitions, changes in useful lives, foreign currency exchange rate fluctuations and other relevant factors.

The Company’s indefinite-lived intangible assets, other than goodwill, consist of tradenames that had a carrying amount of $61.4 million as of April 30, 2020 and 2019.