GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 7 GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair values of the assets acquired and liabilities assumed in a business combination, at the date of acquisition. Goodwill is not amortized but is tested for potential impairment at the reporting unit level, at a minimum on an annual basis, or when indications of potential impairment exist. All of our goodwill is within our North America Solutions reportable segment.

The following is a summary of changes in goodwill (in thousands):



September 30, 2017	$	51,705
Additions	17,791
Impairment	(4,719		)
September 30, 2018	64,777
Additions	18,009
September 30, 2019	82,786
Additions	1,200
Impairment	(38,333		)
September 30, 2020	$	45,653

During the second quarter of fiscal year 2020, as a result of new information identified related to the acquisition of DrillScan^®, the acquisition date fair value of the contingent consideration and goodwill increased by approximately $1.2 million.

Intangible Assets

Finite-lived intangible assets are amortized using the straight-line method over the period in which these assets contribute to our cash flows and are evaluated for impairment in accordance with our policies for valuation of long-lived assets. All of our intangible assets are within our North America Solutions reportable segment. Intangible assets consisted of the following:



		September 30, 2020						September 30, 2019
(in thousands)	Weighted Average Estimated Useful Lives	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Finite-lived intangible asset:
Developed technology	15 years	$	89,096	$	16,222	$	72,874	$	89,096	$	10,256	$	78,840
Intellectual property	13 years	1,500		103		1,397		—		—		—
Trade name	20 years	5,865		842		5,023		5,865		522		5,343
Customer relationships	5 years	4,000		2,267		1,733		4,000		1,467		2,533
		$	100,461	$	19,434	$	81,027	$	98,961	$	12,245	$	86,716

Amortization expense in the Consolidated Statements of Operations was $7.2 million, $5.8 million and $5.4 million for fiscal years 2020, 2019 and 2018, respectively, and is estimated to be $7.2 million for each of the next two succeeding fiscal years, approximately $6.5 million for fiscal year 2023 and approximately $6.4 million for fiscal years 2024 and 2025.

Impairment - Fiscal Year 2020

Consistent with our policy, we test goodwill annually for impairment in the fourth quarter of our fiscal year, or more frequently if there are indicators that goodwill might be impaired.

Due to the market conditions described in Note 5—Property, Plant and Equipment, during the second quarter of fiscal year 2020, we concluded that goodwill and intangible assets might be impaired and tested the H&P Technologies reporting unit, where the goodwill balance is allocated and the intangible assets are recorded, for recoverability. This resulted in a goodwill only non-cash impairment charge of $38.3 million recorded in the Consolidated Statement of Operations during the fiscal year ended September 30, 2020.

The recoverable amount of the H&P Technologies reporting unit was determined based on a fair value calculation which uses cash flow projections based on the Company's financial projections presented to the Board covering a five-year period, and a discount rate of 14 percent. Cash flows beyond that five-year period were extrapolated using the fifth-year data with no implied growth factor. The reporting unit level is defined as an operating segment or one level below an operating segment.

The recoverable amount of the intangible assets tested for impairment within the H&P Technologies reporting unit is determined based on undiscounted cash flow projections using the Company's financial projections presented to the Board covering a five-year period and extrapolated for the remaining weighted average useful lives of the intangible assets.

The most significant assumptions used in our cash flow model include timing of awarded future contracts, commercial pricing terms, utilization, discount rate, and the terminal value. These assumptions are classified as Level 3 inputs by ASC Topic 820 Fair Value Measurement and Disclosures as they are based upon unobservable inputs and primarily rely on management assumptions and forecasts. Although we believe the assumptions used in our analysis and the probability-weighted average of expected future cash flows are reasonable and appropriate, different assumptions and estimates could materially impact the analysis and our resulting conclusion.

Impairment - Fiscal Year 2018

During the fourth quarter of fiscal year 2018, and as part of our annual goodwill impairment test, we performed a detailed assessment of the TerraVici reporting unit, where $4.7 million of goodwill was allocated. We determined that the estimated fair value of this reporting unit was less than its carrying amount and we recorded goodwill impairment losses of $4.7 million. In addition, we recorded an intangible assets impairment loss of $0.9 million. These impairment losses are included in Asset Impairment Charge on the Consolidated Statements of Operations for the fiscal year ended September 30, 2018. Our goodwill impairment analysis performed on our remaining technology reporting units in the fourth quarter of fiscal year 2018 did not result in an impairment charge.