Goodwill and Purchased Intangible Assets

12 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Purchased Intangible Assets

As of July 1, 2017, the Company performed its annual impairment review relative to goodwill and indefinite-lived intangible assets (principally non-amortizable trade names). The Company performed the valuation analysis with the assistance of a third-party valuation adviser. To derive the fair value of its reporting units, the Company utilized both the income and market approaches. For the annual impairment testing in the fourth quarter of fiscal 2017, the Company used a weighted-average cost of capital, depending on the reporting unit, of 9.0% to 10.5% (11.0% to 12.0% at July 1, 2016) and a terminal growth rate of 3.0% (3.0% at July 1, 2016). Under the market approach, the Company derived the fair value of its reporting units based on revenue and earnings multiples of comparable publicly-traded companies. As a corroborative source of information, the Company reconciles its estimated fair value to within a reasonable range of its market capitalization, which includes an assumed control premium (an adjustment reflecting an estimated fair value on a control basis), to verify the reasonableness of the fair value of its reporting units obtained through the aforementioned methods. The control premium is estimated based upon control premiums observed in comparable market transactions. To derive the fair value of its trade names, the Company utilized the “relief from royalty” approach.

At July 1, 2017, approximately 89% of the Company’s recorded goodwill and indefinite-lived purchased intangibles were concentrated within the JLG reporting unit in the access equipment segment. The impairment model assumes that the U.S. economy and construction spending will continue to improve over time. Assumptions utilized in the impairment analysis are highly judgmental. While the Company currently believes that an impairment of intangible assets at JLG is unlikely, events and conditions that could result in the impairment of intangibles at JLG include a sharp decline in economic conditions, significantly increased pricing pressure on JLG's margins or other factors leading to reductions in expected long-term sales or profitability at JLG. Based on the Company’s annual impairment review, the Company concluded that there was no impairment of goodwill. Changes in estimates or the application of alternative assumptions could have produced significantly different results.

The following table presents changes in goodwill during fiscal 2017 and 2016 (in millions):



	Access Equipment		Fire & Emergency		Commercial		Total
Net goodwill at September 30, 2015	$	874.2	$	106.1	$	20.8	$	1,001.1
Foreign currency translation	2.4		—		—		2.4
Net goodwill at September 30, 2016	876.6		106.1		20.8		1,003.5
Foreign currency translation	9.3		—		0.2		9.5
Net goodwill at September 30, 2017	$	885.9	$	106.1	$	21.0	$	1,013.0

The following table presents details of the Company’s goodwill allocated to the reportable segments (in millions):



	September 30, 2017							September 30, 2016
	Gross		Accumulated Impairment			Net		Gross		Accumulated Impairment			Net
Access Equipment	$	1,818.0	$	(932.1	)	$	885.9	$	1,808.7	$	(932.1	)	$	876.6
Fire & Emergency	108.1		(2.0		)	106.1		108.1		(2.0		)	106.1
Commercial	196.9		(175.9		)	21.0		196.7		(175.9		)	20.8
	$	2,123.0	$	(1,110.0	)	$	1,013.0	$	2,113.5	$	(1,110.0	)	$	1,003.5

Details of the Company’s total purchased intangible assets were as follows (in millions):



	September 30, 2017
	Weighted- Average Life	Gross		Accumulated Amortization			Net
Amortizable intangible assets:
Distribution network	39.1	$	55.4	$	(29.5	)	$	25.9
Technology-related	11.9	104.7		(99.7		)	5.0
Customer relationships	12.8	555.0		(467.6		)	87.4
Other	16.3	16.4		(14.7		)	1.7
	14.4	731.5		(611.5		)	120.0
Non-amortizable trade names		387.8		—			387.8
		$	1,119.3	$	(611.5	)	$	507.8



	September 30, 2016
	Weighted- Average Life	Gross		Accumulated Amortization			Net
Amortizable intangible assets:
Distribution network	39.1	$	55.4	$	(28.0	)	$	27.4
Technology-related	11.9	104.7		(91.5		)	13.2
Customer relationships	12.8	550.8		(427.4		)	123.4
Other	16.3	16.5		(14.7		)	1.8
	14.5	727.4		(561.6		)	165.8
Non-amortizable trade names		387.7		—			387.7
		$	1,115.1	$	(561.6	)	$	553.5

When determining the value of customer relationships for purposes of allocating the purchase price of an acquisition, the Company looks at existing customer contracts of the acquired business to determine if they represent a reliable future source of income and hence, a valuable intangible asset for the Company. The Company determines the fair value of the customer relationships based on the estimated future benefits the Company expects from the acquired customer contracts. In performing its evaluation and estimation of the useful lives of customer relationships, the Company looks to the historical growth rate of revenue of the acquired company’s existing customers as well as the historical attrition rates.

In connection with the valuation of intangible assets, a 40-year life was assigned to the value of the Pierce distribution network (net book value of $25.1 million at September 30, 2017). The Company believes Pierce maintains the largest North American fire apparatus distribution network. Pierce has exclusive contracts with each distributor related to the fire apparatus product offerings manufactured by Pierce. The useful life of the Pierce distribution network was based on a historical turnover analysis. Non-compete intangible asset lives are based on the terms of the applicable agreements.

The estimated future amortization expense of purchased intangible assets for the five years succeeding September 30, 2017 are as follows: 2018 - $38.3 million; 2019 - $36.9 million; 2020 - $11.0 million; 2021 - $5.3 million and 2022 - $4.9 million.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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