Goodwill and Intangible Assets

9 Months Ended

Jun. 26, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

13. GOODWILL AND INTANGIBLE ASSETS

Changes in the carrying amount of goodwill are as follows:


(in thousands)	Electrical Raceway		Mechanical Products & Solutions		Total
Balance as of October 1, 2019	$	149,668	$	36,563	$	186,231



Exchange rate effects	378		—		378
Balance as of June 26, 2020	$	150,046	$	36,563	$	186,609

Goodwill balances as of October 1, 2019 and June 26, 2020 include $3,924 and $43,000 of accumulated impairment losses within the Electrical Raceway and MP&S segments, respectively.

The Company assesses the recoverability of goodwill and indefinite-lived trade names on an annual basis in accordance with ASC 350, "Intangibles - Goodwill and Other." The measurement date is the first day of the fourth fiscal quarter, or more frequently, if events or circumstances indicate that it is more likely than not that the fair value of a reporting unit or the respective indefinite-lived trade name is less than the carrying value.

The following table provides the gross carrying value, accumulated amortization and net carrying value for each major class of intangible assets:


		June 26, 2020										September 30, 2019
($ in thousands)	Weighted Average Useful Life (Years)	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Amortizable intangible assets:
Customer relationships	11	$	353,622	$	(194,508)	$	159,114	$	353,256	$	(171,777)	$	181,479
Other	7	19,086		(9,204)		9,882		19,086		(7,761)		11,325
Total		372,708		(203,712)		168,996		372,342		(179,538)		192,804
Indefinite-lived intangible assets:
Trade names		92,880		—		92,880		92,880		—		92,880
Total		$	465,588	$	(203,712)	$	261,876	$	465,222	$	(179,538)	$	285,684

Other intangible assets consist of definite-lived trade names, technology, non-compete agreements and backlogs. Amortization expense for the three months ended June 26, 2020 and June 28, 2019 was $8,026 and $7,868, respectively. Amortization expense for the nine months ended June 26, 2020 and June 28, 2019 was $24,210 and $24,278, respectively. Expected amortization expense for intangible assets for the remainder of fiscal 2020 and over the next five years and thereafter is as follows:


(in thousands)
Remaining 2020						8,956
2021						31,974
2022						30,639
2023						30,520
2024						26,075
2025						13,497
Thereafter						27,335

Actual amounts of amortization may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets and other events.

The Company considered whether the adverse economic impacts of the novel coronavirus (COVID-19) outbreak, which were developing during the three months ended March 27, 2020 and continued to develop during the three months ended June 26, 2020, would indicate whether it’s more likely than not that the fair value of its reporting units or its indefinite lived intangible assets would be below the carrying value.

For a majority of the Company’s operations, the fair values of its related reporting units and indefinite lived intangible assets significantly exceeded their respective carrying values as of the most recent impairment testing period in July 2019. For these reporting units and the indefinite lived intangibles, the Company concluded that it was not more likely than not that the fair value of these reporting units or indefinite lived intangible assets was less than the carrying value and therefore there was not a triggering event requiring the performance of an impairment test as of June 26, 2020.

The economic impacts of the COVID-19 outbreak were more substantial for the Company’s reporting unit related to its operations in Europe, Middle East, and Africa (EMEA), due to the cross-border transactions that occur within those operations, the cross-border interactions needed to fully realize the synergies associated with recent in-region acquisitions and the COVID-19 related closing of these borders. The Company deemed the economic related developments of the outbreak to be a triggering event for the EMEA reporting unit as of March 27, 2020 and performed an updated goodwill impairment test as of that date.

The Company calculated the fair value of its EMEA reporting unit considering three valuation approaches: (a) the income approach; (b) the guideline public company method; and (c) a market approach using a transaction analysis. The income approach calculates the fair value of the reporting unit using a discounted cash flow approach. Internally forecasted future cash flows, which the Company believes reasonably approximate market participant assumptions, are discounted using a weighted average cost of capital (Discount Rate) developed for the specific reporting unit. The Discount Rate is developed using market observable inputs, as well as considering whether or not there is a measure of risk related to the specific reporting unit’s forecasted performance. Fair value under the guideline public company method is determined for the reporting unit by applying market multiples for comparable public companies to the unit’s financial results. The key uncertainties in these calculations are the assumptions used in determining the reporting unit’s forecasted future performance, including revenue growth and EBITDA margins, as well as the perceived risk associated with those forecasts, along with selecting representative market multiples. Fair value under the transactional analysis is determined based on exchange prices in actual transactions and on asking prices for controlling interests in public or private companies currently offered for sale by applying market multiples for comparable public companies to the unit’s financial results. The key uncertainties in the guideline public company method and the transactional analysis calculations are the assumptions used in determining the reporting unit's comparable public companies, comparable transactions and the selection of the market multiples.

The EMEA reporting unit’s impairment test as of March 27, 2020 revealed that its fair value was greater than carrying value by an amount of less than 10%. During the three months ended June 26, 2020, the Company continued to assess information related to the current and anticipated economic impacts of COVID-19 on the EMEA reporting unit and revised its financial projections. As a result of this assessment, the Company concluded that it was not more likely than not that the fair value of the EMEA reporting unit was less than the carrying value and therefore deemed that there was not a triggering event requiring the performance of an updated impairment test.

The goodwill allocated to the EMEA reporting unit as of June 26, 2020 was $34,836. The impairment analysis is sensitive to changes in both business and valuation assumptions. Changes to these assumptions could result in revisions of management's estimates of the fair value of the reporting unit and could result in impairment charges in the future, which could be material to our results of operations. The Company will continue to monitor for such changes in facts or circumstances. Goodwill impairment charges may be recognized in future periods to the extent changes in facts or circumstances occur, including deterioration in the macroeconomic environment, industry, and deterioration in the Company’s performance or its future projections.