Goodwill and Other Intangible Assets

12 Months Ended

Oct. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]


5			Goodwill and Other Intangible Assets

Impairment

Goodwill and indefinite-lived intangible assets are assessed for impairment at least annually during the fourth quarter of each fiscal year unless events or changes in circumstances indicate that impairment may have occurred prior to the annual assessment. Goodwill is assessed for impairment at the reporting unit level and the company's reporting units are its 12 operating segments. Indefinite-lived intangible assets are assessed for impairment at the individual indefinite-lived intangible asset or asset group level, as appropriate. Through the second quarter of fiscal 2023, the company previously assessed qualitative factors, including overall financial performance such as actual and projected cash flows, revenues, and earnings, and concluded it was not more likely than not that the indefinite-lived Spartan trade name intangible asset was impaired nor that the fair value of the Intimidator reporting unit was less than its carrying amount.

During the preparation of the financial statements for the third quarter of fiscal 2023, the company identified deterioration in year-to-date fiscal 2023 results of Intimidator compared to previous expectations and resulting downward revisions to the company's projected future results of Intimidator made during the third quarter of fiscal 2023 as part of the company's annual long range strategic planning process, including future expected cash flows, which were significantly lower than previously expected. The underperformance was attributable to summer seasonality trends that did not materialize primarily due to reduced retail demand from homeowners who prefer professional solutions. This reduced retail demand from homeowners who prefer professional solutions was driven by persistent hot and dry weather patterns across key regions, coupled with a number of macro factors, including higher interest rates, economic uncertainty, and consumer spending preferences following the exceptional demand during the pandemic. Additionally, the company had previously replenished the Intimidator customer channel, which, combined with the reduced retail demand, caused a significant reduction in shipments and customer reorders during the third quarter of fiscal 2023, as well as a material reduction in projected future financial results for Intimidator.

Based on the above factors, the company concluded it was more likely than not that the indefinite-lived Spartan trade name intangible asset was impaired and that the fair value of the Intimidator reporting unit was less than its carrying amount. As such, the company performed quantitative impairment analyses to compare the fair value of the Spartan trade name intangible asset and the Intimidator reporting unit with their respective carrying amounts. Prior to the end of the third quarter of fiscal 2023, the company did not have a material uncertainty associated with the assets of the Intimidator reporting unit, and therefore, did not previously report an early warning disclosure.

The fair value of the Spartan trade name was determined using the relief-from-royalty method under the income approach which utilized various inputs and assumptions, including projected revenues from the company's projection process, assumed royalty rates that could be payable if the company did not own the intangible asset, terminal growth rates applied to projected revenues, applicable tax rates, and a discount rate. The fair value of the Intimidator reporting unit under the quantitative goodwill impairment test was determined using a discounted cash flow model under the income approach which utilized various inputs and assumptions, including projected operating results and growth rates from the company's projection process, applicable tax rates, estimated capital expenditures and depreciation, estimated changes in working capital, terminal growth rates applied to projected operating results in the terminal period, and a weighted-average cost of capital rate. Inputs used to estimate these fair values included significant unobservable inputs that reflect the company’s assumptions about the inputs that market participants would use and, therefore, the fair value assessments are classified within Level 3 of the fair value hierarchy.

As a result of these analyses, at the end of the third quarter of fiscal 2023, the company recorded an impairment charge of $18.0 million related to the indefinite-lived Spartan trade name intangible asset reported under the Professional segment. Further, during the same period, the company recorded an impairment charge of $133.3 million related to goodwill of the Intimidator reporting unit also reported under the Professional segment. Subsequent to these impairment charges, the remaining balance of the indefinite-lived Spartan trade name intangible asset was $81.1 million and the remaining balance of goodwill for the Intimidator reporting unit was $30.5 million. The charges are included in the Non-cash impairment charges caption on the Consolidated Statements of Earnings. These impairment charges resulted in a $36.7 million income tax benefit (deferred tax asset) associated with the remaining tax deductible basis in goodwill and other intangible assets.

Goodwill

The changes in the carrying amount of goodwill by reportable segment for fiscal 2023 and 2022 were as follows (dollars in millions):


	Professional		Residential		Other		Total
Balance as of October 31, 2021	$	411.1	$	10.6	$	—	$	421.7
Goodwill acquired	163.7		—		—		163.7


Translation adjustments	(1.8)		(0.3)		—		(2.1)
Balance as of October 31, 2022	573.0		10.3		—		583.3


Non-cash impairment charge	(133.3)		—		—		(133.3)
Translation adjustments	0.8		—		—		0.8
Balance as of October 31, 2023	$	440.5	$	10.3	$	—	$	450.8

Other Intangible Assets

The components of other intangible assets were as follows (dollars in millions, except weighted-average useful life in years):


October 31, 2023	Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
Patents	9.9	$	18.2	$	(16.0)	$	2.2
Non-compete agreements	5.5	6.9		(6.9)		—
Customer-related	15.8	327.5		(106.7)		220.8
Developed technology	7.1	102.0		(63.1)		38.9
Trade names	13.7	10.7		(4.0)		6.7
Backlog and other	0.6	5.7		(5.7)		—
Total finite-lived	13.3	471.0		(202.4)		268.6
Indefinite-lived - trade names		271.5		—		271.5
Total other intangible assets, net		$	742.5	$	(202.4)	$	540.1


October 31, 2022	Weighted-Average Useful Life in Years	Gross Carrying Amount		Accumulated Amortization		Net
Patents	9.9	$	18.2	$	(15.3)	$	2.9
Non-compete agreements	5.5	6.8		(6.8)		—
Customer-related	16.0	321.0		(83.8)		237.2
Developed technology	7.1	101.9		(53.0)		48.9
Trade names	13.8	10.7		(3.4)		7.3
Backlog and other	0.6	5.7		(5.5)		0.2
Total finite-lived	13.4	464.3		(167.8)		296.5
Indefinite-lived - trade names		289.3		—		289.3
Total other intangible assets, net		$	753.6	$	(167.8)	$	585.8

Amortization expense for finite-lived intangible assets for the fiscal years ended October 31, 2023, 2022, and 2021 was $35.7 million, $33.9 million, and $23.8 million, respectively. Estimated amortization expense for the succeeding fiscal years is as follows (dollars in millions):


Succeeding fiscal year	Estimated amortization expense
2024	$	34.5
2025	31.7
2026	30.5
2027	25.6
2028	22.3
Thereafter	124.0
Total estimated amortization expense	$	268.6