Goodwill and Other Intangible Assets

9 Months Ended

Oct. 31, 2013

3. Goodwill and Other Intangible Assets

The Company performs its assessment of the fair value of goodwill and intangible assets annually (the Company has chosen December 31 as its assessment date) or when events or changes in circumstances indicate an impairment may exist. During the second quarter of fiscal 2014, based on the continued decline in revenues and forecasted results experienced by many of our divisions, the Company reassessed its estimates of the fair value of its reporting units. These circumstances indicated a potential impairment of goodwill in our Geoconstruction division and, as such, we began to assess the fair value of our goodwill to determine if the carrying value exceeded its fair value.

We considered both a market approach and an income approach in estimating the fair value of each reporting unit in our analysis. The market approach may include use of the guideline transaction method, the guideline company method, or both. The guideline transaction method makes use of available transaction price data of companies engaged in the same or similar lines of business as the respective reporting unit. The guideline company method uses market multiples of publicly traded companies with operating characteristics similar to the respective reporting unit. The income approach uses projections of each reporting unit’s estimated cash flows discounted using a weighted average cost of capital that reflects current market conditions. We also compare the aggregate fair value of our reporting units to our market capitalization with consideration of a control premium.

The more significant assumptions used in the income approach, which are subject to change as a result of changing economic and competitive conditions, are as follows:

•

Anticipated future cash flows and long-term growth rates for each reporting unit. The income approach to determining fair value relies on the timing and estimates of future cash flows, including an estimate of long-term growth rates. The projections use management’s estimates of economic and market conditions over the projected period including growth rates in sales and estimates of expected changes in operating margins. The Company’s projections of future cash flows are subject to change as actual results are achieved that differ from those anticipated. Actual results could vary significantly from estimates.

•

Selection of an appropriate discount rate. The income approach requires the selection of an appropriate discount rate, which is based on a weighted average cost of capital analysis. The discount rate is subject to changes in short-term interest rates and long-term yield as well as variances in the typical capital structure of marketplace participants in our industry. The discount rate is determined based on assumptions that would be used by marketplace participants, and for that reason, the capital structure of selected marketplace participants was used in the weighted average cost of capital analysis. Given the current volatile economic conditions, it is possible that the discount rate could change.

As a result of our preliminary analysis in the second quarter of fiscal 2014, we determined the carrying value of the goodwill in the amount of $14.6 million exceeded its fair value and we recorded an impairment charge equal to that amount. We finalized those calculations in the third quarter of fiscal 2014 which resulted in no change to the amounts initially recorded in the second quarter.

The carrying amount of goodwill attributed to each operating segment was as follows:


(in thousands)	Water Resources		Inliner		Heavy Civil		Geoconstruction			Mineral Services		Energy Services		Other		Total
Balance February 1, 2013	$	—	$	8,915	$	—	$	14,646		$	—	$	—	$	—	$	23,561
Additions		—		—		—		—			—		—		—		—
Impairment of goodwill		—		—		—		(14,646	)		—		—		—		(14,646	)

Balance October 31, 2013	$	—	$	8,915	$	—	$	—		$	—	$	—	$	—	$	8,915

Other intangible assets consist of the following:


	October 31, 2013							January 31, 2013
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Weighted Average Amortization Period in Years		Gross Carrying Amount		Accumulated Amortization			Weighted Average Amortization Period in Years
Amortizable intangible assets:
Tradenames	$	6,260	$	(3,101	)		14	$	8,008	$	(3,798	)		14
Customer/contract-related		—		—			—		3,340		(3,215	)		1
Patents		905		(492	)		15		3,012		(1,634	)		15
Software and licenses		2,747		(1,565	)		3		2,747		(919	)		3
Non-competition agreements		680		(340	)		6		680		(255	)		6
Other		966		(512	)		22		1,600		(726	)		21

Total intangible assets	$	11,558	$	(6,010	)			$	19,387	$	(10,547	)

As a result of economic factors discussed above, certain intangible assets were also evaluated for impairment. Based upon current undiscounted cash flows, all such intangible assets were deemed recoverable.

Total amortization expense for other intangible assets was $0.4 million and $1.1 million for the three months ended October 31, 2013 and 2012, respectively and $1.2 million and $3.7 million for the nine months ended October 31, 2013 and 2012, respectively.

As of January 31, 2014, amortization will be expensed by fiscal year as follows:


(in thousands)
2014	$	1,653
2015		1,305
2016		1,000
2017		639
2018		549
Thereafter		1,657

Total	$	6,803

- 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.

+ References+ Details