GOODWILL AND INTANGIBLE ASSETS

9 Months Ended

Apr. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

The Company's goodwill of $231.5 million and $257.1 million as of April 30, 2021 and July 31, 2020, respectively, relates to the Company's Direct Marketing reporting unit, which is the only reporting unit in the Direct Marketing reportable segment. Other intangible assets, net, as of April 30, 2021, include trademarks and tradenames, and customer relationships. The trademarks and tradenames intangible assets, which were fully amortized as of April 30, 2021, were being amortized on a straight-line basis and the customer relationship intangible assets are amortized using an accelerated method, which reflects the pattern in which the Company receives the economic benefit of the asset.

A summary of other intangible assets, net are reflected in the table below:


		April 30, 2021						July 31, 2020
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in years)	(In thousands)
Customer relationships	15	$	192,730	$	73,543	$	119,187	$	192,730	$	60,032	$	132,698
Trademarks and trade names	3	20,520		20,520		—		20,520		17,955		2,565
Total		$	213,250	$	94,063	$	119,187	$	213,250	$	77,987	$	135,263

The table below presents amortization expense recorded by the Company for other intangible assets:


	Three Months Ended April 30,				Nine Months Ended April 30,
	2021		2020		2021		2020
	(In thousands)
Customer relationships	$	4,182	$	4,825	$	13,511	$	15,589
Trademarks and trade names	—		1,706		2,565		5,130
Total	$	4,182	$	6,531	$	16,076	$	20,719

Goodwill Impairment Charge

The carrying value of goodwill is not amortized, but is tested for impairment annually as of June 30, and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. During the three months ended April 30, 2021, IWCO was informed by two significant customers that they would be transitioning their direct marketing services to other providers by the end of the fiscal year ending July 31, 2021 and another customer that it would have significantly lower volumes of sales in at least the next fiscal quarter ending July 31, 2021. In connection with its quarterly close procedures, the Company assessed the anticipated negative impact on revenue and earnings from these changes in demand, along with the previously reported notification of another significant customer transitioning its direct marketing services to another company, and determined these factors were indicators that goodwill and other long-lived assets may be impaired. The customers who are transitioning their direct marketing spending to other companies accounted for approximately $10.9 million or 7% and $13.1 million or 7% of the Company’s revenues for the three months ended April 30, 2021 and 2020, respectively. As a result, the

Company performed an interim impairment test of Direct Marketing's goodwill and other long-lived assets as of April 30, 2021. The Company determined that the goodwill was impaired, and recorded a non-cash impairment charge of $25.7 million for the three months ended April 30, 2021. The Company determined that other long-lived assets were not impaired as of April 30, 2021.

The fair value of the Direct Marketing reporting unit was calculated using a discounted cash flow model (a form of the income approach) using the Company's current projections, which are subject to various risks and uncertainties associated with its forecasted revenue, expenses and cash flows, as well as the duration and expected impact on its business from the COVID-19 pandemic. The Company's significant assumptions in the analysis include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate and the tax rate. The Company's estimates of future cash flows are based on current economic climates, recent operating results and planned business strategies. These estimates could be negatively affected by decreased customer demand for IWCO's services, changes in regulations, further economic downturns, increased customer attrition or an inability to execute IWCO's business strategies. Future cash flow estimates are, by their nature, subjective, and actual results may differ materially from the Company's estimates. If the Company's ongoing cash flow projections are not met, the Company may have to record impairment charges in future periods.