GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Jul. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

The Company's goodwill of $231.5 million as of July 31, 2021 relates to the Company's Direct Marketing reporting unit, which is the only reporting unit in the Direct Marketing reportable segment. 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 ended July 31, 2021 and another customer that it would have significantly lower volumes of sales in at least the fiscal quarter ended 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. This amount also represents the Company's accumulated goodwill impairment loss as of July 31, 2021.

As of the Company’s annual impairment test date on June 30, 2021, the Company performed a quantitative impairment test of goodwill. The Company calculated the fair value of the Direct Marketing reporting unit which indicated the fair value of the reporting unit exceeded its carrying value by greater than 10%, and therefore, as of June 30, 2021, there was no goodwill impairment.

For each of the goodwill impairment tests performed during the year ended July 31, 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 DCF calculation was dependent on estimates for future sales, operating income, depreciation and amortization, income tax payments, working capital changes and capital expenditures, as well as expected long-term growth rates for cash flows. All of these factors are affected by economic conditions related to the industries in which the Company and its customers operate, as well as in conditions in the global capital markets. The discount rates utilized in the DCF valuation are based upon our weighted average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital adjusted as appropriate to consider the risk inherent in future cash flows of the reporting unit. Future cash flow estimates are, by their nature, subjective, and actual results may differ materially from the Company's estimates. 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. If the Company's ongoing cash flow projections are not met, the Company may have to record further impairment charges in future periods.

Other intangible assets, net, as of July 31, 2021, include customer relationships. The customer relationships intangible asset is being amortized on an accelerated basis over their estimated useful lives. At least annually, the remaining useful lives are evaluated.

The table below presents information for the Company's identifiable intangible assets that are subject to amortization:


		July 31, 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	$	77,725	$	115,005	$	192,730	$	60,032	$	132,698
Trademarks and trade names	3	20,520		20,520		—		20,520		17,955		2,565
Total		$	213,250	$	98,245	$	115,005	$	213,250	$	77,987	$	135,263

The Company performed a qualitative assessment of whether it was more likely than not that its other intangibles assets were impaired as of July 31, 2021. The Company reviewed its previous forecasts and assumptions based on the Company's current projections, that are subject to various risks and uncertainties, including forecasted revenues, expenses and cash flows, including the duration and extent of impact to our businesses from the COVID-19 pandemic. Based upon that assessment, the Company concluded it was not more likely than not that the other intangible assets were impaired as of July 31, 2021.

The table below presents amortization expense recorded by the Company for its identifiable intangible assets.


	Fiscal Year Ended July 31,
	2021		2020
	(In thousands)
Customer relationships	$	17,693	$	20,415
Trademarks and trade names	2,565		6,840
Total	$	20,258	$	27,255

The estimated future amortization expense of intangible assets as of July 31, 2021 is as follows (in thousands):


For the Fiscal Years Ended July 31,
2022	$	15,334
2023	11,427
2024	9,371
2025	9,371
2026	9,371
Thereafter	60,131
	$	115,005