Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Intangible Assets

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Goodwill and Intangible Assets
3 Months Ended
Apr. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets
6. Goodwill and Intangible Assets

Goodwill

Goodwill represents the difference between the purchase price and the estimated fair value of identifiable assets acquired and liabilities assumed. We are required to perform impairment tests related to our goodwill annually, which we perform during the third quarter of each fiscal year, or when we identify certain triggering events or circumstances that would more likely than not reduce the estimated fair value of the goodwill of the Company below its carrying amount. At April 30, 2017 and January 31, 2017, we had goodwill of $23.6 million and $23.3 million, respectively. The following table represents the changes in the carrying amount of goodwill for the three months ended April 30, 2017 (amounts in thousands):

 

Balance as of February 1, 2017:

  

Goodwill, gross

   $ 62,566  

Accumulated impairment losses

     (39,279
  

 

 

 

Goodwill, net

     23,287  

Cumulative translation adjustment

     336  
  

 

 

 

Balance as of April 30, 2017:

  

Goodwill, gross

     62,902  

Accumulated impairment losses

     (39,279
  

 

 

 

Goodwill, net

   $ 23,623  
  

 

 

 

We are required to perform impairment tests related to our goodwill annually, which we perform during the third quarter of each fiscal year or sooner if an indicator of impairment occurs. In the second quarter of fiscal 2017, triggering events prompted us to perform “Step 1” of the goodwill impairment test. The triggering events included; a sustained decrease in our stock price during the period, the withdrawal of the permanent reinvestment assertion on earnings generated by our Irish operations and a decline in actual revenue for the quarter compared to projected amounts, which was previously reported in a Current Report on Form 8-K furnished to the SEC on August 23, 2016. The outcome of that preliminary “Step 1” analysis revealed that as of July 31, 2016, the fair value of the net assets exceeded its carrying value by a range of $15.4 million to $25.0 million, or 15.0% to 24.4% of the carrying value of our net assets.

During the third quarter of fiscal 2017, we finalized our “Step 1” analysis of the goodwill impairment test. Our forecast indicated that the estimated fair value of net assets may be less than the carrying value which is a potential indicator of impairment. As such, we were required to perform “Step 2” of the impairment test during which we compare the implied fair value of our goodwill to its carrying value.

We determined based on “Step 1” of our fiscal 2017 annual impairment test, that the fair value of our reporting unit was less than its carrying value, which was $102.5 million at August 1, 2016. Since the estimated fair value of our reporting unit was less than its carrying value, we determined that it was necessary to perform “Step 2” of the impairment test. In “Step 2” of the impairment test we compared the implied fair value of our goodwill to its carrying value. After adjusting the carrying value of all assets, liabilities and equity to fair value at August 1, 2016, the estimated implied fair value of goodwill was calculated to be $22.3 million. Since the implied fair value of goodwill of $22.3 million is less than the carrying value of $45.8 million as of August 1, 2016, we recorded an impairment charge of $23.5 million to loss on impairment of long-lived assets in our consolidated statements of operations and comprehensive loss in January 2017.

There were no indicators of impairment during the first quarter of fiscal 2018. Therefore, no impairment test was required.

Intangible Assets

Intangible assets, net, consisted of the following at April 30, 2017 and January 31, 2017:

 

     Weighted average      As of April 30, 2017      As of January 31, 2017  
     remaining life
(Years)
     Gross      Accumulated
Amortization
    Net      Gross      Accumulated
Amortization
    Net  
     (Amounts in thousands)  

Finite-life intangible assets:

                  

Customer contracts

     2.3      $ 30,260      $ (28,488   $ 1,772      $ 30,056      $ (28,019   $ 2,037  

Non-compete agreements

     2.4        2,406        (2,390     16        2,374        (2,356     18  

Completed technology

     1.0        10,620        (10,173     447        10,496        (9,997     499  

Trademarks, patents and other

     3.0        7,133        (7,086     47        7,125        (7,076     49  
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total finite-life intangible assets

     2.3      $ 50,419      $ (48,137   $ 2,282      $ 50,051      $ (47,448   $ 2,603  
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

As of April 30, 2017, the estimated future amortization expense for our finite-life intangible assets is as follows (amounts in thousands):

 

     Estimated  
     Amortization  

Fiscal Year Ended January 31,

   Expense  

2018 (for the remaining nine months)

   $ 1,204  

2019

     837  

2020

     236  

2021

     5  

2022

     —    

2023 and thereafter

     —    
  

 

 

 

Total

   $ 2,282