Goodwill and Intangible Assets |
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Goodwill And Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 below its carrying amount. The following table represents the changes in goodwill:
In the fourth and second quarters of fiscal 2019, we performed impairment reviews of goodwill and long-lived assets. The impairment reviews were triggered by declines in the stock price, actual operating results and revised forecasts, which we considered to be triggering events for such reviews.
As a result of the quantitative impairment tests performed in the second quarter of fiscal 2019, we determined that the estimated fair value of goodwill and long-lived assets exceeded their carrying value. Therefore, no impairment charges on our goodwill or other long-lived assets were recorded. In the fourth quarter we utilized actual results for the full fiscal 2019 and revised forecasts which were impacted by actual results in our impairment test (using discounted cash flow analyses as discussed below). As a result of the quantitative impairment tests performed in the fourth quarter of fiscal 2019, we determined that the carrying value of goodwill and long-lived assets exceeded their fair value, therefore we recorded an impairment charge to reduce the carrying value of the building, included in property, plant and equipment, the remaining net book value of intangible assets and goodwill to fair value.
We performed our quantitative goodwill impairment test, utilizing the single-step approach to compare the carrying value of the reporting unit to its estimated fair value. We considered three generally accepted approaches for valuing businesses: the income approach, the market approach and the asset-based (cost) approach to arrive at fair value. Based on our particular facts and circumstances, we elected to rely on the income and market approach. We calculated the impairment charge using a discounted cash flow analysis, a form of the income approach and the guideline public company method, a form of the market approach. The discounted cash flow analysis relied on certain assumptions regarding future net free cash flows based on industry market data, historical performance and expected future performance. Future net free cash flows were discounted to present value using a risk-adjusted discount rate, which reflects the Weighted Average Cost of Capital (“WACC”). The WACC was developed using information from same or similar industry participants and publicly available market data. The guideline public company method examined the trading multiples of similarly publicly traded companies as they related to our operating metrics As a result of the impairment test, we recorded an impairment charge of $15.5 million to reduce goodwill from $24.3 million to $8.8 million, based on the difference between our carrying value, after accounting for the impairment charges of long-lived assets, and our fair value determined using a discounted cash flow approach. Our accumulated impairments losses as of January 31, 2019 and 2018 were $54.8 million and $39.3 million, respectively.
As a result of the impairment tests, we recorded an impairment charge of $1.2 million to reduce the carrying value of our building of $4.7 million to $3.5 million and recorded an impairment charge of $0.3 million to reduce the carrying value of intangible assets of $0.3 million to zero, representing fair value of these long-lived assets. Fair value for the building was determined using market data and fair value of the intangible assets was determined using a discounted cash flow approach. Intangible assets, net Intangible assets, net, consisted of the following at January 31, 2018:
As a result of our impairment analysis in the fourth quarter of fiscal 2019, we recorded an impairment charge of $0.3 million to reduce the carrying value of intangible assets to zero. We recognized amortization expense of intangible assets in cost of revenue and operating expense categories as follows:
We recognized $0.7 million and $0.9 million of amortization expense in cost of service revenue during fiscal 2019 and 2018, respectively, of internally developed software, included in other assets on the consolidated balance sheets. We did not capitalize additional costs in fiscal 2019 or 2018 and, at January 31, 2019, the net book value of internally developed software is zero. |