Goodwill and Intangible Assets

12 Months Ended

Oct. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and intangible assetsWe account for goodwill and other intangible assets in accordance with the provisions of ASC 350 and account for business combinations using the acquisition method of accounting and accordingly, the assets and liabilities of the entities acquired are recorded at their estimated fair values at the acquisition date. Goodwill is the excess of purchase price over the fair value of tangible and identifiable intangible net assets acquired in various business combinations. Goodwill is not amortized but is subject to annual impairment testing. Our annual impairment testing is performed as of August 1. Testing is done more frequently if an event occurs or circumstances change that would indicate the fair value of a reporting unit is less than the carrying amount of those assets. We assess the fair value of reporting units on a non-recurring basis using a quantitative analysis that uses a combination of the discounted cash flow method of the Income Approach and the guideline public company method of the Market Approach, and compare the result against the reporting unit’s carrying value of net assets. The implied fair value of our reporting units is determined based on significant unobservable inputs, as discussed below; accordingly, these inputs fall within Level 3 of the fair value hierarchy. The discounted cash flow method (Income Approach) uses assumptions for revenue growth, operating margin, and working capital turnover that are based on management’s strategic plans tempered

by performance trends and reasonable expectations about those trends. Terminal value calculations employ a published formula known as the Gordon Growth Model Method that essentially captures the present value of perpetual cash flows beyond the last projected period assuming a constant Weighted Average Cost of Capital (WACC) methodology and growth rate. For each reporting unit, a sensitivity analysis is performed to vary the discount and terminal growth rates in order to provide a range of reasonableness for detecting impairment. Discount rates are developed using a WACC methodology. The WACC represents the blended average required rate of return for equity and debt capital based on observed market return data and company specific risk factors.

In the application of the guideline public company method (Market Approach), fair value is determined using transactional evidence for similar publicly traded equity. The comparable company guideline group is determined based on relative similarities to each reporting unit since exact correlations are not available. An indication of fair value for each reporting unit is based on the placement of each reporting unit within a range of multiples determined for its comparable guideline company group. Valuation multiples are derived by dividing latest twelve-month performance for revenues and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) into total invested capital, which is the sum of traded equity plus interest bearing debt less cash. These multiples are applied against the revenue and EBITDA of each reporting unit. While the implied indications of fair value using the guideline public company method yield meaningful results, the discounted cash flow method of the income approach includes management’s thoughtful projections and insights as to what the reporting units will accomplish in the near future. Accordingly, the reasonable, implied fair value of each reporting unit is a blend based on the consideration of both the Income and Market approaches.

An impairment charge is recorded for the amount by which the carrying value of the reporting unit exceeds the fair value of the reporting unit, as calculated in the quantitative analysis described above. Based on our annual impairment tests in 2020, 2019 and 2018, the fair value of each reporting unit exceeded its carrying value, and accordingly we did not record any goodwill impairment charges in 2020, 2019 or 2018.

Our reporting units include components of the Industrial Precision Solutions and the Advanced Technology Solutions segments.

Changes in the carrying amount of goodwill during 2020 by operating segment:


	Industrial Precision Solutions		Advanced Technology Solutions		Total
Balance at October 31, 2019	$	411,461	$	1,203,278	$	1,614,739
Acquisitions	—		90,441		90,441
Other	(453)				(453)
Currency effect	4,854		3,773		8,627
Balance at October 31, 2020	$	415,862	$	1,297,492	$	1,713,354

The Other activity above reflects an allocation of goodwill to the disposal group classified as held for sale. See Note 4, Assets Held for Sale.

Changes in the carrying amount of goodwill during 2019 by operating segment:


	Industrial Precision Solutions		Advanced Technology Solutions		Total
Balance at October 31, 2018	$	413,049	$	1,194,969	$	1,608,018
Acquisition	—		9,225		9,225
Currency effect	(1,588)		(916)		(2,504)
Balance at October 31, 2019	$	411,461	$	1,203,278	$	1,614,739

Accumulated impairment losses, which were recorded in 2009, were $232,789 at October 31, 2020 and October 31, 2019. Of these losses, $229,173 related to the Advanced Technology Solutions segment and $3,616 related to the Industrial Precision Solutions segment.

Information regarding intangible assets subject to amortization:


	October 31, 2020
	Carrying Amount		Accumulated Amortization		Net Book Value
Customer relationships	$	483,568	$	193,617	$	289,951
Patent/technology costs	153,555		76,934		76,621
Trade name	74,240		34,693		39,547
Noncompete agreements	9,908		8,444		1,464
Other	1,403		1,400		3
Total	$	722,674	$	315,088	$	407,586


	October 31, 2019
	Carrying Amount		Accumulated Amortization		Net Book Value
Customer relationships	$	480,007	$	173,996	$	306,011
Patent/technology costs	154,735		71,663		83,072
Trade name	96,655		41,303		55,352
Noncompete agreements	11,540		10,406		1,134
Other	1,400		1,394		6
Total	$	744,337	$	298,762	$	445,575

Amortization expense for 2020, 2019 and 2018 was $56,979, $54,790 and $55,448 respectively.

Estimated amortization expense for each of the five succeeding years:


Year	Amounts
2021	$	50,576
2022	$	46,685
2023	$	45,697
2024	$	40,815
2025	$	39,115