Identifiable Intangible Assets

12 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill

Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis on September 1 of each fiscal year or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

The carrying value of the reporting unit, including goodwill, is compared with the estimated fair value of the reporting unit as determined utilizing a combination of the income and market approaches. The income approach, which involves significant unobservable inputs (Level 3 inputs), is based on projected debt-free cash flow which is discounted to the present value using discount rates that consider the timing and risk of the cash flows. The market approach is based on the guideline public company method, which uses market multiples to value our reporting units. The Company weights the income and market approaches in a manner considering the risks of the underlying cash flows. The key assumptions used in estimating the fair value of the Company's reporting units utilizing the income approach include management's best estimate of revenue, EBITDA margin, and discount rate. Accordingly, a change in market conditions or other factors could have a material effect on the estimated values. There are inherent uncertainties related to the assumptions used and to management's application of these assumptions.

We performed our annual impairment testing at September 1, 2023. The results of the testing indicated that the fair value exceeded the carrying value of our reporting units which contained goodwill. As such, no impairment charge was recorded during the fiscal year ended September 30, 2023.

Indefinite-lived Intangible Assets

Indefinite-lived intangible assets are tested for impairment on an annual basis on September 1 of each fiscal year or more frequently if events or circumstances indicate that it is more likely than not that the asset is impaired. We performed our annual impairment testing at September 1, 2023 based on quantitative factors and concluded no impairment losses should be recognized.

Intangible Assets

Direct internal and external costs to develop software used in the provision of services to customers by Water Management Solutions are capitalized and amortized over the six-year estimated useful life of the software, beginning when the software is ready for its intended use. At September 30, 2023, the remaining weighted-average amortization period for this software was 4.2 years. Amortization expense related to such software assets was $2.9 million in 2023 and 2022, and $3.3 million in 2021. Amortization expense for each of the next five years is expected to be $2.6 million in 2024, $2.0 million in 2025, $1.5 million in 2026, $1.1 million in 2027, and $0.8 million in 2028.

At September 30, 2023, the remaining weighted-average amortization period for business combination-related finite-lived customer relationships and technology intangible assets were 3.3 years and 7.7 years, respectively. Amortization expense related to these assets was $25.2 million, $25.5 million and $25.2 million for 2023, 2022 and 2021, respectively. Amortization expense for each of the next five years is scheduled to be $24.8 million in 2024, $5.5 million in 2025, $5.1 million in 2026, $4.9 million in 2027 and $4.8 million in 2028.

Intangible assets are presented below.


	September 30,
	2023		2022
	(in millions)
Capitalized internal-use software:
Cost	$	38.1	$	35.5
Accumulated amortization	(29.7)		(26.8)
Capitalized internal-use software, net	$	8.4	$	8.7

Business combination-related:
Cost:
Finite-lived intangible assets:
Technology	$	119.6	$	119.9
Customer relationships and other	371.5		371.6
Indefinite-lived intangible assets:
Trade names and trademarks	272.6		272.7
	$	763.7	$	764.2
Accumulated amortization:
Technology	$	(95.3)	$	(89.5)
Customer relationships and other	(342.8)		(322.2)
	(438.1)		(411.7)
Business combination-related intangible assets, net	325.6		352.5
Intangible assets, net	$	334.0	$	361.2

Goodwill

As of September 30, 2023, our remaining goodwill balance is within our Water Management Solutions segment. Changes in the carrying amount of goodwill for the years ended September 30, 2023 and 2022 were as follows, in millions:


Balance at September 30, 2021:
Goodwill	$	832.4
Accumulated impairment	(717.3)
Net goodwill	115.1
2022 Activity:
Goodwill impairment	(6.8)
Change in foreign currency exchange rates	(9.7)
Balance at September 30, 2022:
Goodwill	822.7
Accumulated impairment	(724.1)
Net goodwill	98.6
2023 Activity:
Change in foreign currency exchange rates	(4.9)
Balance at September 30, 2023:
Goodwill	817.8
Accumulated impairment	(724.1)
Net goodwill	$	93.7