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PURCHASED INTANGIBLE ASSETS | 12 Months Ended
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Jan. 31, 2019
PURCHASED INTANGIBLE ASSETS |
PURCHASED INTANGIBLE ASSETS | NOTE 7 – PURCHASED INTANGIBLE ASSETS At January 31, 2019, the goodwill balances related to the acquisitions of GPS, TRC and APC were $18.5 million, $12.3 million and $2.0 million, respectively. For income tax reporting purposes, goodwill related to acquisitions in the approximate amount of $16.4 million is being amortized on a straight-line basis over periods of 15 years. The other amounts of the Company’s goodwill are not amortizable for income tax reporting purposes. The Company performed a goodwill impairment assessment for TRC as of November 1, 2018 with the assistance of a professional business valuation firm. It was determined that the fair value of TRC was less than the corresponding carrying value and a goodwill impairment loss of approximately $1.5 million was recorded. The fair value amount for TRC determined as of November 1, 2018 reflected a weighting of results determined using various business valuation approaches. As in the past, the majority of the weighted average fair value was based on the result of modeling discounted future net-after-tax cash flows of the business. The discounted cash flows of TRC were based on a management forecast of operating results. The forecast reflects an average annual growth in revenues of 4.9% over the next seven years with forecasted annual earnings before interest and taxes increasing to 6.5% of revenues by the year ending January 31, 2026. Although the Company believes that the projected financial results are reasonable considering the improved operating results achieved by TRC for the nine months ended October 31, 2018 and the current business prospects, any future results that would compare unfavorably with the projected results could result in additional material goodwill impairment losses. No events related to TRC occurred during the fourth quarter of Fiscal 2019 that caused the Company to perform a subsequent impairment assessment. The forecasting of TRC’s future financial results as of November 1, 2017 by its management team presented a less favorable outlook for TRC at that time than in the past. With the forecast information and using various valuation analyses, including discounted net-after-tax cash flow estimates, management determined that the goodwill associated with this segment was impaired at that date. The corresponding impairment loss of $0.6 million was recorded and included in the consolidated statement of earnings for Fiscal 2018. Early in the year ended January 31, 2017, construction work was suspended on APC’s largest project at that time, which represented over 90% of project backlog, and APC was incurring operating losses. In addition, it was feared that the United Kingdom (the “UK”), considered APC’s most promising future market, would suffer unfavorable economic consequences of its vote to leave the European Economic Union (Brexit). Given these events, the Company performed a valuation of APC which indicated that the carrying value of the reporting unit exceeded its fair value at that time. As a result, APC recorded a goodwill impairment loss of approximately $2.0 million in Fiscal 2017. As the operating results and business prospects of APC have improved since then, despite the continuing uncertainties relating to Brexit and suspended capacity payments to power plant owners, no additional impairment of the goodwill of APC has occurred. The Company’s purchased intangible assets, other than goodwill, consisted of the following elements as of January 31, 2019.
|  |  |  | 2019 |  | 2018
|  | Estimated |  | Gross |  | Accumulated |  | Net |  | Net
|  | Useful Life |  | Amounts |  | Amortization |  | Amounts |  | Amounts
Trade names |  |  |  |  |  |  |  |  |  |  |  |  |  |
TRC |  | 15 years |  | $ | 4,499 |  | $ | 950 |  | $ | 3,549 |  | $ | 3,849
GPS |  | 15 years |  |  | 3,643 |  |  | 2,949 |  |  | 694 |  |  | 936
SMC |  | indefinite |  |  | 181 |  |  | — |  |  | 181 |  |  | 181
Process certifications |  | 7 years |  |  | 1,897 |  |  | 858 |  |  | 1,039 |  |  | 1,310
Customer relationships |  | 4 - 10 years |  |  | 1,346 |  |  | 672 |  |  | 674 |  |  | 873
Totals |  |  |  | $ | 11,566 |  | $ | 5,429 |  | $ | 6,137 |  | $ | 7,149
The Company determined the fair values of the trade names using a relief-from-royalty methodology. The Company believes that the useful lives of the trade names for GPS and TRC represent the number of years that such intangibles are expected to contribute to future cash flows. In order to value the process certifications of TRC, the Company applied a new reproduction cost method that required the estimation of the costs to replace the assets with certifications that would have the same functionality or utility as the acquired assets. Other purchased intangible assets presented in the table above include primarily the fair values estimated for acquired project backlogs, other customer relationships and non-compete agreements. There were no additions to other purchased intangible assets during the years ended January 31, 2019 and 2018, nor were there any impairment losses related to the assets for those years. Amortization expense related to purchased intangible assets for Fiscal 2019, 2018 and 2017 were $1.0 million, $1.0 million and $1.2 million, respectively. The future amounts of amortization related to purchased intangibles are presented below for the years ending January 31,:
2020 |  | $ | 954
2021 |  |  | 905
2022 |  |  | 870
2023 |  |  | 617
2024 |  |  | 392
Thereafter |  |  | 2,218
Total |  | $ | 5,956

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