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PURCHASED INTANGIBLE ASSETS | 12 Months Ended
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Jan. 31, 2020
PURCHASED INTANGIBLE ASSETS |
PURCHASED INTANGIBLE ASSETS | NOTE 7 – PURCHASED INTANGIBLE ASSETS Primarily due to the significant reduction of the fair value of the business of APC deemed to have occurred as a result of the substantial contract loss discussed in Note 4 above, the Company recorded an impairment loss during Fiscal 2020 in the amount of $2.1 million, which was the remaining balance of goodwill associated with APC. The Company performed a goodwill impairment assessment for TRC as of November 1, 2019 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 an additional goodwill impairment loss of approximately $2.8 million was recorded (see the following paragraph).The fair value amount for TRC determined as of November 1, 2019 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 approximately 4.7% over the next seven years, with a terminal value annual growth rate of 3%, with forecasted annual earnings before interest and taxes increasing from 4.8% of revenues for the year ending January 31, 2021 to 6.5% of revenues by the year ending January 31, 2027. The goodwill impairment assessments performed for TRC as of November 1, 2018 and 2017 determined that the fair value of TRC was less than the corresponding carrying value at each date, and goodwill impairment losses of approximately $1.5 million $0.6 million were recorded for Fiscal 2019 and Fiscal 2018, respectively. The fair value amounts for TRC determined at each date reflected a weighting of results determined using various business valuation approaches. 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 that were forecasted at the time. Although the Company believes that the projected financial results as of November 1, 2019 are reasonable considering recent operating and current business prospects, any future results that would compare unfavorably with the projected results could result in additional material goodwill impairment losses.The results of the impairment assessment performed for Fiscal 2020 indicate that TRC was unable to achieve forecasts made in prior years and that working capital requirements have increased. No events related to TRC occurred during the fourth quarter of Fiscal 2020 that caused the Company to perform a subsequent impairment assessment. The changes in the balances of goodwill for Fiscal 2020, Fiscal 2019 and Fiscal 2018 were as follows:
|  | GPS |  | TRC |  | APC |  | Totals
Balances, February 1, 2017 |  | $ | 18,476 |  | $ | 14,365 |  | $ | 2,072 |  | $ | 34,913
Impairment loss |  |  | — |  |  | (584) |  |  | — |  |  | (584)
Balances, January 31, 2018 |  |  | 18,476 |  |  | 13,781 |  |  | 2,072 |  |  | 34,329
Impairment loss |  |  | — |  |  | (1,491) |  |  | — |  |  | (1,491)
Balances, January 31, 2019 |  |  | 18,476 |  |  | 12,290 |  |  | 2,072 |  |  | 32,838
Impairment losses |  |  | — |  |  | (2,823) |  |  | (2,072) |  |  | (4,895)
Balances, January 31, 2020 |  | $ | 18,476 |  | $ | 9,467 |  | $ | — |  | $ | 27,943
The impairment losses recorded by the Company since Fiscal 2016, the year that both APC and TRC were acquired, represents 34% of the goodwill amount originally established for TRC and 100% of the original amount of goodwill related to APC. 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. Purchased intangible assets, other than goodwill, consisted of the following elements as of January 31, 2020.
|  |  |  | 2020 |  | 2019
|  | Estimated |  | Gross |  | Accumulated |  | Net |  | Net
|  | Useful Life |  | Amounts |  | Amortization |  | Amounts |  | Amounts
Trade names |  |  |  |  |  |  |  |  |  |  |  |  |  |
TRC |  | 15 years |  | $ | 4,499 |  | $ | 1,250 |  | $ | 3,249 |  | $ | 3,549
GPS |  | 15 years |  |  | 3,643 |  |  | 3,193 |  |  | 450 |  |  | 694
SMC |  | — |  |  | 181 |  |  | 181 |  |  | — |  |  | 181
Process certifications |  | 7 years |  |  | 1,897 |  |  | 1,129 |  |  | 768 |  |  | 1,039
Customer relationships |  | 4-10 years |  |  | 1,346 |  |  | 812 |  |  | 534 |  |  | 674
Totals |  |  |  | $ | 11,566 |  | $ | 6,565 |  | $ | 5,001 |  | $ | 6,137
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 remaining 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 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. The balance for customer relationships as of January 31, 2020 is associated primarily with TRC; the corresponding gross amount was determined at the time of the acquisition of TRC by discounting cash flows expected from existing significant customer relationships. There were no additions to other purchased intangible assets during Fiscal 2020, Fiscal 2019 and Fiscal 2018, nor were there any impairment losses related to the assets for those years. Amortization expense related to purchased intangible assets for Fiscal 2020, 2019 and 2018 were $1.1 million, $1.0 million and $1.0 million, respectively. The future amounts of amortization related to purchased intangibles are presented below for the years ending January 31,
2021 |  | $ | 905
2022 |  |  | 870
2023 |  |  | 617
2024 |  |  | 392
2025 |  |  | 391
Thereafter |  |  | 1,826
Total |  | $ | 5,001

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