Goodwill and Intangible Assets

12 Months Ended

Jan. 03, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

The Company performs its annual goodwill impairment testing in the fourth quarter each year and regularly assesses whenever events or circumstances make it more likely than not that an impairment may have occurred. During the first quarter of 2020, negative market reaction to the COVID-19 crisis, including declines in our common stock price, caused our market capitalization to decline significantly compared to the fourth quarter of 2019, causing a triggering event. Therefore, we performed an interim step one quantitative test for our previous reporting units with goodwill, Americas Staffing and GTS, and determined that the estimated fair values of both reporting units no longer exceeded their carrying values. Based on the result of our interim goodwill impairment test as of the first quarter of 2020, we recorded a goodwill impairment charge of $147.7 million to write off goodwill for both reporting units. A portion of the goodwill balance was deductible for tax purposes. See impairment adjustments in the table below.

In performing the step one quantitative test and consistent with our prior practice, we determined the fair value of each reporting unit using the income approach, which was validated through reconciliation to observable market capitalization data. Under the income approach, estimated fair value was determined based on estimated future cash flows discounted by an estimated market participant weighted-average cost of capital, which reflects the overall level of inherent risk of the reporting unit being measured. Estimated future cash flows were based on our internal projection model and reflects management’s outlook for the reporting units. Assumptions and estimates about future cash flows and discount rates are complex and often subjective. Our analysis used significant assumptions by reporting unit, including: expected future revenue and expense growth rates, profit margins, discount rate, forecasted capital expenditures and working capital.

As discussed in the Segment Disclosures footnote, during the third quarter of 2020, the Company adopted a new operating model reflecting the Company's focus on delivering specialty talent solutions, which resulted in a change in our operating segments and reporting units. Due to the complete write-off of goodwill in the first quarter of 2020, reallocation of goodwill to the new reporting units as part of the third quarter 2020 change in segment reporting was not necessary. Subsequently, the goodwill resulting from the acquisition of Greenwood/Asher during the fourth quarter of 2020 (see Acquisitions and Disposition footnote) was allocated to the Education operating segment, which was deemed to be a reporting unit, under the new operating model.

During the fourth quarter of 2020, the Company performed a qualitative analysis (a "step zero" test) to determine whether a further quantitative analysis was necessary. The step zero test includes making judgments and assessments to determine whether any events or circumstances have occurred that makes it more likely than not that the fair value of a reporting unit is less than its carrying amount. As a result of this qualitative assessment, a step one quantitative analysis was not deemed necessary and the Company determined goodwill was not impaired as of year-end 2020.

The changes in the carrying amount of goodwill for the fiscal year 2020 are included in the table below. See Acquisitions and Disposition footnote for a description of the additions to goodwill.


	As of Year-End 2019		Additions to Goodwill		Impairment Adjustments		As of Year-End 2020
	(In millions of dollars)
Americas Staffing	$	58.5	$	19.9	$	(78.4)	$	—
Global Talent Solutions	69.3		—		(69.3)		—
Education	—		3.5		—		3.5
Total	$	127.8	$	23.4	$	(147.7)	$	3.5

Intangible assets, excluding fully-amortized intangibles, are included within other assets on our consolidated balance sheet and consist of the following (in millions of dollars):


		2020						2019
	Useful lives	Gross Carrying amount		Less: Accumulated Amortization		Net		Gross Carrying amount		Less: Accumulated Amortization		Net
Customer relationships	10 years	$	52.0	$	13.1	$	38.9	$	40.1	$	8.3	$	31.8
Candidate database	4 years	1.5		1.3		0.2		1.5		0.9		0.6
Trade names	10-15 years	12.7		1.6		11.1		12.1		0.8		11.3
Non-compete agreements	5 years	1.7		0.6		1.1		1.7		0.3		1.4
Trademarks	10 years	4.8		0.5		4.3		4.8		—		4.8
Total		$	72.7	$	17.1	$	55.6	$	60.2	$	10.3	$	49.9

The year-over-year change in total intangible assets was due to the intangibles purchased in connection with the Insight and Greenwood/Asher acquisitions (see Acquisitions and Disposition footnote). Intangible amortization expense, which is included in SG&A expense in the consolidated statements of earnings, was $6.8 million, $5.4 million and $1.8 million in 2020, 2019 and 2018, respectively. The amortization expense will be $6.7 million in 2021, $6.5 million in 2022 and 2023 and $6.2 million in 2024 and 2025.