Annual report pursuant to Section 13 and 15(d)

GOODWILL AND OTHER INTANGIBLE ASSETS

v3.19.3
GOODWILL AND OTHER INTANGIBLE ASSETS
 12 Months Ended
Sep. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND OTHER INTANGIBLE ASSETS GOODWILL AND OTHER INTANGIBLE ASSETS:

Changes to goodwill during the years ended September 30, 2019 and 2018, follow.
 
SGK Brand Solutions
 
Memorialization
 
Industrial Technologies
 
Consolidated
Goodwill
$
491,895

 
$
347,507

 
$
69,144

 
$
908,546

Accumulated impairment losses
(5,752
)
 
(5,000
)
 
—

 
(10,752
)
Balance at September 30, 2017
486,143

 
342,507

 
69,144

 
897,794

 
 
 
 
 
 
 
 
Additions during period
8,743

 
29,059

 
22,877

 
60,679

Translation and other adjustments
(9,568
)
 
(16
)
 
5

 
(9,579
)
Goodwill
491,070

 
376,550

 
92,026

 
959,646

Accumulated impairment losses
(5,752
)
 
(5,000
)
 
—

 
(10,752
)
Balance at September 30, 2018
485,318

 
371,550

 
92,026

 
948,894

 
 
 
 
 
 
 
 
Additions during period
1,506

 
3,592

 
—

 
5,098

Divestiture during period
—

 
(14,970
)
 
—

 
(14,970
)
Translation and other adjustments
(13,548
)
 
(435
)
 
(660
)
 
(14,643
)
Goodwill
479,028

 
364,737

 
91,366

 
935,131

Accumulated impairment losses
(5,752
)
 
(5,000
)
 
—

 
(10,752
)
Goodwill write-down
$
(77,572
)
 
$
—

 
$
—

 
$
(77,572
)
Balance at September 30, 2019
$
395,704

 
$
359,737

 
$
91,366

 
$
846,807



The Company performed its annual impairment review of goodwill and indefinite-lived intangible assets in the second quarter of fiscal 2019. As a result of this review, the Company determined that the estimated fair value of all reporting units exceeded carrying value. Due to challenging market conditions affecting the Graphics Imaging reporting unit within the SGK Brand Solutions segment and the estimated fair value of this reporting unit exceeding its carrying value by approximately 10%, the Company provided additional disclosure in its Form 10-Q for the second and third quarters of fiscal 2019 indicating that further deterioration of conditions could result in a future goodwill write-down for this reporting unit.

In consideration of continued challenging market conditions affecting the SGK Brand Solutions segment throughout the remainder of fiscal 2019, the Company initiated an in-depth review of the commercial and cost structure of the segment during the fourth quarter. This review identified certain opportunities to improve the segment’s profitability and reduce its operating cost structure and, as a result, the Company revised its estimates of future earnings and cash flows for the Graphics Imaging reporting unit. In response to these revised projections, the Company re-evaluated the goodwill for the Graphics Imaging reporting unit, as of September 1, 2019. As a result of this interim assessment, the Company recorded a goodwill write-down of $77,572 during the fiscal 2019 fourth quarter. Subsequent to this write-down, the fair value of the Graphics Imaging reporting unit approximates carrying value at September 30, 2019. The fair value for this reporting unit was determined using level 3 inputs (including estimates of revenue growth, EBITDA contribution and the discount rate) and a combination of the income approach using the estimated discounted cash flows and a market-based valuation methodology. If current projections are not achieved or specific valuation factors outside the Company’s control (such as discount rates) significantly change, additional goodwill write-downs may be necessary in future periods.

In fiscal 2019, the additions to SGK Brand Solutions goodwill reflects the acquisition of Frost. The changes in Memorialization goodwill primarily reflect small acquisitions and divestitures completed in fiscal 2019.
 
In fiscal 2018, the additions to SGK Brand Solutions goodwill reflects several smaller acquisitions. The additions to Memorialization goodwill reflects the acquisitions of Star Granite and several additional smaller acquisitions. The addition to Industrial Technologies goodwill reflects the acquisition of Compass.





21. GOODWILL AND OTHER INTANGIBLE ASSETS, (continued)

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of September 30, 2019 and 2018, respectively.

 
Carrying
Amount
 
Accumulated
Amortization
 
Net
September 30, 2019
 
 
 
 
 
Trade names
$
30,540

 
$
—

*
$
30,540

Trade names
148,628

 
(22,653
)
 
125,975

Customer relationships
374,515

 
(137,330
)
 
237,185

Copyrights/patents/other
20,463

 
(13,513
)
 
6,950

 
$
574,146

 
$
(173,496
)
 
$
400,650

 
 
 
 
 
 
September 30, 2018
 

 
 

 
 

Trade names
$
126,047

 
$
—

*
$
126,047

Trade names
53,523

 
(5,444
)
 
48,079

Customer relationships
372,382

 
(110,760
)
 
261,622

Copyrights/patents/other
20,848

 
(12,686
)
 
8,162

 
$
572,800

 
$
(128,890
)
 
$
443,910

* Not subject to amortization
 

 
 

 
 



The net change in intangible assets during fiscal 2019 included the impact of foreign currency fluctuations during the period, additional amortization, additions related to the Frost acquisition, and reductions from the divestiture of a Memorialization business. In the fourth quarter of fiscal 2019, the Company reassessed its trade name strategy for the SGK Brand Solutions segment, in conjunction with an overall assessment and shift of its commercial structure and strategy for this segment, and initiated a plan to reduce its global trade names for its core brand solutions businesses. As a result of this change, the Company has begun to discontinue the use of certain trade names within the SGK Brand Solutions segment. Accordingly, the remaining useful lives of the impacted trade names have been reduced to three years, reflecting the Company’s brand migration plans and an estimated time period when the discontinued trade names will be classified as defensive assets.

Amortization expense on intangible assets was $45,756, $31,562, and $23,313 in fiscal 2019, 2018 and 2017, respectively. Fiscal year amortization expense is estimated to be approximately $71,500 in 2020, $60,100 in 2021, $46,700 in 2022, $27,800 in 2023 and $26,200 in 2024.