Enerpac Tool Group Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

12 Months Ended

Aug. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

The Energy segment provides products and services to the global energy markets, where safety, reliability, up-time and productivity are key value drivers. The dramatic decline in oil prices in fiscal 2015 caused customers to reduce the scope of maintenance activities or extend intervals between scheduled maintenance and significantly cut back capital spending. While the Company believes in the long-term growth prospects of the global energy markets, it has taken several actions to adjust the cost structure of the Energy segment in response to current unfavorable market demand.

The Energy segment contains three reporting units for goodwill impairment testing (Hydratight, Cortland and Viking). The Hydratight business is primarily tied to downstream production and maintenance activities and therefore is less impacted by changes in customer capital spending patterns or oil & gas prices. However, customer demand at the more recent Cortland and Viking acquisitions is more susceptible to changes in oil & gas prices and capital spending reductions. During the second quarter of fiscal 2015, the Company recognized a $84.4 million non-cash pre-tax impairment charge related to the goodwill and indefinite-lived intangible assets of the Cortland and Viking businesses. The impairment charge (as a result of lower projected near-term sales and profits) consisted of a $78.0 million write-down of goodwill and $6.4 million impairment of indefinite-lived intangible assets (tradenames).

Changes in the gross carrying value of intangible assets and goodwill result from changes in foreign currency exchange rates, business acquisitions, divestitures and impairment charges. The changes in the carrying amount of goodwill for the years ended August 31, 2015 and 2014 are as follows (in thousands):



	Industrial			Energy			Engineered Solutions			Total
Balance as of August 31, 2013	$	82,611		$	341,903		$	310,438		$	734,952
Business acquired (Hayes)	17,536			—			—			17,536
Purchase accounting adjustments	—			(835		)	—			(835		)
Divestiture of RV business	—			—			(17,843		)	(17,843		)
Impact of changes in foreign currency rates	119			9,559			(718		)	8,960
Balance as of August 31, 2014	100,266			350,627			291,877			742,770
Purchase accounting adjustments	(3,244		)	—			—			(3,244		)
Impairment charge	—			(78,530		)	—			(78,530		)
Impact of changes in foreign currency rates	(4,915		)	(35,647		)	(12,178		)	(52,740		)
Balance as of August 31, 2015	$	92,107		$	236,450		$	279,699		$	608,256

The gross carrying amount and accumulated amortization of the Company’s intangible assets are as follows (in thousands):



	Weighted Average Amortization Period (Year)	August 31, 2015						August 31, 2014
	Weighted Average Amortization Period (Year)	Gross		Accumulated Amortization		Net Book Value		Gross		Accumulated Amortization		Net Book Value
Amortizable intangible assets:
Customer relationships	15	$	302,518	$	132,007	$	170,511	$	325,164	$	117,706	$	207,458
Patents	10	30,899		19,928		10,971		31,678		17,494		14,184
Trademarks and tradenames	18	21,604		7,055		14,549		23,241		6,201		17,040
Non-compete agreements & other	3	6,790		6,496		294		7,373		6,783		590
Indefinite lived intangible assets:
Tradenames	N/A	112,437		—		112,437		125,905		—		125,905
		$	474,248	$	165,486	$	308,762	$	513,361	$	148,184	$	365,177

Amortization expense for future years is estimated to be: $23.5 million in fiscal year 2016, $22.5 million in fiscal 2017, $22.2 million in fiscal 2018, $22.0 million in fiscal 2019, $21.4 million in fiscal 2020 and $84.7 million in aggregate thereafter. The future amortization expense amounts represent estimates and may be impacted by potential future acquisitions, divestitures or changes in foreign currency exchange rates.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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