Enerpac Tool Group Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

3 Months Ended

Nov. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Note 6. Goodwill, Intangible Assets and Long-Lived Assets

Changes in the gross carrying value of goodwill and intangible assets can result from changes in foreign currency exchange rates, business acquisitions, divestitures or impairment charges. The changes in the carrying amount of goodwill for the three months ended November 30, 2018 are as follows (in thousands):



	Industrial Tools & Services			Engineered Components & Systems			Total
Balance as of August 31, 2018	$	248,705		$	263,707		$	512,412
Purchase accounting adjustments	253			—			253
Impairment charge	—			(10,166		)	(10,166		)
Reclassification of assets held for sale	—			(20,206		)	(20,206		)
Impact of changes in foreign currency rates	(2,093		)	(2,840		)	(4,933		)
Balance as of November 30, 2018	$	246,865		$	230,495		$	477,360

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



		November 30, 2018						August 31, 2018
	Weighted Average Amortization Period (Years)	Gross Carrying Value		Accumulated Amortization		Net Book Value		Gross Carrying Value		Accumulated Amortization		Net Book Value
Amortizable intangible assets:
Customer relationships	15	$	188,316	$	123,129	$	65,187	$	230,601	$	147,451	$	83,150
Patents	11	20,831		18,757		2,074		30,355		25,327		5,028
Trademarks and tradenames	15	6,862		5,008		1,854		20,823		15,347		5,476
Other intangibles	3	5,143		5,070		73		5,946		5,816		130
Indefinite lived intangible assets:
Tradenames	N/A	83,531		—		83,531		87,253		—		87,253
		$	304,683	$	151,964	$	152,719	$	374,978	$	193,941	$	181,037

The Company estimates that amortization expense will be $10.2 million for the remaining nine months of fiscal 2019. Amortization expense for future years is estimated to be: $12.9 million in fiscal 2020, $12.2 million in 2021, $10.5 million in fiscal 2022, $7.7 million in fiscal 2023, $6.5 million in fiscal 2024 and $9.2 million cumulatively thereafter. The future amortization expense amounts represent estimates and may be impacted by future acquisitions, divestitures or changes in foreign currency exchange rates, among other causes.

Fiscal 2019 Impairment Charge

During the first quarter of fiscal 2019, within the Engineered Components & Systems segment, the Company recognized impairment charges related to the Precision Hayes and Cortland U.S. businesses in conjunction with meeting the criteria for assets classified as held for sale. See Note 5, “Divestiture Activities,” for further discussion of impairment & divestiture charges. As a result of meeting the held for sale criteria, the Company reassessed the weighted-average holding period for the associated assets which resulted in a change in our current estimated fair value. Also, the Company recognized an additional impairment charge related to the Cortland Fibron business based on a change in the anticipated sales proceeds. Accordingly, we recognized a $21.1 million impairment charge, representing the excess of net book value of assets held for sale over anticipated proceeds.

A summary of the fiscal 2019 impairment charge by reporting unit is as follows (in thousands):



	Cortland ⁽¹⁾		Precision Hayes		Total
Goodwill	$	10,166	$	—	$	10,166
Amortizable intangible assets	—		8,264		8,264
Assets held for sale	1,477		—		1,477
Fixed assets	—		1,230		1,230
	$	11,643	$	9,494	$	21,137

⁽¹⁾ The Cortland reporting unit is representative of the Cortland U.S. and Cortland Fibron businesses. The goodwill impairment charge related to Cortland U.S. and the assets held for sale impairment charge related to Cortland Fibron.

To the extent actual proceeds on the divestiture are less than current projections, or there are changes in the composition of the asset disposal group, further write-downs of the carrying value of the Precision Hayes and Cortland reporting units may be required.

- 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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