Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Other Intangible Assets

v3.19.1
Goodwill and Other Intangible Assets
6 Months Ended
Feb. 28, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
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 six months ended February 28, 2019 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

 
(13,678
)
 
(13,678
)
Reclassification of assets held for sale

 
(16,672
)
 
(16,672
)
Impact of changes in foreign currency rates
420

 
(2,526
)
 
(2,106
)
Balance as of February 28, 2019
$
249,378

 
$
230,830

 
$
480,208


The gross carrying value and accumulated amortization of the Company’s other intangible assets are as follows (in thousands):
 
 
 
February 28, 2019
 
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
 
$
188,974

 
$
126,738

 
$
62,236

 
$
230,601

 
$
147,451

 
$
83,150

Patents
11
 
20,946

 
19,041

 
1,905

 
30,355

 
25,327

 
5,028

Trademarks and tradenames
15
 
6,904

 
5,083

 
1,821

 
20,823

 
15,347

 
5,476

Other intangibles
3
 
5,191

 
5,172

 
19

 
5,946

 
5,816

 
130

Indefinite lived intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Tradenames
N/A
 
84,054

 

 
84,054

 
87,253

 

 
87,253

 
 
 
$
306,069

 
$
156,034

 
$
150,035

 
$
374,978

 
$
193,941

 
$
181,037


The Company estimates that amortization expense will be $6.7 million for the remaining six months of fiscal 2019. Amortization expense for future years is estimated to be: $12.9 million in fiscal 2020, $12.2 million in fiscal 2021, $10.5 million in fiscal 2022, $7.7 million in fiscal 2023, $6.6 million in fiscal 2024 and $9.3 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 EC&S 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. 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, for the quarter ended November 30, 2018, representing the excess of net book value of assets held for sale over anticipated proceeds.
During the second quarter of fiscal 2019, within the EC&S segment, the Company recognized impairment charges related to the Cortland U.S. business as a result of changes in the composition of the net asset disposal groups. Accordingly, we recognized a $3.5 million impairment charge during the quarter ended February 28, 2019, representing the excess of net book value of assets held for sale over anticipated proceeds. See Note 5, “Divestiture Activities,” for further discussion of impairment & divestiture charges.
A summary of the six months ended February 28, 2019, impairment charges by reporting unit is as follows (in thousands):
 
 
Cortland (1)
 
Precision Hayes
 
Total
Goodwill
 
$
13,709

 
$

 
$
13,709

Amortizable intangible assets
 

 
8,264

 
8,264

Assets held for sale
 
1,477

 

 
1,477

Fixed assets
 

 
1,230

 
1,230

Total
 
$
15,185

 
$
9,494

 
$
24,679

(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. for the six months ended February 28, 2019 and the assets held for sale impairment charge related to Cortland Fibron for the three months ended November 30, 2019.
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 Cortland U.S. reporting unit may be required.