Goodwill and Intangible Assets

12 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

As discussed in Note 2, goodwill is not amortized but is tested for impairment at least annually, in accordance with the provisions of ASC Topic 350-20-35-1. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. The fair value of a reporting unit is determined using a discounted cash flow methodology. The Company’s reporting units are determined based upon whether discrete financial information is available and reviewed regularly, whether those units constitute a business, and the extent of economic similarities and interdependencies between those reporting units for purposes of aggregation. The Company’s reporting units identified under ASC Topic 350-20-35-33 are at the component level, or one level below the operating segment level as defined under ASC Topic 280-10-50-10 “Segment Reporting – Disclosure.” At March 31, 2018, the Company had four reporting units. Two of these reporting units were sold in connection with the Sold Businesses described in Note 3. As such, the Company has two reporting units as of March 31, 2020, both of which have goodwill. The Duff-Norton reporting unit (which designs, manufactures, and sources mechanical and electromechanical actuators and rotary unions) had goodwill of $9,593,000 and $9,611,000 at March 31, 2020 and 2019, respectively, and the Rest of Products reporting unit (representing the hoist, chain, and forgings, digital power control systems, and distribution businesses) had goodwill of $310,086,000 and $313,205,000 at March 31, 2020 and 2019, respectively.

Fiscal 2020 Annual Goodwill and Intangible Asset Impairment Test

When we evaluate the potential for goodwill impairment, we assess a range of qualitative factors including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel, and overall financial performance. If, after completing this assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value or if economic or other business factors indicate that the fair value of our reporting units may

have declined since our last quantitative test, we proceed to a quantitative impairment test. To perform the quantitative impairment test, the Company uses the discounted cash flow method to estimate the fair value of the reporting units. The discounted cash flow method incorporates various assumptions, the most significant being projected revenue growth rates, operating profit margins and cash flows, the terminal growth rate, and the discount rate. The Company projects revenue growth rates, operating margins and cash flows based on each reporting unit's current business, expected developments, and operational strategies over a five-year period. In estimating the terminal growth rates, the Company considers its historical and projected results, as well as the economic environment in which its reporting units operate. The discount rates utilized for each reporting unit reflect the Company's assumptions of marketplace participants' cost of capital and risk assumptions, both specific to the reporting unit and overall in the economy.

We performed the qualitative assessment as of February 29, 2020 and determined that the quantitative test should be performed for the Rest of Products and Duff-Norton reporting units due to volatility in our stock price and uncertainty in the global economic environment caused by COVID-19. We also performed sensitivities and other analysis and determined it is more likely than not that goodwill is not impaired as of March 31, 2020.

In accordance with ASC Topic 350-30-35, indefinite-lived intangible assets that are not subject to amortization shall be tested for impairment annually or more frequently if events or circumstances indicate that it is more likely than not that an asset is impaired. Similar to goodwill, we first assess various qualitative factors in the analysis. If, after completing this assessment, it is determined that it is more likely than not that the fair value of an indefinite-lived intangible asset is greater than its carrying value, we conclude that the indefinite-lived intangible asset is not impaired. If, after completing this assessment, it is determined that it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value or if economic or other business factors indicate that the fair value of our indefinite-lived intangible assets may have declined since our last quantitative test, the Company performs a new quantitative test. The methodology used to value trademarks is the relief from royalty method. The recorded book value of these trademarks in excess of the calculated fair value triggers an impairment. The key estimate used in this calculation consists of an overall royalty rate applied to the sales covered by the trademark. After performing a qualitative assessment we determined that economic factors indicate that the fair value of our indefinite-lived intangible assets may have declined since our last quantitative test. We performed the quantitative test as of February 29, 2020 and determined that the trademarks were not impaired.

Fiscal 2019 Interim Goodwill Impairment Test

During the first quarter of fiscal 2019, the Company classified the assets and liabilities of certain businesses as held for sale. These businesses were sold later in the year which is described in Note 3. As a result of this classification, the Company determined an indicator of impairment existed and was required to perform an interim goodwill impairment test on the Rest of Products goodwill reporting unit. The net assets of the Rest of Products reporting unit were measured on a non-recurring basis in order to perform a quantitative goodwill impairment test. The interim quantitative goodwill impairment test for Rest of Products did not indicate that goodwill was impaired.

The held for sale classification described above further required the Company to assign a portion of goodwill to the business that was a part of the Rest of Products reporting unit being sold based on its relative fair value and to record the assets and liabilities of the businesses held for sale at the lower of their carrying amount or fair value less cost to sell. Based on this analysis, the Company recorded a $6,174,000 goodwill impairment charge at the time the businesses were classified as held for sale.

A summary of changes in goodwill during the years ended March 31, 2020 and 2019 is as follows:



Balance at April 1, 2018	$	347,434
Interim Goodwill Impairment	$	(6,174	)
Currency translation	(18,444		)
Balance at March 31, 2019	$	322,816
Currency translation	(3,137		)
Balance at March 31, 2020	$	319,679

Goodwill is recognized net of accumulated impairment losses of $113,174,000 as of both March 31, 2020 and 2019. There were no goodwill impairment losses recorded in fiscal 2020 and $6,174,000 and $0 recorded in 2019 and 2018, respectively. The goodwill impairment recorded in fiscal 2019 relates to the 2019 interim goodwill impairment test described above and in Note 5.

Identifiable intangible assets at March 31, 2020 are summarized as follows (in thousands):



	Gross Carrying Amount		Accumulated Amortization			Net
Trademark	$	6,016	$	(4,238	)	$	1,778
Indefinite-lived trademark	46,670		—			46,670
Customer relationships	179,882		(44,216		)	135,666
Acquired technology	46,669		(13,306		)	33,363
Other	3,143		(2,658		)	485
Balance at March 31, 2020	$	282,380	$	(64,418	)	$	217,962

Identifiable intangible assets at March 31, 2019 were as follows (in thousands):



	Gross Carrying Amount		Accumulated Amortization			Net
Trademark	$	6,212	$	(4,138	)	$	2,074
Indefinite-lived trademark	46,981		—			46,981
Customer relationships	182,328		(35,344		)	146,984
Acquired technology	46,715		(10,412		)	36,303
Other	3,254		(2,656		)	598
Balance at March 31, 2019	$	285,490	$	(52,550	)	$	232,940

Customer relationships with a gross carrying amount of $2,815,000 and accumulated amortization of $957,000 were written off during fiscal 2019, in connection with the loss on the Sold Businesses discussed in Note 3. Further, other intangible assets with a gross carrying amount of $226,000 and accumulated amortization of $211,000 were also written off during fiscal 2019 as a result of the loss on the Sold Businesses.

The Company’s intangible assets that are considered to have finite lives are amortized over the period in which the assets are expected to generate future cash flows. Identifiable intangible assets acquired in a business combination are amortized over their estimated useful lives. The weighted-average amortization periods are 15 years for trademarks, 18 years for customer relationships, 18 years for acquired technology, 5 years for other, and 18 years in total. Trademarks with a book value of $46,670,000 have an indefinite useful life and are therefore not being amortized.

Total amortization expense was $12,942,000, $14,900,000, and $15,552,000 for fiscal 2020, 2019, and 2018, respectively. Based on the current amount of intangible assets, the estimated amortization expense for each of the succeeding five years is expected to be approximately $12,400,000.