Impairment of Goodwill and Long-Lived Assets

9 Months Ended

Feb. 28, 2021

Goodwill And Intangible Assets Disclosure [Abstract]

NOTE E – Impairment of Goodwill and Long-Lived Assets

Fiscal 2021: During the first nine months of fiscal 2021, we recorded impairment charges totaling $13,739,000 as impairment indicators were identified as follows:

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Due to the economic impact of the COVID-19 pandemic and related market softness in the oil & gas equipment operations in Tulsa, Oklahoma, we tested the long-lived assets consisting of fixed and customer list intangible assets with net book values of $7,375,000 and $2,374,000, respectively, for impairment. The fair value of the fixed assets was determined to be $5,934,000 (using observable Level 2 inputs) resulting in an impairment charge of $1,441,000. Additionally, the customer list intangible assets were deemed to be fully impaired (using unobservable Level 3 inputs) and written off.

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The future undiscounted cash flows of the cryogenics business primarily operated out of the Theodore, Alabama facility did not support its book value. As a result, property, plant and equipment with a carrying value of $13,526,000 was written down to its estimated fair value of $9,193,000 (determined using Level 2 inputs), resulting in an impairment charge of $4,333,000. Additionally, the customer list intangible and technological know-how assets with a carrying value of $3,662,000 were deemed to be fully impaired (using unobservable Level 3 inputs) and written off. These assets

were subsequently sold in October 2020 (refer to “NOTE F – Restructuring and Other Expense, Net” for additional information on this sale).

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We decided to discontinue our operation of the manufacturing line for alternative fuel cylinders at the Jefferson, Ohio facility. As a result, long-lived assets with a carrying value of $1,823,000 were written down to their estimated fair market value of $400,000 (determined using Level 2 inputs), resulting in an impairment charge of $1,423,000.

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The Company recognized a $506,000 impairment charge related to the Superior Tools business that was acquired as part of Magna Industries, Inc. in fiscal 2019 and subsequently sold.

Fiscal 2020: During the third quarter of fiscal 2020, we recorded impairment charges totaling $34,627,000 due to the following:

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We announced our plan to consolidate our oil & gas equipment manufacturing operations in Wooster, Ohio into our manufacturing facility in Bremen, Ohio. As a result, we tested the long-lived assets of the combined asset group, consisting of fixed assets and customer list intangible assets with net book values of $14,274,000 and $6,577,000, respectively, for impairment. The book value of the fixed assets was determined to be in excess of fair market value, resulting in an impairment charge of $4,679,000. Additionally, the customer list intangible assets were deemed to be fully impaired and written off. Fair market value of the fixed assets was determined using observable Level 2 inputs and the fair value of the customer list intangible assets was determined using unobservable Level 3 inputs. These assets were subsequently sold in January 2021 (refer to “NOTE F - Restructuring and Other Expense, Net”).

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As a result of the impairment charges noted above, we also performed an interim goodwill impairment test of our oil & gas equipment reporting unit. The results of the analysis indicated the fair value of the reporting unit no longer supported the book value of the corresponding goodwill, resulting in an impairment charge of $22,097,000. The key assumptions used in the fair value calculation were projected cash flows and the discount rate, which represent unobservable, Level 3 inputs.

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Our consolidated joint venture WSP committed to a plan to sell the Canton, Michigan facility and some of the production equipment at that facility. The land and building related to the facility were determined not to be impaired. The production equipment was determined to be below fair market value. Therefore, the net assets were written down to their estimated fair market value less cost to sell of $700,000 (determined using Level 2 inputs), resulting in an impairment charge of $1,274,000. These assets, with a net book value of $7,775,000 and $7,813,000, have been presented separately as assets held for sale in the in the consolidated balance sheets at February 28, 2021 and May 31, 2020, respectively.

During the first quarter of fiscal 2020, we committed to plans to sell substantially all of the net assets of our Engineered Cabs business with the exception of the fabricated products facility in Stow, Ohio, and the steel packaging facility in Greensburg, Indiana. As the disposal group met the criteria for classification as assets held for sale as of August 31, 2019, those net assets were presented separately as assets held for sale in our consolidated balance sheet as of August 31, 2019. In accordance with the applicable accounting guidance, the net assets were recorded at the lower of net book value or fair value less costs to sell. The book value of the disposal group exceeded its estimated fair market value of $12,860,000 (determined using Level 2 inputs), resulting in an impairment charge of $35,194,000 during the first quarter of fiscal 2020. Included in the impairment charge were lease ROU assets with a net book value of $905,000 that were deemed fully impaired and written off. We also identified an impairment indicator for the long-lived assets of the fabricated products business as the planned sale would have an adverse impact on the manner and extent in which these assets were used. As a result, fixed assets with a net book value of $1,469,000 and lease ROU assets with a net book value of $3,938,000 were deemed to be fully impaired and written off during the first quarter of fiscal 2020.

Operations at the fabricated products facility in Stow, Ohio, and the steel packaging facility in Greensburg, Indiana were ceased, and the assets sold as of the end of the third quarter of fiscal 2021. Refer to “NOTE F – Restructuring and Other Expense, Net” for additional information on disposition of these assets.