Goodwill and Other Intangible Assets

12 Months Ended

Jul. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

The Company has allocated goodwill to reporting units within its Engine Products and Industrial Products segments. During the years ended July 31, 2017 and 2016, the Company acquired Hy-Pro on May 1, 2017, Partmo on August 31, 2016 and EPC on August 31, 2015 and recorded goodwill for these transactions. See Note 2 for additional discussion of acquisitions. There was no disposition activity during the years ended July 31, 2017 and 2016.

The Company performed its annual impairment assessment during the third quarter of fiscal 2017. The results of this assessment were that the estimated fair values of the reporting units to which goodwill is assigned continued to exceed the corresponding carrying values of the reporting units, resulting in no goodwill impairment. Of the Company's five reporting units that contain goodwill, the estimated fair values exceeded the respective carrying values by at least 60% for all but the Gas Turbine Systems reporting unit, for which the estimated fair value exceeded the carrying amount by approximately 15%.

Goodwill associated with the Gas Turbine Systems reporting unit was $60.4 million as of the annual impairment assessment and is included in the Industrial Products segment. The Company completed its Gas Turbine Systems goodwill impairment assessment using a weighting of the fair values as determined under a market approach and an income approach to determine the estimated fair value of the reporting unit. The public company method of the market approach estimated fair value based on prices investors paid for the stocks of comparable, publicly traded companies. The income approach estimated fair value based on discounted, projected cash flows from the reporting unit's financial forecast. A terminal growth rate of 3.0% was used, as well as a discount rate of 11.5% reflecting the relative risk of achieving cash flows and any other specific risks or factors related to the Gas Turbine Systems reporting unit. The Company believes the assumptions used in its discounted cash flow analysis are appropriate and result in a reasonable estimate of the reporting unit's fair value. The Company performed a sensitivity analysis to determine how the assumptions impact the results of the impairment assessment under this valuation approach. Holding all other assumptions constant, zero revenue growth or below for fiscal years 2019-2026 would result in impairment. Additionally, a decrease in the terminal growth rate of 3.0% to zero or below, or an increase in the discount rate by 1.5% or more, would result in impairment. While these projections supported no impairment of goodwill of this reporting unit, given the sensitivities to the assumptions used in the calculations of the projected cash flows, it is possible that impairment could be incurred in the future. The Company will continue to monitor results and projected cash flows to assess whether goodwill impairment in the Gas Turbine Systems reporting unit may be necessary.

The following is a reconciliation of goodwill for the years ended July 31, 2017 and 2016 (in millions):



	Engine Products		Industrial Products			Total Goodwill
Balance as of July 31, 2015	$	71.0	$	152.7		$	223.7
Goodwill acquired	6.3		—			6.3
Foreign exchange translation	—		(0.7		)	(0.7		)
Balance as of July 31, 2016	77.3		152.0			229.3
Goodwill acquired	6.7		—			6.7
Foreign exchange translation	0.3		1.8			2.1
Balance as of July 31, 2017	$	84.3	$	153.8		$	238.1

No goodwill impairment was recorded during the years ended July 31, 2017 and 2016.

The following is a reconciliation of intangible assets for the years ended July 31, 2017 and 2016 (in millions):



	Gross Carrying Amount		Accumulated Amortization			Net Intangible Assets
Balance as of July 31, 2015	$	87.1	$	(49.2	)	$	37.9
Intangibles acquired	6.6		—			6.6
Amortization expense	—		(6.1		)	(6.1		)
Foreign exchange translation	3.1		(3.0		)	0.1
Balance as of July 31, 2016	96.8		(58.3		)	38.5
Intangibles acquired	8.6		—			8.6
Amortization expense	—		(6.4		)	(6.4		)
Foreign exchange translation	1.2		(1.3		)	(0.1		)
Balance as of July 31, 2017	$	106.6	$	(66.0	)	$	40.6

Net intangible assets consist of customer relationships and lists of $30.8 million and $30.7 million and patents, trademarks and technology of $9.8 million and $7.8 million, as of July 31, 2017 and 2016, respectively. As of July 31, 2017, customer relationships and lists had a weighted average remaining life of 11.9 years, and patents, trademarks and technology had a weighted average remaining life of 8.1 years. Expected amortization expense relating to existing intangible assets is as follows (in millions):



Year Ending July 31,	Amount
2018	$	5.4
2019	5.2
2020	4.9
2021	4.7
2022	3.6
Thereafter	16.8
Total expected amortization expense	$	40.6

- 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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