Goodwill and Other Intangible Assets

9 Months Ended

Mar. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill represents the excess of cost over the fair value of the net assets of acquired companies. Goodwill and other intangible assets with indefinite lives are tested at least annually for impairment. Consistent with the prior year, the Company performed its annual impairment test of goodwill and indefinite lived intangible assets as of March 31st. Historically, we performed this analysis during the June quarter end in connection with our annual planning process; however, this process was accelerated in the current year and finalized during the March quarter end. We also perform specific impairment tests on an interim basis based on the results of an ongoing cumulative qualitative assessment if indicative of impairment of the goodwill for a reporting unit or an indefinite-lived intangible asset. We evaluate the recoverability of goodwill for each of our reporting units by comparing the fair value of each reporting unit with its carrying value. The fair values of our reporting units are determined using a combination of a discounted cash flow analysis and market multiples based upon historical and projected financial information. We apply our best judgment when assessing the reasonableness of the financial projections used to determine the fair value of each reporting unit. We evaluate the recoverability of indefinite-lived intangible assets using a discounted cash flow analysis based on projected financial information. This evaluation is sensitive to changes in market interest rates and other external factors.

Identifiable assets with finite lives are reviewed for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. During the March and December quarter ends, we performed reviews of our identifiable assets with finite lives and determined that the assets were not impaired.

2015 December Quarter End Impairment Charge

Late in the December quarter end, the Company experienced an abrupt change in customer demand in the oil and gas markets that is expected to continue into the foreseeable future, coupled with the severe and persistent decline in the earthworks markets. In view of the severe downturn in the global Infrastructure markets in the December quarter ended, we made an assessment of the possible impairment of the goodwill and other long-lived assets of our Infrastructure reporting unit. As a result of this assessment, we determined that the magnitude and duration of the economic downturn of the Infrastructure end markets; the overall financial performance of the Infrastructure reporting unit; a change in composition or carrying amount of Infrastructure net assets and the testing for recoverability of a significant asset group within Infrastructure; and a sustained trend of decrease in the Company’s share price necessitated an interim impairment test of our Infrastructure reporting unit. As previously disclosed, we recorded a preliminary non-cash pre-tax impairment charge of $376.5 million in the Infrastructure segment, of which $375.0 million was for goodwill and $1.5 million was for an indefinite-lived trademark intangible asset.

During the March quarter ended, we completed our review of the fair values related to intangibles and property, plant and equipment in relation to the preliminary charge. We recorded an additional $6.8 million charge for an indefinite-lived trademark intangible asset based upon completion of the December valuation.

2015 March Quarter End Impairment Charge

As of March 31, 2015, the Company performed its annual impairment test of goodwill and indefinite-lived intangible assets. We recorded an additional non-cash pre-tax impairment charge of $152.9 million in the Infrastructure reporting unit, of which $152.5 million was for goodwill and $0.4 million was for an indefinite-lived trademark intangible asset. These charges were due to the continued weakening of the overall financial performance of the Infrastructure reporting unit, which is driven by the further decline in the future outlook for the global energy market being more severe than originally indicated during the second quarter 2015 impairment testing discussed above, coupled with the extended persistence of the downturn in the earthworks markets into the foreseeable future. Since the Infrastructure reporting unit goodwill and indefinite-lived intangible assets were adjusted to their estimated fair values in connection with the impairment charges, and because certain trademarks have subsequently been written down because they were partially impaired (as discussed above), there is not a significant excess of fair value over the carrying values as of March 31, 2015. If current expectations of future growth rates are not met or specific valuation factors outside of our control, such as discount rates, change significantly, then one or more intangible assets might become impaired in the future. The Industrial reporting unit passed the annual impairment test with estimated fair value exceeding carrying values by a material amount.

The further acceleration or extended persistence of the current downturn in the global end markets could have a further negative impact on our business and financial performance. We are currently exploring strategic alternatives for several businesses mostly within the Infrastructure segment, which have total estimated net book values of approximately $170 million to $250 million as of March 31, 2015. As the strategic direction has not yet been determined for these businesses, the Company cannot determine if additional impairment charges are either probable or estimable.

A summary of the carrying amount of goodwill attributable to each segment, as well as the changes in such, is as follows:



(in thousands)	Industrial			Infrastructure			Total
Gross goodwill	$	472,337		$	654,081		$	1,126,418
Accumulated impairment losses	(150,842		)	—			(150,842		)
Balance as of June 30, 2014	$	321,495		$	654,081		$	975,576

Activity for the nine months ended March 31, 2015:
Acquisition	2,984			—			2,984
Translation	(24,910		)	(14,267		)	(39,177		)
Change in gross goodwill	(21,926		)	(14,267		)	(36,193		)
Impairment charges	—			(527,500		)	(527,500		)

Gross goodwill	450,411			639,814			1,090,225
Accumulated impairment losses	(150,842		)	(527,500		)	(678,342		)
Balance as of March 31, 2015	$	299,569		$	112,314		$	411,883

The components of our other intangible assets were as follows:



	Estimated Useful Life (in years)	March 31, 2015					June 30, 2014
(in thousands)	Estimated Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization				Gross Carrying Amount		Accumulated Amortization
Contract-based	3 to 15	$	8,509	$	(6,781	)		$	23,446	$	(10,820	)
Technology-based and other	4 to 20	52,186		(28,644		)		54,842		(28,516		)
Customer-related	10 to 21	273,790		(84,640		)		285,751		(76,376		)
Unpatented technology	10 to 30	59,092		(13,679		)		61,867		(12,549		)
Trademarks	5 to 20	18,415		(11,500		)		19,256		(10,984		)
Trademarks	Indefinite	24,193		—				37,259		—
Total		$	436,185	$	(145,244	)		$	482,421	$	(139,245	)

During the nine months ended March 31, 2015, an impairment of $10.5 million was recorded for a contract-based technology intangible asset that was part of the Infrastructure segment, resulting in a non-cash impairment charge of $5.5 million and a reduction in a liability of $5.0 million.

As previously mentioned, we recorded $8.7 million of impairment charges for an indefinite-lived trademark intangible asset as a result of the impairment tests of our Infrastructure segment.

During the nine months ended March 31, 2015, we recorded amortization expense of $20.4 million related to our other intangible assets and unfavorable currency translation adjustments of $12.8 million.

- 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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