Assets Held for Sale

9 Months Ended

Dec. 31, 2021

Note 2: Assets Held for Sale

Liquid-cooled Automotive Business

On October 25, 2021, the Company announced that it agreed with Dana Incorporated (“Dana”) to terminate an agreement for the sale of the liquid-cooled automotive business. Both companies had been actively engaged in the regulatory review process in Germany for many months and agreed that it was no longer in the best interest of either party to pursue the sale transaction further.

In connection with the termination of the sale agreement, the Company determined that the liquid-cooled automotive business no longer met the requirements to be classified as held for sale during the third quarter of fiscal 2022. As a result, the Company remeasured the long-lived assets reverting back to held and used classification at the lower of their (i) carrying value, as if held for sale classification had not been met; or (ii) fair value at the date of the decision not to sell. These long-lived assets consisted primarily of property, plant and equipment assets and were fully impaired while classified as held for sale.

During the third quarter of fiscal 2022, the Company reversed $57.2 million of held for sale impairment charges based on the remeasurement of the long-lived assets of the liquid-cooled automotive business. The Company engaged third-party valuation specialists to assist in estimating the fair values of the assets. The Company primarily used the market and cost valuation approaches and utilized third-party information from various industry-accepted sources, including applicable government-published statistics and data from appraisal and resale service providers. The market approach focused on prices for comparable assets in arm’s length transactions. For land and building assets, for example, sales of similar properties near the Company’s facilities were analyzed. For machinery and equipment assets, the Company referenced available third-party information regarding the selling prices of similar equipment. The cost approach focused on the amount for which an asset could be replaced or reproduced. The cost of an asset was then adjusted downward based on various factors including, but not limited to, age, location, and physical condition. After estimating the fair values of the assets reverting back to held and used classification, the Company compared the fair value for each asset to its carrying value. Carrying value represented each asset’s carrying value before the initial impairment charge, reduced for depreciation that would have been recorded if the asset had not been classified as held for sale. The Company then adjusted each asset to the lower of fair value or carrying value, resulting in the reversal of $57.2 million of previous impairment charges. In addition, the Company resumed depreciating the property, plant and equipment assets of the liquid-cooled automotive business based on the remeasured asset values during the third quarter of fiscal 2022.

On a year-to-date basis, the $57.2 million held for sale impairment reversal during the third quarter of fiscal 2022 was partially offset by $1.2 million of net held for sale impairment charges recorded during the first six months of fiscal 2022. At both June 30, 2021 and September 30, 2021, while the liquid-cooled automotive business was held for sale, the Company reassessed its fair value less costs to sell. As a result of these evaluations, the Company recorded a total of $8.6 million of impairment charges during the first and second quarters of fiscal 2022. These impairment charges reduced the net carrying value of property, plant and equipment additions during each quarter to zero. In addition, in connection with a modification of the sale perimeter in the first quarter of fiscal 2022, the Company determined that certain manufacturing operations no longer met the requirements to be classified as held for sale. As a result, the Company reversed $7.4 million of previous impairment charges to adjust the long-lived assets within the asset groups impacted by the sale perimeter change to their estimated fair value as of June 30, 2021. The Company’s determination of fair value for the long-lived assets within these businesses involved judgement and the use of significant estimates and assumptions, including assumptions regarding future revenue projections and operating profit margins, risk-adjusted discount rates, business trends and market conditions.

The Company’s fair value measurements of the property, plant and equipment assets within the liquid-cooled automotive business are categorized as Level 3 within the fair value hierarchy. Refer to Note 4 for the definition of a Level 3 fair value measurement.

The liquid-cooled automotive business was initially classified as held for sale during the third quarter of fiscal 2021. At that time, the Company recorded $134.4 million of impairment charges primarily related to the long-lived assets within the liquid-cooled automotive business. Upon classification as held for sale, the Company assessed the disposal group’s fair value less costs to sell and reduced the net carrying value of the disposal group’s long-lived assets to zero.

The Company reported all impairment charges and reversals during fiscal 2021 and 2022 within the impairment charges (reversals) line on the consolidated statements of operations.

Assets and Liabilities Held for Sale

As of March 31, 2021, the Company presented the assets and liabilities of the liquid- and air-cooled automotive businesses as held for sale. See Note 1 for additional information regarding the sale of the air-cooled automotive business, which was completed on April 30, 2021.

The major classes of assets and liabilities held for sale at March 31, 2021 were as follows:

ASSETS
Cash and cash equivalents	$	8.0
Trade accounts receivable – net		54.4
Inventories		24.7
Other current assets		12.8
Property, plant and equipment – net		164.0
Other noncurrent assets		8.8
Impairment of carrying value		(165.1	)
Total assets held for sale	$	107.6

LIABILITIES
Short-term debt	$	5.0
Accounts payable		46.3
Accrued compensation and employee benefits		15.5
Other current liabilities		12.2
Pensions		17.8
Other noncurrent liabilities		6.5
Total liabilities held for sale	$	103.3