Note F - Goodwill and Other Intangibles

12 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

F

. GOODWILL AND OTHER INTANGIBLES

Goodwill

The Company reviews goodwill for impairment on a reporting unit basis annually as of the

first

day of the Company’s

fourth

fiscal quarter, and whenever events or changes in circumstances (“triggering events”) indicate that the carrying value of goodwill

may

not

be recoverable.

In fiscal

2018

and prior years, the annual testing date was the last day of the fiscal year. In fiscal

2019,

the Company changed its annual testing date to the

first

day of the Company’s

fourth

fiscal quarter in order to provide the Company more time and better information to perform the analyses. The Company does

not

believe that this change constitutes a material change to the method in applying an accounting principle.

The fair value of reporting units is primarily driven by projected growth rates and operating results under the income approach using a discounted cash flow model, which applies an appropriate market-participant discount rate, and consideration of other market approach data from guideline public companies. If declining actual operating results or future operating results become indicative that the fair value of the Company’s reporting units has declined below their carrying values, an interim goodwill impairment test

may

need to be performed and

may

result in a non-cash goodwill impairment charge. If the Company’s market capitalization falls below the Company’s carrying value for a sustained period of time or if such a decline becomes indicative that the fair value of the Company’s reporting units has declined to below their carrying values, an interim goodwill impairment test

may

need to be performed and

may

result in a non-cash goodwill impairment charge.

On

July 2, 2018,

as discussed in Note B, Acquisition of Veth Propulsion Holding B.V., the Company acquired goodwill in the amount of

$23,999

and intangible assets in the amount of

$26,500

consisting of customer relationships, technology and know-how, and trade names as part of the acquisition of Veth Propulsion. As of

June 30, 2019,

these amounts are final. The Company, in coordination with an independent valuation firm, completed its fair value measurements and has recorded all purchase accounting entries in its financial statements for the year ended

June 30, 2019.

Veth Propulsion is reported as part of the Company's manufacturing segment and European Propulsion reporting unit.

During the

2019

fiscal year, the Company determined that there were

no

triggering events to warrant an interim goodwill impairment test. The Company conducted its annual assessment for goodwill impairment on

March 30, 2019,

the

first

day of its

fourth

fiscal quarter, its measurement date, using current assumptions, including updated forecasted cash flows and reporting unit specific discount rates of

13.0%

and

14.0%

for its European Propulsion and European Industrial reporting units, respectively, and concluded that goodwill is

not

impaired. As of

June 30, 2019,

goodwill in the amounts of

$23,371

and

$2,583

is carried in the European Propulsion and European Industrial reporting units, respectively. The fair values exceeded their carrying value by

118%

and

41%

for the European Propulsion and European Industrial reporting units, respectively, and therefore

no

impairment charge was required for these reporting units.

The changes in the carrying amount of goodwill are summarized as follows:

	Net Book Value Rollforward									Net Book Value By Reporting Unit
	Gross Carrying Amount			Accumulated Impairment			Net Book Value			European Industrial			European Propulsion
Balance at June 30, 2017	$	16,407		$	(13,822	)	$	2,585		$	2,585		$	-
Translation adjustment		107			-			107			107			-
Balance at June 30, 2018		16,514			(13,822	)		2,692			2,692			-
Acquisition		23,999			-			23,999			-			23,999
Translation adjustment		(737	)		-			(737	)		(109	)		(628	)
Balance at June 30, 2019	$	39,776		$	(13,822	)	$	25,954		$	2,583		$	23,371

Other Intangibles

At

June 30,

the following acquired intangible assets have definite useful lives and are subject to amortization:

	Net Book Value Rollforward									Net Book Value By Asset Type
	Gross Carrying Amount			Accumulated Amortization / Impairment			Net Book Value			Customer Relationships			Technology Know-how			Trade Name			Other
Balance at June 30, 2017	$	13,436		$	(11,632	)	$	1,804		$	-		$	-		$	1,319		$	485
Addition		19			-			19			-			-			-			19
Amortization		-			(149	)		(149	)		-			-			(84	)		(65	)
Translation adjustment		30			-			30			-			-			53			(23	)
Balance at June 30, 2018		13,485			(11,781	)		1,704			-			-			1,288			416
Addition		236			-			236			-			-			-			236
Acquistion		26,500			-			26,500			16,300			8,400			1,800			-
Amortization		-			(2,653	)		(2,653	)		(1,123	)		(1,172	)		(261	)		(97	)
Translation adjustment		(634	)		-			(634	)		(334	)		(203	)		(94	)		(3	)
Balance at June 30, 2019	$	39,587		$	(14,434	)	$	25,153		$	14,843		$	7,025		$	2,733		$	552

Other intangibles consist of certain proprietary technology, computer software, patents and licensing agreements.

The weighted average remaining useful life of the intangible assets included in the table above is approximately

9

years.

Intangible amortization expense for the years ended

June 30, 2019

and

2018

was

$2,653

and

$149,

respectively. Estimated intangible amortization expense for each of the next

five

fiscal years is as follows:

Fiscal Year
2020	$	2,904
2021		2,890
2022		2,874
2023		2,888
2024		2,789
Thereafter		10,808

The gross carrying amount of the Company’s intangible assets that have indefinite lives and are

not

subject to amortization as of

June 30, 2019

and

2018

are

$200

and

$202,

respectively. These assets are comprised of acquired tradenames.