Other Operating (Income) Expense

12 Months Ended

Dec. 31, 2018

Other Income And Expenses [Abstract]

Other Operating (Income) Expense

5. Other Operating (Income) Expense

Other operating income for the year ended December 31, 2018 primarily consisted of gains on asset sales, including one of the Company’s distribution centers, and was partially offset by other operating expenses.  Other operating expense for the year ended December 31, 2017 was primarily related to an impairment related to the Company’s Millen, Georgia plant.

As of September 30, 2017, the Company had concluded that the Company’s Toomsboro and Millen, Georgia facilities should no longer be evaluated together as a group of assets because the facilities are no longer interchangeable and will not manufacture like products.  

Given the change in the asset groupings of the two facilities and lack of estimated future cash flows associated with the base ceramic production at the Millen facility, the Company identified indicators of impairment at the Millen, Georgia facility as of September 30, 2017.  The Company determined that the projected cash flows attributable to the Millen, Georgia facility did not exceed the carrying value of the assets; therefore the Company concluded there was an impairment at that facility.  The Company engaged the services of a third party consulting firm to assist with the determination of the fair value of the related assets, which concluded that the assets were impaired.  The key assumptions and inputs impacting the fair value include third party data and commentary with respect to the property and equipment at our Millen facility.  For machinery and equipment and construction in progress, we used a cost approach to estimate the valuation.  We applied a 65 percent downward adjustment to calculated replacement cost based on an analysis of construction documents and historical expenditures to remove non-saleable soft costs such as engineering and installation that would have no value to a market participant.  Based on discussions with market participants, a salvage value multiplier ranging from 12 percent to 50 percent of the remaining replacement cost basis was applied to arrive at the estimated fair value for the machinery and equipment and construction in progress subject to impairment.  For real property, we used a market and cost approach and reconciled the two approaches.  In using the market approach, we determined that the value of comparable property ranged from approximately $30 to $40 per square foot, and the concluded value of the property at the Millen facility was approximately $35 per square foot.  In using the cost approach, we applied a 94% downward adjustment to the calculated value for the buildings and site improvements as a representation of economic obsolescence.  As a result of these valuation procedures, which included the use of Level 3 inputs as defined in Note 10, the Company recognized a $125,759 impairment of long-lived assets, primarily relating to buildings, machinery and equipment, and construction in progress.  As of September 30, 2017, the fair value of the Millen facility was estimated to be $18,756 using Level 3 inputs as defined in Note 10.  The Millen facility was sold in December 2018 for $23,000.  At the time of the sale, the Millen facility was classified as held for sale with a recorded value of $17,842.  See Note 19 for additional information.

As a result of the sale of the Company’s Millen facility for less than the carrying value of each of its Toomsboro Georgia and Eufaula, Alabama facilities combined with the continued lowered demand for our base ceramic proppants, the Company evaluated those long-lived assets for possible impairment as of December 31, 2018.  We prepared an undiscounted cash flow analysis for these two asset groups.  The Eufaula, Alabama facility is part of our technology asset group which also includes our New Iberia, Louisiana facility, and as such, we evaluated the entire technology asset grouping for impairment.  Key assumptions underlying our undiscounted cash flow analysis included, but were not limited to, facility utilization, production costs, major maintenance and long-term sales prices for products produced.  Based on these analyses, we noted that, for each of these asset groups, the carrying value was below the sum of the undiscounted cash flows, and thus no impairment was required.

If there are changes to our material assumptions, it is possible that we may have to recognize impairments in the future.  However, we believe that the material assumptions used in our impairment analysis were reasonable and were based on available information and forecasts at the time.  We continue to monitor whether or not events or circumstances would indicate that the carrying value of any of our long-lived assets might not be recoverable.

The Company assesses goodwill for possible impairment annually or sooner if circumstances indicate possible impairment may have occurred.  There were no such impairments during 2018 or 2017.