Note C – Goodwill and Other Long-Lived Assets

Fiscal 2015: During the fourth quarter of fiscal 2015, we determined that indicators of impairment were present with regard to intangible assets related to our compressed natural gas (“CNG”) fuel systems joint venture, dHybrid. Recoverability of the identified asset group was tested using future cash flow projections based on management’s long-range estimates of market conditions. The sum of these undiscounted future cash flows was less than the net book value of the asset group. In accordance with the applicable accounting guidance, the intangible assets were written down to their fair value, resulting in an impairment charge of $2,344,000.

During the third quarter of fiscal 2015, the Company concluded that an interim impairment test of the goodwill of its Engineered Cabs reporting unit was necessary. This conclusion was based on certain indicators of impairment, including the decision to close the Company’s Engineered Cabs’ facility in Florence, South Carolina, and significant downward revisions to forecasted cash flows as a result of continued weakness in the mining and agricultural end markets and higher than expected manufacturing costs. The Company expects to incur approximately $2,400,000 of severance expense associated with the facility closure. This amount will be recognized as restructuring expense ratably over the future service period.

Prior to conducting the goodwill impairment test, the Company first evaluated the other long-lived assets of the Engineered Cabs reporting unit for recoverability. Recoverability was tested using future cash flow projections based on management’s long-range estimates of market conditions. The sums of the undiscounted future cash flows for the customer relationship intangible asset and the property, plant and equipment of the Florence facility were less than their respective carrying values. As a result, these assets were written down to their respective fair values, resulting in impairment charges of $22,356,000 for the customer relationship intangible asset and $14,311,000 for the property, plant and equipment of the Florence asset group during the third quarter of fiscal 2015.

As noted above, the Company determined that indicators of potential impairment existed to require an interim goodwill analysis of the Engineered Cabs reporting unit. A comparison of the fair value of the Engineered Cabs reporting unit, determined using discounted cash flows, to its carrying value indicated that a step 2 calculation to quantify the potential impairment was required. After a subsequent review of the fair value of the net assets of Engineered Cabs, it was determined that the implied fair value of goodwill was $0 and, as a result, the entire $44,933,000 goodwill balance was written off during the third quarter of fiscal 2015. The key assumptions that drove the fair value calculation were projected cash flows and the discount rate.

During the second quarter of fiscal 2015, management committed to a plan to sell the assets of the Advanced Component Technologies, Inc. (“ACT”) business within Engineered Cabs. In accordance with the applicable accounting guidance, the net assets were recorded at the lower of net book value or fair value less costs to sell, resulting in an impairment charge of $2,389,000. During the third quarter of fiscal 2015, the Company completed the sale of this business and recognized a gain of $332,000.

During the second quarter of fiscal 2015, we determined that indicators of impairment were present at the Company’s aluminum high-pressure cylinder business in New Albany, Mississippi, due to current and projected operating losses. Recoverability of the identified asset group was tested using future cash flow projections based on management’s long-range estimates of market conditions. The sum of these undiscounted future cash flows was less than the net book value of the asset group. In accordance with the applicable accounting guidance, the net assets were written down to their fair value, resulting in an impairment charge of $3,221,000. On May 1, 2015, the Company completed the sale of this business. For additional information, refer to “Item 8. – Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Note D – Restructuring and Other Expense (Income)” of this Annual Report on Form 10-K.

During the second quarter of fiscal 2015, we determined that indicators of impairment were present at the Company’s military construction business. Recoverability of the identified asset group was tested using future cash flow projections based on management’s long-range estimates of market conditions. The sum of these undiscounted future cash flows was less than the net book value of the asset group. In accordance with the applicable accounting guidance, the net assets were written down to their fair value, resulting in an impairment charge of $1,179,000, which represents the remaining book value of the asset group.

During the fourth quarter of fiscal 2014, management committed to a plan to sell the Company’s 60%-owned consolidated joint venture in India, Worthington Nitin Cylinders. As all of the criteria for classification as assets held for sale were met, the net assets of the business were presented separately as assets held for sale in our consolidated balance sheet as of May 31, 2014. In accordance with the applicable accounting guidance, the net assets were recorded at the lower of net book value or fair value less costs to sell as of May 31, 2014. As a result of changes in facts and circumstances related to the planned sale of Worthington Nitin Cylinders during the second quarter of fiscal 2015, the Company reassessed the fair value of the business and determined that the remaining book value should be written off resulting in an impairment charge of $6,346,000.

During the fourth quarter of fiscal 2014, management committed to a plan to sell the Company’s stainless steel business, Precision Specialty Metals, Inc. (“PSM”). As all of the criteria for classification as assets held for sale were met, the net assets of the business have been presented separately as assets held for sale in our consolidated balance sheets as of May 31, 2015 and 2014. In accordance with the applicable accounting guidance, the net assets were recorded at the lower of net book value or fair value less costs to sell as of May 31, 2014. As a result of changes in facts and circumstances related to the planned sale, the Company reassessed the fair value of the business resulting in additional impairment charges totaling $3,050,000 during fiscal 2015.

Fiscal 2014: During the fourth quarter of fiscal 2014, management committed to a plan to sell the Company’s 60%-owned consolidated joint venture in India, Worthington Nitin Cylinders. As all of the criteria for classification as assets held for sale were met, the net assets of this business are presented separately as assets held for sale in our consolidated balance sheet as of May 31, 2014. In accordance with the applicable accounting guidance, the net assets were recorded at the lower of net book value or fair value less costs to sell. As the fair value of the asset group, or $5,925,000, was lower than its net book value, an impairment charge of $18,959,000 was recognized within impairment of long-lived assets in our fiscal 2014 consolidated statement of earnings. The portion of this impairment loss attributable to the noncontrolling interest of $7,583,000 was recorded within net earnings attributable to noncontrolling interest in our fiscal 2014 consolidated statement of earnings.

During the fourth quarter of fiscal 2014, management committed to a plan to sell PSM. As all of the criteria for classification as assets held for sale were met, the net assets of this business are presented separately as assets held for sale in our consolidated balance sheet as of May 31, 2014. In accordance with the applicable accounting guidance, the net assets were recorded at the lower of net book value or fair value less costs to sell. As the fair value of the asset group, or $19,115,000, was lower than its net book value, an impairment charge of $7,141,000 was recognized within impairment of long-lived assets in our fiscal 2014 consolidated statement of earnings.

During the fourth quarter of fiscal 2014, we determined that indicators of impairment were present at the Company’s aluminum high-pressure cylinder business in New Albany, Mississippi, due to current and projected operating losses. Recoverability of the identified asset group was tested using future cash flow projections based on management’s long-range estimates of market conditions. The sum of these undiscounted future cash flows was less than the net book value of the asset group. In accordance with the applicable accounting guidance, the net assets were written down to their fair value of $7,034,000, resulting in an impairment charge of $1,412,000 within impairment of long-lived assets in our fiscal 2014 consolidated statement of earnings.

During the second quarter of fiscal 2014, we committed to a re-branding initiative. Under the re-branding initiative, we re-branded substantially all of our businesses under the Worthington Industries name. In connection with the change in branding strategy, we discontinued the use of all non-Worthington trade names except those related to consumer products such as BernzOmatic^® and Balloon Time^® and those related to our joint ventures. As a result, we determined an impairment indicator was present for the trade names that have been or will be discontinued. As no future cash flows will be attributed to the impacted trade names, the entire book value was written off, resulting in an impairment charge of $30,734,000 within impairment of long-lived assets in our fiscal 2014 consolidated statement of earnings.

Fiscal 2013: During the fourth quarter of fiscal 2013, we determined that indicators of impairment were present at Worthington Nitin Cylinders due to current and projected operating losses. Recoverability of the identified asset group was tested using future cash flow projections based on management’s long-range estimates of market conditions. The sum of these undiscounted future cash flows was less than the net book value of the asset group. In accordance with the applicable accounting guidance, the net assets were written down to their fair value of $6,856,000, resulting in an impairment charge of $4,968,000 within impairment of long-lived assets in our fiscal 2013 consolidated statement of earnings. The portion of this impairment loss attributable to the noncontrolling interest, or $1,987,000, was recorded within net earnings attributable to noncontrolling interest in our fiscal 2013 consolidated statement of earnings.

During the first quarter of fiscal 2013, management committed to a plan to sell the Company’s pressure cylinders operations in Czech Republic. In accordance with the applicable accounting guidance, the net assets were recorded at the lower of net book value or fair value less costs to sell. As the fair value of the asset group was lower than its net book value, an impairment charge of $1,570,000 was recognized. On October 31, 2012, we completed the sale of this asset group to an unrelated third party resulting in a gain of approximately $50,000. The combined impact of these items of $1,520,000 is presented within impairment of long-lived assets in our fiscal 2013 consolidated statement of earnings.

Goodwill

The following table summarizes the changes in the carrying amount of goodwill during fiscal 2015 and fiscal 2014 by reportable business segment:


	Steel Processing		Pressure Cylinders			Engineered Cabs			Other			Total
(in thousands)
Balance at May 31, 2013
Goodwill	$	-	$	163,274		$	44,933		$	127,245		$	335,452
Accumulated impairment losses		-		-			-			(121,594	)		(121,594	)

		-		163,274			44,933			5,651			213,858

Acquisitions and purchase accounting adjustments		-		36,033			-			-			36,033
Translation adjustments		-		1,202			-			-			1,202

Balance at May 31, 2014
Goodwill		-		200,509			44,933			127,245			372,687
Accumulated impairment losses		-		-			-			(121,594	)		(121,594	)

		-		200,509			44,933			5,651			251,093

Acquisitions and purchase accounting adjustments		6,587		41,421			-			-			48,008
Divestitures		-		(1,891	)		-			-			(1,891	)
Translation adjustments		-		(13,278	)		-			-			(13,278	)
Impairment losses		-		-			(44,933	)		-			(44,933	)

		6,587		26,252			(44,933	)		-			(12,094	)

Balance at May 31, 2015
Goodwill		6,587		226,761			44,933			127,245			405,526
Accumulated impairment losses		-		-			(44,933	)		(121,594	)		(166,527	)

	$	6,587	$	226,761		$	-		$	5,651		$	238,999

For additional information regarding the Company’s acquisitions, refer to “Note O – Acquisitions.”

Other Intangible Assets

Intangible assets with definite lives are amortized on a straight-line basis over their estimated useful lives, which range from one to 20 years. The following table summarizes other intangible assets by class as of May 31, 2015 and 2014:


	2015				2014
(in thousands)	Cost		Accumulated Amortization		Cost		Accumulated Amortization
Indefinite-lived intangible assets:
Trademarks	$	12,601	$	-	$	12,601	$	-

Total indefinite-lived intangible assets		12,601		-		12,601		-
Definite-lived intangible assets:
Customer relationships	$	119,871	$	34,421	$	143,585	$	28,257
Non-compete agreements		14,221		6,897		10,733		4,263
Technology / know-how		15,633		2,350		12,068		1,273
Other		4,338		3,879		2,512		1,713

Total definite-lived intangible assets		154,063		47,547		168,898		35,506

Total intangible assets	$	166,664	$	47,547	$	181,499	$	35,506

Amortization expense of $20,422,000, $17,386,000, and $10,467,000 was recognized during fiscal 2015, fiscal 2014 and fiscal 2013, respectively.

Amortization expense for each of the next five fiscal years is estimated to be:


(in thousands)
2016	$	17,163
2017	$	16,275
2018	$	15,850
2019	$	12,731
2020	$	10,345