Note C – Goodwill and Other Long-Lived Assets

Goodwill

The following table summarizes the changes in the carrying amount of goodwill during fiscal 2018 and fiscal 2017 by reportable business segment:

(in thousands)	Steel Processing		Pressure Cylinders			Engineered Cabs			Other			Total
Balance at May 31, 2016
Goodwill	$	7,045	$	233,371		$	44,933		$	127,245		$	412,594
Accumulated impairment losses		-		-			(44,933	)		(121,594	)		(166,527	)
		7,045		233,371			-			5,651			246,067
Acquisitions and purchase accounting adjustments		854		-			-			-			854
Translation adjustments		-		752			-			-			752
		854		752			-			-			1,606
Balance at May 31, 2017
Goodwill		7,899		234,123			44,933			127,245			414,200
Accumulated impairment losses		-		-			(44,933	)		(121,594	)		(166,527	)
		7,899		234,123			-			5,651			247,673
Acquisitions and purchase accounting adjustments		-		103,437			-			-			103,437
Translation adjustments		-		3,739			-			-			3,739
Impairment losses		-		(4,015	)		-			(5,651	)		(9,666	)
		-		103,161			-			(5,651	)		97,510
Balance at May 31, 2018
Goodwill		7,899		341,299			44,933			127,245			521,376
Accumulated impairment losses		-		(4,015	)		(44,933	)		(127,245	)		(176,193	)
	$	7,899	$	337,284		$	-		$	-		$	345,183

For additional information regarding the Company’s acquisitions, refer to “Note O – Acquisitions.” Fiscal 2018 impairment charges noted in the table above consisted of $4,015,000 of goodwill allocated to oil & gas equipment assets available for sale and $5,651,000 related to the sale of a 65% stake in WEI on March 31, 2018.

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, 2018 and 2017:

	2018				2017
			Accumulated				Accumulated
(in thousands)	Cost		Amortization		Cost		Amortization
Indefinite-lived intangible assets:
Trademarks	$	76,701	$	-	$	14,501	$	-
Total indefinite-lived intangible assets		76,701		-		14,501		-
Definite-lived intangible assets:
Customer relationships	$	173,363	$	57,125	$	96,262	$	45,822
Non-compete agreements		8,669		8,137		9,443		7,751
Technology / know-how		26,411		5,856		21,755		5,607
Other		3,804		3,804		3,954		3,954
Total definite-lived intangible assets		212,247		74,922		131,414		63,134
Total intangible assets	$	288,948	$	74,922	$	145,915	$	63,134

The increase in the carrying value of other intangible assets was primarily driven by the June 2, 2017 acquisition of AMTROL, as disclosed in “Note O – Acquisitions”, partially offset by impairment charges of $11,549,000, $3,849,000 and $1,674,000 related to intangible assets of Worthington Aritas, certain oil & gas equipment asset groups in Pressure Cylinders and WEI, respectively, as further discussed below.

Amortization expense totaled $19,679,000, $13,525,000, and $15,813,000 in fiscal 2018, fiscal 2017 and fiscal 2016, respectively.

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

(in thousands)
2019	$	15,308
2020	$	13,299
2021	$	12,539
2022	$	10,858
2023	$	10,221

Impairment of Long-Lived Assets

Fiscal 2018: During the fourth quarter of fiscal 2018, management committed to plans to sell the Company’s cryogenics business in Turkey, Worthington Aritas, and certain underperforming oil & gas equipment assets within Pressure Cylinders. As all of the criteria for classification as assets held for sale were met in both instances, the net assets of each asset group have been presented separately as assets held for sale in our consolidated balance sheets. 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. The book value of Worthington Aritas exceeded its estimated fair market value of $9,000,000, resulting in an impairment charge of $42,422,000, consisting of $19,621,000, $11,549,000, and $11,252,000 related to fixed assets, intangible assets, and other assets, respectively. The impairment charge related to intangible assets was for customer relationships and technological know-how. The book value of the oil & gas equipment asset group also exceeded its estimated fair market value of $21,000,000, resulting in an impairment charge of $10,497,000, consisting of $4,015,000, $3,849,000, and $2,633,000 related to allocated goodwill, intangible assets, and fixed assets, respectively. The impairment charge related to intangible assets was for the full write-off of the remaining book value of customer relationships. In both instances, fair value was determined using observable (Level 2) inputs.

During the second quarter of fiscal 2018, the Company determined that indicators of impairment were present with regard to the goodwill and intangible assets of the former WEI reporting unit. As a result, these assets were written down to their estimated fair value resulting in an impairment charge of $7,325,000. During the second quarter of fiscal 2018, the Company also identified the presence of impairment indicators with regard to vacant land at the oil & gas equipment facility in Bremen, Ohio, resulting in an impairment charge of $964,000 to write the vacant land down to its estimated fair value.

Fiscal 2016: Due to the decline in oil prices and resulting reduced demand for products, management determined that an impairment indicator was present for the long-lived assets in the oil & gas equipment business within Pressure Cylinders. The Company had tested the five asset groups in its oil & gas equipment business for impairment during the fourth quarter of fiscal 2015 and again in the first quarter of fiscal 2016. In each of these tests, the Company’s estimate of the undiscounted future cash flows for each asset group indicated that the carrying amounts were expected to be recovered as of those measurement dates.

During the second quarter of fiscal 2016, the continued decline of oil prices further reduced the demand for oil & gas equipment products, causing a significant decrease in the long-term cash flow projections of that business. Based on these revised cash flow projections, the Company determined that long-lived assets of two of the facilities with a combined carrying amount of $59,895,000 were impaired and wrote them down to their estimated fair value of $36,933,000, resulting in an impairment charge of $22,962,000. Fair value was based on expected future cash flows using Level 3 inputs under Accounting Standard Codification (“ASC”) 820. The cash flows are those expected to be generated by market participants, discounted at an appropriate rate for the risks inherent in those cash flow projections, or 13%.

As a result of the impairment of the oil & gas equipment assets noted above, the Company also performed an impairment review of the goodwill of the Pressure Cylinders reporting unit during the second quarter of fiscal 2016. The Company first assessed the reporting unit structure and determined that it was no longer appropriate to aggregate the oil & gas equipment component with the rest of Pressure Cylinders for purposes of goodwill impairment testing. This determination was driven by changes in the economic characteristics of the oil & gas equipment business as a result of sustained low oil prices, which indicated that the risk profile and prospects for growth and profitability were no longer similar to the other components of Pressure Cylinders. In accordance with the applicable accounting guidance, the Company allocated a portion of Pressure Cylinders goodwill totaling $25,982,000 to the Oil & Gas Equipment reporting unit using a relative fair value approach. A subsequent comparison of the fair values of the Oil & Gas Equipment and the Pressure Cylinders reporting units, determined using discounted cash flows, to their respective carrying values indicated that a step 2 calculation to quantify a potential impairment was not required. The key assumptions that drive the fair value calculations are projected cash flows and the discount rate. Prior to the allocation of goodwill, the Company tested the goodwill of the old Pressure Cylinders reporting unit for impairment and determined that fair value exceeded carrying value by a significant amount.

During the first quarter of fiscal 2016, management finalized its plan to close the Engineered Cabs facility in Florence, South Carolina and transfer the majority of the business to the Engineered Cabs facility in Greeneville, Tennessee. Under the plan, certain machinery and equipment was transferred to the Greeneville facility to support higher volume requirements. Management reevaluated the recoverability of the remaining assets and determined that long-lived assets with a carrying value of $4,059,000 were impaired. As a result, these long-lived assets were written down to their estimated fair value of $1,059,000 resulting in an impairment charge of $3,000,000 during the first quarter of fiscal 2016. The Company ceased production at the Florence facility on September 30, 2015.