Fair Value

3 Months Ended

Aug. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value

NOTE Q – Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Fair value is an exit price concept that assumes an orderly transaction between willing market participants and is required to be based on assumptions that market participants would use in pricing an asset or a liability.  Current accounting guidance establishes a three-tier fair value hierarchy as a basis for considering such assumptions and for classifying the inputs used in the valuation methodologies.  This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.  The three levels of inputs used to measure fair values are as follows:

Level 1 – Observable prices in active markets for identical assets and liabilities.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the assets and liabilities, either directly or indirectly.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

Recurring Fair Value Measurements

At August 31, 2020, our assets and liabilities measured at fair value on a recurring basis were as follows:

			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative instruments (1)	$	-	$	2,531	$	-	$	2,531
Investment in Nikola (2)		287,630		-		-		287,630
Total assets	$	287,630	$	2,531	$	-	$	290,161
Liabilities
Derivative instruments (1)	$	-	$	2,966	$	-	$	2,966
Total liabilities	$	-	$	2,966	$	-	$	2,966

At May 31, 2020, our assets and liabilities measured at fair value on a recurring basis were as follows:

			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Derivative instruments (1)	$	-	$	181	$	-	$	181
Total assets	$	-	$	181	$	-	$	181
Liabilities
Derivative instruments (1)	$	-	$	8,777	$	-	$	8,777
Total liabilities	$	-	$	8,777	$	-	$	8,777

(1) The fair value of our derivative instruments is based on the present value of the expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities.  Market observable, Level 2 inputs are used to determine the present value of the expected future cash flows.  Refer to “NOTE P – Derivative Instruments and Hedging Activities” for additional information regarding our use of derivative instruments.

(2) The fair value of the investment in Nikola is based on the share price of Nikola stock at August 31, 2020.

Non-Recurring Fair Value Measurements

At August 31, 2020, our assets measured at fair value on a non-recurring basis were as follows:

			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Long-lived assets held and used (1)	$	-	$	9,593	$	-	$	9,593
Total assets	$	-	$	9,593	$	-	$	9,593

(1) During the quarter, management determined indicators of impairment were present with regard to the cryogenics business primarily operated out of Theodore, Alabama with European distribution in Austria.  As a result, long-lived assets with a carrying value of $13,526,000 were written down to their estimated fair value of $9,193,000.  Additionally, the customer list intangible assets with a carrying value of $3,662,000 were deemed to be fully impaired and written off.  

During the quarter, the Company decided to discontinue its operation of the manufacturing line for alternative fuel cylinders at the Jefferson, Ohio facility.  As a result, long-lived assets with a carrying value of $1,823,000 were written down to their estimated fair market value of $400,000.  

At May 31, 2020, our assets measured at fair value on a non-recurring basis were as follows:

			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
(in thousands)	(Level 1)		(Level 2)		(Level 3)		Totals
Assets
Investment in unconsolidated affiliate (1)	$	-	$	-	$	13,623	$	13,623
Long-lived assets held for sale (2)		-		4,084		-		4,084
Long-lived assets held and used (3)		-		6,477		2,800		9,277
Total assets	$	-	$	10,561	$	16,423	$	26,984

(1) On November 1, 2019, in connection with the contribution of substantially all of the net assets of the Engineered Cabs business to the newly-formed Cabs joint venture, we obtained a 20% minority ownership interest.  In accordance with the applicable accounting guidance, our minority ownership interest in the Cabs joint venture was recorded at its acquisition date fair value of $13,623,000.  

During the first quarter of fiscal 2020, we determined our 10% minority ownership interest in our Nisshin joint venture was fully impaired based on the estimated recoverability of the related assets.  

(2) During the third quarter of fiscal 2020, the Company’s consolidated joint venture WSP committed to plans to sell its Canton, Michigan facility and some of the production equipment at that facility.  In accordance with the applicable accounting guidance, certain production equipment was recorded at the lower of net book value or fair market value less costs to sell.  The book value of the WSP production equipment exceeded the estimated fair value of $700,000, resulting in an impairment charge of $1,274,000.  

During the third quarter of fiscal 2020, in connection with the closure of the oil & gas equipment manufacturing operations in Wooster, Ohio, fixed assets consisting of land and a building were written down to their estimated fair market value of $3,384,000.  

(3) During the fourth quarter of 2020, in connection with the annual indefinite lived assets impairment test, certain European tradenames were written down to their estimated fair market value of $2,800,000.    

During the fourth quarter of fiscal 2020, the Company identified an impairment indicator related to the TWB Hermosillo facility operating lease due to the economic impact of COVID-19.  As a result, the lease ROU asset with a net book value of $565,000 was deemed fully impaired and written off.

In May 2020, the Company committed to a plan to shut down the packaging solutions business in Greensburg, Indiana.  As a result, long-lived assets with a carrying value of $2,810,000 were written down to their estimated fair market value of $266,000.

During the third quarter of fiscal 2020, in connection with the closure of the oil & gas equipment manufacturing operations in Wooster, Ohio, customer list intangible assets were determined to be fully impaired and written off.  In addition, the remaining fixed assets at Wooster, Ohio were written down to their estimated fair market value of $6,211,000.  

During the third quarter of fiscal 2020, the Company identified an impairment indicator for the oil & gas equipment business and performed an interim impairment test of the reporting unit.  In accordance with the applicable accounting guidance, the book value of the corresponding goodwill was written off, resulting in an impairment charge of $22,097,000.

During the first quarter of fiscal 2020, the Company identified an impairment indicator for the fabricated products business in Stow, Ohio within the former Engineered Cabs operating segment.  As a result, fixed assets with a net book value of $1,469,000 and lease ROU assets with a net book value of $3,938,000 were deemed to be fully impaired and written off.  

The fair value of non-derivative financial instruments included in the carrying amounts of cash and cash equivalents, receivables, notes receivable, income taxes receivable, other assets, accounts payable, accrued compensation, contributions to employee benefit plans and related taxes, other accrued items, income taxes payable and other liabilities approximate carrying value due to their short-term nature. The fair value of long-term debt, including current maturities, based upon models utilizing market observable (Level 2) inputs and credit risk, was $788,567,000 and $740,678,000 at August 31, 2020 and May 31, 2020, respectively. The carrying amount of long-term debt, including current maturities, was $707,491,000 and $699,665,000 at August 31, 2020 and May 31, 2020, respectively.