GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Aug. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table details the changes in the carrying amount of goodwill by reportable segment:



		Americas								International
(in thousands)		Recycling			Mills		Fabrication			Mill			Marketing and Distribution			Consolidated
Goodwill, gross
Balance at September 1, 2015		$	9,751		$	4,970	$	57,637		$	2,517		$	1,912		$	76,787
	Foreign currency translation	—			—		—			(85		)	70			(15		)
Balance at August 31, 2016		9,751			4,970		57,637			2,432			1,982			76,772
	Acquisitions	—			—		306			—			—			306
	Foreign currency translation	—			—		—			232			—			232
Balance at August 31, 2017		$	9,751		$	4,970	$	57,943		$	2,664		$	1,982		$	77,310

Accumulated impairment losses
Balance at September 1, 2015		$	(9,751	)	$	—	$	(493	)	$	(160	)	$	—		$	(10,404	)
	Foreign currency translation	—			—		—			5			—			5
Balance at August 31, 2016		(9,751		)	—		(493		)	(155		)	—			(10,399		)
	Foreign currency translation	—			—		—			(14		)	—			(14		)
	Impairment	—			—		—			—			(1,982		)	(1,982		)
Balance at August 31, 2017		$	(9,751	)	$	—	$	(493	)	$	(169	)	$	(1,982	)	$	(12,395	)

Goodwill, net
Balance at September 1, 2015		$	—		$	4,970	$	57,144		$	2,357		$	1,912		$	66,383
	Foreign currency translation	—			—		—			(80		)	70			(10		)
Balance at August 31, 2016		—			4,970		57,144			2,277			1,982			66,373
	Acquisitions	—			—		306			—			—			306
	Foreign currency translation	—			—		—			218			—			218
	Impairment	—			—		—			—			(1,982		)	(1,982		)
Balance at August 31, 2017		$	—		$	4,970	$	57,450		$	2,495		$	—		$	64,915

In the fourth quarter of 2017, the Company recorded a $2.0 million goodwill impairment charge related to a reporting unit in its International Marketing and Distribution segment due to management's decision to wind-down the associated operations. For fiscal 2016, the annual goodwill impairment analysis did not result in any impairment charges at any of the Company's reporting units. For fiscal 2015, the Company recorded a $7.3 million goodwill impairment charge related to its Americas Recycling segment due to weakened demand for ferrous scrap exports coupled with a lower near term forecast of future operating results.

The Company estimates the fair value of its reporting units using a weighting of fair values derived from the income and market approaches. Under the income approach, the Company determines the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on management's estimates of revenue growth rates and operating margins, taking into account industry and market conditions. The discount rate is based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the Company. The market approach, on the other hand, estimates fair value based on market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and investment characteristics as the reporting unit.

As of August 31, 2017 and 2016, one of the Company's reporting units within the Americas Fabrication reporting unit comprised $51.6 million and $51.3 million, respectively, of the Company's total goodwill. As a result of our annual testing, the fair value of this reporting unit exceeded the carrying value by 13.5%. The assumptions that have the most significant impact on determination of the fabrication reporting unit fair value are the estimates of gross margin expansion, value of the terminal year, and the weighted average cost of capital (discount rate). A change in any of these assumptions, individually or in the aggregate, or future financial performance that is below management expectations may result in the carrying value of this reporting unit exceeding its fair value, and goodwill could be impaired. For all other reporting units, the excess of the fair value over carrying value of each reporting unit was substantial. The future occurrence of a potential indicator of impairment could include matters such as: a decrease in expected net earnings, adverse equity market conditions, a decline in current market multiples, a decline in CMC's common stock price, a significant adverse change in legal factors or the general business climate, an adverse action or assessment by a regulator, a significant downturn in non-residential construction markets in the United States, and continued levels of imported steel into the United States. In the event of significant adverse changes of the nature described above, it may be necessary for the Company to recognize a non-cash impairment of goodwill, which could have a material adverse effect on the Company's consolidated business, results of operations and financial condition.

The following intangible assets subject to amortization are included in other noncurrent assets on the Company's consolidated balance sheets:



	August 31, 2017						August 31, 2016
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Customer base	$	6,334	$	2,660	$	3,674	$	6,160	$	2,714	$	3,446
Favorable land leases	10,189		2,849		7,340		10,081		2,518		7,563
Non-competition agreements	1,750		578		1,172		1,600		371		1,229
Brand name	1,328		770		558		628		328		300
Other	101		65		36		101		58		43
Total	$	19,702	$	6,922	$	12,780	$	18,570	$	5,989	$	12,581

Excluding goodwill, there are no other significant intangible assets with indefinite lives. Amortization expense for intangible assets for the years ended August 31, 2017, 2016 and 2015 was $2.3 million, $3.6 million, and $6.9 million, respectively. At August 31, 2017, the weighted average remaining useful life of these intangible assets, excluding the favorable land leases was seven years. The weighted average life of the favorable land leases was 48 years. Estimated amounts of amortization expense for the next five years are as follows.




Year Ended August 31,	(in thousands)
2018	$	1,578
2019	1,342
2020	1,105
2021	1,082
2022	804

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details