Quarterly report pursuant to Section 13 or 15(d)

Intangible Assets and Goodwill (Notes)

v3.8.0.1
Intangible Assets and Goodwill (Notes)
 6 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets Disclosure [Text Block]
Intangible Assets and Goodwill

Intangible Assets

Intangible assets are stated at the lower of cost or fair value.  With the exception of most trade names, intangible assets are amortized on a straight-line basis over periods ranging from three to 21 years, representing the period over which we expect to receive future economic benefits from these assets.  We assess the carrying value of most trade names annually, or more often if events or changes in circumstances indicate there may be impairment.  

The following tables summarize the carrying amounts and related accumulated amortization for intangible assets as of March 31, 2018 and September 30, 2017.
 

 
March 31, 2018
 
September 30, 2017
 
Cost
 
Accumulated
Amortization
 
Cost
 
Accumulated
Amortization
Finite-lived assets:
 

 
 

 
 

 
 

Trade names
$
0.2

 
$
(0.1
)
 
$
0.2

 
$
(0.1
)
Customer relationships
477.4

 
(140.0
)
 
468.7

 
(125.9
)
Technology, including patents
82.8

 
(43.7
)
 
80.7

 
(39.9
)
Software
57.5

 
(47.6
)
 
48.3

 
(41.5
)
Other
0.2

 
(0.2
)
 
0.2

 
(0.2
)
 
618.1

 
(231.6
)
 
598.1

 
(207.6
)
Indefinite-lived assets:
 

 
 

 
 

 
 

Trade names
131.3

 
—

 
133.4

 
—

 
 
 
 
 
 
 
 
Total
$
749.4

 
$
(231.6
)
 
$
731.5

 
$
(207.6
)


As a result of the required annual impairment assessment performed in the third quarter of 2017, the fair value of trade names was determined to meet or exceed the carrying value for all trade names, resulting in no impairment to trade names.

The net change in intangible assets during the six months ended March 31, 2018 was driven by normal amortization, foreign currency translation, and an impairment charge on certain trade names. See below for an update to the impairment assessment for trade names most directly impacted by domestic coal mining and coal power for which an impairment of $4.6 pre-tax ($3.5 after tax) was recorded during the quarter ended March 31, 2018. As of March 31, 2018 we had approximately $4 of trade name book value remaining in the Process Equipment Group segment most directly impacted by domestic coal mining and coal power. In conjunction with our impairment testing, we also reassessed the useful lives of other definite-lived intangible assets specific to the intangibles impacted by domestic coal mining and coal power, resulting in no significant changes in amortization.

Goodwill

Goodwill is not amortized, but is subject to annual impairment tests.  Goodwill has been assigned to reporting units.  We assess the carrying value of goodwill annually, or more often if events or changes in circumstances indicate there may be impairment.  Impairment testing is performed at a reporting unit level.

 
Process
Equipment
Group
 
Batesville
 
Total
Balance September 30, 2017
$
639.2

 
$
8.3

 
$
647.5

Impairment charge
58.8

 
—

 
58.8

Foreign currency adjustments
13.9

 
—

 
13.9

Balance March 31, 2018
$
594.3

 
$
8.3

 
$
602.6



As a result of the required annual impairment assessment performed in the third quarter of 2017, the Company tested the recoverability of its goodwill, and in all reporting units, the fair value of goodwill was determined to exceed the carrying value, resulting in no impairment of goodwill. Since the fair value of each reporting unit exceeded its carrying value, the second step of the goodwill impairment test was not necessary.

As previously disclosed, the fair value of the reporting unit in the Process Equipment Group segment that is most directly impacted by domestic coal mining and coal power had exceeded its carrying value by less than 10% for three quarters. Testing for impairment of goodwill and indefinite lived assets must be performed annually, or on an interim basis upon the occurrence of triggering events or substantive changes in circumstances that indicate fair value is impaired.  In connection with the preparation of the quarterly financial statements for the second quarter 2018, an interim impairment assessment was performed at the previously mentioned reporting unit in the Process Equipment Group segment. During the quarter ended March 31, 2018, published industry reports reduced their forecasts for domestic coal production and consumption. The reporting unit also experienced a larger than expected decline in orders for equipment and parts used in the domestic coal mining and coal power industries. In conjunction with these events and as part of the long-term strategic forecasting process, the Company made the decision to redirect strategic investments for growth, significantly reducing the reporting unit’s terminal growth rate.  As a result of this change in expected future cash flows, along with comparable fair value information, management concluded that the reporting unit carrying value exceeded its fair value, resulting in a goodwill impairment charge of $58.8. The pre-impairment goodwill balance for the reporting unit was $71.3.  A 10% further reduction in the fair value of this reporting unit would indicate a potential additional impairment of $7.4.  Intangible asset impairment charges for trade names associated with the same reporting unit were $4.6 pre-tax ($3.5 after tax) based on similar factors.