| Fair Value | NOTE O
– 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 – Observable inputs other than quoted prices in active markets
for identical assets and liabilities.
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, 2015, our financial assets and liabilities
measured at fair value on a recurring basis were as
follows:
(in
thousands) Quoted Prices Significant Significant (Level
3) Totals
Assets
Derivative contracts
(1) $ - $ 11 $ - $ 11
Total assets $ - $ 11 $ - $ 11
Liabilities
Derivative contracts
(1) $ - $ 22,112 $ - $ 22,112
Contingent consideration
obligations (2) - - 3,979 3,979
Total
liabilities $ - $ 22,112 $ 3,979 $ 26,091
At May 31, 2015, our financial assets and liabilities
measured at fair value on a recurring basis were as
follows:
(in
thousands) Quoted Prices Significant Significant Totals
Assets
Derivative contracts
(1) $ - $ 171 $ - $ 171
Total assets $ - $ 171 $ - $ 171
Liabilities
Derivative contracts
(1) $ - $ 22,131 $ - $ 22,131
Contingent consideration
obligation (2) - - 3,979 3,979
Total
liabilities $ - $ 22,131 $ 3,979 $ 26,110
(1)
The fair value of our derivative contracts 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 N –
Derivative Instruments and Hedging Activities” for additional
information regarding our use of derivative instruments.
(2)
The fair value of the contingent consideration obligation
is determined using a probability weighted cash flow approach based
on management’s projections of future cash flows of the
acquired business. The fair value measurement was based on Level 3
inputs not observable in the market.
Non-Recurring Fair Value Measurements At August 31, 2015, our financial assets and liabilities
measured at fair value on a non-recurring basis were as
follows:
(in
thousands) Quoted Prices Significant Significant Totals
Assets
Long-lived assets held
and used (1) $ - $ 1,059 $ - $ 1,059
Total assets $ - $ 1,059 $ - $ 1,059
(1)
During the first quarter of fiscal 2016, management
reviewed certain long-lived assets of its Engineered Cabs facility
in Florence, South Carolina, for impairment. In accordance with the
applicable accounting guidance, long-lived assets with a carrying
value of $4,059,000 were written down to their estimated fair value
of $1,059,000 resulting in an impairment charge of $3,000,000
during the three months ended August 31, 2015. Comparable
market transactions were used to measure fair value. Refer to
“NOTE C – Impairment of Long-Lived Assets” for
additional information.
At May 31, 2015, our assets measured at fair value on a
non-recurring basis were categorized as follows:
(in
thousands) Quoted Prices Significant Significant Totals
Assets
Long-lived assets held
and used (1) $ - $ - $ 12,403 $ 12,403
Total assets $ - $ - $ 12,403 $ 12,403
(1)
During the fourth quarter of fiscal 2015, management
reviewed certain intangible assets related to our CNG fuel systems
joint venture, dHybrid, for impairment. In accordance with the
applicable accounting guidance, the intangible assets were written
down to their fair value of $600,000, resulting in an impairment
charge of $2,344,000. The key assumptions that drove the fair value
calculation were projected cash flows and the discount
rate. During the third quarter of fiscal 2015, the Company concluded
that an interim impairment test of the goodwill of its Engineered
Cabs operating segment was necessary. Prior to conducting the
goodwill impairment test, the Company first evaluated the other
long-lived assets of the Engineered Cabs operating segment for
recoverability. Recoverability was tested using future cash flow
projections based on management’s long-range estimates of
market conditions. The sum of the undiscounted future cash flows
for the customer relationship intangible asset and the property,
plant and equipment of the Florence, South Carolina facility were
less than their respective carrying values. As a result, these
assets were written down to their respective fair values of
$2,000,000 and $9,803,000. The fair value measurements were based
on Level 3 inputs not observable in the market. The key assumptions
that drove the fair value calculations were projected cash flows
and the discount rate. 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, short-term borrowings, 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
$596,651,000 and $610,028,000 at August 31, 2015 and
May 31, 2015, respectively. The carrying amount of long-term
debt, including current maturities, was $581,747,000 and
$580,193,000 at August 31, 2015 and May 31, 2015,
respectively. |
