XML 28 R14.htm IDEA: XBRL DOCUMENT
v3.19.2

Goodwill and Intangible Assets | 12 Months Ended
--- | ---
Jun. 01, 2019
Goodwill And Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets |
7. | GOODWILL AND INTANGIBLE ASSETS
Goodwill The Company had $6.3 million of goodwill reported on our balance sheet at June 2, 2018, entirety related to our IMES reporting unit, which was acquired in fiscal 2016 and is included in the Healthcare segment. As a result of the Company’s annual impairment review as of March 3, 2019, and after reviewing the totality of events and circumstances as provided in ASU 2011-08, we determined that it was more likely than not that the fair value for the IMES reporting unit was less than its carrying value. Accordingly, we performed the quantitative impairment test using the income method, which was based on a discounted future cash flow approach that used the significant assumptions of projected revenue, projected operational profit, terminal growth rates and the cost of capital. The Guideline Public Company Method was also considered in the goodwill impairment assessment. The quantitative impairment test determined that the IMES reporting unit’s carrying value exceeded its fair value by an amount that exceeded the recorded goodwill balance. As a result, in the fourth quarter of fiscal year 2019, the Company recorded a non-cash goodwill impairment charge of $6.3 million for the full amount of the goodwill associated with the IMES reporting unit. Factors considered in calculating the fair value of the IMES reporting unit were historical performance, forecasted financials for the following ten years and information from comparable public companies. Estimates contain management’s best estimates of economic and market conditions over the projected period, including growth rates in revenue and costs and best estimates of future expected changes in operating margins and capital expenditures. Our projection of estimated operating results and cash flows were discounted using a weighted average cost of capital of 15% that reflects current market conditions. The discount rate is sensitive to changes in interest rates and other market rates in place at the time the assessment was performed. The Guideline Public Company Method calculated an Enterprise Value Range consistent with the discounted cash flow method. Factors that contributed to the impairment charge included shortfalls in sales expected from new product offerings, changes in key management personnel and increased net assets. These events decreased the forecasted future cash flows and the fair value of the IMES reporting unit below its carrying value as of the March 3, 2019 testing date. Also, the Company assessed whether the carrying amounts of the IMES reporting unit’s long-lived assets may not be recoverable and therefore impaired. To assess the recoverability of the IMES reporting unit’s long-lived assets, the undiscounted cash flows of the reporting unit (the asset group) was analyzed over a period of ten years, with a residual period, compared to the carrying value of the asset group. The sum of the undiscounted cash flows exceeded the carrying value of the asset group, therefore, there was no impairment indicated. Intangible Assets Intangible assets are initially recorded at their fair market values determined by quoted market prices in active markets, if available, or recognized valuation models. Intangible assets that have finite useful lives are amortized over their useful lives and are tested for impairment when events or changes in circumstances occur that indicate possible impairment. Our intangible assets represent the fair value for trade name, customer relationships, non-compete agreements and technology acquired in connection with our acquisitions. Intangible assets subject to amortization were as follows (in thousands):
|  | June 1, 2019 |  |  | June 2, 2018 |
Gross Amounts: |  |  |  |  |  |  |  |
Trade Name |  | $ | 659 |  |  | $ | 659 |
Customer Relationships (1) |  |  | 3,394 |  |  |  | 3,408 |
Non-compete Agreements |  |  | 177 |  |  |  | 177 |
Technology |  |  | 230 |  |  |  | 230 |
Total Gross Amounts |  | $ | 4,460 |  |  | $ | 4,474 |
Accumulated Amortization: |  |  |  |  |  |  |  |
Trade Name |  | $ | 659 |  |  | $ | 651 |
Customer Relationships |  |  | 796 |  |  |  | 617 |
Non-compete Agreements |  |  | 139 |  |  |  | 115 |
Technology |  |  | 103 |  |  |  | 77 |
Total Accumulated Amortization |  | $ | 1,697 |  |  | $ | 1,460 |
Net Intangibles |  | $ | 2,763 |  |  | $ | 3,014 |
(1) | Change from prior periods reflect impact of foreign currency translation.
Under ASC 350, companies must perform the annual test for impairment for indefinite live intangible assets, for which the Company has none, as well as test definite life assets for impairment in the event of a “trigger event” such as adverse changes in the business climate or market which might negatively impact the value of a reporting unit. As noted above under Goodwill, we tested the IMES definite life intangible assets and determined that the $2.3 million of net intangible assets were not impaired as of June 1, 2019. For the remainder of the Company’s intangible assets, we determined that they were not impaired as of June 1, 2019 on the basis that no adverse events or changes in circumstances were identified that could indicate that the carrying amounts of such assets may not be recoverable. The amortization expense associated with the intangible assets subject to amortization for the next five years is presented in the following table (in thousands):
Fiscal Year |  | Amortization Expense |
2020 |  | $ | 257 |
2021 |  |  | 245 |
2022 |  |  | 252 |
2023 |  |  | 245 |
2024 |  |  | 232 |
Thereafter |  |  | 1,532 |
Total amortization expense |  | $ | 2,763 |
The amortization expense associated with the intangible assets totaled approximately $0.3 million during fiscal 2019, $0.4 million during fiscal 2018 and fiscal 2017. The weighted average number of years of amortization expense remaining is 14.2 years.

X
- References No definition available. + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for goodwill and intangible assets. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration