Total accumulated impairment losses were $156.3 million and $14.9 million at May 31, 2017 and 2016. Of the
accumulated balance, $141.4 million was recorded during the fiscal year ended May 31, 2017 by our consumer segment, and $14.9 million was recorded during the fiscal year ended May 31, 2009 by our industrial reportable segment.
Other intangible assets consist of the following major classes:
As of May 31, 2017
Amortized intangible assets
Total Amortized Intangibles
Indefinite-lived intangible assets
Total Other Intangible Assets
As of May 31, 2016
The aggregate intangible asset amortization expense for the fiscal years ended May 31, 2017, 2016 and 2015 was
$41.9 million, $40.5 million and $32.9 million, respectively. For the next five fiscal years, we estimate annual intangible asset amortization expense related to our existing intangible assets to approximate the following: 2018
$40.3 million, 2019 $38.1 million, 2020 $35.8 million, 2021 $33.0 million and 2022 $32.2 million.
amount of other intangible asset accumulated impairment losses at May 31, 2016 totaled $0.6 million, all of which was recorded during the fiscal year ended May 31, 2009 by our industrial reportable segment. For the May 31, 2017,
we recorded other intangible asset impairment losses of approximately $53.0 million, all of which was recorded by our consumer reportable segment.
previously reported, we had monitored the performance of our Kirker nail enamel business throughout fiscal 2016. During the third quarter of fiscal 2016, we reported that performance shortfalls for Kirker were attributable to a delay in new
business. We performed our annual goodwill impairment analysis during the fourth quarter of fiscal 2016, which resulted in an excess of fair value over carrying value of 8% for our Kirker reporting unit. During our first quarter ended
August 31, 2016, we reported that while Kirkers first quarter results were below the comparable prior year period, their performance was in line with expectations, and our assessment of the Kirker business did not indicate the presence of
any goodwill impairment triggering events.
During the second quarter of fiscal 2017, we identified certain factors that we considered important in assessing the
requirement to perform an interim impairment evaluation for our Kirker reporting unit. First, Kirkers three month operating results for the period ended November 30, 2016 were significantly below historical and expected operating results
and downward adjustments were recently made regarding our expectations for Kirkers performance. In the quarter ended November 30, 2016, Kirker experienced market share losses at several key customers, including the loss of its largest
which accounted for over 15% of Kirkers fiscal 2016 sales. In addition, some problematic customer relationship issues
surfaced during the quarter ended November 30, 2016, which resulted in a personnel change in a key leadership position at Kirker. After considering the totality of these recent events, we determined that an interim step one goodwill impairment
assessment was required, as well as an impairment assessment for our intangible and other long-lived assets. Our testing resulted in the preliminary impairment charges reflected above for goodwill and other intangible assets.
Our goodwill impairment assessment included estimating the fair value of our Kirker reporting unit and comparing it with its carrying amount at November 30, 2016.
Since the carrying amount of Kirker exceeded its fair value, additional steps were required to determine and recognize a preliminary impairment loss. Calculating the fair value of a reporting unit requires our significant use of estimates and
assumptions, which are generally considered Level 3 inputs based on our review of the fair value hierarchy. We estimated the fair value of our Kirker reporting unit by applying a discounted future cash flow calculation to Kirkers
projected earnings before interest, taxes, depreciation and amortization (EBITDA). In applying this methodology, we relied on a number of factors, including actual and forecasted operating results and market data for the nail enamel
industry. Discounted cash flow calculations represent a common measure used to value and buy or sell businesses in our industry. The discounted cash flow used in the goodwill impairment test for Kirker assumed discrete period revenue growth through
fiscal 2021 that was reflective of recent downward revisions to previous expectations for future growth from market opportunities related to contracting with certain retailers to fill nail polish for their respective private label brands as well as
downward revisions to growth expectations for the Kirker liquid nail polish business below the expected liquid nail polish growth rates for the markets in which Kirker operates. In the terminal year we assumed a long-term earnings growth rate of
3.0% that we believe is appropriate given the current industry specific expectations. As of the valuation date, we utilized a weighted-average cost of capital of 8.0%, which we believe is appropriate as it reflects the relative risk, the time
42 RPM International Inc. and Subsidiaries
RPM International Inc. (NYSE: RPM) owns subsidiaries that are world leaders in coatings, sealants, building materials and related services. From homes to precious landmarks worldwide, their brands are trusted by consumers and professionals alike to protect, improve and beautify. Among its leading consumer brands are Rust-Oleum, DAP and Zinsser. Learn more about RPM brands >>
RPM is a compelling long-term investment.
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