NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents the changes in the carrying amount of goodwill and other intangible assets during the year ended December 31, 2017 (in thousands):

	Goodwill		Other Intangible Assets			Total

Balances as of December 31, 2016	$	187,591	$	94,831		$	282,422
Translation adjustment		-		960			960
Amortization		-		(17,266	)		(17,266	)
Balances as of December 31, 2017	$	187,591	$	78,525		$	266,116

The following table presents the changes in the carrying amount of goodwill and other intangible assets during the year ended December 31, 2016 (in thousands):

	Goodwill			Other Intangible Assets			Total

Balances as of December 31, 2015	$	197,362		$	112,297		$	309,659
Sale of subsidiary		(9,620	)		-			(9,620	)
Purchase accounting adjustment		(151	)		-			(151	)
Translation adjustment		-			595			595
Amortization		-			(18,061	)		(18,061	)
Balances as of December 31, 2016	$	187,591		$	94,831		$	282,422

The following table presents goodwill balance by reportable segment as of December 31, 2017 and 2016 (in thousands):

	As of December 31,
	2017		2016
Service Centers	$	154,473	$	154,473
Innovative Pumping Solutions		15,980		15,980
Supply Chain Services		17,138		17,138
Total	$	187,591	$	187,591

During the third quarter of 2015, the price of DXP’s common stock and the price of crude oil declined over 40% and over 20%, respectively. This decline in oil prices reduced spending by our customers and reduced our revenue expectations. This sustained decline in crude oil prices, reduced capital spending by customers and reduced revenue expectations were determined to be a triggering event during the third quarter of 2015. This triggering event required us to perform testing for possible goodwill impairment in two of our reporting units, and our step one testing indicated there was an impairment in the B27 IPS and B27 SC reporting units. No triggering event was identified in our other reporting units during the third quarter. ASC 350 step two of the goodwill impairment testing for the reporting units was performed preliminarily during the third quarter of 2015. Our preliminary analysis concluded that $48.0 million of our B27 IPS reporting unit’s goodwill and $9.8 million of our B27 SC reporting unit’s goodwill was impaired. The remaining goodwill for the B27 IPS and B27 SC reporting units at September 30, 2015 was $4.9 million and $10.3 million, respectively. The September 30, 2015 ASC 350 step two testing was completed in the fourth quarter of 2015 without any adjustment to the amount recorded in the third quarter of 2015. Fair value was based on expected future cash flow using Level 3 inputs under Account Standards Codification 820 Fair Value Measurements (“ASC 820”). The cash flows are those expected to be generated by market participants, discounted at a rate of return market participants would expect. Approximately 60% of the goodwill associated with the B27 acquisition is not deductible for tax purposes. Accordingly, the financial statement tax benefit is calculated for only 40% of the goodwill impairment. The pretax impairment impacted DXP’s effective tax rate for 2015. For the year ended December 31, 2014, accumulated impairment for the B27 IPS and B27 SC reporting units was $95.1 million and $10.2 million, respectively. After recording the third quarter impairment loss, accumulated impairment expenses for the B27 IPS and B27 SC reporting units were $143.1 million and $20.0 million, respectively, at September 30, 2015.

DXP recorded $1.1 million of impairment expense in the third quarter of 2015 to write off an acquired intangible asset related to an ITT Goulds distribution agreement, which was terminated by ITT Goulds during 2015. The remaining intangible asset value of vendor distribution agreements for the year ended December 31, 2015 was zero. None of the impairment is expected to be deductible for tax purposes.

During the fourth quarter of 2015, the price of DXP’s common stock and the price of crude oil declined over 16% and over 18%, respectively. This decline in oil prices reduced spending by our customers during the fourth quarter and resulted in fourth quarter actual earnings for the B27 IPS and B27 SC reporting units declining significantly from the forecasts used in the impairment analysis at the end of the third quarter of 2015. The declines in forecasted earnings for these two reporting units were determined to be a triggering event during the fourth quarter of 2015. This triggering event required us to perform testing for possible goodwill impairment in these two reporting units, and our step one testing indicated there may be an impairment in the B27 IPS and B27 SC reporting units. No triggering event was identified in our other reporting units during the fourth quarter. ASC 350 step two of the goodwill impairment testing for the reporting units was performed during the fourth quarter of 2015. Our analysis concluded that $4.9 million of our B27 IPS reporting unit’s goodwill and $5.0 million of our B27 SC reporting unit’s goodwill was impaired. Fair value was based on expected future cash flow using Level 3 inputs under ASC 820. The cash flows are those expected to be generated by market participants, discounted at a rate of return market participants would expect. The remaining goodwill for the B27 IPS and B27 SC reporting units at December 31, 2015 was zero and $5.3 million, respectively. Approximately 60% of the goodwill associated with the B27 acquisition is not deductible for tax purposes. Accordingly, the financial statement tax benefit is calculated for only 40% of the goodwill impairment. The pretax impairment impacted DXP’s effective tax rate for 2015. After recording the fourth quarter impairment loss, accumulated impairment for the B27 IPS and B27 SC reporting units were $148.0 million and $25.0 million, respectively, for the year ended December 31, 2015. As none of the Company’s other reporting units recorded impairment losses in 2015, accumulated impairment for these units remained at $12.3 million.

The impairment losses during the year ended December 31, 2015 are included in the “impairment expense” line item on the consolidated statements of income (loss).

The following table presents a summary of amortizable other intangible assets (in thousands):

	As of December 31, 2017							As of December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Carrying Amount, net		Gross Carrying Amount		Accumulated Amortization			Carrying Amount, net
Customer relationships	$	162,200	$	(83,806	)	$	78,394	$	163,022	$	(68,446	)	$	94,576
Non-compete agreements		949		(818	)		131		1,836		(1,581	)		255
Total	$	163,149	$	(84,624	)	$	78,525	$	164,858	$	(70,027	)	$	94,831

Gross carrying amounts as well as accumulated amortization are partially affected by the fluctuation of foreign currency rates. Other intangible assets are amortized according to estimated economic benefits over their estimated useful lives.

Customer relationships are amortized over their estimated useful lives. Amortization expense is recognized according to estimated economic benefits and was $17.3 million, $18.1 million, and $20.6 million for the years ended December 31, 2017, 2016, and 2015, respectively. The estimated future annual amortization of intangible assets for each of the next five years and thereafter are as follows (in thousands):

2018	$	15,615
2019		14,170
2020		10,292
2021		8,911
2022		7,264
Thereafter		22,273
Total	$	78,525

The weighted average remaining estimated life for customer relationships and non-compete agreements are 8.3 years and 1.8 years, respectively.