Note 4 - Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Text Block]

(4) GOODWILL, INTANGIBLE AND LONG-LIVED ASSETS

Goodwill and intangible assets on our balance sheets are the result of our acquisitions of Sigma Systems Corp. ("Sigma") in October 2008 and Thermonics in January 2012. The acquisition of Thermonics is discussed further in Note 3.

Goodwill

All of our goodwill is allocated to our Thermal Products segment. Changes in the amount of the carrying value of goodwill for the year ended December 31, 2012 are as follows:

	Sigma		Thermonics		Total
Balance - January 1, 2012	$	1,656	$	-	$	1,656
Acquisition of Thermonics		-		50		50
Balance - December 31, 2012	$	1,656	$	50	$	1,706

Intangible Assets

The following table provides further detail about our intangible assets as of December 31, 2012 and 2011:

	December 31, 2012
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	1,480	$	439	$	1,041
Patented technology		590		233		357
Software		270		115		155
Trade name		140		33		107
Customer backlog		70		70		-
Non-compete/non-solicitation agreement		48		24		24
Total finite-lived intangible assets		2,598		914		1,684
Indefinite-lived intangible assets:
Sigma trademark		510		-		510
Total intangible assets	$	3,108	$	914	$	2,194

	December 31, 2011
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	370	$	200	$	170
Patented technology		230		150		80
Software		270		88		182
Total finite-lived intangible assets		870		438		432
Indefinite-lived intangible assets:
Sigma trademark		510		-		510
Total intangible assets	$	1,380	$	438	$	942

We generally amortize our finite-lived intangible assets over their estimated useful lives on a straightline basis, unless an alternate amortization method can be reliably determined. Any such alternate amortization method would be based on the pattern in which the economic benefits of the intangible asset are expected to be consumed. None of our finite-lived assets have any residual value. The following table provides further information about the estimated useful lives of our finite-lived intangible assets as of December 31, 2012:

	Estimated Useful Life		Remaining Estimated Useful Life at Dec. 31, 2012
	- - - - (in months) - - - -
Finite-lived intangible assets resulting from the acquisition of Sigma:
Customer relationships		72		21
Software		120		69
Patented technology		60		9
Finite-lived intangible assets resulting from the acquisition of Thermonics:
Customer relationships		72		60.5
Customer backlog		3		-
Trade name		48		36.5
Patented technology		132		120.5
Non-compete/non-solicitation agreement		18		9

The following table sets forth changes in the amount of the carrying value of finite-lived intangible assets for the year ended December 31, 2012:

Balance - January 1, 2012	$	432
Acquisition of Thermonics		1,728
Amortization		(476	)
Balance - December 31, 2012	$	1,684

Total amortization expense for the years ended December 31, 2012 and 2011 was $476 and $135, respectively. The following table sets forth the estimated annual amortization expense for our finite-lived intangible assets for each of the next five years:

2013	$	446
2014	$	355
2015	$	289
2016	$	229
2017	$	212

Impairment of Goodwill and Indefinite Life Intangible Assets

During December 2012 and 2011, we assessed our goodwill and indefinite life intangible assets for impairment in accordance with the requirements of ASC Topic 350 (Intangibles - Goodwill and Other). Our goodwill impairment assessment is based upon a combination of the income approach, which estimates the fair value of our reporting units based upon a discounted cash flow approach, and the market approach which estimates the fair value of our reporting units based upon comparable market multiples. This fair value is then reconciled to our market capitalization at year end with an appropriate control premium. The discount rate used in 2012 and 2011 for the discounted cash flows were 24% and 20%, respectively. The selection of these rates was based upon our analysis of market based estimates of capital costs and discount rates. The peer companies used in the market approach operate in our market segment. The determination of the fair value of our reporting units requires management to make significant estimates and assumptions including the selection of appropriate peer group companies, control premiums, discount rate, terminal growth rates, forecasts of revenue and expense growth rates, changes in working capital, depreciation, amortization and capital expenditures. Changes in assumptions concerning future financial results or other underlying assumptions would have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge.

During the goodwill impairment assessment in both 2012 and 2011, we performed a Step I test to identify potential impairment, in which the fair value of the reporting unit was compared with its book value. This assessment indicated no impairment existed as the fair value of this reporting unit was determined to exceed its carrying value by 41% or $7,516 at December 31, 2012 and by 50% or $8,670 at December 31, 2011.

During the indefinite life intangible asset impairment assessment in both 2012 and 2011, we compared the fair value of our intangible assets with their carrying amount. This assessment indicated no impairment existed as the fair value of the intangible assets exceeded their carrying values in both 2012 and 2011.

Impairment of Long-Lived Assets and Finite-lived Intangible Assets

In accordance with ASC Topic 350 (Intangibles - Goodwill and Other) and ASC Topic 360 (Property, Plant and Equipment), we review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the estimated undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. The cash flow estimates used to determine the impairment, if any, contain management's best estimates using appropriate assumptions and projections at that time. As previously noted, our long-lived assets consist of our finite-lived intangible assets and property and equipment. During December 2012, due to continued operating losses experienced throughout 2012 in our Mechanical Products segment, we assessed the long-lived assets of this segment for impairment. Our assessment indicated that the property and equipment that is allocated to this segment was not impaired. During 2012, we did not review our Thermal and Electrical Products segment’s long lived assets for impairment and during 2011, we did not review our long-lived assets in any of our segments for impairment as we determined there were no events or circumstances that indicated the need for such review.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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