Note 5 - Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Text Block]

(

)

GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible assets on our balance sheets are the result of our acquisitions of Sigma Systems Corp. ("Sigma") in

October 2008,

Thermonics, Inc. ("Thermonics

") in

January 2012

and Ambrell in

May 2017.

All of our goodwill and intangible assets are allocated to our Thermal segment.

Goodwill

Changes in the amount of the carrying value of goodwill for the year ended

December 31, 2017

are as follows:

	Sigma		Thermonics		Ambrell		Total
Balance - January 1, 2017	$	1,656	$	50	$	-	$	1,706
Acquisition of Ambrell		-		-		12,032		12,032
Balance - December 31, 2017	$	1,656	$	50	$	12,032	$	13,738

Intangible Assets

Changes in the amount of the carrying value of finite-lived intangible assets for the year ended

December 31, 2017

are as follows:

Balance - January 1, 2017	$	365
Acquisition of Ambrell		10,100
Amortization		(1,161	)
Balance - December 31, 2017	$	9,304

The following tables provide further detail about our intangible assets as of

December 31, 2017

and

2016:

	December 31, 2017
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	10,480	$	1,828	$	8,652
Technology		600		95		505
Patents		590		463		127
Software		270		250		20
Trade name		140		140		-
Customer backlog		500		500		-
Total finite-lived intangible assets		12,580		3,276		9,304
Indefinite-lived intangible assets:
Trademarks		6,710		-		6,710
Total intangible assets	$	19,290	$	3,276	$	16,014

	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	1,480	$	1,328	$	152
Patents		590		424		166
Software		270		223		47
Trade name		140		140		-
Total finite-lived intangible assets		2,480		2,115		365
Indefinite-lived intangible assets:
Sigma trademark		510		-		510
Total intangible assets	$	2,990	$	2,115	$	875

We generally amortize our finite-lived intangible assets over their estimated useful lives on a

straight-line 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 intangible assets have any residual value.

Total amortization expense for our finite-lived intangible assets was

$1,161

and

$229,

respectively, for the years ended

December 31, 2017

and

2016.

The following table sets forth the estimated annual amortization

expense for each of the next

five

years:

2018	$	1,102
2019	$	1,257
2020	$	1,234
2021	$	1,227
2022	$	1,167

Impairment of Goodwill and Indefinite Life Intangible Assets

During

December 2017

and

2016,

we assessed our goodwill and indefinite life intangible asset 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 rates used in

2017

and

2016

for the discounted cash flows were

14.5%

and

18.5%,

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, income tax rates, changes in working capital, depreciation, amortization and capital expenditures. Changes in assumptions concerning future financial results or other underlying assumptions could 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

2017

and

2016,

we performed a Step I test to identify potential impairment, in which the fair value of the Thermal reporting unit was compared with its book value. This assessment indicated

impairment existed as the fair value of this reporting unit was determined to exceed its carrying value.

During the indefinite life intangible asset impairment assessment in both

2017

and

2016,

we compared the fair value of our intangible asset with its carrying amount. This assessment indicated

impairment existed as the fair value of the intangible assets exceeded their carrying values in both

2017

and

2016.

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

As previously noted, our long-lived assets consist of our finite-lived intangible assets and property and equipment. During

2016,

the operations of what was then reported as our Mechanical Products segment were substantially restructured. However, as this segment still experienced an operating loss for

2016,

we performed an assessment of the long-lived assets of this segment for impairment during

December 2016.

Our assessment indicated that the property and equipment that was allocated to this segment was

not

impaired. During

2016,

we did

not

review the long lived assets of our remaining operations for impairment as there were

events or changes in business circumstances that would indicate an impairment might exist. During

2017,

we did

not

review any of our long lived assets for impairment as there were

events or changes in business circumstances that would indicate an impairment might exist.

- 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.

+ References + Details