GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2018

GOODWILL AND OTHER INTANGIBLE ASSETS

NOTE 6 — GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of the purchase price over the fair value of assets acquired, including identifiable intangibles and liabilities. Goodwill is not amortized but is tested at least annually for impairment or more frequently whenever events or circumstances occur indicating that those assets might be impaired. The Company added $4,993 of goodwill as a result of the Red Wolf acquisition, which was included in the Process Systems segment. See Note 14, “Segment Reporting” of these condensed consolidated financial statements for further discussion of the Company’s segments.

During the second quarter of 2018, the Company identified triggering events associated with the release of Red Wolf’s final earn-out reserve, Red Wolf’s recent operating results, a reduction in their major customer’s performance and the delay of new initiatives being implemented. As a result, the Company evaluated the recoverability of the Red Wolf asset group. In accordance with GAAP, the Company compared the carrying value of the Red Wolf asset group to the forecast undiscounted cash flows associated with this asset group. Based on the analysis performed, the forecast undiscounted cash flows exceeded the carrying value and no impairment of this group was indicated or recorded.

The Company next assessed the fair value by comparing the carrying value of the Red Wolf reporting unit to the fair value of the Red Wolf reporting unit. The fair value was determined using significant unobservable inputs, or level 3 in the fair value hierarchy. The two main assumptions utilized in the forecast discounted cash flow analysis were the cash flows from operations and the weighted average cost of capital of 18.6%. Based on the analysis performed, the Company determined that the carrying amount of the reporting unit exceeded the fair value and recorded a $4,993 impairment charge in the second quarter. The Company utilized a third-party appraisal to validate the results of the analysis.

Other intangible assets represent the fair value assigned to definite-lived assets such as trade names and customer relationships as part of the Company’s acquisition of Brad Foote completed in 2007 as well as the noncompetition agreements, trade names and customer relationships that were part of the Company’s acquisition of Red Wolf in 2017. See Note 17, “Business Combinations” of these condensed consolidated financial statements for further discussion of the Red Wolf acquisition. Other intangible assets are amortized on a straight-line basis over their estimated useful lives, with a remaining life range from 5 to 10 years. The Company tests other intangible assets for impairment when events or circumstances indicate that the carrying value of these assets may not be recoverable. During the second quarter of 2018, the Company continued to identify triggering events associated with the Gearing segment’s current period operating loss combined with its history of continued operating losses. As a result, the Company evaluated the recoverability of certain of its long-lived assets associated with the Gearing segment. Based upon the Company’s most recent impairment assessments, the Company utilized third-party appraisals and other estimates of the fair value of the Gearing asset group. The Company assumed that the assets would be exchanged in an orderly transaction between market participants and would represent the highest and best use of these assets. Based on the analysis, the Company determined that no impairment to this asset group was indicated as of June 30, 2018 and December 31, 2017.

As of June 30, 2018 and December 31, 2017, the cost basis, accumulated amortization and net book value of intangible assets were as follows:


	June 30, 2018									December 31, 2017
									Remaining							Remaining
									Weighted							Weighted
							Net		Average					Net		Average
	Cost		Accumulated		Impairment		Book		Amortization	Cost		Accumulated		Book		Amortization
	Basis		Amortization		Charge		Value		Period	Basis		Amortization		Value		Period
Goodwill and other intangible assets:
Goodwill	$	4,993	$	—	$	(4,993)	$	—		$	4,993	$	—	$	4,993
Noncompete agreements		170		(40)		—		130	4.6		170		(26)		144	5.1
Customer relationships		15,979		(5,680)		—		10,299	7.5		15,979		(4,992)		10,987	8.0
Trade names		9,099		(4,392)		—		4,707	10.0		9,099		(4,152)		4,947	10.5
Other intangible assets	$	25,248	$	(10,112)	$	—	$	15,136	7.0	$	25,248	$	(9,170)	$	16,078	8.8

As of June 30, 2018, estimated future amortization expense is as follows:


2018	$	942
2019		1,884
2020		1,884
2021		1,884
2022		1,884
2023 and thereafter		6,658
Total	$	15,136

- 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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