Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The carrying amounts of goodwill, by operating segment, for the years ended December 31, 2016 and 2015 were as follows:



	(In thousands)
	Structural Systems			Electronic Systems			Consolidated Ducommun
Gross goodwill	$	57,243		$	182,048		$	239,291
Accumulated goodwill impairment	(57,243		)	(81,722		)	(138,965		)
Transfer to assets held for sale	—			(17,772		)	(17,772		)
Balance at December 31, 2015	$	—		$	82,554		$	82,554
Balance at December 31, 2016	$	—		$	82,554		$	82,554

We perform our annual goodwill impairment test during the fourth quarter each year. In the fourth quarter of 2016, the carrying amount of goodwill at the date of the most recent annual impairment test was $82.6 million, all of which was in our Electronic Systems operating segment. In performing our annual goodwill impairment test in the fourth quarter of 2016, the fair value of our Electronic Systems internal reporting unit exceeding its carrying value by 32% and thus, not deemed impaired.

In the fourth quarter of 2015, we met the criteria for assets held for sale for our Pittsburgh, Pennsylvania (“Pittsburgh”) operation and Miltec (“Miltec”) operation (both are part of our Electronic Systems operating segment). Assets held for sale, other than goodwill, is tested for impairment prior to the testing of goodwill for impairment. No impairment was noted of these assets held for sale. Our Pittsburgh operation and Miltec operation were sold in January 2016 and March 2016, respectively. As of the date of the 2015 annual goodwill impairment test, the fair value of the Electronic Systems and Miltec internal reporting units exceeded their carrying values by 42% and 18%, respectively, and thus, not deemed impaired. However, the fair value of the Structural Systems reporting unit was less than the carrying value as a result of the lowered revenue outlook in our military and space end-use markets due to the decrease in U.S. government defense spending. As a result, the second step (“Step Two”) of the goodwill impairment test was performed for the Structural Systems reporting unit. The implied fair value of goodwill was determined by allocating the fair value of the tangible and intangible assets and liabilities in a manner similar to a purchase price allocation. As a result of this analysis, we recorded $57.2 million of goodwill impairment thereby reducing the Structural Systems operating segment’s its goodwill carrying value to zero as of December 31, 2015.

In the fourth quarter of 2015, the carrying value of the trade-name indefinite-lived intangible asset at the date of the impairment test was approximately $32.9 million. In performing our annual impairment test in the fourth quarter of 2015, we concluded the fair value of the indefinite-lived trade name to be zero as a result of divesting businesses in Electronic Systems and our discontinuation of the use of the trade name. Thus, we recorded an impairment of approximate $32.9 million, which was the remaining carrying value of the trade name.

Other Intangible Assets

Other intangible assets are related to acquisitions and recorded at fair value at the time of the acquisition. Other intangible assets with finite lives are generally amortized on the straight-line method over periods ranging from fourteen to eighteen years. Intangible assets are as follows:



		(In thousands)
		December 31, 2016						December 31, 2015
	Wtd. Avg Life (Yrs)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived assets
Customer relationships	18	$	159,200	$	58,352	$	100,848	$	159,200	$	49,463	$	109,737
Contract renewal	14	1,845		1,362		483		1,845		1,230		615
Technology	15	400		158		242		400		131		269
Total		$	161,445	$	59,872	$	101,573	$	161,445	$	50,824	$	110,621

The carrying amount of other intangible assets by operating segment as of December 31, 2016 and 2015 was as follows:



	(In thousands)
	December 31, 2016						December 31, 2015
	Gross		Accumulated Amortization		Net Carrying Value		Gross		Accumulated Amortization		Net Carrying Value
Other intangible assets
Structural Systems	$	19,300	$	15,555	$	3,745	$	19,300	$	14,433	$	4,867
Electronic Systems	142,145		44,317		97,828		142,145		36,391		105,754
Total	$	161,445	$	59,872	$	101,573	$	161,445	$	50,824	$	110,621

Amortization expense of other intangible assets was $9.0 million, $10.0 million and $10.4 million for the years ended December 31, 2016, 2015 and 2014, respectively. Future amortization expense by operating segment is expected to be as follows:



	(In thousands)
	Structural Systems		Electronic Systems		Consolidated Ducommun
2017	$	907	$	7,927	$	8,834
2018	737		7,927		8,664
2019	591		7,926		8,517
2020	490		7,883		8,373
2021	381		7,794		8,175
Thereafter	639		58,371		59,010
	$	3,745	$	97,828	$	101,573

- 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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