Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The carrying amounts of goodwill, all in our Electronic Systems segment, for the years ended December 31, 2017 and 2016 were as follows:



	(In thousands)
Gross goodwill	$	164,276
Accumulated goodwill impairment	(81,722		)
Balance at December 31, 2016	82,554
Goodwill from acquisition during the period	34,881
Balance at December 31, 2017	$	117,435

Goodwill is evaluated for impairment on a annual basis on the first day of the fourth fiscal quarter or more frequently if events or changes in circumstances indicate that the asset may be impaired. Our impairment evaluation of goodwill consists of a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The qualitative evaluation is an assessment of factors, including reporting unit specific operating results as well as industry, market, and economic conditions, to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If our qualitative assessment indicates it is more likely than not that the estimated fair value of a reporting unit exceeds its carrying value, no further analysis is required and goodwill is not impaired. Otherwise, we will follow a two-step quantitative goodwill impairment test to determine if goodwill is impaired.

In the fourth quarter of 2017, the carrying amount of goodwill at the date of the most recent annual impairment evaluation was $117.4 million, all of which was in our Electronic Systems operating segment. As of the date of our 2017 annual evaluation for goodwill impairment, we used a qualitative assessment noting it was not more likely than not that the fair value of a reporting unit is less than its carrying amount and thus, goodwill was not deemed impaired. Our most recent step-one goodwill impairment analysis was in the prior year fourth quarter of 2016 and the fair value of the Electronic Systems internal reporting unit exceeded its carrying value at that time by 32% and thus, was not deemed impaired.

In September 2017, we acquired 100.0% of the outstanding equity interests of LDS for a purchase price of $60.0 million, net of cash acquired. We allocated the gross purchase price of $62.0 million to the assets acquired and liabilities assumed at estimated fair values. The excess of the purchase over the aggregate fair values was recorded as goodwill. See Note 2.

Other intangible assets are related to acquisitions, including LDS, 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, 2017						December 31, 2016
	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	17	$	180,300	$	67,449	$	112,851	$	159,200	$	58,352	$	100,848
Trade names	15	1,300		26		1,274		—		—		—
Contract renewal	14	1,845		1,493		352		1,845		1,362		483
Technology	15	400		184		216		400		158		242
Total		$	183,845	$	69,152	$	114,693	$	161,445	$	59,872	$	101,573

The carrying amount of other intangible assets by operating segment as of December 31, 2017 and 2016 was as follows:



	(In thousands)
	December 31, 2017						December 31, 2016
	Gross		Accumulated Amortization		Net Carrying Value		Gross		Accumulated Amortization		Net Carrying Value
Other intangible assets
Structural Systems	$	19,300	$	16,464	$	2,836	$	19,300	$	15,555	$	3,745
Electronic Systems	164,545		52,688		111,857		142,145		44,317		97,828
Total	$	183,845	$	69,152	$	114,693	$	161,445	$	59,872	$	101,573

Amortization expense of other intangible assets was $9.3 million, $9.0 million and $10.0 million for the years ended December 31, 2017, 2016 and 2015, respectively. Future amortization expense by operating segment is expected to be as follows:



	(In thousands)
	Structural Systems		Electronic Systems		Consolidated Ducommun
2018	$	737	$	9,420	$	10,157
2019	591		9,419		10,010
2020	490		9,348		9,838
2021	381		9,287		9,668
2022	320		9,288		9,608
Thereafter	317		65,095		65,412
	$	2,836	$	111,857	$	114,693

- 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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