Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2013

5. Goodwill and Intangible Assets

The Company has two reportable business segments, Metalcutting Machine Solutions (MMS) and Aftermarket Tooling and Accessories (ATA).

Detail and activity of goodwill by segment is presented below:

	MMS			ATA			Total

	(in thousands)
Balance at December 31, 2011	$	—		$	—		$	—
Acquisition of Usach		8,497			—			8,497


Balance at December 31, 2012		8,497			—			8,497
Acquisition of Forkardt		—			5,678			5,678
Impairment loss		(3,809	)		—			(3,809	)
Disposal of Forkardt Switzerland		—			(662	)		(662	)
Other adjustments		160			—			160


Balance at December 31, 2013	$	4,848		$	5,016		$	9,864

The gross carrying value of goodwill for the years ended December 31, 2013 and 2012 was $38.1 million and $32.3 million, respectively. Accumulated impairment losses were $27.6 million and $23.8 million, respectively.

The major components of intangible assets other than goodwill are as follows:

	December 31, 2013			December 31, 2012

	(in thousands)
Gross amortizable intangible assets:
Land rights	$	2,865		$	2,784
Patents		3,030			3,006
Technical know-how, customer list, and other		21,375			12,152


Total gross amortizable intangible assets		27,270			17,942
Accumulated amortization:
Land rights		(177	)		(116	)
Patents		(2,884	)		(2,807	)
Technical know-how, customer list, and other		(5,220	)		(3,870	)


Total accumulated amortization		(8,281	)		(6,793	)


Amortizable intangible assets, net		18,989			11,149


Indefinite lived intangible assets:
Assets associated with Bridgeport acquisition⁽¹⁾		7,354			7,595
Usach trade name⁽²⁾		1,550			2,840
Forkardt trade name⁽³⁾		4,170			—


		13,074			10,435


Intangible assets other than goodwill, net	$	32,063		$	21,584

⁽¹⁾: Represents the aggregate value of the trade name, trademarks and copyrights associated with the former worldwide operations of Bridgeport. We use the Bridgeport brand name on all of our machining center lines. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.
⁽²⁾: Represents the value of the trade name associated with Usach which the Company acquired in 2012. We use the Usach trade name on all of the grinding machines and grinding systems manufactured by Usach. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.
⁽³⁾: Represents the value of the trade name associated with Forkardt which the Company acquired in 2013. We use the Forkardt trade name on all of the products manufactured by Forkardt. After consideration of legal, regulatory, contractual, competitive, economic and other factors, the asset has been determined to have an indefinite useful life.

Amortization expense related to these amortizable intangible assets was $1.5 million for 2013 and $0.8 million for 2012 and 2011 respectively. The aggregated amortization expense on existing intangible assets for each of the next five years is approximately $1.7 million, $1.7 million, $1.1 million, $1.1 million and $0.9 million, respectively.

As of December 31, the remaining weighted average amortization period of our amortizable intangible assets are as follows:

	2013

	(in years)
Land rights		46.9	47.9
Patents		2.8	3.0
Technical know-how, customer list, and other		15.4	14.7


Total weighted average amortization period		19.7	23.1

As part of the annual impairment test as of December 31, 2013, the fair values of the Company's reporting units for goodwill impairment testing were estimated using the expected present value of future cash flows, recent industry transaction multiples and using estimates, judgments and assumptions that management believed were appropriate in the circumstances. The estimates and judgments used in the assessment included multiples of EBITDA, the weighted average cost of capital and the terminal growth rate. The Company performed a Step 1 analysis for each of the reporting units having a goodwill balance. For the Company's Usach reporting unit, which is part of the Company's MMS business segment and had a goodwill balance of $8.7 million, it was determined that its carrying value exceeded its fair value. As a result a step 2 analysis was performed and an impairment charge of $3.8 million was recognized in the impairment charge caption in the Consolidated Statement of Operations for the year ended December 31, 2013. The Company performed further analysis of the reporting units' long-lived assets and determined that impairments of these assets were not present.

The Company's ATA reporting unit has a goodwill balance of $5.0 million as of December 31, 2013. The Company performed a Step 1 analysis for the reporting unit and determined its carrying value was less than its fair value.

The Company also performed an annual impairment test of its indefinite lived intangible assets as of December 31, 2013. The fair value of the indefinite lived intangible assets were calculated using a discounted cash flow analysis. As a result of this impairment test, it was determined that the fair value of the Company's Usach trade name and Forkardt's trade name were less than their carrying values resulting in impairment charges of $1.3 million and $1.1 million, respectively, which were recognized in the impairment charge caption in the Consolidated Statement of Operations for the year ended December 31, 2013.

See Footnote 11 for a discussion of the fair value measures used in determining these impairment charges.

- 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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