Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

12. Goodwill and Other Intangible Assets

Goodwill and intangible assets with indefinite useful lives are not amortized, but are tested for impairment at least annually. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination. Our reporting units are consistent with our operating segments.

Determining the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates, and future market conditions, among others. Goodwill and other long-lived assets are reviewed for impairment whenever events, such as significant changes in the business climate, plant closures, changes in product offerings, or other circumstances indicate that the carrying amount may not be recoverable.

To determine fair value, we utilize two market-based approaches and an income approach. Under the market-based approaches, we utilize information regarding the Company as well as publicly available industry information to determine earnings multiples and sales multiples. Under the income approach, we determine fair value based on estimated future cash flows of each reporting unit, discounted by an estimated weighted-average cost of capital, which reflects the overall level of inherent risk of a reporting unit and the rate of return an outside investor would expect to earn.

On April 8, 2016, the Company acquired the outstanding shares of Harris Corporation’s composite aerostructures business. The assets acquired include amortizable intangible assets of $71.6 million and goodwill of $95.7 million. As of December 31, 2016, the amount of goodwill acquired was still provisional because the Company is waiting for information needed to finalize the amount.

Prior to the acquisition, the entire balance of goodwill on our books was attributable to the Machine Clothing business. In the second quarter of 2016, the Company applied the qualitative assessment approach in performing its annual evaluation of goodwill and concluded that no impairment provision was required. There were no Machine Clothing amounts at risk due to the large spread between the fair and carrying values.

We are continuing to amortize certain patents, trade names, customer contracts and technology assets that have finite lives. The changes in intangible assets and goodwill from December 31, 2014 to December 31, 2016, were as follows:

	Amortization life	Balance at				Currency		Balance at
(in thousands, except for years)	in years	December 31, 2015	Acquisition	Amortization		Translation		December 31, 2016
Amortized intangible assets:
AEC trade names	15	$25	$-	($5	)	$-		$20
AEC technology	15	129	-	(25	)	-		104
AEC customer contracts	6	-	20,420	(2,561	)	-		17,859
AEC customer relationships	15	-	49,490	(2,481	)	-		47,009
AEC other intangibles	5	-	1,720	(258	)	-		1,462
Total amortized intangible assets		$154	$71,630	($5,330	)	$-		$66,454
Unamortized intangible assets:
MC Goodwill		$66,373	$-	$-		($1,728	)	$64,645
AEC Goodwill		-	95,730	-		-		95,730
Total amortized intangible assets		$66,373	$95,730	$-		($1,728	)	$160,375

	Balance at			Currency		Balance at
(in thousands)	December 31, 2014	Amortization		Translation		December 31, 2015
Amortized intangible assets:
AEC trade names	$29	($4	)	$-		$25
AEC customer contracts	202	(202	)	-		-
AEC technology	154	(25	)	-		129
Total amortized intangible assets	$385	($231	)	$-		$154
Unamortized intangible assets:
Goodwill	$71,680	$-		($5,307	)	$66,373

As of December 31, 2016, the cost and accumulated amortization of amortized intangible assets was $72.1 million and $5.6 million, respectively. As of December 31, 2015, the cost and accumulated amortization of amortized intangible assets was $0.5 million and $0.3 million, respectively.

In 2016, amortization expense related to intangible assets was reported in the Consolidated Statements of Income as follows: $2.6 million in Cost of goods sold and $2.7 million in Selling, general and administrative expenses. In 2015 and 2014, all intangible amortization expense was included in Cost of goods sold. Estimated amortization expense of intangibles for the years ending December 31, 2017 through 2021, is as follows:

	Annual amortization
Year	(in thousands)
2017	$7,076
2018	7,076
2019	7,076
2020	7,076
2021	6,796