Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

13. 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.

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.

In the second quarter of 2017, 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 amounts at risk due to the large spread between the fair, and carrying value, of each reporting unit.

In the third quarter, the Company decided to discontinue the Bear Claw® line of hydraulic fracturing components used in the oil and gas industry, which was part of the Harris aerostructures business acquired by AEC in 2016. This decision resulted in a non-cash write-off of intangibles for $4.1 million to restructuring expense, which is presented as other changes in the table below for intangible assets and goodwill as of September 30, 2017. The write-off represents the full carrying value of intangible assets associated with the Bear Claw® product line as, based upon anticipated cash flows and the Company’s plan to exit the business, we determined the product line to have no fair value as of September 30, 2017. Due to the decision to exit this product line, management performed an interim assessment of goodwill and concluded that no goodwill was allocable to the Bear Claw® product line, and no impairment provision was required. 

We are continuing to amortize certain patents, trade names, customer relationships, customer contracts and technology assets that have finite lives. The gross carrying value, accumulated amortization and net values of intangible assets and goodwill as of December 31, 2016 to September 30, 2017, were as follows:

As of September 30, 2017 (in thousands)	Weighted average amortization life in years	Gross carrying amount	Accumulated amortization	Net carrying amount
Amortized intangible assets:
AEC trade names	15	$43	$27	$16
AEC technology	15	228	142	86
Customer relationships	15	48,528	4,956	43,572
Customer contracts	6	18,211	5,114	13,097
Other intangibles	5	742	516	226
Total amortized intangible assets		$67,752	$10,755	$56,997
Unamortized intangible assets:
MC Goodwill		$70,280	$-	$70,280
AEC Goodwill		95,730	-	95,730
Total unamortized intangible assets:		$166,010	$-	$166,010

As of December 31, 2016 (in thousands)	Weighted average amortization life in years	Gross carrying amount	Accumulated amortization	Net carrying amount
Amortized intangible assets:
AEC trade names	15	$43	$23	$20
AEC technology	15	228	124	104
Customer relationships	15	49,490	2,481	47,009
Customer contracts	6	20,420	2,561	17,859
Other intangibles	5	1,720	258	1,462
Total amortized intangible assets		$71,901	$5,447	$66,454
Unamortized intangible assets:
MC Goodwill		$64,645	$-	$64,645
AEC Goodwill		95,730	-	95,730
Total unamortized intangible assets:		$160,375	$-	$160,375

The changes in intangible assets and goodwill from December 31, 2016 to September 30, 2017, were as follows:

(in thousands)	December 31, 2016	Amortization		Other Changes		Currency Translation	September 30, 2017
Amortized intangible assets:
AEC trade names	$20	$(4	)	$-		$-	$16
AEC technology	104	(18	)	0		-	86
Customer relationships	47,009	(2,475	)	(962	)	-	43,572
Customer contracts	17,859	(2,553	)	(2,209	)	-	13,097
Other intangibles	1,462	(258	)	(978	)	-	226
Total amortized intangible assets	$66,454	($5,308	)	($4,149	)	$-	$56,997
Unamortized intangible assets:
MC Goodwill	$64,645	$-				$5,635	$70,280
AEC Goodwill	95,730	-				-	95,730
Total unamortized intangible assets:	$160,375	$-		$-		$5,635	$166,010

Estimated amortization expense of intangibles for the years ending December 31, 2017 through 2021, is as follows:

	Annual amortization
Year	(in thousands)
2017	$6,865
2018	6,232
2019	6,232
2020	6,232
2021	6,162