Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

15. 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 reportable segments 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.

In the second quarter of 2018, 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 values, of each reporting unit.

In the third quarter of 2017, 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 $4.1 million non-cash write-off of intangibles to restructuring expense, which is presented as other changes in the table below for intangible assets and goodwill in 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 contracts and technology assets that have finite lives. The changes in intangible assets and goodwill from December 31, 2016 to December 31, 2018, were as follows:

(in thousands, except for years)	Amortization life in years	Balance at December 31, 2017	Amortization		Other Changes	Currency Translation		Balance at December 31, 2018
Amortized intangible assets:
AEC trade names	15	$15	$(4	)	$-	$-		$11
AEC technology	15	80	(24	)	-	-		56
AEC customer contracts	6	12,369	(2,913	)	-	-		9,456
AEC customer relationships	15	42,767	(3,229	)	-	-		39,538
AEC other intangibles	5	210	(65	)	-	-		145
Total amortized intangible assets		$55,441	$(6,235	)	$-	$-		$49,206
Unamortized intangible assets:
MC Goodwill		$71,066	$-		$-	$(2,414	)	$68,652
AEC Goodwill		95,730	-		-	-		95,730
Total amortized intangible assets		$166,796	$-		$-	$(2,414	)	$164,382

(in thousands, except for years)	Amortization life in years	Balance at December 31, 2016	Amortization		Other Changes		Currency Translation	Balance at December 31, 2017
Amortized intangible assets:
AEC trade names	15	$20	$(5	)	$-		$-	$15
AEC technology	15	104	(24	)	-		-	80
AEC customer contracts	6	17,859	(3,279	)	(2,211	)	-	12,369
AEC customer relationships	15	47,009	(3,281	)	(961	)	-	42,767
AEC other intangibles	5	1,462	(275	)	(977	)	-	210
Total amortized intangible assets		$66,454	$(6,864	)	$(4,149	)	$-	$55,441
Unamortized intangible assets:
MC Goodwill		$64,645	$-		$-		$6,421	$71,066
AEC Goodwill		95,730	-		-		-	95,730
Total amortized intangible assets		$160,375	$-		$-		$6,421	$166,796

As of December 31, 2018, the gross carrying amount and accumulated amortization of amortized intangible assets was $66.7 million and $17.5 million, respectively.

Amortization expense related to intangible assets was reported in the Consolidated Statement of Income as follows: $2.9 million in Cost of goods sold and $3.3 million in Selling, general and administrative expenses in 2018; $3.3 million in Cost of goods sold and $3.6 million in Selling, general and administrative expenses in 2017; and $2.6 million in Cost of goods sold and $2.7 million in Selling, general and administrative expenses in 2016. Estimated amortization expense of intangibles for the years ending December 31, 2019 through 2023, is as follows:

	Annual amortization
Year	(in thousands)
2019	$6,235
2020	6,235
2021	6,163
2022	3,949
2023	3,228