Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

The Company assesses goodwill and other intangible assets for impairment on an annual basis as of October 1, and more frequently if there are changes in the business climate or as a result of a triggering event taking place. During the third quarter of 2020, as a result of a decline in its aerospace-related business' financial results, a significant reduction in its financial projections for the remainder of 2020 compared with prior projections, and uncertainty around the duration and magnitude of the impact of the COVID-19 pandemic on future financial results given their dependence on future levels of air travel and new aircraft builds, the Company determined there was a triggering event requiring an interim quantitative goodwill impairment assessment of each of its two aerospace-related reporting units: Aerospace Fasteners and Aerospace Engineered Products.

In preparing the quantitative analysis, the Company utilized both income and market-based approaches. The income-based approach was conducted using the discounted cash flow method, for which management updated its internal five-year forecast, and reflected its current best estimates of when, and at what level, a recovery of air travel, new aircraft builds, and resulting customer orders would occur and the related impact on each reporting unit's future sales, earnings and cash flows. Assumptions in estimating the future cash flows were based on Level 3 inputs under the fair value hierarchy. The Company also selected appropriate terminal growth rates as well as discount rates, which considered various factors including the level of inherent risk in achieving the forecast based on prior history and current market conditions. The market-based approach considered potentially comparable publicly traded companies and transactions within the aerospace industry and applied their trading multiples to management's forecast estimates.

Upon completion of the quantitative goodwill impairment tests, the Company determined that the carrying values of the Aerospace Fasteners and Aerospace Engineered Products reporting units exceeded their fair values, resulting goodwill impairment charges of approximately $70.8 million in its Aerospace Fasteners reporting unit and approximately $56.0 million in its Aerospace Engineered Products reporting unit during the three and nine month periods ended September 30, 2020. Following the impairment charges, the Aerospace Fasteners reporting unit has $62.9 million of remaining goodwill, while the Aerospace Engineered Products reporting unit has no remaining goodwill. The Company notes that a 1% change in the discount rate would have impacted the total goodwill impairment charge by approximately $20 million, while a 0.5% change in the terminal growth rate would have impacted the total goodwill impairment charge by approximately $5 million. If the future financial results of the aerospace-related businesses significantly differ from the assumptions inherent in this analysis, the Company may be subject to further impairment charges.

In the first quarter of 2020, the Company began reporting its machined components operations within the Aerospace segment. These operations were previously reported in the Company's Specialty Products segment. As a result of the reporting structure change, goodwill of approximately $12.7 million was reassigned from the Specialty Products segment to the Aerospace segment.

Changes in the carrying amount of goodwill for the nine months ended September 30, 2020 are summarized as follows (dollars in thousands):



	Packaging		Aerospace		Specialty Products		Total
Balance, December 31, 2019	$	181,650	$	133,690	$	19,300	$	334,640
Goodwill from acquisitions	—		43,260		—		43,260
Goodwill reassigned in segment realignment	—		12,740		(12,740)		—
Impairment charge	—		(126,840)		—		(126,840)

Foreign currency translation and other	810		—		—		810
Balance, September 30, 2020	$	182,460	$	62,850	$	6,560	$	251,870

Other Intangible Assets

As a result of the significant forecast reduction in the Company's aerospace-related businesses, the Company also performed an interim quantitative assessment for the indefinite-lived intangible assets within the Aerospace segment, using the relief-from-royalty method. Significant management assumptions used under the relief-from-royalty method reflected the Company's current assessment of the risks and uncertainties associated with the aerospace industry. Upon completion of the quantitative impairment test, the Company determined that certain of the Company's aerospace-related trade names had carrying values that exceeded their fair values, and therefore recorded impairment charges of approximately $7.8 million during the three and nine month periods ended September 30, 2020.

The Company amortizes its other intangible assets over periods ranging from one to 30 years. The gross carrying amounts and accumulated amortization of the Company's other intangibles are summarized below (dollars in thousands):


	As of September 30, 2020				As of December 31, 2019
Intangible Category by Useful Life	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Finite-lived intangible assets:
Customer relationships, 5 – 12 years	$	100,610	$	(56,810)	$	73,860	$	(49,910)
Customer relationships, 15 – 25 years	122,270		(60,840)		122,280		(56,010)
Total customer relationships	222,880		(117,650)		196,140		(105,920)
Technology and other, 1 – 15 years	54,110		(32,020)		52,430		(29,790)
Technology and other, 17 – 30 years	43,300		(39,090)		43,300		(37,620)
Total technology and other	97,410		(71,110)		95,730		(67,410)
Indefinite-lived intangible assets:
Trademark/Trade names	44,060		—		42,850		—
Total other intangible assets	$	364,350	$	(188,760)	$	334,720	$	(173,330)

Amortization expense related to intangible assets as included in the accompanying consolidated statement of operations is summarized as follows (dollars in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Technology and other, included in cost of sales	$	1,240	$	1,190	$	3,710	$	3,590
Customer relationships, included in selling, general and administrative expenses	4,070		3,460		11,750		10,440
Total amortization expense	$	5,310	$	4,650	$	15,460	$	14,030