XML 31 R16.htm IDEA: XBRL DOCUMENT
v3.7.0.1

GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended
--- | ---
Dec. 31, 2016
GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract] |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 8 - GOODWILL AND OTHER INTANGIBLE ASSETS The following table presents the changes in the carrying amount of goodwill and other intangible assets during the year ended December 31, 2016 (in thousands):
|  | Goodwill |  |  | Other Intangible Assets |  |  | Total |
Balances as of December 31, 2015 |  | $ | 197,362 |  |  | $ | 112,297 |  |  | $ | 309,659 |
Sale of subsidiary |  |  | (9,620 | ) |  |  | - |  |  |  | (9,620 | )
Purchase accounting adjustment |  |  | (151 | ) |  |  | - |  |  |  | (151 | )
Translation adjustment |  |  | - |  |  |  | 595 |  |  |  | 595 |
Amortization |  |  | - |  |  |  | (18,061 | ) |  |  | (18,061 | )
Balances as of December 31, 2016 |  | $ | 187,591 |  |  | $ | 94,831 |  |  | $ | 282,422 |
The following table presents the changes in the carrying amount of goodwill and other intangible assets during the year ended December 31, 2015 (in thousands):
|  | Goodwill |  |  | Other Intangible Assets |  |  | Total |
Balances as of December 31, 2014 |  | $ | 253,312 |  |  | $ | 130,333 |  |  | $ | 383,645 |
Acquired during the period |  |  | 11,713 |  |  |  | 7,263 |  |  |  | 18,976 |
Impairment |  |  | (67,663 | ) |  |  | (1,072 | ) |  |  | (68,735 | )
Translation adjustment |  |  | - |  |  |  | (3,606 | ) |  |  | (3,606 | )
Amortization |  |  | - |  |  |  | (20,621 | ) |  |  | (20,621 | )
Balances as of December 31, 2015 |  | $ | 197,362 |  |  | $ | 112,297 |  |  | $ | 309,659 |
The following table presents goodwill balance by reportable segment as of December 31, 2016 and 2015 (in thousands):
|  | As of December 31, |
|  | 2016 |  |  | 2015 |
Service Centers |  | $ | 154,473 |  |  | $ | 164,244 |
Innovative Pumping Solutions |  |  | 15,980 |  |  |  | 15,980 |
Supply Chain Services |  |  | 17,138 |  |  |  | 17,138 |
Total |  | $ | 187,591 |  |  | $ | 197,362 |
During the third quarter of 2015, the price of DXP’s common stock and the price of crude oil declined over 40% and over 20%, respectively. This decline in oil prices reduced spending by our customers and reduced our revenue expectations. This sustained decline in crude oil prices, reduced capital spending by customers and reduced revenue expectations were determined to be a triggering event during the third quarter of 2015. This triggering event required us to perform testing for possible goodwill impairment in two of our reporting units, and our step one testing indicated there was an impairment in the B27 IPS and B27 SC reporting units. No triggering event was identified in our other reporting units during the third quarter. ASC 350 step two of the goodwill impairment testing for the reporting units was performed preliminarily during the third quarter of 2015. Our preliminary analysis concluded that $48.0 million of our B27 IPS reporting unit’s goodwill and $9.8 million of our B27 SC reporting unit’s goodwill was impaired. The remaining goodwill for the B27 IPS and B27 SC reporting units at September 30, 2015 was $4.9 million and $10.3 million, respectively. The September 30, 2015 ASC 350 step two testing was completed in the fourth quarter of 2015 without any adjustment to the amount recorded in the third quarter of 2015. Fair value was based on expected future cash flow using Level 3 inputs under Account Standards Codification 820 Fair Value Measurements (“ASC 820”). The cash flows are those expected to be generated by market participants, discounted at a rate of return market participants would expect. Approximately 60% of the goodwill associated with the B27 acquisition is not deductible for tax purposes. Accordingly, the financial statement tax benefit is calculated for only 40% of the goodwill impairment. The pretax impairment impacted DXP’s effective tax rate for 2015. For the year ended December 31, 2014, accumulated impairment for the B27 IPS and B27 SC reporting units was $95.1 million and $10.2 million, respectively. After recording the third quarter impairment loss, accumulated impairment expenses for the B27 IPS and B27 SC reporting units were $143.1 million and $20.0 million, respectively, at September 30, 2015. DXP recorded $1.1 million of impairment expense in the third quarter of 2015 to write off an acquired intangible asset related to an ITT Goulds distribution agreement, which was terminated by ITT Goulds during 2015. The remaining intangible asset value of vendor distribution agreements for the year ended December 31, 2015 was zero. None of the impairment is expected to be deductible for tax purposes. During the fourth quarter of 2015, the price of DXP’s common stock and the price of crude oil declined over 16% and over 18%, respectively. This decline in oil prices reduced spending by our customers during the fourth quarter and resulted in fourth quarter actual earnings for the B27 IPS and B27 SC reporting units declining significantly from the forecasts used in the impairment analysis at the end of the third quarter of 2015. The declines in forecasted earnings for these two reporting units were determined to be a triggering event during the fourth quarter of 2015. This triggering event required us to perform testing for possible goodwill impairment in these two reporting units, and our step one testing indicated there may be an impairment in the B27 IPS and B27 SC reporting units. No triggering event was identified in our other reporting units during the fourth quarter. ASC 350 step two of the goodwill impairment testing for the reporting units was performed during the fourth quarter of 2015. Our analysis concluded that $4.9 million of our B27 IPS reporting unit’s goodwill and $5.0 million of our B27 SC reporting unit’s goodwill was impaired. Fair value was based on expected future cash flow using Level 3 inputs under ASC 820. The cash flows are those expected to be generated by market participants, discounted at a rate of return market participants would expect. The remaining goodwill for the B27 IPS and B27 SC reporting units at December 31, 2015 was zero and $5.3 million, respectively. Approximately 60% of the goodwill associated with the B27 acquisition is not deductible for tax purposes. Accordingly, the financial statement tax benefit is calculated for only 40% of the goodwill impairment. The pretax impairment impacted DXP’s effective tax rate for 2015. After recording the fourth quarter impairment loss, accumulated impairment for the B27 IPS and B27 SC reporting units were $148.0 million and $25.0 million, respectively, for the year ended December 31, 2015. As none of the Company’s other reporting units recorded impairment losses in 2015, accumulated impairment for these units remained at $12.3 million. During the fourth quarter of 2014, DXP performed its annual goodwill impairment test at its B27 IPS reporting unit and recognized impairment expense of $95.1 million. In performing the goodwill impairment test, Step 1 of the test failed as the fair value of the reporting unit no longer exceeded its carrying amount primarily due to actual revenues being lower than revenues forecasted as of the date of acquisition and the decline in oil prices during the third quarter of 2014. Fair value was based on expected future cash flow using Level 3 inputs under ASC 820. The cash flows are those expected to be generated by market participants, discounted at a rate of return market participants would expect. In Step 2, goodwill with a carrying amount of $148.0 million was determined to have an implied fair value of $52.9 million after the hypothetical purchase price allocation under US GAAP guidance for business combinations. Approximately 60% of the goodwill associated with the B27 acquisition is not deductible for tax purposes. Accordingly, the financial statement tax benefit is calculated for only 40% of the goodwill impairment. The pretax impairment impacted DXP’s effective tax rate for 2014. B27 IPS is reported in the IPS reportable segment. The Company has not previously recorded an impairment loss for the reporting unit. For the year ended December 31, 2014, accumulated impairment for the B27 IPS reporting unit was $95.1 million. During the fourth quarter of 2014, DXP performed its annual goodwill impairment test at its NatPro IPS reporting unit and recognized impairment expense of $12.3 million consisting of goodwill. Fair value was based on expected future cash flows using Level 3 inputs under ASC 820. The cash flows are those expected to be generated by the market participants, discounted at a rate of return market participants would expect. Goodwill was determined to have an implied fair value of zero after the hypothetical purchase price allocation under US GAAP guidance for business combinations. None of the goodwill associated with the NatPro acquisition is deductible for tax purposes. The pretax goodwill impairment impacted DXP's effective tax rate for 2014. NatPro IPS is reported in the IPS reportable segment. The Company has not previously recorded an impairment loss for the reporting unit. For the year ended December 31, 2014, accumulated impairment for the NatPro IPS reporting unit was $12.3 million. During the fourth quarter of 2014, DXP performed its annual goodwill impairment test at its B27 SC reporting unit and recognized a goodwill impairment expense of $10.2 million. In performing the goodwill impairment test, Step 1 of the test failed as the fair value of the reporting unit no longer exceeded its carrying amount primarily due to actual revenues being lower than revenues forecasted as of the date of acquisition and the decline in oil prices during the third quarter of 2014. Fair value was based on expected future cash flow using Level 3 inputs under ASC 820. The cash flows are those expected to be generated by market participants, discounted at a rate of return market participants would expect. In Step 2, goodwill was determined to have an implied fair value of $20.1 million after the hypothetical purchase price allocation under USGAAP guidance for business combinations. Approximately 60% of the goodwill associated with the B27 acquisition is not deductible for tax purposes. Accordingly, the financial statement tax benefit is calculated for only 40% of the impairment. The pretax impairment impacted DXP’s effective tax rate for 2014. B27 Service Centers is reported in the Service Centers reportable segment. The Company has not previously recorded an impairment loss for the reporting unit. For the year ended December 31, 2014, accumulated impairment for the B27 Service Centers reporting unit was $10.2 million. The impairment losses during the years ended December 31, 2015 and 2014 are included in the “impairment expense” line item on the consolidated statements of income (loss). The following table presents a summary of amortizable other intangible assets (in thousands):
|  | As of December 31, 2016 |  |  | As of December 31, 2015 |
|  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Carrying Amount, net |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Carrying Amount, net |
Customer relationships |  |  | 163,022 |  |  |  | (68,446 | ) |  |  | 94,576 |  |  |  | 195,580 |  |  |  | (83,741 | ) |  |  | 111,839 |
Non-compete agreements |  |  | 1,836 |  |  |  | (1,581 | ) |  |  | 255 |  |  |  | 1,815 |  |  |  | (1,357 | ) |  |  | 458 |
Total |  | $ | 164,858 |  |  | $ | (70,027 | ) |  | $ | 94,831 |  |  | $ | 197,395 |  |  | $ | (85,098 | ) |  | $ | 112,297 |
Gross carrying amounts as well as accumulated amortization are partially affected by the fluctuation of foreign currency rates. Other intangible assets are amortized according to estimated economic benefits over their estimated useful lives. Customer relationships are amortized over their estimated useful lives. Amortization expense is recognized according to estimated economic benefits and was $18.1 million, $20.6 million, and $22.5 million for the years ended December 31, 2016, 2015, and 2014, respectively. The estimated future annual amortization of intangible assets for each of the next five years and thereafter are as follows (in thousands):
2017 |  | $ | 17,209 |
2018 |  |  | 15,558 |
2019 |  |  | 14,114 |
2020 |  |  | 10,680 |
2021 |  |  | 8,427 |
Thereafter |  |  | 28,843 |
The weighted average remaining estimated life for customer relationships and non-compete agreements are 9.2 years and 2.4 years, respectively.

X
- References No definition available. + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16373-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16265-109275 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66006027&loc=d3e16323-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13816-109267 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13854-109267 + Details
Name: | us-gaap_GoodwillAndIntangibleAssetsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration