6.	Goodwill and Intangible Assets


(Table only in thousands)	Six months ended June 30, 2015						Year ended December 31, 2014
Goodwill / Tradename	Goodwill			Tradename			Goodwill			Tradename
Beginning balance	$	167,547		$	19,766		$	134,062		$	18,419
Acquisitions and related adjustments		2,488			—			34,638			1,730
Foreign currency translation		(711	)		(238	)		(1,153	)		(383	)

	$	169,324		$	19,528		$	167,547		$	19,766


(Table only in thousands)	As of June 30, 2015						As of December 31, 2014
Intangible assets – finite life	Cost			Accum. Amort.			Cost			Accum. Amort.
Patents	$	1,456		$	1,450		$	1,429		$	1,427
Employment agreements		647			513			693			433
Technology		7,905			2,786			8,317			2,290
Customer lists		58,024			13,136			58,617			8,959
Noncompetition agreements		1,120			146			1,118			34
Tradename		1,390			91			1,390			23

	$	70,542		$	18,122		$	71,564		$	13,166

Activity for the six months ended June 30, 2015 and 2014 is as follows:


(Table only in thousands)	2015			2014
Intangible assets – finite life, net at beginning of period	$	58,398		$	46,611
Amortization expense		(5,230	)		(3,593	)
Foreign currency adjustments		(748	)		(85	)

Intangible assets – finite life, net at end of period	$	52,420		$	42,933

Amortization expense of finite life intangible assets was $2.6 million and $1.8 million for the three-month periods ended June 30, 2015 and 2014, respectively, and $5.2 million and $3.6 million for the six-month periods ended June 30, 2015 and 2014, respectively. Amortization over the next five years for finite life intangibles is expected to be $5.3 million for the remainder of 2015, $9.2 million in 2016, $7.9 million in 2017, $6.3 million in 2018, and $5.2 million in 2019.

The Company completes an annual (or more often if circumstances require) impairment assessment of its goodwill and indefinite life intangible assets. The Company did not identify any circumstances that would require an impairment assessment of its goodwill or indefinite life intangible assets as of June 30, 2015. A qualitative analysis, which included reviewing current year results for revenue and profit, was done for all reporting units. For four of our reporting units with total goodwill of $105.4 million as of December 31, 2014, the analysis led to the conclusion that it was not more likely than not that the fair value for these reporting units exceeded the carrying value. Accordingly, the first step of the two step goodwill impairment test as described in FASB ASC 350-20-35 was performed.

Under the first step, the estimated fair value of the reporting unit is calculated by the discounted cash flow method. The significant assumptions used under the discounted cash flow method are projected revenue, projected operational profit, terminal growth rates, and the cost of capital. Projected revenue, projected operational profit and terminal growth rates were determined to be significant assumptions because they are three primary drivers of the projected cash flows in the discounted cash flow fair value model. Cost of capital was also determined to be a significant assumption as it is the discount rate used to calculate the current fair value of those projected cash flows. Under this approach, the resultant estimated fair value of the reporting units exceeded its carrying value as of December 31, 2014 and no goodwill impairment charges were recorded.

For two of the reporting units tested under the first step, which carried combined goodwill of $90.9 million, the aggregate excess of fair value over their carrying value was only 3%. These two reporting units were acquired in the second half of fiscal 2013, and therefore the Company did not expect the fair value to be significantly in excess of the carrying value. Furthermore, there were no fundamental changes in the business or market that would indicate a significant decline in the fair value since the acquisition date. Management’s projections used to estimate the undiscounted cash flows included increasing sales volumes and operational improvements designed to reduce costs. Changes in any of the significant assumptions used, including if the Company does not successfully achieve its 2015 operating plan, can materially affect the expected cash flows, and such impacts can result in the requirement to proceed to a step 2 test and potentially a material non-cash impairment charge could result. Therefore, the key assumptions most susceptible to change are projected revenue and projected operational profit. We determined that with other assumptions held constant, for the first reporting unit that carried $77.9 million of goodwill, a decrease in projected revenue growth rates of approximately 30 basis points or a decrease in projected operational profit of approximately 70 basis points would result in fair value of the reporting unit being equal to its carrying value, which would require us to perform a step 2 test for this reporting unit. Likewise, we determined that with other assumptions held constant, for the second reporting unit that carried $13.0 million of goodwill, a decrease in projected revenue growth rates of approximately 100 basis points or a decrease in projected operational profit of approximately 90 basis points would result in fair value of the reporting unit being equal to its carrying value, which would require us to perform a step 2 test for this reporting unit. The Company is not currently aware of any negative changes in its assumptions that could lead to the fair value of the reporting units being less than the carrying value.

This same qualitative analysis was done for all reporting units with indefinite life intangible assets. For five reporting units that had indefinite life intangible assets totaling $13.5 million as of December 31, 2014, the analysis led to the conclusion that it was not more likely than not that the fair value for these indefinite life intangible assets exceeded their carrying value. Accordingly, the Company estimated the fair value of the indefinite life intangible assets. The estimated fair value is calculated by the relief from royalty method. The significant assumptions used under the relief from royalty method are projected revenue, royalty rates, terminal growth rates, and the cost of capital. Projected revenue, royalty rates and terminal growth rates were determined to be significant assumptions because they are three primary drivers of the projected royalty cash flows in the relief from royalty method. Cost of capital was also determined to be a significant assumption as it is the discount rate used to calculate the current fair value of those projected royalty cash flows. Under this approach, the resultant estimated fair value of the indefinite life intangible assets exceeded their carrying value as of December 31, 2014 and no impairment charges were recorded.

For three of the reporting units, which carried combined indefinite life intangible assets of $10.0 million, the aggregate excess of fair value over their carrying value was only 5%. These three reporting units were acquired in the second half of fiscal 2013, and therefore the Company did not expect the fair value to be significantly in excess of the carrying value. Furthermore, there were no fundamental changes in the businesses or markets that would indicate a significant decline in the fair value since the acquisition date. Management’s projections used to estimate the fair values included increasing sales volumes and operational improvements designed to reduce costs. Changes in any of the significant assumptions used, including if the Company does not successfully achieve its 2015 operating plan, can materially affect the expected cash flows, and such impacts can result in the requirement to proceed to a step 2 test and potentially can result in material non-cash impairment charges. Therefore, the key assumption most susceptible to change is projected revenue. We determined that with other assumptions held constant, for the first, second and third reporting units that carried $6.8 million, $2.3 million and $0.9 million, respectively, of indefinite life intangible assets, a decrease in projected revenue growth rates of approximately 70 basis points, 40 basis points and 160 basis points, respectively, would result in fair value of the indefinite life intangible assets being equal to its carrying value, which would require us to perform a step 2 test for this reporting unit. The Company is not currently aware of any negative changes in its assumptions that could lead to the fair value of the indefinite life intangible assets being less than the carrying value.

Two of the reporting units where the fair value was not significantly in excess of the carrying value had definite live intangible assets of $24 million as of December 31, 2014 which could be at risk of impairment if the Company does not successfully achieve its 2015 operating plan as described above. The Company will continue to assess the potential for impairment on a quarterly basis in fiscal 2015.