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Goodwill and Intangible Assets | 9 Months Ended
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Sep. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets |
6. | Goodwill and Intangible Assets
(Table only in thousands) |  | Nine months ended September 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 |  |  | 65,687 |  |  |  | 10,750 |  |  |  | 34,638 |  |  |  | 1,730 |
Foreign currency translation |  |  | (994 | ) |  |  | (267 | ) |  |  | (1,153 | ) |  |  | (383 | )
|  | $ | 232,240 |  |  | $ | 30,249 |  |  | $ | 167,547 |  |  | $ | 19,766 |
(Table only in thousands) |  | As of September 30, 2015 |  |  | As of December 31, 2014 |
Intangible assets – finite life |  | Cost |  |  | Accum. Amort. |  |  | Cost |  |  | Accum. Amort. |
Patents |  | $ | 1,456 |  |  | $ | 1,455 |  |  | $ | 1,429 |  |  | $ | 1,427 |
Employment agreements |  |  | 653 |  |  |  | 572 |  |  |  | 693 |  |  |  | 433 |
Technology |  |  | 15,583 |  |  |  | 3,222 |  |  |  | 8,317 |  |  |  | 2,290 |
Customer lists |  |  | 79,104 |  |  |  | 15,355 |  |  |  | 58,617 |  |  |  | 8,959 |
Noncompetition agreements |  |  | 1,111 |  |  |  | 201 |  |  |  | 1,118 |  |  |  | 34 |
Tradename |  |  | 1,390 |  |  |  | 127 |  |  |  | 1,390 |  |  |  | 23 |
Backlog |  |  | 6,120 |  |  |  | 510 |  |  |  | — |  |  |  | — |
|  | $ | 105,417 |  |  | $ | 21,442 |  |  | $ | 71,564 |  |  | $ | 13,166 |
Activity for the nine months ended September 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 |  |  | (8,513 | ) |  |  | (5,342 | )
Acquisitions/purchase accounting adjustments |  |  | 34,900 |  |  |  | — |
Foreign currency adjustments |  |  | (810 | ) |  |  | (870 | )
Intangible assets – finite life, net at end of period |  | $ | 83,975 |  |  | $ | 40,399 |
Amortization expense of finite life intangible assets was $3.3 million and $1.7 million for the three-month periods ended September 30, 2015 and 2014, respectively, and $8.5 million and $5.3 million for the nine-month periods ended September 30, 2015 and 2014, respectively. Amortization over the next five years for finite life intangibles is expected to be $4.7 million for the remainder of 2015, $16.9 million in 2016, $13.0 million in 2017, $10.7 million in 2018, and $8.9 million in 2019. The Company completes an annual (or more often if circumstances require) impairment assessment of its goodwill and indefinite life intangible assets. Management has changed the annual impairment testing date from December 31 to October 1. As of the date of this filing, the Company has not yet completed its assessment. The Company did not identify any triggering events that would require an impairment assessment of its goodwill or indefinite life intangible assets as of September 30, 2015. A qualitative analysis, which included reviewing current year results for revenue and profit, was done for all reporting units as of December 31, 2014. 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. As of September 30, 2015, a number of our reporting units, including the two mentioned above, continue to have lower than expected sales and operating profits for 2015, and we will need to carefully analyze these units for impairment on October 1, 2015, which is our annual testing date. 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 primarily included increasing sales volumes, but the units are experiencing softer sales than expected for 2015. Changes in any of the significant assumptions used, including if the Company does not successfully achieve its 2015 operating plan, which is possible for certain units as of September 30, 2015, 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. As previously mentioned, the Company is experiencing soft sales in a number of reporting units, and if this continues into the fourth quarter, an impairment may be possible. 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 perform its annual impairment assessment in the fourth quarter. Management has changed the annual impairment testing date from December 31 to October 1. As of the date of this filing, the Company has not yet completed its assessment.

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- 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=26713463&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=26713463&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=26713463&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
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