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Goodwill and Intangible Assets | 12 Months Ended
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Dec. 31, 2016
Goodwill And Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets |
7. | Goodwill and Intangible Assets
(Table only in thousands) |  | Energy Segment |  |  | Environmental Segment |  |  | Fluid Handling and Filtration Segment |  |  | Totals |
Balance of goodwill at December 31, 2014 |  | $ | 17,773 |  |  | $ | 55,031 |  |  | $ | 93,057 |  |  | $ | 165,861 |
2015 acquisition |  |  | 55,655 |  |  |  | — |  |  |  | — |  |  |  | 55,655 |
Foreign currency translation |  |  | (1,353 | ) |  |  | — |  |  |  | — |  |  |  | (1,353 | )
Balance of goodwill at December 31, 2015 |  |  | 72,075 |  |  |  | 55,031 |  |  |  | 93,057 |  |  |  | 220,163 |
2016 acquisition related adjustments |  |  | 4,205 |  |  |  | — |  |  |  | — |  |  |  | 4,205 |
Impairment charge |  |  | — |  |  |  | (6,828 | ) |  |  | (46,934 | ) |  |  | (53,762 | )
Foreign currency translation |  |  | (453 | ) |  |  | — |  |  |  | — |  |  |  | (453 | )
Balance of goodwill at December 31, 2016 |  | $ | 75,827 |  |  | $ | 48,203 |  |  | $ | 46,123 |  |  | $ | 170,153 |
As of December 31, 2016 and 2015, the Company has an aggregate amount of goodwill acquired of $241.1 million and $237.3 million, respectively, and an aggregate amount of impairment losses of $70.9 million and $17.1 million, respectively. 2016 acquisition related adjustments consisted of the finalization of the purchase accounting for PMFG. These adjustments included decreases of $5.5 million to property and equipment and $1.7 million to current assets partially offset by decreases of $1.1 million to the deferred income tax liability and $1.8 million to the noncontrolling interest. The Company’s indefinite lived intangible assets as of December 31, 2016 and 2015 consisted of the following:
|  | Tradenames |
(Table only in thousands) |  | 2016 |  |  | 2015 |
Beginning balance |  | $ | 26,337 |  |  | $ | 19,766 |
Acquisitions and related adjustments |  |  | — |  |  |  | 10,280 |
Impairment charge |  |  | (4,161 | ) |  |  | (3,340 | )
Foreign currency adjustments |  |  | (134 | ) |  |  | (369 | )
|  | $ | 22,042 |  |  | $ | 26,337 |
The Company completes an annual (or more often if circumstances require) impairment assessment of its goodwill and indefinite life intangible assets. During 2015, management changed the annual impairment testing date from December 31 to October 1. For 2016, the first step of the two step goodwill impairment test as described in FASB ASC 350-20-35 was performed for all reporting units. Under the first step, the Company bases its measurement of the fair value of a reporting unit using a weighting of the income method and the market method on a 50/50 basis. The income method is based on a discounted future cash flow approach that uses the significant assumptions of 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 future cash flow approach. 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. The market method is based on financial multiples of comparable companies and applies a control premium. Significant estimates in the market approach include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and operating income multiples in estimating the fair value of a reporting unit. Based on the step 1 analysis, the resultant estimated fair value of the reporting units for all but three of our reporting units exceeded their carrying value as of October 1, 2016. The first step of the impairment test indicated potential impairment for the SAT reporting unit due to lower operating performance as a result of increased competition caused by market and pricing pressures. This impairment was measured in the second step. The first step of the impairment test indicated potential impairment for the Duall and GPS reporting units due to changes in sales forecasts for future years in the fourth quarter of fiscal 2016. These changes were influenced by weaker market conditions, partially due to depressed oil prices. This impairment was measured in the second step. The SAT and Duall reporting units are included in the Environmental Segment. The GPS reporting unit is included in the Fluid Handling and Filtration Segment. The finalization of the analysis of internal strategic initiatives to improve operating performance did not result in significant projected improvements in operating results for future years, which indicated the existence of potential impairment. The second step measures the implied value of goodwill by subtracting the fair value of each reporting unit’s assets and liabilities, including intangible assets, from the fair value of each reporting unit as estimated in step 1. The goodwill impairment charge was measured as the difference between the implied fair value of goodwill and the carrying value. Impairment charges of $1.7 million, $5.1 million and $46.9 million were recorded during the fourth quarter of fiscal 2016 for the SAT, Duall and GPS reporting units, respectively. These impairment charges resulted in a reduction in goodwill, leaving a balance of zero, $5.4 million and $26.8 million in goodwill related to the SAT, Duall and GPS reporting units, respectively, as of December 31, 2016. Significant assumptions used to estimate the fair value of the SAT, Duall and GPS reporting units include estimates of future cash flows, discount rate and multiples of revenue and operating income. These assumptions are typically not considered individually because assumptions used to select one variable should also be considered when selecting other variables; however, sensitivity of the overall fair value assessment to each significant variable is also considered. In the 2016 analysis for each of the reporting units that were evaluated in Step 2, a 1% increase in the selected discount rate would have resulted in zero, $0.4 million and $2.8 million, of additional impairment for the SAT, Duall, and GPS reporting units, respectively. A 5% decrease in the selected multiples of revenue would have resulted in zero, $0.2 million and $1.7 million, of additional impairment for the SAT, Duall and GPS reporting units, respectively. The Company also performed a step 1 analysis for all reporting units with indefinite life intangible assets. The Company based its measurement of the fair value of the indefinite life intangible assets utilizing 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. Changes in any of the significant assumptions used can materially affect the expected cash flows, and such impacts can result in material non-cash impairment charges. Under this approach, the resultant estimated fair value of the indefinite life intangible assets exceeded their carrying value for all but four reporting units as of December 31, 2016. For four of the reporting units, which carried combined indefinite life intangible assets of $16.5 million, our fair value measurement resulted in the aggregate fair value being 25.2% lower than the aggregate carrying value. Accordingly, we recorded an impairment charge of $4.2 million during the year ended December 31, 2016. The Duall and SAT reporting units with indefinite life intangible asset impairment of $0.5 million and $0.3 million, respectively, were acquired in the second half of fiscal 2014. The GPS reporting unit with indefinite life intangible asset impairment of $1.8 million was acquired in the second half of 2013. The PMFG reporting unit with indefinite life intangible asset impairment of $1.6 million was acquired in the second half of 2015. The PMFG reporting unit is included in the Energy Segment. Management’s projections used to estimate the fair values at the date of acquisition primarily included increasing sales volumes; however, the units have experienced lower sales than originally projected. The Company concluded there was a triggering event that required an impairment test to be performed to support the definite lived intangible assets and other long-lived assets carrying value as a result of the impairments noted above. An undiscounted cash flow analysis was performed at the lowest level of cash flows for each asset group and the sum of the undiscounted cash flows exceeded the long-lived assets’ carrying values. As a result of this analysis, no impairment related to these assets was recorded in 2016. During the annual impairment test of indefinite life intangible assets in 2015, the carrying values of three reporting units’ indefinite life intangible assets exceeded their fair values. The Company recorded a $3.3 million impairment charge during the year ended December 31, 2015. There was no goodwill impairment recorded in 2015 or 2014. There was no indefinite life intangible asset impairment recorded in 2014. As described above, the fair value measurement methods used in the Company’s goodwill and indefinite life intangible assets impairment analyses utilizes a number of significant unobservable inputs or Level 3 assumptions. These assumptions include, among others, projections of our future operating results, the implied fair value of these assets using an income approach by preparing a discounted cash flow analysis and other subjective assumptions.
|  | 2016 |  |  | 2015 |
(Table only in thousands) Intangible assets – finite life |  | Cost |  |  | Accum. Amort. |  |  | Cost |  |  | Accum. Amort. |
Patents |  | $ | 1,439 |  |  | $ | 1,439 |  |  | $ | 1,456 |  |  | $ | 1,456 |
Employment agreements |  |  | 733 |  |  |  | 733 |  |  |  | 733 |  |  |  | 677 |
Technology |  |  | 15,867 |  |  |  | 6,360 |  |  |  | 15,867 |  |  |  | 4,027 |
Customer lists |  |  | 77,497 |  |  |  | 26,041 |  |  |  | 77,497 |  |  |  | 17,756 |
Noncompetition agreements |  |  | 1,118 |  |  |  | 478 |  |  |  | 1,118 |  |  |  | 257 |
Tradename |  |  | 1,390 |  |  |  | 301 |  |  |  | 1,390 |  |  |  | 162 |
Backlog |  |  | 4,270 |  |  |  | 4,270 |  |  |  | 4,270 |  |  |  | 1,423 |
Foreign currency adjustments |  |  | (2,964 | ) |  |  | (1,000 | ) |  |  | (2,309 | ) |  |  | (693 | )
|  | $ | 99,350 |  |  | $ | 38,622 |  |  | $ | 100,022 |  |  | $ | 25,065 |
Amortization expense of finite life intangible assets was $13.9 million, $12.3 million and $7.6 million for 2016, 2015 and 2014, respectively. Amortization over the next five years for finite life intangibles is $11.5 million in 2017, $10.0 million in 2018, $8.8 million in 2019, $7.1 million in 2020, and $5.8 million in 2021. The weighted average amortization period for the finite lived intangible assets acquired in fiscal 2015 is 8.7 years. The weighted average amortization period for finite lived intangible assets acquired in fiscal 2014 is 9.9 years.

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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=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
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