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Note 10 - Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Text Block]

Note 10 – Goodwill and Other Intangible Assets

The major components of Goodwill and other intangible assets are:

	2020				2019
	Historical Cost		Accumulated Amortization		Historical Cost		Accumulated Amortization
Finite-lived intangible assets:
Customer relationships	$	7,876	$	6,991	$	7,832	$	6,301
Technology and drawings		6,761		4,015		6,749		3,712
Other intangibles		2,307		1,521		2,292		1,151
Total finite-lived intangible assets		16,944		12,527		16,873		11,164
Goodwill		27,537		-		27,215		-
Trade names and trademarks		2,221		-		2,072		-
Total	$	46,702	$	12,527	$	46,160	$	11,164

Amortization of intangible assets was $1.3 million, $1.2 million and $1.2 million in 2020, 2019 and 2018, respectively. Amortization of these intangible assets for 2021 through 2025 is expected to approximate $0.5 million per year.

Changes in the carrying value of goodwill during the years ended December 31, 2020 and 2019 are as follows:

	Goodwill
Balance at December 31, 2018	$	27,234
Acquisitions		-
Impairment		-
Foreign currency		(19	)
Balance at December 31, 2019	$	27,215
Acquisitions		-
Impairment		-
Foreign currency		322
Balances at December 31, 2020	$	27,537

For 2020, the Company used a quantitative analysis for the annual goodwill impairment testing as of October 1 for its National Pump Company (“National”) reporting unit. The fair value for this reporting unit was estimated using a discounted cash flow model, which considered forecasted cash flows discounted at an estimated weighted-average cost of capital. The forecasted cash flows were based on the Company’s long-term operating plan and a terminal value was used to estimate the cash flows beyond the period covered by the operating plan. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. These analyses require the exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates and the timing of expected future cash flows. Sensitivity analyses were performed around these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values.

The result of this goodwill impairment test indicated that no impairment existed at National. The Company’s annual impairment analysis performed as of October 1, 2020 concluded that National’s fair value exceeded its carrying value by approximately 31%. A sensitivity analysis was performed for the National reporting unit, assuming a hypothetical 100 basis point decrease in the expected long-term growth rate or a hypothetical 100 basis point increase in the weighted average cost of capital, and both scenarios independently yielded an estimated fair value for the National reporting unit above carrying value. If National fails to experience growth or revises its long-term projections downward, it could be subject to impairment charges in the future. Goodwill relating to the National reporting unit is $13.6 million, 3.4% of the Company’s December 31, 2020 total assets.

For 2020, for all other reporting units, the Company used a qualitative analysis for goodwill impairment testing as of October 1. This qualitative assessment included consideration of current industry and market conditions and circumstances as well as any mitigating factors that would most affect the fair value of the Company and these reporting units. Based on the assessment and consideration of the totality of the facts and circumstances, including the business environment in the fourth quarter of 2020, the Company determined that it was not more likely than not that the fair value of the Company or these reporting units is less than their respective carrying amounts. As such, no goodwill impairments for these reporting units were recorded for the year ended December 31, 2020.

Other indefinite-lived intangible assets primarily consist of trademarks and trade names. The fair value of these assets is also tested annually for impairment as of October 1, or whenever events or changes in circumstances indicate there may be a possible permanent loss of value. The fair value of these assets is determined using a royalty relief methodology similar to that employed when the associated assets were acquired, but using updated estimates of future sales, cash flows and profitability. For 2020 and 2019 the fair value of all indefinite lived intangible assets exceeded the respective carrying values.

Finite-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recovered through future net cash flows generated by the assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future net undiscounted cash flows estimated to be generated by such assets. Based upon our fiscal 2020 and 2019 quantitative and qualitative impairment analyses the Company was not aware of any events or changes in circumstances that indicate the carrying value of its finite-lived intangible assets may not be recoverable.