Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Other Intangible Assets [Abstract]

7.	Goodwill and Other Intangible Assets

Goodwill

We assess the impairment of long-lived and identifiable intangibles assets and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. With respect to goodwill, we test for impairment of goodwill of a reporting unit on an annual basis or in interim periods if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying amount. We completed our annual impairment test of goodwill as of December 31, 2012.

Goodwill is tested for impairment using a two-step approach. When performing our evaluation, if we conclude qualitatively that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is not required. If we are unable to reach this conclusion, then we would perform the two-step impairment test. We have decided to perform the two-step impairment test for goodwill at both the Engine Management and Temperature Control reporting units at December 31, 2012. The first step of the impairment analysis consists of a comparison of the fair value of the reporting units with their respective carrying amounts, including goodwill. If the fair value of the reporting unit exceeds the carrying amount of the reporting unit, step two of the impairment analysis is not required. The fair values of the Engine Management and Temperature Control reporting units were determined based upon the Income Approach, which estimates the fair value based on future discounted cash flows, and the Market Approach, which estimates the fair value based on market prices of comparable companies. We base our fair value estimates on projected financial information which we believe to be reasonable. We also considered our total market capitalization as of December 31, 2012. Our December 31, 2012 annual goodwill impairment analysis did not result in an impairment charge as it was determined that the fair values of our Engine Management and Temperature Control reporting units were 70% and 60%, respectively, in excess of their carrying amounts. While the fair values exceed the carrying amounts at the present time and we do not believe that impairments are probable, the performance of the business and brands require continued improvement in future periods to sustain their carrying values.

Changes in the carrying values of goodwill by operating segment during the years ended December 31, 2012 and 2011 are as follows (in thousands):

	Engine Management			Temperature Control		Total

Balance as of December 31, 2010
Goodwill	$	39,925		$	-	$	39,925
Accumulated impairment losses		(38,488	)		-		(38,488	)
	$	1,437		$	-	$	1,437
Activity in 2011
Acquisition of Engine Controls business
of BLD Products, Ltd.	$	12,867		$	-	$	12,867
Acquisition of Forecast Trading Corporation		11,820			-		11,820
Balance as of December 31, 2011
Goodwill		64,612			-		64,612
Accumulated impairment losses		(38,488	)		-		(38,488	)
	$	26,124		$	-	$	26,124
Activity in 2012
Acquisition of CompressorWorks, Inc.	$	-		$	9,703	$	9,703
Balance as of December 31, 2012
Goodwill		64,612			9,703		74,315
Accumulated impairment losses		(38,488	)		-		(38,488	)
	$	26,124		$	9,703	$	35,827

In April 2011, we acquired the Engine Controls business of BLD Products, Ltd., for $27 million in cash. The purchase price exceeded the fair value of the acquired net assets and, accordingly, $12.9 million was allocated to goodwill in our consolidated balance sheet.

In October 2011, we acquired all of the capital stock of Forecast Trading Corporation for $44.3 million in cash. The purchase price exceeded the fair value of the acquired net assets and, accordingly, $11.8 million was allocated to goodwill in our consolidated balance sheet.

In April 2012, we acquired substantially all of the assets of CompressorWorks, Inc. for $38.6 million, which consisted of a purchase price of $37.4 million and a $1.2 million working capital adjustment. The purchase price exceeded the fair value of the acquired net assets and, accordingly, $9.7 million was allocated to goodwill in our consolidated balance sheet.

Acquired Intangible Assets

Acquired identifiable intangible assets as of December 31, 2012 and 2011 consist of:

	December 31,
	2012			2011
	(In thousands)
Customer relationships	$	40,100		$	32,100
Trademarks and trade names		6,800			6,300
Non-compete agreements		910			700
Patents and supply contracts		723			723
Leaseholds		160			-
Total acquired intangible assets		48,693			39,823
Less accumulated amortization (1)		(14,210	)		(9,467	)
Net acquired intangible assets	$	34,483		$	30,356

(1)

Applies to all intangible assets, except for the Dana acquisition related trademarks and trade names totaling $5.2 million, which have indefinite useful lives and, as such, are not being amortized.

In April 2011, we acquired the Engine Controls business of BLD Products, Ltd. Intangible assets acquired in the acquisition consisted of $7.2 million of customer relationships. It was determined that the customer relationships acquired have a finite life and are being amortized on a straight-line basis over the estimated useful life of 10 years.

In October 2011, we acquired all of the capital stock of Forecast Trading Corporation. Intangible assets acquired in the acquisition consisted of $13.8 million of customer relationships, $0.8 million of trademarks and trade names and $0.7 million of non-compete agreements. It was determined that the customer relationships, trademarks and trade names, and non-compete agreements have finite lives and are being amortized on a straight-line basis over the estimated useful lives of 7 to 10 years, 10 years and 5 years, respectively.

In April 2012, we acquired substantially all of the assets of CompressorWorks, Inc. Intangible assets acquired of $8.9 million consists of customer relationships of $8 million that will be amortized on a straight-line basis over the estimated useful life of 7 years; trademarks and trade names of $0.5 million that will be amortized on a straight-line basis over the estimated useful life of 3 years; non-compete agreements of $0.2 million that will be amortized on a straight-line basis over the estimated useful life of 3 years; and leaseholds of $0.2 million that will be amortized on a straight-line basis over the estimated useful life of 2.3 years.

Total amortization expense for acquired intangible assets was $4.7 million for the year ended December 31, 2012, $2.1 million for the year ended December 31, 2011, and $1.2 million for the year ended December 31, 2010. Based on the current estimated useful lives assigned to our intangible assets, amortization expense is estimated to be $4.7 million for 2013, $4.1 million in 2014, $3.9 million in 2015 and $16.6 million in the aggregate for the years 2016 through 2028.

Other Intangible Assets

Other intangible assets include computer software. As of December 31, 2012 and 2011, these costs totaled $17.3 million and $16.1 million, respectively, and total accumulated computer software amortization was $15.2 million and $14.7 million, respectively. Computer software is amortized over its estimated useful life of 3 to 10 years. Amortization expense for computer software was $0.5 million, $0.7 million and $1.1 million for the years ended December 31, 2012, 2011 and 2010, respectively.

- 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.

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