Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill and Other Intangible Assets [Abstract]

8. 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 on an annual basis or in interim periods if an event occurs or circumstances change that may indicate the fair value of a reporting unit is below its carrying amount. We completed our annual impairment test of goodwill as of December 31, 2020.

When performing our evaluation of goodwill for impairment, 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 a quantitative impairment test would not be required. If we are unable to reach this conclusion, then we would perform a goodwill quantitative impairment test. In performing the quantitative test, the fair value of the reporting unit is compared to its carrying amount. A charge for impairment is recognized by the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

In light of the recent loss of business in our Engine Management product line from a large retail customer, we elected to bypass the qualitative assessment at December 31, 2020 and have decided to perform a quantitative impairment test for goodwill at both the Engine Management and Temperature Control reporting units. 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, 2020. Our December 31, 2020 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 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, we will need to maintain the ongoing performance of the business at current projected levels in future periods to sustain their carrying values.

Changes in the carrying values of goodwill by operating segment during the years ended December 31, 2020 and 2019 are as follows (in thousands):

	Engine Management			Temperature Control		Total
Balance as of December 31, 2018:
Goodwill	$	91,539		$	14,270	$	105,809
Accumulated impairment losses		(38,488	)		—		(38,488	)
	$	53,051		$	14,270	$	67,321
Activity in 2019
Acquisition of Pollak Business of Stoneridge, Inc.		10,401			—		10,401
Foreign currency exchange rate change		80			—		80
Balance as of December 31, 2019:
Goodwill		102,020			14,270		116,290
Accumulated impairment losses		(38,488	)		—		(38,488	)
	$	63,532		$	14,270	$	77,802
Activity in 2020
Foreign currency exchange rate change		35			—		35
Balance as of December 31, 2020:
Goodwill		102,055			14,270		116,325
Accumulated impairment losses		(38,488	)		—		(38,488	)
	$	63,567		$	14,270	$	77,837

Acquired Intangible Assets

Acquired identifiable intangible assets as of December 31, 2020 and 2019 consist of:

	December 31,
	2020			2019
	(In thousands)
Customer relationships	$	111,701		$	111,692
Trademarks and trade names		6,980			6,980
Non-compete agreements		3,272			3,276
Patents		723			723
Supply agreements		800			800
Leaseholds		160			160
Total acquired intangible assets		123,636			123,631
Less accumulated amortization (1)		(70,221	)		(59,431	)
Net acquired intangible assets	$	53,415		$	64,200

(1)

Applies to all intangible assets, except for related trademarks and trade names totaling $2.6 million and $5.2 million as of December 31, 2020 and 2019, respectively, which have indefinite useful lives and, as such, are not being amortized.

In December 2020, a large retail customer informed us of its decision to pursue a private brand strategy for its engine management product line. As a result of this development, we anticipate that revenues sold under the BWD trademark will be significantly reduced and uncertain beyond the first quarter of 2021. In connection with the decision, we recorded an impairment charge of $2.6 million in 2020.

Total amortization expense for acquired intangible assets was $8.2 million for the year ended December 31, 2020, $8 million for the year ended December 31, 2019, and $7.6 million for the year ended December 31, 2018. Based on the current estimated useful lives assigned to our intangible assets, amortization expense is estimated to be $6.8 million for 2021, $5.2 million in 2022, $5 million in 2023, $4.9 million in 2024 and $28.9 million in the aggregate for the years 2025 through 2034.

Other Intangible Assets

Other intangible assets include computer software. Computer software as of December 31, 2020 and 2019 totaled $17 million and $16.9 million, respectively. Total accumulated computer software amortization as of December 31, 2020 and 2019 was $16.4 million and $16.2 million, respectively. Computer software is amortized over its estimated useful life of 3 to 10 years. Amortization expense for computer software was $0.3 million, $0.4 million and $0.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Fully amortized computer software, no longer in use, of $0.2 million was written-off during the year ended December 31, 2020.