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Goodwill And Other Intangible Assets
 9 Months Ended
Sep. 30, 2014
Deferred Tax Liabilities, Goodwill and Intangible Assets [Abstract]  
Goodwill And Other Intangible Assets
Goodwill and Other Intangible Assets
We are required to review goodwill and indefinite-lived intangible assets annually for impairment. Goodwill impairment is tested at the reporting unit level (graphite electrodes, needle coke and advanced graphite materials) on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.
Our annual impairment test of goodwill was performed as of December 31, 2013 for all reporting units. The estimated fair values of our reporting units were based on discounted cash flow ("DCF") models derived from internal earnings forecasts and assumptions. The assumptions and estimates used in these valuations incorporated the then current and expected economic environment. Based on these valuations, the fair values substantially exceeded our carrying values. In addition to the quantitative analysis, we qualitatively assessed our reporting units and believe that the quantitative analysis supporting the fair values in excess of the carrying values was appropriate.
As a result of the deteriorating market conditions impacting our AGM product group, as discussed in Note 2, goodwill assigned to our AGM reporting unit of $0.4 million was written off in the second quarter of 2014.
We evaluated potential triggering events as of September 30, 2014 and noted that the aggregate carrying value of our consolidated net assets significantly exceeded our market capitalization. As a result, we determined that the recent decline in our market capitalization was a triggering event and tested our goodwill for impairment. The estimated fair values of our reporting units were based on long term discounted cash flow models derived from internal earnings forecasts and assumptions. These DCF models included twelve years of forecasted cash flows, plus an estimated terminal value. For the first several years in the models, the cash flows were based on the current operating and capital plans as prepared by management and approved by executive management. These plans were based on existing operating performance, as adjusted for current trends regarding pricing and currency rates, as well as known or expected near-term changes in product mix, operating costs, operating configuration and system-wide capacity. These plans also incorporated required or anticipated near-term capital projects and working capital changes. In a DCF model, the earlier years have a more pronounced impact on the calculated value as compared to later periods. As such, if economic conditions were to deteriorate or events were to occur resulting in the ultimate operating results for these initial years being significantly lower than what is reflected in the DCF, that would have an unfavorable effect on estimated fair values.
Discount rates are based on appropriately weighted average cost of capital ("WACC"), Company specific beta and mix of debt to equity are inputs into the determination of the discount rate, which is then qualitatively assessed from the standpoint of potential market participants. WACC has a significant impact on estimated fair values since this rate is used to discount the projected cash flows. As WACC increases, estimated fair values based on DCF decrease and vice versa.
Based on these valuations, the implied fair value of the reporting units substantially exceeded their carrying values. The results of the discounted cash flows for all reporting units, after deducting corporate debt, were compared to the market capitalization to determine an implied control premium. We evaluated the appropriateness of the implied control premium using equity valuations based on a share price average range, spot share prices as well as  third party estimates of earnings and share price.
In addition to the quantitative analysis, we qualitatively assessed our reporting units and we believe that the quantitative analysis supporting the fair values in excess of the carrying values is appropriate. However, a further deterioration in the global economic environment or in any of the input assumptions in our calculation could adversely affect the fair values of our reporting units and result in an impairment of some or all of the goodwill on the balance sheet.
The changes in the carrying value of goodwill during the nine months ended September 30, 2014 is as follows:
 
Total
 
(Dollars in
Thousands)
Balance as of December 31, 2013
$
496,810

Impairment
(413
)
Currency translation effect
(453
)
Balance as of September 30, 2014
$
495,944


The following table summarizes acquired intangible assets with determinable useful lives by major category as of December 31, 2013 and September 30, 2014:
 
As of December 31, 2013
 
As of September 30, 2014
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization & Impairment
 
Net
Carrying
Amount
 
(Dollars in Thousands)
Trade name
$
7,900

 
$
(3,944
)
 
$
3,956

 
$
7,900

 
$
(4,495
)
 
$
3,405

Technological know-how
43,349

 
(18,582
)
 
24,767

 
43,349

 
(23,446
)
 
19,903

Customer –related
    intangible
110,798

 
(44,664
)
 
66,134

 
110,798

 
(54,209
)
 
56,589

Total finite-lived
    intangible assets
$
162,047

 
$
(67,190
)
 
$
94,857

 
$
162,047

 
$
(82,150
)
 
$
79,897


Accumulated amortization as of September 30, 2014 included impairment charges related to our rationalization initiatives discussed in Note 2. The impairments represented charges of $0.4 million to customer-related intangible assets and $0.3 million to technological know-how.
Amortization expense of acquired intangible assets was $5.0 million and $4.7 million in the three months ended September 30, 2013 and September 30, 2014, respectively. Estimated amortization expense will approximate $4.7 million in the remainder of 2014, $17.1 million in 2015, $13.1 million in 2016, $11.8 million in 2017 and $10.7 million in 2018.