Note 3 – Goodwill and Other Intangible Assets

As a result of a review of the financial results and outlook for the MOSFETs segment following the completion of production transfers, Vishay determined that an interim indefinite-lived intangible asset impairment test was required for its Siliconix tradenames as of the end of the third fiscal quarter of 2016.

As a result of this analysis, the Company determined that its Siliconix tradenames, with a carrying value of $20,359, were impaired. The Company recorded an impairment charge of $1,559 to write-down the tradenames to their fair value. The tradenames are no longer considered indefinite-lived and the remaining value is being amortized over 10 years, which was the estimated remaining useful life.

The fair value of indefinite-lived trademarks is measured as the discounted cash flow savings realized from owning such tradenames and not having to pay a royalty for their use. The evaluation of the fair value of indefinite-lived trademarks requires us to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the assumed market-royalty rate; the discount rate; terminal growth rates; and forecasts of revenue.

In light of a sustained decline in market capitalization for Vishay and its peer group companies, and other factors (including the cost reduction programs announced during the third fiscal quarter of 2015 as described in Note 4), Vishay determined that interim goodwill and indefinite-lived impairment tests were required as of the end of the third fiscal quarter of 2015.

Prior to completing the interim assessment of goodwill for impairment, the Company performed a recoverability test of certain depreciable and amortizable long-lived assets. As a result of those assessments, it was determined that the depreciable and amortizable assets associated with the Company's Capella business were not recoverable, and the Company recorded impairment charges totaling $57,600 to write-down the related assets to their fair value.

The Company determined that the estimated fair value of the Capacitors reporting unit was less than the net book value of that reporting unit. Upon completion of the impairment analysis for the Capacitors reporting unit, the Company recorded a full goodwill impairment charge of $5,380.

The fair value of long-lived assets is measured primarily using present value techniques based on projected cash flows from the asset group. The evaluation of the recoverability of long-lived assets, and the determination of their fair value, requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the identification of the asset group at the lowest level of independent cash flows and the principal asset of the group; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures.

The fair value of reporting units for goodwill impairment testing purposes is measured primarily using present value techniques based on projected cash flows from the reporting unit. The calculated results are evaluated for reasonableness using comparable company data. The determination of the fair value of the reporting units requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which the Company competes; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures.

Due to the inherent uncertainty involved in making these estimates, actual financial results could differ from those estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge; could have a significant impact on the conclusion that an asset group's carrying value is recoverable, that an indefinite-lived asset is not impaired, or the determination of any impairment charge if it was determined that the asset values were indeed impaired.

The Company performs its annual goodwill and indefinite-lived impairment test as of the first day of the fiscal fourth quarter. The interim impairment tests performed as the last day of the third fiscal quarters of 2016 and 2015, were effectively the annual impairment tests for 2016 and 2015. No impairment was identified as a result of the Company's annual impairment test for 2017.

The recorded impairment charges are noncash in nature and do not affect Vishay's liquidity, cash flows from operating activities, or debt covenants, and will not have a material impact on future operations.

Note 3 – Goodwill and Other Intangible Assets (continued)

The changes in the carrying amount of goodwill by segment for the years ended December 31, 2017 and 2016 were as follows:

	Optoelectronic Components		Resistors & Inductors			Total

Balance at January 1, 2016	$	96,849	$	41,395		$	138,244
Sonntag acquisition		-		3,485			3,485
Exchange rate effects		-		(322	)		(322	)
Balance at December 31, 2016	$	96,849	$	44,558		$	141,407
Exchange rate effects		-		1,335			1,335
Balance at December 31, 2017	$	96,849		45,893			142,742

Other intangible assets are as follows:

	December 31,
	2017			2016

Intangible assets subject to amortization:
Patents and acquired technology	$	71,596		$	93,395
Capitalized software		54,325			53,807
Customer relationships		63,655			84,905
Tradenames		55,272			53,680
Non-competition agreements		606			1,266
		245,454			287,053
Accumulated amortization:
Patents and acquired technology		(63,868	)		(81,807	)
Capitalized software		(50,246	)		(49,388	)
Customer relationships		(26,622	)		(42,787	)
Tradenames		(34,378	)		(27,460	)
Non-competition agreements		(586	)		(1,148	)
		(175,700	)		(202,590	)
Net Intangible Assets Subject to Amortization	$	69,754		$	84,463

Amortization expense (excluding capitalized software) was $14,263, $14,842, and $21,829, for the years ended December 31, 2017, 2016, and 2015, respectively.

Estimated annual amortization expense of intangible assets on the balance sheet at December 31, 2017 for each of the next five years is as follows:

2018	$	11,620
2019		7,741
2020		6,750
2021		5,863
2022		5,192