Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2015

Goodwill and Other Intangible Assets [Abstract]

4. GOODWILL AND OTHER INTANGIBLE ASSETS

The following table represents the goodwill balance by reportable segment:



		Rail Products and Services		Construction Products		Tubular and Energy Services		Total
Balance at December 31, 2014	$	38,956	$	5,147	$	38,846	$	82,949
Acquisitions		8,772		-		69,908		78,680
Foreign currency translation impact		(90)		-		-		(90)
Impairment charges		-		-		(80,337)		(80,337)
Balance at September 30, 2015	$	47,638	$	5,147	$	28,417	$	81,202

The Company performs goodwill impairment tests annually during the fourth quarter, unless it is determined that it is more likely than not that the fair value of a reporting unit is less than the carrying amount. Qualitative factors are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. During the current quarter, the Company’s IOS and Chemtec reporting units underperformed against their projections and revised their forecasts downward. Additionally, in August, the Company revised its full year outlook as a result of trends in the energy market as well as the loss of sales to UPRR. The impact of these factors led to a decline in the Company’s market capitalization which fell below the shareholder’s equity value. The Company concluded that the aggregation of these events were indications of impairments.

Based upon these indicators, with the assistance of an independent valuation firm, the Company performed an interim test for impairment of goodwill as of September 1, 2015. The valuation included the use of both the income and market approach. The Company applied greater weighting to the income approach as the Company believes it is the most reliable indication of value as it captures forecasted revenues and earnings for the reporting units in the projection period that the market approach may not directly incorporate.

The results of the test indicated that the IOS and Chemtec reporting units’ respective fair values were less than their carrying value. All other reporting units that maintain goodwill exceeded their carrying value and were not at risk of impairment. As a result of the downturn within the energy markets impact on both reporting units, the prolonged expectations for recovery, and the reduction in active U.S. land oil rig count which specifically impacted the IOS reporting unit, the near term projections of these reporting units have deteriorated and the expected future growth of each of these reporting units was insufficient to support the carrying values.

The Company compared the implied fair values of the IOS and Chemtec goodwill amounts with the carrying amounts of that goodwill. The fair values of the IOS and Chemtec reporting units were allocated to all of the assets and liabilities of the respective reporting unit as if IOS and Chemtec had been acquired in business combinations as of the test date and the fair value was the purchase price paid to acquire each reporting unit. As a result of this valuation, it was determined that the carrying amounts of IOS’s and Chemtec’s goodwill exceeded the implied fair values of that goodwill. The Company recognized a non-cash goodwill impairment charge of $80,337 ($63,887 net of taxes) to write down the carrying values to the implied fair values, of which $69,908 represents the full carrying value of goodwill related to the IOS acquisition and the remaining $10,429 relates to the Chemtec reporting unit,.

The Company performed a recoverability test on the long-lived tangible and definite lived intangible assets related to the IOS and Chemtec acquisitions and concluded that no impairment existed. The Company will continue to monitor these assets, including their respectful useful lives, in future periods.

The following table represents the gross other intangible assets balance by reportable segment:


		September 30,		December 31,
		2015		2014
Rail Products and Services	$	58,736	$	44,781
Construction Products		3,178		3,178
Tubular and Energy Services		98,166		47,812
	$	160,080	$	95,771

The components of the Company’s intangible assets are as follows:



	September 30, 2015
	Weighted Average		Gross				Net
	Amortization Period		Carrying		Accumulated		Carrying
	In Years		Value		Amortization		Amount

Non-compete agreements	4	$	6,979	$	(2,015)	$	4,964
Patents	10		531		(236)		295
Customer relationships	16		95,633		(8,759)		86,874
Supplier relationships	5		350		(318)		32
Trademarks and trade names	13		14,274		(2,719)		11,555
Technology	13		42,313		(8,511)		33,802
		$	160,080	$	(22,558)	$	137,522



	December 31, 2014
	Weighted Average		Gross				Net
	Amortization Period		Carrying		Accumulated		Carrying
	In Years		Value		Amortization		Amount

Non-compete agreements	5	$	4,143	$	(705)	$	3,438
Patents	10		564		(189)		375
Customer relationships	19		44,450		(4,679)		39,771
Supplier relationships	5		350		(268)		82
Trademarks and trade names	14		10,765		(1,855)		8,910
Technology	14		35,499		(5,941)		29,558
		$	95,771	$	(13,637)	$	82,134

Intangible assets are amortized over their useful lives ranging from 5 to 25 years, with a total weighted average amortization period of approximately 15 years. Amortization expense for the three-month periods ended September 30, 2015 and 2014 was $3,337 and $1,191, respectively. Amortization expense for the nine-month periods ended September 30, 2015 and 2014 was $8,950 and $3,504, respectively.

Estimated amortization expense for the remainder of 2015 and thereafter is as follows:



		Amortization Expense
2015	$	3,263
2016		13,040
2017		12,139
2018		11,807
2019		11,076
2020 and thereafter		86,197
	$	137,522

- 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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