Goodwill and Other Intangible Assets, Net

12 Months Ended

Dec. 31, 2014

GOODWILL AND OTHER INTANGIBLE ASSETS, NET [Abstract]

Goodwill and Other Intangible Assets, Net

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

The following table sets forth the change in the carrying amount of goodwill for each reportable segment and for the Company:



	2014									2013
	Distribution			Aerospace			Total			Distribution			Aerospace			Total
In thousands
Gross balance at beginning of period	$	105,637		$	114,538		$	220,175		$	96,155		$	110,072		$	206,227
Accumulated impairment	—			(16,252		)	(16,252		)	—			(14,181		)	(14,181		)
Net balance at beginning of period	105,637			98,286			203,923			96,155			95,891			192,046
Additions	38,033			1,532			39,565			9,493			3,527			13,020
Change in goodwill due to the disposal of Delamac	(2,014		)	—			(2,014		)	—			—			—
Impairments	—			—			—			—			(2,071		)	(2,071		)
Foreign currency translation	(44		)	(2,849		)	(2,893		)	(11		)	939			928
Net balance at end of period	$	141,612		$	96,969		$	238,581		$	105,637		$	98,286		$	203,923

Accumulated impairment at end of period	$	—		$	(16,252	)	$	(16,252	)	$	—		$	(16,252	)	$	(16,252	)

The increase in the goodwill balance at the Company's Distribution segment is primarily due to the acquisition of B.W. Rogers. See Note 3, Acquisitions, for further discussion of this acquisition. The addition to goodwill in the Company's Aerospace segment relates to an earnout payment associated with a previous acquisition.

9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET (CONTINUED)

2014 Analysis

During 2014, the Company performed a reevaluation of its reporting units for the purpose of its annual goodwill assessment. The Company reorganized its metallic and composite aerostructures businesses, as well as its engineering design and air, vehicle and maintenance, repair and overhaul businesses, into a new entity called Kaman Aerosystems. The Company has designated this entity as a reporting unit for purposes of its annual assessment of goodwill for impairment. Since this is the first year the Company assessed goodwill at this reporting unit level, the two-step impairment test was performed.

Upon completion of the qualitative assessment of events and circumstances affecting recorded goodwill as described in Note 1, Summary of Significant Accounting Policies, the Company concluded that other than Aerosystems, no reporting units should be subject to the two-step goodwill impairment test required by ASC 350 at the end of 2014. The qualitative assessment that management performed took into consideration the following factors: general economic conditions, industry specific performance, changes in carrying values of the reporting units, the assessment of assumptions used in the previous fair value calculation and changes in transaction multiples.

The results of the Aerosystems Step 1 test indicated that the Company did not need to proceed to Step 2, as the percentage by which the fair value exceeds the carrying value is 16%. The Company performed a sensitivity analysis relative to the discount rate and growth rate selected and determined a decrease of 1% in the terminal growth rate or an increase of 1% in the discount rate would not result in a fair value calculation less than the carrying value for Aerosystems.

2013 Analysis

During 2013, the Company's legacy VT Composites reporting unit experienced delays on certain programs that were driven by changes in customers' requirements during 2012. The Company anticipated these changes in requirements would shift revenues and related cash flows into 2013 and future periods. The anticipated deferred revenues did not materialize to the levels the Company had projected in 2013, and therefore the results of Step 1 of the impairment analysis resulted in a fair value for the reporting unit below its carrying value. Prior to proceeding to Step 2 of the impairment analysis, management assessed the tangible and intangible assets subject to amortization to determine if they were impaired. Based on this analysis management concluded these assets were not impaired. Upon completion of the Step 2 impairment analysis, the Company recorded a non-cash non-tax deductible goodwill impairment charge of $2.1 million, or 11% of the reporting unit's total goodwill balance, to reduce the carrying value of goodwill to its implied fair value. This charge has been included in the 2013 operating results of the Company's Aerospace segment.

Other Intangible Assets

Other intangible assets consisted of:



		At December 31,					At December 31,
		2014					2013
	Amortization Period	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization
In thousands
Customer lists / relationships	6-21 years	$	123,005	$	(31,868	)	$	109,790	$	(23,647	)
Trademarks / trade names	3-8 years	3,546		(2,080		)	2,695		(1,594		)
Non-compete agreements and other	1-9 years	6,719		(4,948		)	6,133		(4,055		)
Patents	17 years	523		(406		)	523		(396		)
Total		$	133,793	$	(39,302	)	$	119,141	$	(29,692	)

The increase in the other intangible assets balance at December 31, 2014, as compared to December 31, 2013, is primarily due to the acquisition of B.W. Rogers. See Note 3, Acquisitions, for further discussion of this acquisition. Intangible asset amortization expense was $10.6 million, $9.2 million and $7.4 million in 2014, 2013 and 2012, respectively.

9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET (CONTINUED)

Other Intangible Assets - continued

Estimated amortization expense for the next five years associated with intangible assets existing as of December 31, 2014, is as follows:



In thousands
2015	$	12,164
2016	$	11,650
2017	$	11,728
2018	$	11,728
2019	$	10,609

In order to determine the useful life of our customer lists/relationships acquired, the Company considered numerous factors, most importantly the industry considerations associated with the acquired entities. The Company determined the amortization period for the customer lists/relationships intangible assets for its Distribution acquisitions in 2014 and 2013 based primarily on an analysis of their historical customer sales attrition information.

- 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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