Goodwill and Other Intangible Assets, Net

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [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:



	2016								2015
	Distribution		Aerospace			Total			Distribution		Aerospace			Total
In thousands
Gross balance at beginning of period	$	149,204	$	219,758		$	368,962		$	141,612	$	113,221		$	254,833
Accumulated impairment	—		(16,252		)	(16,252		)	—		(16,252		)	(16,252		)
Net balance at beginning of period	149,204		203,506			352,710			141,612		96,969			238,581
Additions	—		2,138			2,138			7,592		106,488			114,080
Impairments	—		—			—			—		—			—
Foreign currency translation	—		(7,342		)	(7,342		)	—		49			49
Purchase price adjustment	—		(9,612		)	(9,612		)	—		—			—
Net balance at end of period	$	149,204	$	188,690		$	337,894		$	149,204	$	203,506		$	352,710

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

Additions to goodwill in the Company's Aerospace segment primarily relate to an earnout payment associated with a previous acquisition. See Note 3, Acquisitions, for further discussion of these acquisitions. During the purchase price measurement period, the Company made adjustments to the purchase price allocation related to the GRW acquisition. These adjustments were for the finalization of certain tax matters and the reduction of the accrual related to the environmental remediation at the Rimpar, Germany facility.

2016 Analysis

The Company performed a reevaluation of its reporting units for the purposes of its annual goodwill assessment. As previously disclosed in our 2015 Form 10-K, RWG, EXTEX and GRW were reorganized under the single management team of Kaman Specialty Bearings and Engineered Products. The Company tested the new reporting unit for impairment immediately after its creation by comparing the sum of the fair values of the entities moved into the new reporting unit to the carrying value of the new reporting unit, noting the fair value exceeded the carrying value. Prior to the reorganization, these reporting units were stand-alone reporting units. The fair value of RWG was assessed as part of our 2015 annual test for goodwill impairment, prepared during the fourth quarter of 2015. EXTEX and GRW were acquired during the fourth quarter of 2015 and as such were not included in the 2015 annual test for goodwill impairment. There were no significant changes to the conditions of the entities in the new reporting unit that would have impacted the results of the analysis as of January 1, 2016. Since this is the first year the Company assessed goodwill at this reporting unit level, the two-step impairment test was performed.

In accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”), the Company evaluates goodwill for possible impairment on at least an annual basis. Upon completion of our 2016 qualitative assessment of events and circumstances affecting recorded goodwill as described in Note 1, Summary of Significant Accounting Policies, the Company concluded that all reporting units, other than KPP - Orlando, should receive a Step 1 analysis. The qualitative assessment performed for KPP - Orlando took into consideration the following factors: general economic conditions, industry specific performance, changes in carrying values of the reporting unit, the assessment of assumptions used in the previous fair value calculation and changes in transaction multiples. The results of this analysis indicated that this reporting unit did not need to proceed to the two-step impairment test.

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

Goodwill - continued

2016 Analysis - continued

For the remaining reporting units the Company performed a Step 1 analysis. The results of the Step 1 analyses indicated that the Company did not need to proceed to Step 2, as the percentage by which the fair value exceeds the carrying value was greater than 25% for all reporting units other than Aerosystems, whose fair value exceeded carrying value by 4%. 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 the Kaman Specialty Bearings and Engineered Products and Kaman Distribution reporting units. An increase of 1% in the discount rate would result in a fair value approximately 5% less than the carrying value for the Kaman Aerosystems reporting unit. A decrease of 1% in the terminal growth rate would not result in a fair value calculation less than the carrying value for the Kaman Aerosystems reporting unit.

2015 Analysis

In accordance with ASC 350, the Company evaluates goodwill for possible impairment on at least an annual basis. For the Company's 2015 annual assessment a Step 1 analysis was performed for all of its reporting units that carry goodwill. The result of these analyses indicated that the Company did not need to proceed to Step 2, as the percentage by which the fair value exceeded the carrying value was greater than 13% for all reporting units. 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 any of the reporting units.

Other Intangible Assets

Other intangible assets consisted of:



		At December 31,					At December 31,
		2016					2015
	Amortization Period	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization
In thousands
Customer lists / relationships	6-26 years	$	154,745	$	(51,800	)	$	158,831	$	(41,445	)
Developed technologies	10-20 years	19,049		(1,394		)	19,055		(154		)
Trademarks / trade names	3-15 years	8,344		(3,250		)	8,478		(2,556		)
Non-compete agreements and other	1-9 years	8,096		(7,444		)	8,453		(6,006		)
Patents	17 years	523		(425		)	523		(416		)
Total		$	190,757	$	(64,313	)	$	195,340	$	(50,577	)

The decrease in the other intangible assets balance at December 31, 2016, as compared to December 31, 2015, is primarily due to amortization. See Note 3, Acquisitions, for further discussion of these acquisitions. Intangible asset amortization expense was $15.6 million, $11.8 million and $10.6 million in 2016, 2015 and 2014, respectively.

In accordance with ASC 360 - Property, Plant, and Equipment ("ASC 360"), the Company is required to evaluate long-lived intangible assets for possible impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. During the fourth quarter of 2016, the Company evaluated certain long-lived intangible assets associated with our U.K. Composites facility. The Company compared the carrying amount of these long-lived intangible assets to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets. The carrying value did not exceed the fair value, indicating there was no impairment of long-lived intangible assets held by the U.K. Composites business.

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, 2016, is as follows:



In thousands
2017	$	15,435
2018	$	14,173
2019	$	12,217
2020	$	11,718
2021	$	11,232

In order to determine the useful life of acquired intangible assets, the Company considered numerous factors, most importantly the industry considerations associated with the acquired entities. The Company determined the amortization period for the acquired intangible assets for its acquisitions in 2015 based primarily on an analysis of their historical customer sales attrition information and the period over which the assets are expected to deliver meaningful cash flow generation in support of the fair value of the asset.

- 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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