Goodwill and Other Intangible Assets, Net

9 Months Ended

Oct. 02, 2020

Intangible Assets, Net (Including Goodwill) [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 continuing operations:

In thousands
Gross balance at December 31, 2019	$	211,566
Accumulated impairment	(16,252)
Net balance at December 31, 2019	195,314
Additions(1)	104,489
Impairments	(50,307)
Foreign currency translation	3,211
Ending balance at October 2, 2020	$	252,707

(1) The additions to goodwill in the nine-month fiscal period ended October 2, 2020 were attributable to the acquisition of Bal Seal. Refer to Note 4, Business Combinations, for further information on this acquisition.

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

Goodwill - continued

In accordance with ASC 350 - Intangibles - Goodwill and Other, the Company is required to evaluate goodwill for possible impairment testing if an event occurs or circumstances change that indicate that the fair value of the reporting entity may be below its carrying amount. The spread of COVID-19 and the precautionary measures instituted by governments and businesses to mitigate the risk of its spread have contributed to the general slowdown in the global economy and significant volatility in financial markets, which resulted in a significant decrease in the Company's stock price and market capitalization in the first quarter. As COVID-19 continued to impact the organization through the third quarter and the Company’s stock price remained at a similar level, management assessed each reporting unit for triggering events for potential impairment as of October 2, 2020.

Management performed qualitative analyses on its Specialty Bearings, KPP-Orlando and Bal Seal reporting units, which took into consideration the following factors: general economic conditions, industry specific performance, changes in carrying values of the reporting units and the assessments of assumptions used in the previous fair value calculation. Based on these analyses, no triggering events for potential impairment were identified and the results indicated that it is more likely than not that goodwill is not impaired for these reporting units.

As part of management's evaluation of triggering events for the third quarter, the assessment of the Company's operating results identified a decline in earnings compared to forecasts used in prior periods for its Aerosystems reporting unit. The Company considered this decline, as well as the updated forecasts for the reporting unit, which indicated the forecasted cash flows for this reporting unit were lower than amounts previously forecasted. As a result, management identified a triggering event for possible goodwill impairment in its Aerosystems reporting unit. Management performed a quantitative analysis on the Aerosystems reporting unit using an income methodology based on management's estimates of forecasted cash flows, with those cash flows discounted to present value using rates commensurate with the risks associated with those cash flows. In addition, management used a market-based valuation method involving analysis of market multiples of revenues and earnings before interest, taxes, depreciation and amortization ("EBITDA") for (i) a group of comparable companies and (ii) recent transactions, if any, involving comparable companies. In estimating the fair value of the reporting unit, a weighting of 80% to the income approach and 20% to the market-based valuation method was selected, consistent with quantitative analyses performed in prior periods. The estimated fair value of the reporting unit was adjusted based on an assumption of excess working capital, which represents management's identification of specific contract-related assets that will generate cash flows in the future. The quantitative analysis resulted in a conclusion that the fair value of the Aerosystems reporting unit was $56.1 million below its carrying value; therefore, goodwill was impaired. In the three month fiscal period ended October 2, 2020, the Company recorded a goodwill impairment charge of $50.3 million for the Aerosystems reporting unit, which represents the entire goodwill balance for the reporting unit. This impairment charge was included in goodwill impairment on the Company's Condensed Statement of Operations.

Other Intangibles

Other intangible assets consisted of:

		At October 2,				At December 31,
		2020				2019
	Amortization Period	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
In thousands
Customer lists / relationships	6-38 years	$	119,676	$	(27,429)	$	56,789	$	(21,415)
Developed technologies	7-20 years	44,721		(8,414)		19,552		(5,217)
Trademarks / trade names	15-40 years	16,731		(1,904)		5,012		(1,368)
Non-compete agreements and other	1-15 years	5,092		(4,402)		2,338		(2,321)
Patents	17 years	523		(462)		523		(454)
Total		$	186,743	$	(42,611)	$	84,214	$	(30,775)

The increase in other intangible assets, net was attributable to the acquisition of Bal Seal. Refer to Note 4, Business Combinations, for further information on this acquisition.