Goodwill and Intangible Assets

Gross and net carrying amounts of goodwill at December 31, 2014 and 2013 were as follows:



In thousands	Performance Materials		Industrial Filtration		Thermal/ Acoustical Metals			Other Products and Services			Totals
Goodwill	$	13,929	$	—	$	12,160		$	5,787		$	31,876
Accumulated amortization/impairment	—		—		(12,160		)	(1,127		)	(13,287		)
Balance at December 31, 2013	13,929		—		—			4,660			18,589
Goodwill	13,340		3,943		12,160			5,787			35,230
Accumulated amortization/impairment	—		—		(12,160		)	(1,127		)	(13,287		)
Balance at December 31, 2014	$	13,340	$	3,943	$	—		$	4,660		$	21,943

The changes in the carrying amounts of goodwill in 2013 and 2014 were as follows:



In thousands	Performance Materials			Industrial Filtration		Other Products and Services		Totals
Balance at January 1, 2013	$	13,622		$	—	$	4,660	$	18,282
Goodwill adjustment	110			—		—		110
Currency translation adjustment	197			—		—		197
Balance at December 31, 2013	13,929			—		4,660		18,589
Goodwill adjustment	—			3,943		—		3,943
Currency translation adjustment	(589		)	—		—		(589		)
Balance at December 31, 2014	$	13,340		$	3,943	$	4,660	$	21,943

Goodwill Associated with Acquisitions and Divestitures

The goodwill associated with the Industrial Filtration segment results from the acquisition of the Industrial Filtration business on February 20, 2014. The amount allocated to goodwill is reflective of the benefits the Company expects to realize from the entrance into new global markets and Industrial Filtration's assembled workforce. None of the recognized goodwill is deductible for income tax purposes.

The goodwill adjustment of $0.1 million in 2013 was related to the acquisition of DSM Solutech B.V. (“Solutech”) in December 2008. Lydall was obligated to pay to the Seller payments based on the net revenues of Solutech for a period of five years beginning on December 1, 2008 and ending on November 30, 2013 (“Contingent Consideration”). This Contingent Consideration equaled 4% of Solutech’s net revenues, as defined, during each of the periods. The value of the Contingent Consideration when paid was added to the original cost of the acquisition and increased the amount of goodwill previously recorded, as the acquisition occurred prior to the revised guidance issued by the Financial Accounting Standards Board (ASC 805) for business combinations.

Goodwill Impairment Testing

During the fourth quarter of 2014, the Company performed its annual impairment analysis of the $13.3 million of goodwill in the Performance Materials reporting unit (PM reporting unit), $3.9 million in the Industrial Filtration reporting unit (IF reporting unit) and $4.7 million of goodwill in the Life Sciences Vital Fluids reporting unit (VF reporting unit), included in OPS.

After considering changes in assumptions used in the Company's most recent quantitative annual testing, including the capital markets environment, economic conditions, industry trends, changes in results of operations, the magnitude of the excess of fair value over the carrying value, and other factors, the Company concluded it was not necessary to perform the two-step impairment test for the PM or VF reporting unit as it was not more likely than not that the fair value of the reporting unit was less than its carrying value. As a result, the Company concluded that the PM and VF reporting unit goodwill was not impaired.

The Company also used the qualitative method to analyze the goodwill for IF reporting unit, which was acquired in February 2014. When considering capital markets environment, economic conditions, industry trends, results of operations, and other factors the Company determined that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount.

Other Intangible Assets

The table below presents the gross carrying amount and, as applicable, the accumulated amortization of the Company’s acquired intangible assets other than goodwill included in “Other intangible assets, net” in the Consolidated Balance Sheets as of December 31, 2014 and 2013:



	December 31, 2014					December 31, 2013
In thousands	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
License agreements	$	818	$	(818	)	$	881	$	(881	)
Technology	2,500		(143		)	—		—
Customer Relationships	2,477		(195		)	—		—
Patents	6,037		(3,274		)	6,766		(3,307		)
Other	691		(252		)	278		(227		)
Total amortized intangible assets	$	12,523	$	(4,682	)	$	7,925	$	(4,415	)

During 2014, the Company recognized $5.6 million of intangible assets as a result of the Industrial Filtration acquisition, including $2.5 million in both technology and customer relationships and $0.6 million in other. As of December 31, 2014, the weighted average useful life of the Industrial Filtration intangible assets was approximately 12 years.

Amortization of all intangible assets for the years ended December 31, 2014, 2013, and 2012 was $0.9 million, $0.4 million, and $0.8 million, respectively. Estimated amortization expense for intangible assets is expected to be $0.8 million for each of the years ending December 31, 2015 through 2018, and $0.7 million for the year ended December 31, 2019. As of December 31, 2014, the weighted average useful life of intangible assets was approximately 11 years.

During the fourth quarter of 2014, the Company performed an impairment analysis for long-lived assets at the Company’s DSM Solutech B.V. (“Solutech”) operation, included in the Performance Materials segment. During 2014, Solutech generated cash flow in excess of amounts projected in the impairment analysis completed in the third quarter of 2013. Although 2014 results were more favorable than forecasted, there was still a cash flow loss for 2014. Cash flow losses caused by a delay in commercialization of Solutech products to the market place by Solutech’s customers, are expected to continue in 2015. As a result of these negative cash flows, combined with historical operating losses, the Company determined that it was appropriate to test the Solutech asset group for recoverability in the fourth quarter of 2014. Acquisition related intangibles with a remaining useful life of 9 years primarily comprise the carrying value of the asset group of $3.4 million. To determine the recoverability of the Solutech asset group the Company completed an undiscounted cash flow analysis and compared it to the asset group carrying value. This analysis was primarily dependent on the increase in net sales over the period when the business has technological exclusivity provided by the intangible assets.

The Company determined that the Solutech asset group had undiscounted cash flow which was in excess of its carrying value and, as a result, the asset group was not impaired at December 31, 2014. The estimate of undiscounted cash flows of the Solutech long-lived asset group was based on the best information available as of the date of the assessment, which incorporated management assumptions around cash flows generated from future operations, the estimated economic useful life of the primary asset within the Solutech long-lived asset group, as well as other market information. The Company performed various sensitivity analyses noting that a more conservative scenario of high single digit revenue growth and an appropriate related cost structure, the undiscounted cash flows exceeded the carrying value with no impairment indicated. As of December 31, 2014, the Company expects to meet the cash flow forecasts included in the impairment analysis. Future cash flows are dependent on the success of commercialization efforts of Solutech products by OEMs, the quality of Solutech products and technology advancements and management’s ability to manage costs. In the event that Solutech’s cash flows in the future do not meet current expectations, management, based upon conditions at the time, would consider taking actions as necessary to maximize cash flow. Accordingly, the above sensitivity analysis, while a useful tool, should not be used as a sole predictor of future impairment. A thorough analysis of all the facts and circumstances existing at the time would need to be performed to determine if recording an impairment loss was appropriate.