Goodwill and Intangible Assets

Gross and net carrying amounts of goodwill at December 31, 2015 and 2014 were as follows:



In thousands	Performance Materials		Industrial Filtration		Thermal/ Acoustical Metals			Other Products and Services			Totals
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
Goodwill	12,898		3,943		12,160			—			29,001
Accumulated amortization/impairment	—		—		(12,160		)	—			(12,160		)
Balance at December 31, 2015	$	12,898	$	3,943	$	—		$	—		$	16,841

The changes in the carrying amounts of goodwill in 2014 and 2015 were as follows:



In thousands	Performance Materials			Industrial Filtration		Other Products and Services			Totals
Balance at January 1, 2014	$	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 adjustment	—			—		(4,660		)	(4,660		)
Currency translation adjustment	(442		)	—		—			(442		)
Balance at December 31, 2015	$	12,898		$	3,943	$	—		$	16,841

Goodwill Associated with Acquisitions and Divestitures

The goodwill adjustment in 2015 associated with Other Products and Services of $4.7 million was the result of the sale of the Company's Life Sciences Vital Fluids business on January 30, 2015.

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.

Goodwill Impairment Testing

During the fourth quarter of 2015, the Company performed its annual impairment analysis of the $12.9 million of goodwill in the Performance Materials reporting unit (PM reporting unit) and $3.9 million in the Industrial Filtration reporting unit (IF reporting unit).

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, and other factors, the Company concluded it was necessary to perform the two-step impairment test for the PM reporting unit. As a result of testing, the Company concluded that the PM reporting unit, with $12.9 million of goodwill, had an estimated fair value which exceeded its carrying value by greater than 50%, and as a result, step two of the impairment test was not required.

The Company used both the income approach and market approach in performing step one of the impairment analysis to estimate the fair value of the reporting unit. The income approach involved determining the present value of future cash flows from the reporting unit’s projected financial results from 2016 - 2018 and the projected cash flows beyond that three year period computed as the terminal value. The Company believes the income approach was appropriate because it provided a fair value estimate based upon the reporting unit’s expected long-term operations and cash flow performance.

In applying the market approach, valuation multiples were derived from historic operating data of selected guideline companies, which were evaluated and adjusted, if necessary. The valuation multiples were then applied to the appropriate operating data of the reporting unit to arrive at an indication of fair value. The Company believes the market approach was appropriate because it provided a fair value using multiples from companies with operations and economic characteristics similar to its reporting unit.

The Company used the qualitative method to analyze the goodwill for the 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, 2015 and 2014:



	December 31, 2015					December 31, 2014
In thousands	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
License agreements	$	771	$	(771	)	$	818	$	(818	)
Technology	2,500		(310		)	2,500		(143		)
Customer Relationships	2,412		(411		)	2,477		(195		)
Patents	4,137		(3,272		)	6,037		(3,274		)
Other	612		(269		)	691		(252		)
Total amortized intangible assets	$	10,432	$	(5,033	)	$	12,523	$	(4,682	)

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, 2015, the weighted average useful life of the Industrial Filtration intangible assets was approximately 11 years.

Amortization of all intangible assets for the years ended December 31, 2015, 2014, and 2013 was $0.8 million, $0.9 million, and $0.4 million, respectively. Estimated amortization expense for intangible assets is expected to be $0.6 million for each of the years ending December 31, 2016 through 2018, and $0.5 million for the years ended December 31, 2019 and 2020. As of December 31, 2015, the weighted average useful life of intangible assets was approximately 10 years.

Impairment of Long-Lived Assets

During the fourth quarter of 2015, 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, as a result of indicators of possible impairment. During 2015, Solutech reported a cash flow loss which was caused by the delay in commercialization of certain Solutech products to the market place by Solutech’s customers. As a result of these negative cash flows, combined with historical operating losses, and a reduction in the expected amount of future cash flows of Solutech, the Company determined that it was appropriate to test the Solutech asset group for recoverability in the fourth quarter of 2015. Patents, with a remaining useful life of 8 years, and machinery and equipment primarily comprise the carrying value of the asset group of $3.2 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 its patents. 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.

The impairment test concluded that the Solutech asset group was not recoverable as the resulting undiscounted cash flows were less than their carrying amount. Accordingly, the Company estimated the fair value of the Solutech long-lived assets to determine the impairment amount. Determining fair value is judgmental in nature and requires the use of significant estimates and assumptions considered to be Level 3 inputs including royalty rates, long-term growth rates and discount rates.

To determine the fair value of its patents, the Company used the relief from royalty method, which is a form of the income approach, which focused on the level of royalty payments that the user of an intangible asset would have to pay a third party for the use of the asset if it were not owned by the user. Under this approach, revenue associated with the associated technology was projected over the expected remaining useful life of the asset, with a royalty rate applied to the expected revenue. The estimated fair value of the patents was below its carrying value.

To determine the estimated fair value of its machinery and equipment, the Company used the cost approach. Under the cost approach, the determination of fair value considered the replacement cost of the assets with adjustments in value for physical deterioration, functional obsolescence, and economic obsolescence, all Level 3 inputs. The estimated fair value of the machinery and equipment exceeded its carrying value, resulting in no adjustment to the machinery and equipment.

As a result of the Company’s fair value estimates, the Company adjusted the carrying value of the patents to $0.7 million and recorded an impairment charge of $1.4 million during the quarter ended December 31, 2015. This charge was recorded in the Company’s Performance Materials segment as part of selling, product development and administrative expenses.