Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

The changes in the carrying amount of goodwill by reportable segment for the years ended December 31, 2016, 2015 and 2014 are as follows:



(in thousands)	Grain			Plant Nutrient			Rail		Total
Balance as of January 1, 2014	$	38,165		$	16,222		$	4,167	$	58,554
Acquisitions	8,257			5,554			—		13,811
Balance as of December 31, 2014	46,422			21,776			4,167		72,365
Acquisitions	—			47,735			—		47,735
Impairments	(46,422		)	(9,744		)	—		(56,166		)
Balance as of December 31, 2015	—			59,767			4,167		63,934
Acquisitions	—			—			—		—
Balances of December 31, 2016	$	—		$	59,767		$	4,167	$	63,934

During the fourth quarter of 2015, the Company prospectively changed its annual goodwill impairment testing date from the last day of its fiscal year to the first day of October. The voluntary change was to better align its goodwill impairment testing procedures with its annual planning and budgeting process and to provide the Company with adequate time to evaluate goodwill for impairment. This change in accounting principle does not delay, accelerate, or avoid an impairment loss, nor does the change have a cumulative effect on pre-tax income, net income or loss, retained earnings, or net assets. This change was applied prospectively beginning on October 1, 2015. Retrospective application to prior periods did not occur, as it is impracticable to objectively determine the assumptions that would have been used in those earlier periods to estimate fair value.

In 2016 and 2015, the Company performed quantitative assessments of goodwill. In 2014, the Company performed a combination of quantitative and qualitative assessments of goodwill.

The quantitative approach uses a two-step process. Step 1 compares the business enterprise value ("BEV") of each reporting unit with its carrying value. The BEV was computed based on both an income approach (discounted cash flows) and a market approach. The income approach uses a reporting unit's estimated future cash flows, discounted at the weighted average cost of capital of a hypothetical third-party buyer. The market approach estimates fair value by applying cash flow multiples to the reporting unit's operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting unit. If the BEV is less than the carrying value for any reporting unit, then Step 2 must be performed. Step 2 compares the implied fair value of goodwill with the carrying amount of goodwill. Any excess of the carrying value of the goodwill over the implied fair value will be recorded as an impairment loss. The calculations of the BEV in Step 1 and the implied fair value of goodwill in Step 2 are based on significant unobservable inputs, such as price trends, customer demand, material costs, discount rates and asset replacement costs, and are classified as Level 3 in the fair value hierarchy.

In performing the qualitative assessment of goodwill, management considered the following relevant events and circumstances to determine if any reporting units were deemed to be at risk:


•	Macroeconomic conditions including, but not limited to deterioration in general economic conditions, limitation on accessing capital, or other developments in equity and credit markets;


•	Industry and market considerations such as a deterioration in the environment in which an entity operates, an increased competitive environment, a change in the market for an entity's products or services, or a regulatory or political development;


•	Adverse fluctuations in commodity prices


•	Cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows;


•	Overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods;


•	Other relevant entity-specific events such as changes in management, key personnel, strategy, or customers and;

•

Events affecting a reporting unit such as a change in the composition or carrying amount of its net assets, a more-likely-than-not expectation of selling or disposing all, or a portion, of a reporting unit, the testing for recoverability of a significant asset group within a reporting unit, or recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit.

There is a certain degree of uncertainty associated with the key assumptions used. Potential events or changes in circumstances that could reasonably be expected to negatively affect the key assumptions include significant volatility in commodity prices or raw material prices and unanticipated changes in the economy or industries within which the businesses operate.

No goodwill impairment charges were incurred in 2016 as a result of our annual impairment testing.

Within our Plant Nutrient segment, the estimated fair value of our Wholesale reporting unit with $59.1 million of goodwill, exceeded its carrying value by approximately 8 percent. The discounted cash flow model used in the goodwill impairment test assumed discrete period revenue growth through 2020 that was reflective of market opportunities, changes in product mix from recent acquisitions, and cyclical trends within our wholesale nutrient business. In the terminal year, we assumed a long-term earnings growth rate of 2.5 percent that we believe is appropriate given the current industry-specific expectations. As of the valuation date, we utilized a weighted-average cost of capital of 8.8 percent, which we believe is appropriate as it reflects the relative risk, the time value of money, and is consistent with the peer group of the Wholesale reporting unit. The goodwill fair value is highly sensitive to changes in assumptions, including interest rates and outlook for future volume and margins.

While performing the annual assessment of goodwill impairment in 2015, the Company recorded impairment losses related to our Grain and Farm Center reporting units of $54.2 million due to compressed margins over the past several years and anticipated unfavorable operating conditions in domestic and global commodity markets, including oil and ethanol, as well as foreign exchange impacts. This is in addition to the $2.0 million of impairment related to our Cob business which was recognized in the third quarter of that year.

The Company's other intangible assets are as follows:



(in thousands)	Original Cost		Accumulated Amortization		Net Book Value
December 31, 2016
Intangible asset class
Customer list	$	41,477	$	14,958	$	26,519
Non-compete agreement	4,594		3,064		1,530
Supply agreement	9,806		4,827		4,979
Technology	15,500		4,243		11,257
Trademarks and patents	18,717		4,335		14,382
Lease intangible	5,514		4,969		545
Software	71,362		24,592		46,770
Other	1,953		1,835		118
	$	168,923	$	62,823	$	106,100
December 31, 2015
Intangible asset class
Customer list	$	42,561	$	12,130	$	30,431
Non-compete agreement	4,594		2,517		2,077
Supply agreement	9,806		3,955		5,851
Technology	15,500		2,483		13,017
Trademarks and patents	18,717		2,273		16,444
Lease intangible	5,479		4,586		893
Software	70,846		19,508		51,338
Other	1,953		1,764		189
	$	169,456	$	49,216	$	120,240

Amortization expense for intangible assets was $16.8 million, $14.5 million and $8.8 million for 2016, 2015 and 2014, respectively. Expected future annual amortization expense is as follows: 2017 -- $16.1 million; 2018 -- $15.6 million; 2019 -- $14.8 million; 2020 -- $13.6 million; and 2021 -- $12.9 million. In December 2016, the Company recorded a $0.5 million impairment related to software in the Retail Group. In December 2014, the Company recorded an impairment of $1.5 million related to a customer list in the Grain Group.

- 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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