Goodwill And Intangible Assets

3 Months Ended

Mar. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

8. Goodwill And Intangible Assets

Acquisition in Fiscal 2014

On July 25, 2014, the Company acquired certain assets and assumed certain liabilities of Dynetic Systems, Inc. (“Dynetic”), pursuant to an Asset Purchase Agreement for an initial purchase price of $4,000,000 less a working capital adjustment of $27,000 (the “Dynetic Acquisition”). The Asset Purchase Agreement also includes a possible earn-out, initially estimated at $310,000, which is comprised of annual payments based on sales of Dynetic products and sales to Dynetic customers over the period immediately following the date of the Dynetic Acquisition through December 31, 2017. Dynetic designed, developed and manufactured precision quality, instrument grade motion control products, and provided custom motor and motion control solutions to the aerospace, defense, medical, commercial and industrial markets. SLMTI DS LLC (“SLMTI DS”), a new formed subsidiary of SL-MTI, holds the assets acquired in the Dynetic Acquisition.

As of March 31, 2015, the total liability for the estimated earn-out was $288,000. The Dynetic results from the date of acquisition through March 31, 2015 are included in the SL-MTI segment.

Goodwill And Intangible Assets

Intangible assets consist of the following:


		March 31, 2015						December 31, 2014
	Amortizable Life (years)	Gross Value		Accumulated Amortization		Net Value		Gross Value		Accumulated Amortization		Net Value
		(in thousands)
Finite-lived intangible assets:
Customer relationships	5 to 10	$	5,378	$	3,892	$	1,486	$	5,378	$	3,858	$	1,520
Patents ⁽¹⁾	5 to 20		1,508		1,227		281		1,501		1,223		278
Developed technology	5 to 6		1,980		1,728		252		1,980		1,719		261
Trademarks	2		60		18		42		60		13		47
Non-compete agreements	5		11		1		10		11		1		10

Total amortized finite-lived intangible assets			8,937		6,866		2,071		8,930		6,814		2,116

Indefinite-lived intangible assets:
Trademarks			1,672		—		1,672		1,672		—		1,672

Other intangible assets, net		$	10,609	$	6,866	$	3,743	$	10,602	$	6,814	$	3,788

(1)	During 2015, MTE Corporation (“MTE”) capitalized $7,000 of legal fees related to a new patent application. The estimated useful life of the asset is 20 years.

In accordance with ASC 350 “Intangibles – Goodwill and Other,” goodwill and other indefinite-lived intangible assets are not amortized, but are tested for impairment. Such impairment testing is undertaken annually, or more frequently upon the occurrence of some indication that an impairment has taken place. The Company conducted an annual impairment test as of December 31, 2014.

A two-step process is utilized to determine if goodwill has been impaired. In the first step, the fair value of each reporting unit is compared to the net asset value recorded for such unit. If the fair value exceeds the net asset value, the goodwill of the reporting unit is not adjusted. However, if the recorded net asset value exceeds the fair value, the Company performs a second step to measure the amount of impairment loss, if any. In the second step, the implied fair value of the reporting unit’s goodwill is compared with the goodwill recorded for such unit. If the recorded amount of goodwill exceeds the implied fair value, an impairment loss is recognized in the amount of the excess.

Going forward there can be no assurance that economic conditions or other events may not have a negative material impact on the long-term business prospects of any of the Company’s reporting units. In such case, the Company may need to record an impairment loss, as stated above. The next annual impairment test will be conducted as of December 31, 2015, unless management identifies a triggering event in the interim.

Management has not identified any triggering events, as defined by ASC 350, during the three months ended March 31, 2015. Accordingly, no interim impairment test has been performed.

Estimated future amortization expense for intangible assets subject to amortization in each of the next five fiscal years is as follows:


	Amortization Expense (in thousands)
2015	$	282
2016	$	266
2017	$	223
2018	$	218
2019	$	217

Total amortization expense, excluding the amortization of deferred financing costs, consists of amortization expense related to intangible assets and software. Amortization expense related to intangible assets for the three months ended March 31, 2015 and March 31, 2014 was $52,000 and $91,000 respectively. Amortization expense related to software for the three months ended March 31, 2015 and March 31, 2014 was $58,000 and $49,000, respectively.

The following table reflects the components of goodwill as of March 31, 2015, and December 31, 2014:


	March 31, 2015						December 31, 2014
	Gross Amount		Accumulated Impairment Losses		Goodwill, Net		Gross Amount		Accumulated Impairment Losses		Goodwill, Net
	(in thousands)
SL Power Electronics Corp.	$	4,228	$	—	$	4,228	$	4,230	$	—	$	4,230
High Power Group:
MTE Corporation		8,189		—		8,189		8,189		—		8,189
TEAL Electronics Corp.		5,055		5,055		—		5,055		5,055		—
SL-MTI		653		—		653		653		—		653

Goodwill	$	18,125	$	5,055	$	13,070	$	18,127	$	5,055	$	13,072

- 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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