Goodwill And Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Note 11. Goodwill And Intangible Assets

Intangible assets consist of the following:


		December 31, 2015						December 31, 2014
	Amortizable			Accumulated						Accumulated
	Life (years)	Gross Value		Amortization		Net Value		Gross Value		Amortization		Net Value
		(in thousands)
Finite-lived intangible assets:
Customer relationships ^{(1) (2)}	5 to 10	$	11,535	$	4,420	$	7,115	$	5,378	$	3,858	$	1,520
Patents ^{(3) (4)}	5 to 20		651		371		280		1,501		1,223		278
Developed technology ^{(1) (2)}	5 to 10		6,517		1,990		4,527		1,980		1,719		261
License ⁽²⁾	10		408		17		391		—		—		—
Trademarks	2		60		43		17		60		13		47
Backlog ^{(1) (2)}	1 to 2		498		190		308		—		—		—
Non-compete agreements	5		11		3		8		11		1		10

Total amortized finite-lived intangible assets			19,680		7,034		12,646		8,930		6,814		2,116

Indefinite-lived intangible assets:
Trademarks ^{(1) (2)}			3,827		—		3,827		1,672		—		1,672

Other intangible assets, net		$	23,507	$	7,034	$	16,473	$	10,602	$	6,814	$	3,788

(1)

On May 22, 2015, the Company acquired certain assets and assumed certain liabilities of Torque Systems. Included in the purchase price allocation are customer relationships valued at $1,535,000 with an estimated useful life of 5 years, developed technology valued at $1,124,000 with an estimated useful of 8 years, backlog valued at $211,000 with an estimated life of 2 years, and an indefinite-lived trademark valued at $473,000. As of the acquisition date, the total weighted-average amortization period of the Torque Systems intangible assets, excluding the indefinite-lived trademark, was approximately 6 years.

(2)

On July 27, 2015, the Company acquired all of the issued and outstanding stock of Davall. As of the acquisition date, included in the purchase price allocation are customer relationships valued at $4,836,000 with an estimated useful life of 10 years, developed technology valued at $3,570,000 with an estimated useful of 10 years, a royalty-free, perpetual license valued at $426,000 with an estimated useful life of 10 years, backlog valued at $300,000 with an estimated life of 1 year, and an indefinite-lived trademark valued at $1,759,000. As of the acquisition date, the total weighted-average amortization period of the Davall intangible assets, excluding the indefinite-lived trademark, was approximately 10 years.

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

(4)	During 2015, TEAL Electronics Corp (“TEAL”) retired expired patents which had a gross value of $870,000 and a net book value of zero. No loss was recognized as a result of this transaction.

Goodwill is tested at the reporting unit levels annually, and if necessary, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The fair values of the reporting units were estimated using a combination of the expected present values of future cash flows, an assessment of comparable market multiples and a review of market capitalization with estimated control premiums. For 2015, there were four reporting units identified for impairment testing. Those units were SLPE, MTE, SL-MTI, and Davall.

There were no impairment charges related to goodwill recorded during 2015 and 2014. There were no impairment charges related to indefinite-lived intangible assets recorded during 2015, 2014, and 2013. In 2013, the Company’s annual impairment test resulted in our assessment that the carrying value of the TEAL Electronics Corp (“TEAL”) reporting unit exceeded its fair value. As a result of the Company’s annual impairment test, a $5,055,000 non-cash goodwill impairment charge was assessed and recorded in goodwill impairment expense on the Consolidated Statements of Income in the fourth quarter of 2013 in our High Power Group segment. The goodwill impairment was primarily due to a decline in medical imaging equipment market sales during the year coupled with the cancellation of a large solar contract during the fourth quarter of 2013. This resulted in the TEAL reporting unit having lower sales and cash flows for the year than previously projected and lower forecasts of future sales and cash flows for the reporting unit.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assigning assets and liabilities to reporting units, assigning goodwill to reporting units and determining the fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include estimating future cash flows, determining appropriate discount and growth rates, operating margins and working capital requirements, selecting comparable companies within each reporting unit and market and determining control premiums. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit.

As of December 31, 2015, the total fair values for each of the Company’s reporting units, excluding the recently acquired Davall, in all of the Company’s segments exceeded their total carrying values by 122% or greater. Davall’s fair value exceeded its carrying value by 13%. Although our analysis regarding the fair values of the goodwill and indefinite lived intangible assets indicates that they exceed their respective carrying values, materially different assumptions regarding the future performance of the Company’s businesses or significant declines in the Company’s stock price could result in additional goodwill impairment losses.

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)
2016	$	1,883
2017	$	1,598
2018	$	1,548
2019	$	1,547
2020	$	1,346

Total amortization expense, excluding the amortization of deferred financing costs, for 2015, 2014 and 2013 was $1,373,000, $671,000 and $548,000, respectively. Amortization expense related to intangible assets for 2015, 2014 and 2013 was $1,088,000, $466,000 and $384,000, respectively. Amortization expense related to software for 2015, 2014 and 2013 was $285,000, $205,000 and $164,000, respectively.

Changes in goodwill balances by segment (which are defined below) are as follows:


	Balance December 31, 2014		Acquisitions		Foreign Exchange			Balance December 31, 2015
	(in thousands)
SL Power Electronics Corp.	$	4,230	$	—	$	24		$	4,254
High Power Group:
MTE Corporation		8,189		—		—			8,189
TEAL Electronics Corp.		—		—		—			—
SL-MTI		653		6,018		(110	)		6,561

Goodwill	$	13,072	$	6,018	$	(86	)	$	19,004

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


	December 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.	$	4,254	$	—	$	4,254	$	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		6,561		—		6,561		653		—		653

Goodwill	$	24,059	$	5,055	$	19,004	$	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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