Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

The Company tests goodwill and indefinite-lived intangible assets for impairment at least annually. The Company performs its annual impairment test on October first after the annual forecasting process is completed. Furthermore, goodwill and indefinite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

The Company reviews goodwill for impairment at the reporting unit level. Prior to 2012, the Company’s reporting units were the same as its reportable segments: Mobile Industries, Process Industries, Aerospace and Defense and Steel. During 2012, management began reviewing goodwill for impairment at a level below the segment level for the Process Industries and Aerospace and Defense segments. The change was necessitated by a change in management structure, as well as the level of review of financial information by management within the Aerospace and Defense segment, and the acquisition of the assets of Gears and Services. Gears and Services is part of the Process Industries segment. The Company still reviews goodwill for impairment at the segment level for the Mobile Industries and Steel segments.

During 2011, the Company adopted the provisions of ASU No. 2011-8, “Intangibles–Goodwill and Other (Topic 350): Testing Goodwill for Impairment,” which allows companies to assess qualitative factors to determine if goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test. Based on a review of various qualitative factors, management concluded that goodwill for the Mobile Industries, Process Industries and Steel segments, as well as the Gears and Services reporting unit, was not impaired and that the two-step approach was not required to be performed for these reporting units. Based on a review of various qualitative factors, management concluded that the goodwill for the three reporting units within the Aerospace and Defense segment would be tested under the two-step approach. The Company prepares its goodwill impairment analysis by comparing the estimated fair value of each reporting unit, using an income approach (a discounted cash flow model), as well as a market approach, with its carrying value.

In 2012, 2011 and 2010, no goodwill impairment loss was recorded.

Changes in the carrying value of goodwill were as follows:

Year ended December 31, 2012:



	Mobile Industries		Process Industries			Aerospace and Defense		Steel		Total
Beginning Balance	$	16.9	$	141.1		$	162.1	$	12.6	$	332.7
Acquisitions	0.8		6.3			—		—		7.1
Other	—		(1.0		)	0.1		—		(0.9		)
Ending Balance	$	17.7	$	146.4		$	162.2	$	12.6	$	338.9

Acquisitions in 2012 primarily relate to the purchase price allocation of $6.1 million for the Wazee acquisition completed on December 31, 2012. All of the goodwill acquired in 2012 is tax-deductible and will be amortized over 15 years for tax purposes. “Other” primarily includes foreign currency translation adjustments for 2012.

Year ended December 31, 2011:



	Mobile Industries		Process Industries			Aerospace and Defense			Steel		Total
Beginning Balance	$	—	$	50.0		$	162.3		$	12.1	$	224.4
Acquisitions	16.9		91.9			—			—		108.8
Other	—		(0.8		)	(0.2		)	0.5		(0.5		)
Ending Balance	$	16.9	$	141.1		$	162.1		$	12.6	$	332.7

The Company obtained additional information on the fair value of intangible assets acquired in 2011, and therefore, adjusted the value of goodwill and other intangible assets during 2012. The purchase price allocation adjustments were made retroactive to December 31, 2011.

The change related to acquisitions in the table above for 2011 reflects the purchase price allocation of $74.2 million for the Gears and Services acquisition completed on July 1, 2011 and $34.6 million for the Drives acquisition completed on October 3, 2011. All of the goodwill acquired in 2011 is tax-deductible and will be amortized over 15 years for tax purposes. “Other” primarily includes foreign currency translation adjustments for 2011.

The following table displays intangible assets as of December 31:



	2012						2011
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Customer relationships	$	159.6	$	38.1	$	121.5	$	157.1	$	26.3	$	130.8
Know-how	26.1		2.8		23.3		22.6		1.5		21.1
Industrial license agreements	0.2		0.1		0.1		0.1		0.1		—
Land-use rights	8.6		4.1		4.5		8.6		3.8		4.8
Patents	2.5		1.8		0.7		2.5		1.7		0.8
Technology use	47.0		11.5		35.5		46.9		8.7		38.2
Trademarks	4.2		3.4		0.8		2.8		2.3		0.5
PMA licenses	8.8		3.6		5.2		8.8		3.1		5.7
Non-compete agreements	4.4		3.3		1.1		3.9		2.5		1.4
Unpatented technology	7.2		6.7		0.5		7.2		6.3		0.9
	$	268.6	$	75.4	$	193.2	$	260.5	$	56.3	$	204.2
Intangible assets not subject to amortization:
Tradename	$	17.3	$	—	$	17.3	$	17.3	$	—	$	17.3
FAA air agency certificates	14.2		—		14.2		14.2		—		14.2
	$	31.5	$	—	$	31.5	$	31.5	$	—	$	31.5
Total intangible assets	$	300.1	$	75.4	$	224.7	$	292.0	$	56.3	$	235.7

Intangible assets acquired in 2012 were $7.7 million for the Wazee acquisition. Intangible assets subject to amortization acquired in 2012 were assigned useful lives of five to 20 years and had a weighted-average amortization period of 13.8 years. Intangible assets acquired in 2011 were $88.6 million for the Gears and Services acquisition and $32.4 million for the Drives acquisition. Intangible assets subject to amortization acquired in 2011 were assigned useful lives of two to 20 years and had a weighted-average amortization period of 10.7 years.

Amortization expense for intangible assets was $19.0 million, $14.0 million and $9.4 million for the years ended December 31, 2012, 2011 and 2010, respectively. Amortization expense for intangible assets is estimated to be approximately $18.9 million in 2013; $18.6 million in 2014; $18.6 million in 2015; $18.3 million in 2016 and $18.1 million in 2017.

- 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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