For the Years Ended December 31, 2013, 2012 and 2011
The following table sets forth the change in the carrying amount of goodwill for each reportable segment and for the Company:
|Gross balance at beginning of period||$ 96,155||$ 110,072||$ 206,227||$ 59,112||$ 108,336||$ 167,448|
|Net balance at beginning of period||96,155||95,891||192,046||59,112||94,155||153,267|
|Change in goodwill due to the disposal of Canadian operations||—||—||—||(1,633)||—||(1,633)|
|Foreign currency translation||(11)||939||928||57||1,581||1,638|
|Net balance at end of period||$ 105,637||$ 98,286||$ 203,923||$ 96,155||$ 95,891||$ 192,046|
|Accumulated impairment at end of period||$ —||$ (16,252)||$ (16,252)||$ —||$ (14,181)||$ (14,181)|
The increase in the goodwill balance at the Company's Distribution segment is due to the acquisitions of Northwest Hose, Ohio Gear & Transmission and Western. See Note 3, Acquisitions, for further discussion of the acquisitions. The addition to the goodwill for the Company's Aerospace segment relates to an earnout payment associated with a previous acquisition.
As previously disclosed in the Company's Form 10-Q for the quarter ended September 27, 2013, the Company's VT Composites reporting unit experienced delays on certain programs that were driven by changes in customers' requirements during 2012. The Company anticipated these changes in requirements would shift revenues and related cash flows into 2013 and future periods. The anticipated deferred revenues did not materialize to the levels the Company had projected in 2013, and therefore the results of Step 1 of the impairment analysis resulted in a fair value for the reporting unit below its carrying value. Prior to proceeding to Step 2 of the impairment analysis, management assessed the tangible and intangible assets subject to amortization to determine if they were impaired. Based on this analysis management concluded these assets were not impaired. Upon completion of the Step 2 impairment analysis, the Company recorded a non-cash non-tax deductible goodwill impairment charge of $2.1 million, or 11% of the reporting unit's total goodwill balance, to reduce the carrying value of goodwill to its implied fair value. This charge has been included in the operating results of the Company's Aerospace segment. See Note 6, Fair Value Measurements, for further discussion.
For KES and U.K. Composites, the results of the Step 1 test indicated that the Company did not need to proceed to step-two for either reporting unit, as the percentage by which the fair value exceeds the carrying value is 25.0% for KES and 10.0% for U.K. Composites. The Company performed a sensitivity analysis relative to the discount rate and growth rate selected and determined a decrease of 1% in the terminal growth rate or an increase of 1% in the discount rate would not result in a fair value calculation less than the carrying value for KES. An increase of 1% in the discount rate or a decrease of 10% in the fair value would result in a fair value calculation less than the carrying value for U.K. Composites.
For the remaining reporting units carrying goodwill, the Company performed the Step 1 test in 2013, as a period of three years had elapsed since the last Step 1 test. These reporting units include Kaman Distribution, KPP-Orlando and RWG. The percentage by which the fair value exceeded the carrying value was in excess of 25.0% for each of these reporting units.
Other intangible assets consisted of:
|At December 31,
|At December 31,
|Customer lists / relationships||6-21 years||$ 109,790||$ (23,647)||$ 103,894||$ (15,541)|
|Trademarks / trade names||3-7 years||2,695||(1,594)||2,655||(1,128)|
|Non-compete agreements and other||1-9 years||6,133||(4,055)||5,979||(3,091)|
|Total||$ 119,141||$ (29,692)||$ 113,164||$ (20,251)|
The increase in the other intangible assets balance at December 31, 2013, as compared to December 31, 2012, is primarily due to the acquisitions of Northwest Hose, Ohio Gear & Transmission and Western. See Note 3, Acquisitions, for further discussion of the acquisitions. Intangible asset amortization expense was $9.4 million, $7.5 million and $5.2 million in 2013, 2012 and 2011, respectively.
Estimated amortization expense for the next five years associated with intangible assets existing as of December 31, 2013, is as follows:
In order to determine the useful life of our customer lists/relationships acquired, the Company considered numerous factors, most importantly the industry considerations associated with the acquired entities. The Company determined the amortization period for the customer lists/relationships intangible assets for its Distribution acquisitions in 2013 and 2012 based primarily on an analysis of their historical customer sales attrition information.