Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Intangible Assets

v3.20.1
Goodwill and Intangible Assets
3 Months Ended
Mar. 28, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
GOODWILL AND INTANGIBLE ASSETS

6.  GOODWILL AND INTANGIBLE ASSETS

Goodwill

A summary of changes in goodwill by segment for the three months ended March 28, 2020, is as follows:

 

 

Hydraulics

 

 

Electronics

 

 

Total

 

Balance at December 28, 2019

 

$

271,196

 

 

$

106,373

 

 

$

377,569

 

Impairment charge

 

 

(31,871

)

 

 

 

 

 

(31,871

)

Currency translation

 

 

(1,883

)

 

 

 

 

 

(1,883

)

Balance at March 28, 2020

 

$

237,442

 

 

$

106,373

 

 

$

343,815

 

During the first quarter of 2020, the global economy was significantly impacted by the COVID-19 pandemic. Given the economic impact, primarily in Europe, government mandated facility closures and an unfavorable outlook for certain end markets, the Company concluded that this change in circumstances triggered the need for an interim impairment review of its Faster reporting unit. The interim review was performed as of March 28, 2020. A recoverability test for the long-lived assets within the Faster reporting unit was performed first and resulted in the conclusion that the carrying value of the long-lived assets was fully recoverable. An interim quantitative impairment test for goodwill was then performed.

The fair value of the Faster reporting unit was determined based on a combination of income and market approach methodologies. The income approach utilized a discounted cash flow analysis, which estimates the present value of the projected free cash flows to be generated by the reporting unit. Principal assumptions used in the analysis include the Company's estimates of future revenue and terminal growth rates, margin assumptions and discount rates. While assumptions utilized are subject to a high degree of judgment and complexity, the Company has made every effort to estimate future cash flows as accurately as possible, given the high degree of economic uncertainty that currently exists. The market approaches estimate fair value by comparing to guideline public companies and guideline transactions. Various valuation multiples of companies that are economically and operationally similar were used as data points for selecting multiples. The Company concluded that the estimated fair value of the Faster reporting unit was less than its carrying value, and as a result, recorded a non-cash, non-tax-deductible goodwill impairment charge of $31,871. If the economic impact from the COVID-19 pandemic is more severe than anticipated, or if the economic recovery takes longer to materialize or does not materialize as strongly as anticipated, it could result in further goodwill impairment charges.  

The Company considered the known and anticipated impacts of the COVID-19 pandemic on its other reporting units and concluded that it was more likely than not that their fair value exceeded their carrying value.

Intangible Assets

At March 28, 2020, and December 28, 2019, intangible assets consisted of the following:

 

 

 

March 28, 2020

 

 

December 28, 2019

 

 

 

Gross carrying

amount

 

 

Accumulated

amortization

 

 

Net carrying

amount

 

 

Gross carrying

amount

 

 

Accumulated

amortization

 

 

Net carrying

amount

 

Definite-lived intangibles:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names and brands

 

$

55,747

 

 

$

(8,362

)

 

$

47,385

 

 

$

56,032

 

 

$

(7,658

)

 

$

48,374

 

Non-compete agreements

 

 

950

 

 

 

(633

)

 

 

317

 

 

 

950

 

 

 

(586

)

 

 

364

 

Technology

 

 

31,544

 

 

 

(9,414

)

 

 

22,130

 

 

 

31,704

 

 

 

(8,661

)

 

 

23,043

 

Supply agreement

 

 

21,000

 

 

 

(7,000

)

 

 

14,000

 

 

 

21,000

 

 

 

(6,475

)

 

 

14,525

 

Customer relationships

 

 

226,835

 

 

 

(21,678

)

 

 

205,157

 

 

 

227,844

 

 

 

(19,499

)

 

 

208,345

 

 

 

$

336,076

 

 

$

(47,087

)

 

$

288,989

 

 

$

337,530

 

 

$

(42,879

)

 

$

294,651

 

 

Amortization expense for the three months ended March 28, 2020, and March 30, 2019, was $4,348 and $4,521, respectively. Future estimated amortization expense is presented below.

 

Year:

 

 

 

 

2020 Remaining

 

$

13,413

 

2021

 

 

17,674

 

2022

 

 

17,411

 

2023

 

 

17,352

 

2024

 

 

16,697

 

2025

 

 

16,642

 

Thereafter

 

 

189,800

 

Total

 

$

288,989