Goodwill and Other Intangible Assets
 9 Months Ended
Sep. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangible Assets
Goodwill and Other Intangible Assets

As a result of acquisitions of various businesses, the Company has significant intangible assets on its balance sheet that include goodwill and indefinite-lived intangibles (primarily trade names). Goodwill represents the difference between purchase cost and the fair value of net assets acquired in business acquisitions. Indefinite lived intangible assets are not amortized unless their useful life is determined to be finite. Long-lived intangible assets are subject to amortization using the straight-line method. The Company’s goodwill and indefinite-lived intangibles are tested and reviewed for impairment annually as of March 31st or more frequently if facts and circumstances warrant by comparing the fair value of each reporting unit to its carrying value. Each of the Company’s businesses represents a reporting unit, except Arnold, which comprises three reporting units.

Goodwill
2016 Annual goodwill impairment testing
The Company uses a qualitative approach to test goodwill for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment testing. The qualitative factors we consider include, in part, the general macroeconomic environment, industry and market specific conditions for each reporting unit, financial performance including actual versus planned results and results of relevant prior periods, operating costs and cost impacts, as well as issues or events specific to the reporting unit. At March 31, 2016, we determined that the Tridien reporting unit (which is reported as a discontinued operations in the accompanying financial statements after the sale of the reporting unit in September 2016) required further quantitative testing (step 1) because we could not conclude that the fair value of the reporting unit exceeds its carrying value based on qualitative factors alone. Results of the step 1 quantitative testing of Tridien indicated that the fair value of Tridien exceeded its carrying value. For the reporting units that were tested qualitatively, the results of the qualitative analysis indicated that the fair value of those reporting units exceeded their carrying value.
Arnold
Arnold has experienced declines in revenue and operating income during the first nine months of 2016 as compared to the prior year. The results at Arnold may continue to be be lower than forecast and as a result, it may be necessary to perform interim Step 1 goodwill impairment testing at Arnold in the fourth quarter of 2016.
A summary of the net carrying value of goodwill at September 30, 2016 and December 31, 2015, is as follows (in thousands):
 
Nine months ended September 30, 2016
 
Year ended 
 December 31, 2015
Goodwill - gross carrying amount
485,054

 
390,655

Accumulated impairment losses
—

 
—

Goodwill - net carrying amount
$
485,054

 
$
390,655


The following is a reconciliation of the change in the carrying value of goodwill for the nine months ended September 30, 2016 by operating segment (in thousands):
 
Corporate (1)
 
5.11
 
Ergobaby
 
Liberty
 
Manitoba Harvest
 
ACI
 
Arnold (2)
 
Clean Earth
 
Sterno
 
Total
Balance as of January 1, 2016
$
8,649

 
$
—

 
$
41,664

 
$
32,828

 
$
52,673

 
$
58,019

 
$
51,767

 
$
111,339

 
$
33,716

 
$
390,655

Acquisition of Northern International Inc.
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
5,980

 
5,980

Acquisition of Phoenix Soil (3)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
3,212

 
—

 
3,212

Acquisition of EWS (3)
—

 
—

 
—

 
—

 
—

 
—

 
—

 
3,313

 
—

 
3,313

Acquisition of BabyTula (3)
—

 
—

 
13,193

 
—

 
—

 
—

 
—

 
—

 
—

 
13,193

Purchase adjustments - HOCI
—

 
—

 
—

 
—

 
(10,579
)
 
—

 
—

 
—

 
—

 
(10,579
)
Acquisition of 5.11 (3)
—

 
76,186

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
76,186

Foreign currency translation
—

 
—

 
—

 
—

 
3,094

 
—

 
—

 
—

 
—

 
3,094

Balance as of Sept. 30, 2016
$
8,649

 
$
76,186

 
$
54,857

 
$
32,828

 
$
45,188

 
$
58,019

 
$
51,767

 
$
117,864

 
$
39,696

 
$
485,054


(1)
Represents goodwill resulting from purchase accounting adjustments not "pushed down" to the ACI segment. This amount is allocated back to the respective segment for purposes of goodwill impairment testing.

(2)
Arnold Magnetics has three reporting units PMAG, FlexMag and Precision Thin Metals with goodwill balances of $40.4 million, $4.8 million and $6.5 million, respectively.

(3) 
The goodwill related to the acquisitions of 5.11 Tactical, and the acquisitions of Phoenix Soil and EWS by Clean Earth and Baby Tula by Ergobaby is based on a preliminary purchase price allocation.
Long lived assets
Orbitbaby
During the second quarter of 2016, Ergobaby's board of directors approved a plan to dispose of the Orbitbaby product line. Ergobaby determined at the time the plan was approved that the carrying value of the long lived assets associated with the Orbitbaby product line was not recoverable, and therefore, Ergobaby recorded a loss on disposal of assets of $7.2 million related to the write off of the long-lived assets of Orbitbaby. The loss is comprised of the write-off of intangible assets of $5.5 million, property, plant and equipment of $0.4 million, other assets of $1.0 million, and $0.3 million in early lease termination costs. Ergobaby will continue to sell the remaining Orbitbaby inventory through the end of 2016.
2016 Annual indefinite lived impairment testing

The Company uses a qualitative approach to test indefinite lived intangible assets for impairment by first assessing qualitative factors to determine whether it is more-likely-than-not that the fair value of an indefinite lived intangible asset is impaired as a basis for determining whether it is necessary to perform quantitative impairment testing. The Company evaluated the qualitative factors of each reporting unit that maintains indefinite lived intangible assets in connection with the annual impairment testing for 2016. Results of the qualitative analysis indicate that the carrying value of the Company’s indefinite lived intangible assets did not exceed their fair value.
Other intangible assets are comprised of the following at September 30, 2016 and December 31, 2015 (in thousands):

 
 
September 30, 2016
 
December 31, 2015
 
Weighted
Average
Useful Lives
Customer relationships
 
$
308,336

 
$
212,454

 
13
Technology and patents
 
51,953

 
38,230

 
9
Trade names, subject to amortization
 
129,007

 
25,003

 
15
Licensing and non-compete agreements
 
8,645

 
6,024

 
5
Permits and airspace
 
110,624

 
98,673

 
13
Distributor relations and other
 
606

 
606

 
5
 
 
609,171

 
380,990

 
 
Accumulated amortization:
 

 

 
 
Customer relationships
 
(76,803
)
 
(62,679
)
 
 
Technology and patents
 
(23,393
)
 
(16,481
)
 
 
Trade names, subject to amortization
 
(6,053
)
 
(4,639
)
 
 
Licensing and non-compete agreements
 
(6,637
)
 
(5,913
)
 
 
Permits and airspace
 
(19,651
)
 
(12,313
)
 
 
Distributor relations and other
 
(606
)
 
(606
)
 
 
Total accumulated amortization
 
(133,143
)
 
(102,631
)
 
 
Trade names, not subject to amortization
 
72,986

 
72,328

 
 
Total intangibles, net
 
$
549,014

 
$
350,687

 
 

Amortization expense related to intangible assets was $8.4 million and $24.0 million for the three and nine months ended September 30, 2016, and $7.3 million and $21.5 million for the three and nine months ended September 30, 2015, respectively. Estimated charges to amortization expense of intangible assets over the next five years, is as follows (in thousands):

July 1, 2016 through Dec. 31, 2016
 
$
19,454

2017
 
43,542

2018
 
43,046

2019
 
42,162

2020
 
41,916

 
 
$
190,120