Goodwill and Intangible Assets
|12 Months Ended|
Dec. 31, 2020
|Goodwill and Intangible Assets Disclosure [Abstract]|
|Goodwill and Intangible Assets||Goodwill and Intangible Assets
Changes in goodwill for the years ended December 31, 2020 and 2019 are as follows (in thousands):
In the first quarter of 2020, we completed the sale of our Prime Turbines subsidiary and certain related inventory assets and recognized a loss on the sale of the business and inventory. Prime Turbines was reported within our Aviation segment. As part of determining the loss on sale, goodwill of $7.4 million was allocated to the disposal group on a relative fair value basis and was written-off upon the completion of the sale.
We perform an annual review of goodwill for impairment during the fourth quarter and whenever events or other changes in circumstances indicate that the carrying value may not be fully recoverable.
As a result of the decline in the macroeconomic environment caused by the COVID-19 pandemic and the decrease in our market capitalization, we performed an interim impairment analysis during the first quarter of 2020, utilizing a qualitative approach. We concluded it was more likely than not that the fair value exceeded the carrying value of our reporting units with the exception of our VSE Aviation reporting unit, which required a quantitative impairment test. The fair value of the reporting unit was determined using a combination of an income approach using a discounted cash flow analysis and a market-based valuation approach based on relevant data from guideline public companies. The result of the quantitative impairment test indicated that the VSE Aviation reporting unit was not impaired. Due to the ongoing impact of the COVID-19 pandemic, we performed an interim impairment analysis during the second quarter of 2020, utilizing a quantitative approach. The result of the impairment analysis indicated that the fair value of our reporting units, with the exception of our VSE Aviation reporting unit, exceeded their carrying values and no impairment charge was required. The estimated fair value of our VSE Aviation reporting unit was determined to be below its carrying value, which resulted in a $30.9 million goodwill impairment charge in the second quarter of 2020. Refer to Note (16) "Fair Value Measurements" for additional information on the valuation methodology assumptions.
For our 2020 annual analysis of goodwill, we elected to perform a qualitative assessment. The results of our annual goodwill impairment assessment in the fourth quarter of 2020 indicated that it was more likely than not that the fair value of our reporting units exceeded their carrying values. We did not record impairment charges related to goodwill in 2019 or 2018.
Intangible assets consisted of the following (in thousands):
During the second quarter of 2020, we completed the sale of all of the inventory of the CT Aerospace subsidiary, which is reported within our Aviation segment. As a result of the sale, we concluded that the useful life of certain long-lived assets, which represented the intangible assets acquired in the acquisition of the subsidiary, was zero and that there was no ongoing expected future cash flows related to these long-lived assets and no residual value. As a result, such assets were determined to be fully impaired and an impairment charge of approximately $2.8 million, representing the carrying value of these intangible assets, was recorded during the second quarter of 2020, which is reflected within goodwill and intangible impairment in the consolidated statements of income. As the sale did not represent a disposition of a business, no goodwill was allocated to the disposal group.
Amortization expense for the years ended December 31, 2020, 2019 and 2018 was approximately $17.5 million, $19.3 million and $16.0 million, respectively.
Future expected amortization of intangible assets is as follows for the years ending December 31, (in thousands):
The entire disclosure for goodwill and intangible assets.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef