Thermon Group Holdings, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Goodwill

Goodwill

3 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

Goodwill

The carrying amount of goodwill by operating segment as of June 30, 2017 is as follows:



	United States		Canada		Europe		Asia		Total
Balance as of March 31, 2017	$	52,016	$	43,444	$	18,437	$	8,624	$	122,521
Foreign currency translation impact	—		1,078		1,090		—		2,168
Balance as of June 30, 2017	$	52,016	$	44,522	$	19,527	$	8,624	$	124,689

The excess purchase price over the fair value of assets acquired is recorded as goodwill. Goodwill is tested for impairment on an annual basis, and between annual tests if indicators of potential impairment exist. We perform a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If required, we also perform a quantitative analysis using the income approach, based on discounted future cash flows, which are derived from internal forecasts and economic expectations, and the market approach based on market multiples of guideline public companies. The most significant inputs in the Company's goodwill impairment tests are projected financial information, the weighted average cost of capital and market multiples for similar transactions. Our annual impairment test is performed during the fourth quarter of our fiscal year.

During the fiscal years ended March 31, 2017 and 2016, revenue from our Canadian operations decreased by approximately 27% and 42% compared to the fiscal years ended March 31, 2016 and 2015, respectively. Lower crude oil prices have had a significant adverse impact on capital spending, particularly in the Canadian oil sands region, which in turn resulted in the recent decline in revenue in Canada. We believe that the prior year decreases in our Canadian reporting units are cyclical in nature and that our long term business model is sound. We cannot, however, provide any assurances regarding a recovery in the financial performance of our Canadian operations.

We consider the sustained decline in our Canadian business, which management believes is attributable to lower oil prices and the reduction of capital investments in the Canadian oil sands region, to be an indicator of potential asset impairments in our Canadian reporting units. The goodwill balance in the Canadian reporting units at June 30, 2017 is $44,522 and the net intangible assets are $23,569. Beginning in the second quarter of fiscal 2016, we began to perform quarterly goodwill and intangible asset impairment assessments of our Canadian operations utilizing the income approach, based on discounted future cash flows, which were derived from internal forecasts and economic expectations, and the market approach, based on market multiples of guideline public companies. As of June 30, 2017, based on the results of our quarterly goodwill impairment assessment, the estimated fair value of the Canadian reporting units exceeds the carrying values. As such, there was no impairment of our Canadian reporting units’ goodwill or intangible assets at June 30, 2017. We will continue to monitor our Canadian reporting units' goodwill and intangible asset valuations and test for potential impairments until the overall market conditions in Canada improve.

Changes in estimates and assumptions used to determine whether impairment exists or future declines in actual and forecasted operating results and/or market conditions in the United States, especially in energy markets, could indicate a need to reevaluate the fair value of our United States reporting unit and may ultimately result in an impairment to goodwill and/or indefinite-lived intangible assets of our United States reporting unit in future periods.

Our total intangible assets consisted of the following:



	Gross Carrying Amount at June 30, 2017		Accumulated Amortization		Net Carrying Amount at June 30, 2017		Gross Carrying Amount at March 31, 2017		Accumulated Amortization		Net Carrying Amount at March 31, 2017
Trademarks	$	45,346	$	595	$	44,751	$	44,563	$	521	$	44,042
Developed technology	9,975		3,647		6,328		9,796		3,454		6,342
Customer relationships	101,044		68,317		32,727		99,676		64,682		34,994
Certifications	449		—		449		442		—		442
Other	2,631		2,340		291		2,626		2,268		358
Total	$	159,445	$	74,899	$	84,546	$	157,103	$	70,925	$	86,178

- 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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