Goodwill, Intangible Assets and Impairment Charges

12 Months Ended

Dec. 31, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill, Intangible Assets and Impairment Charges

6. Goodwill, Intangible Assets and Impairment Charges

Goodwill

The following table summarizes changes in goodwill during the year ended December 31, 2016 (in thousands):

	December 31, 2016
Balance at beginning of year	$	103,456
Net working capital adjustment of Lincoln Laser acquisition		(43	)
Goodwill acquired from Reach acquisition		4,715
Balance at end of year	$	108,128

Goodwill acquired from the Reach acquisition is reflected in the Vision segment. Goodwill by reportable segment as of December 31, 2016 is as follows (in thousands):

	Reportable Segment
	Photonics			Vision			Precision Motion			Total
Goodwill	$	136,278		$	89,116		$	33,963		$	259,357
Accumulated impairment of goodwill		(102,461	)		(31,722	)		(17,046	)		(151,229	)
Total	$	33,817		$	57,394		$	16,917		$	108,128

Goodwill by reportable segment as of December 31, 2015 is as follows (in thousands):

	Reportable Segment
	Photonics			Vision			Precision Motion			Total
Goodwill	$	136,321		$	84,401		$	33,963		$	254,685
Accumulated impairment of goodwill		(102,461	)		(31,722	)		(17,046	)		(151,229	)
Total	$	33,860		$	52,679		$	16,917		$	103,456

Intangible Assets

Intangible assets as of December 31, 2016 and 2015, respectively, are summarized as follows (dollar amounts in thousands):

	December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Life (Years)
Amortizable intangible assets:
Patents and acquired technologies	$	84,742	$	(67,902	)	$	16,840		7.6
Customer relationships		69,554		(42,934	)		26,620		12.9
Customer backlog		622		(540	)		82		0.9
Non-compete covenant		2,514		(1,419	)		1,095		2.0
Trademarks and trade names		10,709		(6,630	)		4,079		8.3
Amortizable intangible assets		168,141		(119,425	)		48,716		10.2
Non-amortizable intangible assets:
Trade names		13,027		—			13,027
Total	$	181,168	$	(119,425	)	$	61,743

	December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Remaining Life (Years)
Amortizable intangible assets:
Patents and acquired technologies	$	82,821	$	(66,297	)	$	16,524		7.7
Customer relationships		67,168		(36,914	)		30,254		13.6
Customer backlog		2,644		(2,589	)		55		1.0
Non-compete covenant		2,514		(882	)		1,632		3.2
Trademarks and trade names		10,711		(5,934	)		4,777		9.1
Amortizable intangible assets		165,858		(112,616	)		53,242		11.0
Non-amortizable intangible assets:
Trade names		13,027		—			13,027
Total	$	178,885	$	(112,616	)	$	66,269

Amortizable intangible assets as of December 31, 2016 include intangible assets recognized in conjunction with the acquisition of certain video processing and video management technologies used in medical visualization solutions in December 2016. The fair value of intangible assets acquired is comprised of the following (dollar amounts in thousands):

			Weighted Average
	Estimated Fair		Amortization
	Value		Period
Developed technology	$	3,980	10 years
Total	$	3,980

All definite-lived intangible assets are amortized either on a straight-line basis or an economic benefit basis over their remaining estimated useful life. Amortization expense for customer relationships and definite-lived trademarks, trade names and other intangibles is included in operating expenses in the accompanying consolidated statements of operations. Amortization expense for patents and acquired technologies is included in cost of revenue in the accompanying consolidated statements of operations. Amortization expense is as follows (in thousands):

	Year Ended December 31,
	2016		2015		2014
Amortization expense – cost of revenue	$	4,164	$	4,712	$	6,143
Amortization expense – operating expenses		8,251		7,611		10,262
Total amortization expense	$	12,415	$	12,323	$	16,405

Estimated future amortization expense for each of the five succeeding years and thereafter is as follows (in thousands):

Year Ending December 31,	Cost of Revenue		Operating Expenses		Total
2017	$	3,658	$	7,384	$	11,042
2018		2,274		6,713		8,987
2019		2,083		4,691		6,774
2020		1,931		2,718		4,649
2021		1,767		2,290		4,057
Thereafter		5,127		8,080		13,207
Total	$	16,840	$	31,876	$	48,716

Impairment Charges

The most recent annual goodwill and indefinite-lived intangible asset impairment test was performed as of the beginning of the second quarter of 2016, noting no impairment. Implied fair values of all reporting units exceeded their carrying values by at least 20%.

The Company did not have any goodwill or indefinite-lived intangible asset impairment charges during 2015 or 2016.

During the fourth quarter of 2014, the Company performed an interim impairment review of the goodwill and intangible assets related to the NDS reporting unit. First, the Company performed a long-lived asset recoverability test in accordance with ASC 360-10-35-15, “Impairment or Disposal of Long-Lived Assets,” on the lowest level of identifiable cash flows, which was determined to be the NDS business. The recoverability test compared the carrying value of the NDS business to the undiscounted cash flows. As a result of this recoverability test, the Company determined that the assets were not recoverable.  The Company then determined the fair value of the NDS business using a discounted cash flow methodology, which resulted in a $21.9 million intangible assets impairment charge in the fourth quarter of 2014. The impairment charge is reflected in the operating results of the Vision segment.  

Subsequent to impairing the NDS business’s long-lived assets, step one of the goodwill impairment analysis was performed.  As the carrying value of the NDS reporting unit exceeded its implied fair value, the Company performed the second step of the goodwill impairment test, comparing the implied fair value of the reporting unit’s goodwill with its carrying value to measure the impairment loss. The Company recorded a $19.6 million goodwill impairment charge in the fourth quarter of 2014. The impairment charge is reflected in the operating results of the Vision segment.