Intangible Assets and Goodwill

9 Months Ended

Apr. 30, 2013

Note 7. Intangible Assets and Goodwill

Our intangible assets with definite lives consist of customer relationships, technology, brand names, non-compete agreements and patents. These intangible assets are being amortized using the straight-line method over the estimated useful lives of the assets ranging from 2-20 years and have a weighted average amortization period of 11 years. Amortization expense related to definite lived intangible assets was $2,598,000 and $7,438,000 for the three and nine months ended April 30, 2013, respectively, and $2,279,000 and $6,846,000 for the three and nine months ended April 30, 2012, respectively. Our intangible assets that have indefinite useful lives and therefore are not amortized consist of trademarks and trade names.

The Company’s intangible assets consist of the following:

	April 30, 2013
	Gross		Accumulated Amortization			Net
Intangible assets with finite lives:
Customer relationships	$	68,754,000	$	(24,748,000	)	$	44,006,000
Technology	21,054,000		(9,094,000		)	11,960,000
Brand names	12,758,000		(7,777,000		)	4,981,000
Non-compete agreements	3,359,000		(655,000		)	2,704,000
Patents and other registrations	1,650,000		(563,000		)	1,087,000
	107,575,000		(42,837,000		)	64,738,000
Trademarks and trade names	9,427,000		—			9,427,000
Total intangible assets	$	117,002,000	$	(42,837,000	)	$	74,165,000

	July 31, 2012
	Gross		Accumulated Amortization			Net
Intangible assets with finite lives:
Customer relationships	$	60,271,000	$	(20,421,000	)	$	39,850,000
Technology	20,797,000		(7,590,000		)	13,207,000
Brand names	11,945,000		(6,778,000		)	5,167,000
Non-compete agreements	3,147,000		(404,000		)	2,743,000
Patents and other registrations	1,372,000		(463,000		)	909,000
	97,532,000		(35,656,000		)	61,876,000
Trademarks and trade names	9,435,000		—			9,435,000
Total intangible assets	$	106,967,000	$	(35,656,000	)	$	71,311,000

Estimated amortization expense of our intangible assets for the remainder of fiscal 2013 and the next five years is as follows:

Three month period ending July 31, 2013	$	2,597,000
Fiscal 2014	10,099,000
Fiscal 2015	9,840,000
Fiscal 2016	6,600,000
Fiscal 2017	6,024,000
Fiscal 2018	5,747,000

Goodwill changed during fiscal 2012 and the nine months ended April 30, 2013 as follows:

	Endoscopy		Water Purification and Filtration			Healthcare Disposables		Dialysis		All Other			Total Goodwill

Balance, July 31, 2011	$	9,648,000	$	52,074,000		$	55,864,000	$	8,133,000	$	9,051,000		$	134,770,000
Acquisitions	49,582,000		—			—		—		—			49,582,000
Foreign currency translation	—		(309,000		)	—		—		(388,000		)	(697,000		)
Balance, July 31, 2012	59,230,000		51,765,000			55,864,000		8,133,000		8,663,000			183,655,000
Acquisitions	—		597,000			23,977,000		—		—			24,574,000
Foreign currency translation	—		(24,000		)	—		—		(29,000		)	(53,000		)
Balance, April 30, 2013	$	59,230,000	$	52,338,000		$	79,841,000	$	8,133,000	$	8,634,000		$	208,176,000

On July 31, 2012, we performed impairment studies of the Company’s goodwill and indefinite lived trademarks and trade names and concluded that such assets were not impaired. While the results of these annual reviews have historically not indicated impairment, impairment reviews are highly dependent on management’s projections of our future operating results and cash flows (which management believes to be reasonable), discount rates based on the Company’s weighted average cost of capital and appropriate benchmark peer companies. Assumptions used in determining future operating results and cash flows include current and expected market conditions and future sales forecasts. Subsequent changes in these assumptions and estimates could result in future impairment. Although we consistently use the same methods in developing the assumptions and estimates underlying the fair value calculations, such estimates are uncertain by nature and can vary from actual results. At July 31, 2012, the average fair value of all of our reporting units exceeded book value by substantial amounts, except our Dialysis and Specialty Packaging segments, which had average fair values that exceeded book values by approximately 19% and 24%, respectively. At April 30, 2013, goodwill relating to our Dialysis and Specialty Packaging reporting units were $8,133,000 and $7,110,000, respectively. We believe the most significant assumptions impacting the impairment assessment of Dialysis relate to the projected future operating results and cash flows of this segment, including the impact of the shift from reusable to single-use dialyzers as more fully explained in our “Management’s Discussion and Analysis” and in “Risk Factors” in our 2012 Form 10-K. We believe the most significant assumptions impacting the impairment assessment of Specialty Packaging relate to an assumed compounded annual sales growth of 14% and future operating efficiencies included in our projections of future operating results and cash flows of this segment, which forecasts are in excess of historical run rates. If future operating results and cash flows are substantially less than our projections, future impairment charges may be recorded. On April 30, 2013, management concluded that no events or changes in circumstances have occurred during the three and nine months ended April 30, 2013 that would indicate that the carrying amount of our intangible assets and goodwill may not be recoverable.

- 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.

+ References+ Details