4. Goodwill and Intangible Assets

Goodwill is tested for impairment at the reporting unit level on an annual basis as of October 1 as well as between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value. Based on the test completed in 2014, the Company concluded that the fair value of each of the reporting units, excluding MBS Dev, was in excess of the carrying value. The Company makes a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The Company applied this qualitative approach to one of its four reporting units. Two of the other four reporting units were evaluated for impairment using the market based and/or the discounted cash flow approach to determine fair value. At the Company’s annual impairment test date of October 1, 2014, the Company concluded for three of the four reporting units that goodwill was not impaired as prescribed by related accounting guidance.

Prior to the completion of the annual goodwill impairment test for MBS Dev, the Company began negotiating the sale of MBS Dev with third parties and concluded that this change in strategy for MBS Dev was an interim indicator of impairment that necessitated an interim test for goodwill impairment. The Company completed a goodwill impairment test as of the date the assets were classified as held for sale, and used a market approach to determine the fair value of the MBS Dev reporting unit. The fair value of the MBS Dev reporting unit did not exceed its carrying value, requiring the Company to determine the amount of goodwill impairment loss by valuing the entity’s assets and liabilities at fair value and comparing the fair value of the implied goodwill to the carrying value of goodwill. Upon completion of this calculation, the carrying amount of the goodwill exceeded the implied fair value of that goodwill, resulting in a goodwill impairment of $9.0 million. The goodwill impairment was partially offset by the fair value of the consideration received for MBS Dev being in excess of the carrying value, leading to a total loss on disposition of MBS Dev of $8.2 million. The recognized and unrecognized intangible assets were valued using the cost method and relief from royalty approach using estimates of forecasted future revenues.

Indefinite lived intangible assets are tested for impairment annually as of October 1 or more frequently if events or changes in circumstances indicate that the assets might be impaired. Based on the testing completed in 2014 and no changes in circumstances in the fourth quarter of 2014, intangible values exceeded their book value. In the fourth quarter of 2012, it was determined that a trade name acquired in a past acquisition was no longer in use and therefore was fully impaired. The Company wrote off the value of this indefinite lived intangible, $0.7 million, in the fourth quarter of 2012 and included this amount within operating expenses in the Consolidated Statement of Income and within depreciation and amortization in the Consolidated Statement of Cash Flows.

As of December 31, 2014 and 2013, the Company’s Consolidated Balance Sheets reflected $398.0 million and $356.8 million of goodwill, and $112.0 million and $65.5 million in net intangible assets, respectively.

The changes in the carrying amount of goodwill are noted in the following table (in thousands):

Goodwill, balance as of December 31, 2013	$	356,811
Acquisition of CPO		25,108
Acquisition of MEDCO		30,514
Impairment of MBS Dev Goodwill		(9,034	)
MBS Dev divestiture		(4,599	)
Currency translation adjustment		(758	)
Goodwill, balance as of December 31, 2014	$	398,042

Net intangible assets consist primarily of customer lists, trademarks, and non-compete agreements purchased as part of past acquisitions. The Company has no intention to renew or extend the terms of acquired intangible assets and accordingly, did not incur any related costs during 2014 or 2013. Amortization of intangible assets purchased as part of these acquisitions totaled $8.6 million, $7.0 million, and $6.1 million for the years ended December 31, 2014, 2013 and 2012, respectively. Accumulated amortization of intangible assets as of December 31, 2014 and 2013 totaled $45.2 million and $38.8 million, respectively.

The following table summarizes the intangible assets of the Company by major class of intangible assets and the cost, accumulated amortization, net carrying amount, and weighted average life, if applicable (in thousands):

	December 31, 2014								December 31, 2013
								Weighted								Weighted
								Average								Average
	Gross					Net		Useful	Gross					Net		Useful
	Carrying		Accumulated			Carrying		Life	Carrying		Accumulated			Carrying		Life
	Amount		Amortization			Amount		(years)	Amount		Amortization			Amount		(years)
Intangible assets subject to amortization
Customer relationships and other intangibles	$	125,761	$	(41,123	)	$	84,638	16	$	84,470	$	(36,232	)	$	48,238	17
Non-compete agreements		4,672		(2,364	)		2,308	4		4,700		(1,952	)		2,748	4
Trademarks		14,428		(1,716	)		12,712	13		2,890		(674	)		2,216	5
Total	$	144,861	$	(45,203	)	$	99,658		$	92,060	$	(38,858	)	$	53,202
Intangible assets not subject to amortization
Trademarks		12,300		-			12,300	n/a		12,300	-				12,300	n/a
Total	$	157,161	$	(45,203	)	$	111,958		$	104,360	$	(38,858	)	$	65,502

The following table summarizes the amortization expense expected to be incurred over the next five years on intangible assets (in thousands):

Year	Amounts
2015	$	13,943
2016		13,360
2017		11,296
2018		7,521
2019		5,749

The Company’s industry is changing rapidly and is being shaped by digitalization of work and office, the blurring of its traditional channels, a massive marketing shift to online away from brick and mortar stores, and the convergence of Business-to-Business and Business-to-Consumer. As a result, the Company is executing actions to reposition itself for success and to continue to give its customers what they need to succeed. A key action in the repositioning was the approval of a rebranding plan in February 2015. This rebranding plan will be presented for stockholder approval in the proxy statement for the 2015 annual meeting of stockholders. At December 31, 2014, the Company held approximately $12.0 million in intangible assets related to brand names; the Company expects to substantially reduce its use of these brand names as a result of the rebranding. Accordingly, the Company anticipates in the first quarter of 2015 that certain indefinite lived intangible assets will become definite lived and there will be a reduction to the useful lives of certain other intangible assets. The Company anticipates recording a non-cash impairment charge during the first quarter of 2015 of approximately $10.0 million and an impact of $12.0 million for the full year 2015 related to impairment and amortization of these intangibles.

The Company will also continue to exit non-strategic channels and categories during 2015 to further align with its strategies. In February 2015, the Company approved a plan to sell a subsidiary in Mexico. The Company will actively market the entity as an asset sale and plans to dispose of the entity by the end of 2015. In conjunction with the classification as held-for-sale, in accordance with ASC 205, the Company is currently estimating a non-cash loss related to the revaluation of these assets of $12.0 million to $16.0 million in the first quarter of 2015. The Company anticipates additional impacts during 2015 related to transaction expenses and foreign exchange volatility. As of December 31, 2014, the Company had $9.4 million recognized in Accumulated Other Comprehensive Income related to the subsidiary’s deferred foreign exchange loss.

As of December 31, 2014, the carrying amounts of the Mexican subsidiary by major classes of assets and liabilities included in the Consolidated Balance Sheet are as follows (in thousands):

	Amount
ASSETS
Current assets:
Cash and cash equivalents	$	1,288
Accounts receivable, less allowance for doubtful accounts		9,355
Inventories		14,757
Other current assets		261
Total current assets		25,661
Property, plant and equipment, at cost
Fixtures and equipment		589
Capitalized software costs		109
Total property, plant and equipment		698
Less: accumulated depreciation and amortization		576
Net property, plant equipment		122
Goodwill		4,621
Other assets		658
Total assets	$	31,062

LIABILITIES
Current liabilities:
Accounts payable		5,242
Accrued liabilities		1,651
Total current liabilities		6,893
Other long-term liabilities		7
Total liabilities	$	6,900