Goodwill, Capitalized Software and Other Intangible Assets

6 Months Ended

Sep. 30, 2014

Goodwill, Capitalized Software and Other Intangible Assets [Abstract]

Goodwill, Capitalized Software and Other Intangible Assets

Note 7 – Goodwill, Capitalized Software and Other Intangible Assets

Goodwill

The Company has the following reporting units: Dynatrace (formerly “Application Performance Management” or “APM”), Mainframe (“MF”), and Covisint Application Services (“AS” or “Covisint”). The changes in the carrying amount of goodwill by reporting unit during the six months ended September 30, 2014 are summarized as follows (in thousands):

	Dynatrace			MF		AS		Total

Goodwill as of March 31, 2014	$	482,857		$	140,304	$	25,385	$	648,546

Effect of foreign currency translation		(16,440	)		-		-		(16,440	)

Goodwill as of September 30, 2014	$	466,417		$	140,304	$	25,385	$	632,106

Capitalized software and other intangible assets

The components of the Company’s capitalized software and other intangible assets are as follows (in thousands):

	As of September 30, 2014
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Unamortized intangible assets	$	667				$	667

Amortized intangible assets:
Capitalized software
Internally developed		239,895	$	(176,359	)		63,536
Purchased		120,141		(109,084	)		11,057
Customer relationship		46,706		(26,161	)		20,545
Other		19,756		(19,756	)		-
Total amortized intangible assets	$	426,498	$	(331,360	)	$	95,138

	As of March 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount

Unamortized intangible assets	$	358				$	358

Amortized intangible assets:
Capitalized software
Internally developed		225,249	$	(165,720	)		59,529
Purchased		122,396		(107,116	)		15,280
Customer relationship		47,000		(24,185	)		22,815
Other		20,530		(19,750	)		780
Total amortized intangible assets	$	415,175	$	(316,771	)	$	98,404

Capitalized software includes the costs of internally developed software technology and software technology purchased through acquisitions. Internally developed capitalized software costs and capitalized purchased software technology are being amortized over periods up to five years.

Customer relationship agreements are related to acquisition activity and are being amortized over periods up to ten years.

Other amortized intangible assets include amortizable trademarks and patents relating to acquisition activity and are amortized over periods up to three years.

Unamortized intangibles include a trademark acquired as part of the Covisint acquisition and a domain name, each of which are deemed to have an indefinite life.

Amortization of intangible assets

Amortization expense of capitalized software, customer relationship and other intangible assets was as follows (in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,
	2014		2013		2014		2013
Amortized intangible assets:
Capitalized software
Internally developed	$	5,366	$	4,817	$	10,640	$	9,353
Purchased		1,664		2,391		3,378		4,761
Customer relationship		1,032		1,032		2,067		2,063
Other		-		770		780		1,532

Total amortization expense	$	8,062	$	9,010	$	16,865	$	17,709

Capitalized software amortization related to our on-premises software is reported as “cost of software license fees”, amortization related to our hosted software is reported as “cost of subscription fees” and amortization related to our application services is reported as “cost of application services” in the condensed consolidated statements of operations.

Customer relationship amortization related to our Dynatrace segment is reported as “sales and marketing” and amortization related to our application services segment is reported as “cost of application services” in the condensed consolidated statements of operations.

Amortization expense associated with trademarks and trade names related to our Dynatrace segment is reported as “cost of software license fees” and amortization related to our application services segment is reported as “cost of application services” in the condensed consolidated statements of operations. These intangibles are fully amortized as of September 30, 2014.

Based on the capitalized software, customer relationship and other intangible assets recorded through September 30, 2014, the annual amortization expense over the next five fiscal years and thereafter is expected to be as follows (in thousands):

	Fiscal Year Ended March 31,
	2015		2016		2017		2018		2019		Thereafter
Amortized intangible assets:
Capitalized software	$	28,426	$	26,787	$	17,549	$	9,727	$	4,777	$	1,345
Customer relationship		4,124		4,113		3,949		3,805		3,805		2,816
Other		780

Total amortization expense	$	33,330	$	30,900	$	21,498	$	13,532	$	8,582	$	4,161

- 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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