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Net Intangible Assets
 12 Months Ended
Dec. 31, 2012
Net Intangible Assets [Abstract]  
Net Intangible Assets

Note 7 — Net Intangible Assets

Net intangible assets consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2012

 

2011

Promotion and distribution contract rights

 

$

           —

 

$
47,687 

Less accumulated amortization

 

 

           —

 

 
(2,502)

 

 

$

           —

 

$
45,185 

 

 

 

 

 

 

 

As part of the acquisition of NovaMed, the Company recorded intangible assets related to promotion and distribution contract rights that were included in the Company’s China segment. During the third quarter of 2012, the Company identified impairment indicators related to the intangible assets. The Company determined that the undiscounted cash flows estimated to be generated by the intangible assets were less than the carrying amounts. The Company further performed a discounted cash flow analysis related to the intangible assets and determined that a full impairment should be recorded as the estimated fair value was determined to be zero. As a result, the Company recognized a non-cash impairment loss of approximately $42.7 million on its consolidated statement of income for the year ended December 31, 2012. Fair value measurements are based on a three-tier hierarchy that prioritizes the inputs used to measure fair value (see Note 1). The significant Level 3 unobservable inputs used in the fair value measurement of the intangible assets were estimates of projected revenues and earnings, a discount rate of approximately 20%, and assumptions regarding the probability of renewal of the customer contracts. Significant changes in the estimated revenues and earnings would have resulted in adjustments in the fair value measurement.  A change in the renewal probability rates of the customer contracts would have also resulted in a significant change in the fair value measurement.

Acquired promotion and distribution contract intangible assets were being amortized on a straight-line basis over 13.5 years, based on their estimated useful life. Amortization expense was  $2.6 million, $2.5 million, and $0 for the years ended December 31, 2012, 2011, and 2010, respectively. No further amortization expense will be recorded in future periods related to the acquired promotion and distribution contract intangible assets.