Goodwill and Other Intangible Assets

9 Months Ended

Sep. 28, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The roll-forward of activity related to our goodwill was as follows (in thousands):



	Thirty-Nine Weeks Ended
	September 28, 2014			September 29, 2013
Balance, beginning of period	$	136,152		$	131,320
Goodwill additions	46,880			3,545
Goodwill adjustments	(5,212		)	319
Balance, end of period	$	177,820		$	135,184

Additions to goodwill represent goodwill from acquisitions made during the period. Adjustments to goodwill include translation adjustments resulting from a portion of our goodwill being recorded on the books of our foreign subsidiaries as well as minor adjustments made for the finalization of the purchase price allocations.

Acquisition of Lithicon AS

On February 5, 2014 we acquired 100% of the outstanding shares of Lithicon AS (“Lithicon”), which has operations in Norway and Australia. Lithicon provides digital rock technology services and pore-scale micro computed tomography (“microCT”) equipment to oil and gas companies. In conjunction with the acquisition we have obtained the helical scan microCT product and associated software from the Australian National University through a licensing and development agreement.

The total purchase price of the acquisition was $68.0 million, plus an adjustment for the change in final closing accounts of $0.4 million. We paid $0.4 million in transaction costs, of which $0.3 million was paid in the first quarter. Those costs were expensed as incurred and are recorded in selling, general and administrative costs on the Consolidated Statements of Operations. The total purchase price was allocated to the net tangible and intangible assets acquired based on their preliminary fair values as of February 5, 2014. The fair value of net tangible assets acquired was $7.7 million and the fair value of net intangible assets acquired was $22.0 million, which consisted of $18.6 million in developed technology, $2.2 million of customer relationships and $1.2 million of purchased backlog. Including an increase to net deferred tax liabilities of $8.1 million, the excess of the purchase price over the fair value of the net assets acquired was $46.9 million, which was recorded as goodwill in the Industry Group. For the thirteen and thirty-nine week periods ended September 28, 2014 the acquired business added $1.9 million and $4.3 million of revenue, respectively, and a net loss of $1.0 million and $3.1 million, respectively, to our consolidated financial results.

The goodwill arising from the acquisition of Lithicon is primarily related to expected future cash flows from expansion of our product offerings in the oil and gas market to include digital rock services, as well as synergies from the introduction of the microCT product to the existing FEI product suite.

The acquired developed technology, customer relationships and purchased backlog will be amortized over a period of 10 years, 5 years and 2 years, respectively.

No pro forma financial information has been provided for this acquisition as it is insignificant.

Other Intangible Assets

Patents, trademarks and other are amortized using the straight-line method over their estimated useful lives of 2 to 10 years. Customer relationships are amortized using the straight-line method over their estimated useful lives of 5 to 10 years. Developed technology is amortized using the straight-line method over the estimated useful life of the related technology, which ranges from 5.5 to 10 years. Note issuance costs were amortized over the life of the related debt, which was 7 years.

The gross amount of our other intangible assets and the related accumulated amortization were as follows (in thousands):



	September 28, 2014			December 31, 2013
Patents, trademarks and other	$	25,786		$	24,327
Accumulated amortization	(12,354		)	(9,296		)
Net patents, trademarks and other	13,432			15,031
Customer relationships	22,809			21,650
Accumulated amortization	(5,428		)	(3,547		)
Net customer relationships	17,381			18,103
Developed technology	35,562			18,161
Accumulated amortization	(7,004		)	(4,098		)
Net developed technology	28,558			14,063
Note issuance costs	2,445			2,445
Accumulated amortization	(2,445		)	(2,445		)
Net note issuance costs	—			—
Total intangible assets included in other long-term assets	$	59,371		$	47,197

Amortization expense was as follows (in thousands):



	Thirty-Nine Weeks Ended
	September 28, 2014		September 29, 2013
Patents, trademarks and other	$	3,850	$	2,527
Customer relationships	1,882		1,728
Developed technology	2,906		1,718
Note issuance costs	—		146
Total amortization expense	$	8,638	$	6,119

Expected amortization, without consideration for foreign currency effects, is as follows over the next five years and thereafter (in thousands):



	Patents, Trademarks and Other		Customer Relationships		Developed Technology		Total
Remainder of 2014	$	826	$	688	$	1,004	$	2,518
2015	3,643		2,749		4,016		10,408
2016	2,702		2,749		4,016		9,467
2017	2,262		2,401		3,756		8,419
2018	1,661		2,321		3,387		7,369
Thereafter	2,338		6,473		12,379		21,190
Total future amortization expense	$	13,432	$	17,381	$	28,558	$	59,371

- 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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