GOODWILL AND OTHER INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

The Company revised its operating segments and reporting segments in connection with the change in the Company’s Chief Executive Officer (who serves as the Company’s chief operating decision maker) effective January 3, 2012. As a result, the Company reassigned the goodwill to these new reportable segments based on the relative fair value of the Company’s eight underlying reporting units as of January 1, 2012. On July 31, 2012, the Company performed the annual goodwill impairment test. The Company first assessed the qualitative factors to determine whether it is more likely than not that the fair value of the reporting units is less than their carrying amounts. The Company performed this qualitative assessment for seven reporting units that each had an estimated fair value that was in excess of its carrying value by a significant amount. For each reporting unit, the Company weighed the relative impact of factors that are specific to the reporting unit as well as industry and macroeconomic factors. The reporting unit specific factors that were considered included the results of the most recent impairment tests, as well as financial performance and changes to the reporting units' carrying amounts since the most recent impairment tests. The Company concluded that each of the reporting unit specific and industry factors had either a positive or neutral impact on their fair values. The Company also determined that macroeconomic factors during 2012 did not have a significant impact on the discount rates and growth rates used for the January 1 tests. Based on the qualitative assessment, the Company concluded that for these seven reporting units, it is more likely than not that their carrying values are less than their fair values at July 31, 2012.

The Company performed the first step of the goodwill impairment test for its U.S. Spine business. This component has $31.7 million of allocated goodwill. As a result of the annual impairment assessment, the Company determined that the fair value exceeded its carrying value by approximately 13% at July 31, 2012. However, if future results do not meet or exceed the Company's forecasts, or if unfavorable changes occur in the weighted-average cost of capital, growth assumptions for future revenue, terminal value growth rate and/or forecasted cash flows utilized in the discounted cash flow analysis, the Company may record an impairment of this goodwill at a future date.

Changes in the carrying amount of goodwill for the nine months ended September 30, 2012 were as follows:



	U.S. Neurosurgery		U.S. Instruments		U.S. Extremities			U.S. Spine and Other		International			Total
	(In thousands)
Goodwill, gross	$	93,913	$	57,270	$	60,544		$	55,693	$	25,560		$	292,980
Accumulated impairment losses
Goodwill at December 31, 2011	93,913		57,270		60,544			55,693		25,560			292,980
SeaSpine, Inc. working capital adjustment								289					289
Ascension Orthopedics, Inc. working capital adjustment and other					(448		)						(448		)
Foreign currency translation										(395		)	(395		)
Balance, September 30, 2012	$	93,913	$	57,270	$	60,096		$	55,982	$	25,165		$	292,426

The components of the Company’s identifiable intangible assets were as follows:



	Weighted Average Life	September 30, 2012							December 31, 2011
	Weighted Average Life	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
	(Dollars in Thousands)
Completed technology	11 years	$	75,553	$	(36,707	)	$	38,846	$	75,990	$	(32,157	)	$	43,833
Customer relationships	11 years	147,550		(66,783		)	80,767		147,230		(57,348		)	89,882
Trademarks/brand names	32 years	33,764		(14,116		)	19,648		33,669		(10,897		)	22,772
Trademarks/brand names	Indefinite	48,484		—			48,484		48,484		—			48,484
Supplier relationships	26 years	33,810		(5,783		)	28,027		33,810		(5,389		)	28,421
All other⁽¹⁾	6 years	5,582		(3,009		)	2,573		11,434		(7,704		)	3,730
		$	344,743	$	(126,398	)	$	218,345	$	350,617	$	(113,495	)	$	237,122


⁽¹⁾	At September 30, 2012 and December 31, 2011, all other included in-process research and development of $1.7 million, which was indefinite lived.

During the nine months ended September 30, 2012, the Company recorded impairment charges of $0.1 million in cost of goods sold related to technology assets whose related products are being discontinued.

Based on quarter-end exchange rates, annual amortization expense is expected to approximate $25.1 million in 2012, $19.0 million in 2013, $18.1 million in 2014, $16.3 million in 2015 and $14.0 million in 2016. Identifiable intangible assets are initially recorded at fair market value at the time of acquisition using an income or cost approach.

- 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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