GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

The excess of the cost over the fair value of net assets of acquired businesses is recorded as goodwill. Goodwill is not subject to amortization, but is reviewed for impairment at the reporting unit level annually, or more frequently if impairment indicators arise. The Company's assessment of the recoverability of goodwill is based upon a comparison of the carrying value of goodwill with its estimated fair value. This assessment is performed annually during the third quarter and was performed most recently on July 31, 2012 resulting in no impairment. 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.

The Company has experienced a decline in sales relative to the previous forecasts, partially with respect to its U.S. Spine and Private Label reporting units which has recorded goodwill of $46.8 million and $8.9 million, respectively. This decline is in part attributable to the recall, as well as lower sales to customers. The Company currently believes this impact is temporary. However, in the event that sales and operating results of the U.S. Spine and Private Label reporting units in the second half of the year continue to deteriorate, or in the event that management revises its forecasts, an impairment of goodwill may be recognized.

Changes in the carrying amount of goodwill for the six months ended June 30, 2013 were as follows:



	U.S. Neurosurgery			U.S. Instruments			U.S. Extremities			U.S. Spine and Other			International			Total
	(In thousands)
Goodwill, gross	$	94,312		$	57,514		$	60,353		$	56,219		$	25,669		$	294,067
Accumulated impairment losses
Goodwill at December 31, 2012	94,312			57,514			60,353			56,219			25,669			294,067
Tarsus Medical, Inc. acquisition							116									116
Foreign currency translation	(417		)	(255		)	(267		)	(249		)	(114		)	(1,302		)
Balance at June 30, 2013	$	93,895		$	57,259		$	60,202		$	55,970		$	25,555		$	292,881

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



	Weighted Average Life	June 30, 2013							Weighted Average Life	December 31, 2012
	Weighted Average Life	Cost		Accumulated Amortization			Net		Weighted Average Life	Cost		Accumulated Amortization			Net
	(Dollars in thousands)
Completed technology	12 years	$	80,456	$	(41,496	)	$	38,960	12 years	$	75,692	$	(38,402	)	$	37,290
Customer relationships	12 years	146,333		(74,633		)	71,700		12 years	147,690		(70,005		)	77,685
Trademarks/brand names	31 years	33,578		(15,164		)	18,414		31 years	33,807		(15,034		)	18,773
Trademarks/brand names	Indefinite	48,484		—			48,484		Indefinite	48,484		—			48,484
Supplier relationships	27 years	34,721		(8,561		)	26,160		27 years	34,721		(7,817		)	26,904
All other⁽¹⁾	4 years	4,830		(1,664		)	3,166		4 years	4,519		(1,388		)	3,131
		$	348,402	$	(141,518	)	$	206,884		$	344,913	$	(132,646	)	$	212,267


⁽¹⁾	At June 30, 2013 and December 31, 2012, all other included in-process research and development of $2.1 million and $1.7 million, respectively, which was indefinite-lived.

Based on quarter-end exchange rates, annual amortization expense is expected to approximate $19.4 million in 2013, $18.4 million in 2014, $16.6 million in 2015, $14.3 million in 2016 and $12.5 million in 2017. 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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