Invacare 2015 Annual Report Download - page 90

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-18
Intangibles
All of the company’s other intangible assets have been assigned definite lives and continue to be amortized over their useful
lives, except for $24,524,000 related to trademarks, which have indefinite lives. The changes in intangible balances reflected on
the balance sheet from December 31, 2014 to December 31, 2015 were the result of foreign currency translation and amortization.
The company’s intangibles consist of the following (in thousands):
December 31, 2015 December 31, 2014
Historical
Cost
Accumulated
Amortization
Historical
Cost
Accumulated
Amortization
Customer lists . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 49,858 $ 45,019 $ 78,693 $ 71,343
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,524 — 28,314 —
License agreements . . . . . . . . . . . . . . . . . . . . . . . 1,098 1,098 1,290 1,290
Developed technology . . . . . . . . . . . . . . . . . . . . . 7,405 5,921 8,297 6,340
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,959 5,843 6,102 5,804
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,161 1,124 2,548 2,454
$ 90,005 $ 59,005 $ 125,244 $ 87,231
Amortization expense related to other intangibles was $1,907,000, $20,358,000 and $10,567,000 for 2015, 2014 and 2013,
respectively. Estimated amortization expense for each of the next five years is expected to be $1,626,000 for 2016, $1,549,000 in
2017, $1,530,000 in 2018, $992,000 in 2019 and $184,000 in 2020. Amortized intangibles are being amortized on a straight-line
basis over remaining lives from 1 to 10 years with the majority of the intangibles being amortized over an average remaining life
of approximately 5 years.
In accordance with ASC 350, Intangibles—Goodwill and Other, the company reviews intangibles for impairment. The
company's intangible assets consist of intangible assets with defined lives as well as intangible assets with indefinite lives. Defined-
lived intangible assets consist principally of customer lists, developed technology, license agreements, patents and other
miscellaneous intangibles such as non-compete agreements. The company's indefinite lived intangible assets consist entirely of
trademarks.
The company evaluates the carrying value of definite-lived assets whenever events or circumstances indicate possible
impairment. Definite-lived assets are determined to be impaired if the future un-discounted cash flows expected to be generated
by the asset are less than the carrying value. Actual impairment amounts for definite-lived assets are then calculated using a
discounted cash flow calculation. The company reviews indefinite-lived assets for impairment annually in the fourth quarter of
each year and whenever events or circumstances indicate possible impairment. Any impairment amounts for indefinite-lived assets
are calculated as the difference between the future discounted cash flows expected to be generated by the asset less than the carrying
value for the asset.
During 2014, the company recognized intangible write-down charges in the IPG segment of $13,041,000 comprised of a
customer list impairment of $12,826,000 and a non-compete agreement of $215,000 as the actual and remaining cash flows
associated with the intangibles were less than the cash flows originally used to value the intangibles, primarily driven by reduced
net sales. The after-tax and pre-tax impairment amounts were the same for each of the above impairments.
During 2013, the company recognized intangible write-down charges of $1,523,000 comprised of: trademarks with indefinite
lives impairment of $568,000, a trademark with a definite life impairment of $123,000, customer list impairment of $442,000 and
developed technology impairment of $223,000 all recorded in the IPG segment and a customer list impairment of $167,000 recorded
in the North America/HME segment. The after-tax and pre-tax impairment amounts were the same for each of the above impairments
except for the indefinite-lived trademark impairment in the IPG segment, which was $496,000 after-tax.
The fair values of the customer lists were calculated using an excess earnings method, using a discounted cash flow model.
Estimated cash flow returns to the customer relationship were reduced by the cash flows required to satisfy the return requirements
of each of the assets employed with the residual cash flow then discounted to value the customer list. The fair values of the
trademarks and developed technology were calculated using a relief from royalty payment methodology which requires applying
an estimated market royalty rate to forecasted net sales and discounting the resulting cash flows to determine fair value. The patent
was impaired as the related product was discontinued.