GOODWILL AND INTANGIBLE ASSETS
The Company performed the required annual impairment tests of goodwill at April 30, 2013 on thirteen reporting units. To determine the fair value of the Company’s reporting units, the Company uses a discounted cash flow model with market-based support as its valuation technique to measure the fair value for its reporting units. The discounted cash flow model uses five-year forecasted cash flows plus a terminal value based on a multiple of earnings. In addition, the Company applies gross margin and operating expense assumptions consistent with historical trends. The total cash flows were discounted based on a range between 8.4% to 11.5%, which included assumptions regarding the Company’s weighted-average cost of capital. The Company considered the current market conditions both in the U.S. and globally, when determining its assumptions. Lastly, the Company reconciled the aggregated fair values of its reporting units to its market capitalization, which included a reasonable control premium based on market conditions. As a result of the annual impairment tests of goodwill, no impairment was identified.
Impairments of identifiable definite-lived and indefinite-lived intangible assets for the years ended December 31, 2013, 2012 and 2011 were $2.0 million, $5.2 million and $1.5 million, respectively, and are included in “Restructuring and other costs” on the Consolidated Statements of Operations.
A reconciliation of changes in the Company’s goodwill by segment and in total are as follows:
|
| | | | | | | | | | | | | | | | | | | |
(in thousands) | Dental Consumable and Laboratory Businesses | | Orthodontics/Canada/Mexico/Japan | | Select Distribution Businesses | | Implants/Endodontics/Healthcare/Pacific Rim | | Total |
| | | | | | | | | |
Balance at December 31, 2012 | $ | 488,206 |
| | $ | 102,065 |
| | $ | 92,473 |
| | $ | 1,528,209 |
| | $ | 2,210,953 |
|
Acquisition activity | 42,998 |
| | — |
| | — |
| | 9,901 |
| | 52,899 |
|
Business unit transfers | (111,766 | ) | | (4,365 | ) | | (29,510 | ) | | 145,641 |
| | — |
|
Additional consideration for post closing adjustments | — |
| | — |
| | — |
| | 610 |
| | 610 |
|
Effect of exchange rate changes | 1,844 |
| | (2,531 | ) | | 3,571 |
| | 14,250 |
| | 17,134 |
|
Balance, at December 31, 2013 | $ | 421,282 |
| | $ | 95,169 |
| | $ | 66,534 |
| | $ | 1,698,611 |
| | $ | 2,281,596 |
|
During 2013, the Company transferred goodwill from other reporting units to the Implants/Endodontics/Healthcare/Pacific Rim segment due to changes in reporting units resulting from the integration of the implant businesses. Affected reporting units were tested for potential impairment of goodwill before and after the transfers. No impairment was identified.
Identifiable definite-lived and indefinite-lived intangible assets consist of the following:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 |
(in thousands) | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| | | | | | | | | | | |
Patents | $ | 181,847 |
| | $ | (91,736 | ) | | $ | 90,111 |
| | $ | 179,512 |
| | $ | (81,390 | ) | | $ | 98,122 |
|
Trademarks | 85,922 |
| | (35,994 | ) | | 49,928 |
| | 83,073 |
| | (33,129 | ) | | 49,944 |
|
Licensing agreements | 31,950 |
| | (20,992 | ) | | 10,958 |
| | 30,695 |
| | (18,966 | ) | | 11,729 |
|
Customer relationships | 497,108 |
| | (82,381 | ) | | 414,727 |
| | 491,859 |
| | (50,632 | ) | | 441,227 |
|
Total definite-lived | $ | 796,827 |
| | $ | (231,103 | ) | | $ | 565,724 |
| | $ | 785,139 |
| | $ | (184,117 | ) | | $ | 601,022 |
|
| | | | | | | | | | | |
Trademarks and In-process R&D | $ | 229,599 |
| | $ | — |
| | $ | 229,599 |
| | $ | 229,620 |
| | $ | — |
| | $ | 229,620 |
|
| | | | | | | | | | | |
Total identifiable intangible assets | $ | 1,026,426 |
| | $ | (231,103 | ) | | $ | 795,323 |
| | $ | 1,014,759 |
| | $ | (184,117 | ) | | $ | 830,642 |
|
Amortization expense for identifiable definite-lived intangible assets for 2013, 2012 and 2011 was $46.2 million, $49.7 million and $21.0 million, respectively. The annual estimated amortization expense related to these intangible assets for each of the five succeeding fiscal years is $47.7 million, $46.9 million, $46.3 million, $45.6 million and $44.3 million for 2014, 2015, 2016, 2017 and 2018, respectively.
