Intangible Assets and Goodwill

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

The components of our amortizable intangible assets were as follows:



(In millions)	Trade Names			Software			Customer Relationships			Other			Total
March 31, 2014
Gross carrying amount	$	34.3		$	59.0		$	20.3		$	26.3		$	139.9
Accumulated amortization	(10.3		)	(54.1		)	(2.5		)	(7.2		)	(74.1		)
Intangible assets, net	$	24.0		$	4.9		$	17.8		$	19.1		$	65.8
December 31, 2013
Gross carrying amount	$	34.3		$	58.5		$	20.4		$	26.3		$	139.5
Accumulated amortization	(9.2		)	(53.3		)	(2.1		)	(6.3		)	(70.9		)
Intangible assets, net	$	25.1		$	5.2		$	18.3		$	20.0		$	68.6

Other intangible assets, net as of March 31, 2014 consists primarily of $15.6 million of developed technology.

Amortization expense for intangible assets consisted of the following:



	Three Months Ended
	March 31,
(In millions)	2014		2013
Amortization expense	$	3.2	$	3.6

Based on the intangible assets in service as of March 31, 2014, estimated amortization expense for the remainder of 2014 and each of the next five years is as follows:



(In millions)	2014 (Remainder)		2015		2016		2017		2018
Amortization expense	$	9.4	$	11.9	$	8.5	$	7.7	$	6.3

Goodwill

We test the carrying amount of a reporting unit's goodwill for impairment on an annual basis during the fourth quarter of each year and during an interim period if an event occurs or circumstances change that would warrant impairment testing.

For our Storage Solutions reporting unit, our actual results for the three months ended March 31, 2014 were lower than originally planned as revenues that we had expected late in the first quarter did not materialize. We determined this to be a triggering event requiring us to review our goodwill for impairment as of March 31, 2014. For the impairment test, the estimated fair value of the reporting unit exceeded the carrying value in Step 1 of the impairment test by 24.7 percent, resulting in no impairment as of March 31, 2014. This excess of estimated fair value over carrying value is a decrease of 1.0 percentage point from the 25.7 percent excess that resulted in the test performed during the fourth quarter of 2013. In determining the estimated fair value of the reporting unit, we used the income approach, a valuation technique under which we estimate future cash flows using the reporting unit's financial forecasts and the market approach, a valuation technique that provides an estimate of the value of the reporting unit based on a comparison to other similar businesses.

We used forecasted cash flows over a ten year period, a terminal growth rate of 3.0 percent and a discount rate of 13.5 percent. The discount rate reflects the relative risk of achieving cash flows as well as any other specific risks or factors related to the Storage Solutions reporting unit. We calculated the impact of a potential change in our assumptions to determine the impact on the results of the impairment test. Holding all other assumptions constant, an unfavorable change in various components of our projected cash flows of 3.0 percent or less would potentially result in an indication of impairment. Additionally, a decrease in the residual growth rate of less than 2.0 basis points and an increase in the discount rate of less than 1.0 basis point would potentially result in an indication of impairment.

In reviewing the outlook for this reporting unit, although the first quarter 2014 results were lower than expected, we presently believe our longer-term forecast for our Storage Solutions reporting unit generally has not changed. We believe that the lower than expected results for the first quarter of 2014 are due to certain temporal factors including delays in hiring of sales force personnel, delays in purchasing from some of our larger customers and continued impacts from reductions in government spending. We continue to believe significant growth in our storage solutions revenues will occur and we are investing to facilitate this growth with hiring of sales personnel, introducing new products and promoting the Nexsan brand globally. While our current projections support no impairment of this reporting unit as of March 31, 2014, given that our first quarter 2014 results fell below expectations and the sensitivities to the assumptions used in the calculation of the estimated cash flows, it is reasonably possible that an impairment could be incurred in the future. We will continue to closely monitor our results and expected cash flows in the future to assess whether a goodwill impairment in our Storage Solutions reporting unit may be necessary. The Storage Solutions reporting unit contains $64.1 million of goodwill as of March 31, 2014.

- 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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