Goodwill and Other Intangible Assets

9 Months Ended

Oct. 03, 2015

Goodwill and Other Intangible Assets Disclosure

Goodwill and Other Intangible Assets [Text Block]

Note 2 – Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost of a business acquired over the fair value of the related net assets at the date of acquisition. Goodwill is not amortized but rather tested for impairment at least annually. These impairment tests must be performed more frequently whenever events or changes in circumstances indicate that the asset might be impaired. The Company's business segments (see Note 10) represent its reporting units for goodwill impairment testing purposes.

In light of a sustained decline in market capitalization for Vishay and its peer group companies, and other factors (including the cost reduction programs announced during the third fiscal quarter as described in Note 3), Vishay determined that interim goodwill and indefinite-lived impairment tests were required as of the end of the third fiscal quarter of 2015.

Prior to completing the interim assessment of goodwill for impairment, the Company performed a recoverability test of certain depreciable and amortizable long-lived assets. As a result of those assessments, it was determined that the depreciable and amortizable assets associated with the Company's Capella business were not recoverable, and the Company recorded impairment charges totaling $57,600 to write-down the related assets to their fair value.

After completing step one of the goodwill impairment test, it was determined that the estimated fair value of the Capacitors reporting unit was less than the net book value of that reporting unit, requiring the completion of the second step of the impairment evaluation. The estimated fair value of the Resistors & Inductors and Optoelectronic Components reporting units exceeded the net book value of those reporting units by ratios of 2.0x and 1.3x, respectively, and no second step was required for those reporting units.

Upon completion of the step two analysis for the Capacitors reporting unit, the Company recorded a full goodwill impairment charge of $5,380.

As part of these analyses, the Company determined that its Siliconix tradenames, with a carrying value of $20,359, were not impaired and will continue to be reported as indefinite-lived intangible assets. The estimated fair value of the Siliconix tradenames exceeded the carrying value by a narrow margin. They will continue to be closely monitored for impairment.

The fair value of long-lived assets is measured primarily using present value techniques based on projected cash flows from the asset group. The evaluation of the recoverability of long-lived assets, and the determination of their fair value, requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the identification of the asset group at the lowest level of independent cash flows and the principal asset of the group; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures.

The fair value of indefinite-lived trademarks is measured as the discounted cash flow savings realized from owning such tradenames and not having to pay a royalty for their use. The evaluation of the fair value of indefinite-lived trademarks requires us to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the assumed market-royalty rate; the discount rate; terminal growth rates; and forecasts of revenue.

The fair value of reporting units for goodwill impairment testing purposes is measured primarily using present value techniques based on projected cash flows from the reporting unit. The calculated results are evaluated for reasonableness using comparable company data. The determination of the fair value of the reporting units and the allocation of that value to individual assets and liabilities within those reporting units requires the Company to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which the Company competes; the discount rate; terminal growth rates; and forecasts of revenue, operating income, depreciation and amortization, and capital expenditures. The allocation requires several analyses to determine fair value of assets and liabilities including, among others, completed technology, tradenames, customer relationships, and certain property and equipment.

Due to the inherent uncertainty involved in making these estimates, actual financial results could differ from those estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge; could have a significant impact on the conclusion that an asset group's carrying value is recoverable, that an indefinite-lived asset is not impaired, or the determination of any impairment charge if it was determined that the asset values were indeed impaired.

The Company performs its annual goodwill and indefinite-lived impairment test as of the first day of the fiscal fourth quarter. The interim impairment test performed as of October 3, 2015, the last day of the third fiscal quarter, was effectively the annual impairment test for 2015. If financial conditions deteriorate, an additional interim assessment may be required in the fourth fiscal quarter.

The recorded impairment charges are noncash in nature and do not affect Vishay's liquidity, cash flows from operating activities, or debt covenants, and will not have a material impact on future operations.

The changes in the carrying amount of goodwill by segment for the nine fiscal months ended October 3, 2015 was as follows:

	Optoelectronic Components		Resistors & Inductors			Capacitors			Total

Balance at January 1, 2015	$	96,849	$	42,146		$	5,364		$	144,359
Goodwill impairment charges		-		-			(5,380	)		(5,380	)
Exchange rate effects		-		(592	)		16			(576	)
Balance at October 3, 2015	$	$96,849	$	41,554		$	-		$	138,403

Following the impairment charges recorded in the third fiscal quarter of 2015, the other intangible assets are as follows:

	October 3,			December 31,
	2015			2014

Intangible Assets Subject to Amortization
(Definite-lived):
Patents and acquired technology	$	93,786		$	108,190
Capitalized software		53,197			53,369
Customer relationships		85,526			153,853
Tradenames		35,758			39,612
Non-competition agreements		2,267			2,283
		270,534			357,307
Accumulated amortization:
Patents and acquired technology		(74,959	)		(71,700	)
Capitalized software		(46,976	)		(45,979	)
Customer relationships		(36,359	)		(50,630	)
Tradenames		(23,052	)		(21,384	)
Non-competition agreements		(1,769	)		(1,360	)
		(183,115	)		(191,053	)
Net Intangible Assets Subject to Amortization		87,419			166,254

Intangible Assets Not Subject to Amortization
(Indefinite-lived):
Tradenames		20,359			20,359
	$	107,778			186,613

Estimated annual amortization expense of intangible assets on the balance sheet at October 3, 2015 for the fourth fiscal quarter of 2015 and the next four years is as follows:

2015	$	4,135
2016		15,314
2017		13,162
2018		9,180
2019		5,343

- 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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