Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Other Intangible Assets [Abstract]

Note 3 – Goodwill and Other Intangible Assets

As a result of a review of recent financial results and outlook for the MOSFETs segment following the recent completion of production transfers, Vishay determined that an interim indefinite-lived intangible asset impairment test was required for its Siliconix tradenames as of the end of the third fiscal quarter of 2016.

As a result of this analysis, the Company determined that its Siliconix tradenames, with a carrying value of $20,359, were impaired. The Company recorded an impairment charge of $1,559 to write-down the tradenames to their fair value. The tradenames are no longer considered indefinite-lived and the remaining value will be amortized over the 10 year estimated remaining useful life.

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.

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 of 2015 as described in Note 4), 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. Upon completion of the step two analysis for the Capacitors reporting unit, the Company recorded a full goodwill impairment charge of $5,380.

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 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 tests performed as the last day of the third fiscal quarters of 2016 and 2015, were effectively the annual impairment tests for 2016 and 2015.

The recorded impairment charges are non-cash 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.

Note 3 – Goodwill and Other Intangible Assets (continued)

The changes in the carrying amount of goodwill by segment for the years ended December 31, 2016 and 2015 were 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		-		(751	)		16			(735	)
Balance at December 31, 2015	$	96,849	$	41,395		$	-		$	138,244
Sonntag acquisition		-		3,485			-			3,485
Exchange rate effects		-		(322	)		-			(322	)
Balance at December 31, 2016	$	96,849	$	44,558		$	-		$	141,407

Other intangible assets are as follows:

	December 31,
	2016			2015

Intangible Assets Subject to Amortization
(Definite-lived):
Patents and acquired technology	$	93,395		$	93,606
Capitalized software		53,807			53,401
Customer relationships		84,905			85,418
Tradenames		53,680			35,493
Non-competition agreements		1,266			2,261
		287,053			270,179
Accumulated amortization:
Patents and acquired technology		(81,807	)		(76,258	)
Capitalized software		(49,388	)		(47,394	)
Customer relationships		(42,787	)		(37,989	)
Tradenames		(27,460	)		(23,798	)
Non-competition agreements		(1,148	)		(1,841	)
		(202,590	)		(187,280	)
Net Intangible Assets Subject to Amortization		84,463			82,899

Intangible Assets Not Subject to Amortization
(Indefinite-lived):
Tradenames		-			20,359
	$	84,463		$	103,258

Amortization expense (excluding capitalized software) was $14,842, $21,829, and $18,651, for the years ended December 31, 2016, 2015, and 2014, respectively.

Estimated annual amortization expense of intangible assets on the balance sheet at December 31, 2016 for each of the next five years is as follows:

2017	$	15,884
2018		11,096
2019		7,332
2020		6,567
2021		5,787

- 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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