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Goodwill and Intangible Assets
9 Months Ended
Sep. 30, 2016
Goodwill And Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets

7. Goodwill and Intangible Assets

Goodwill

Goodwill is recorded when the consideration for a business combination exceeds the fair value of net tangible and identifiable intangible assets acquired. The Company tests its goodwill balances annually for impairment as of the beginning of the second quarter or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The Company performed its annual goodwill impairment test at the beginning of the second quarter of 2016 and noted no impairment of goodwill. The implied fair value of all the reporting units exceeded their carrying values by at least 20%.

The following table summarizes changes in goodwill during the nine months ended September 30, 2016 (in thousands):

 

Balance at beginning of the period

$

103,456

 

Net working capital adjustment of Lincoln Laser acquisition

 

(43

)

Goodwill acquired from Reach acquisition

 

4,924

 

Balance at end of the period

$

108,337

 

 

Goodwill by reportable segment as of September 30, 2016 was as follows (in thousands):

 

 

Reportable Segment

 

 

 

 

 

 

Photonics

 

 

Vision

 

 

Precision

Motion

 

 

Total

 

Goodwill

$

136,278

 

 

$

89,325

 

 

$

33,963

 

 

$

259,566

 

Accumulated impairment of goodwill

 

(102,461

)

 

 

(31,722

)

 

 

(17,046

)

 

 

(151,229

)

Total

$

33,817

 

 

$

57,603

 

 

$

16,917

 

 

$

108,337

 

 

Goodwill by reportable segment as of December 31, 2015 was as follows (in thousands):

 

 

Reportable Segment

 

 

 

 

 

 

Photonics

 

 

Vision

 

 

Precision

Motion

 

 

Total

 

Goodwill

$

136,321

 

 

$

84,401

 

 

$

33,963

 

 

$

254,685

 

Accumulated impairment of goodwill

 

(102,461

)

 

 

(31,722

)

 

 

(17,046

)

 

 

(151,229

)

Total

$

33,860

 

 

$

52,679

 

 

$

16,917

 

 

$

103,456

 

 

Intangible Assets

Intangible assets as of September 30, 2016 and December 31, 2015, respectively, are summarized as follows (in thousands):

 

 

September 30, 2016

 

 

December 31, 2015

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Amount

 

 

Gross Carrying

Amount

 

 

Accumulated

Amortization

 

 

Net Carrying

Amount

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patents and acquired technologies

$

80,981

 

 

$

(67,120

)

 

$

13,861

 

 

$

82,821

 

 

$

(66,297

)

 

$

16,524

 

Customer relationships

 

69,651

 

 

 

(41,400

)

 

 

28,251

 

 

 

67,168

 

 

 

(36,914

)

 

 

30,254

 

Customer backlog

 

622

 

 

 

(379

)

 

 

243

 

 

 

2,644

 

 

 

(2,589

)

 

 

55

 

Non-compete covenant

 

2,514

 

 

 

(1,284

)

 

 

1,230

 

 

 

2,514

 

 

 

(882

)

 

 

1,632

 

Trademarks and trade names

 

10,774

 

 

 

(6,515

)

 

 

4,259

 

 

 

10,711

 

 

 

(5,934

)

 

 

4,777

 

Amortizable intangible assets

 

164,542

 

 

 

(116,698

)

 

 

47,844

 

 

 

165,858

 

 

 

(112,616

)

 

 

53,242

 

Non-amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

13,027

 

 

 

 

 

 

13,027

 

 

 

13,027

 

 

 

 

 

 

13,027

 

Totals

$

177,569

 

 

$

(116,698

)

 

$

60,871

 

 

$

178,885

 

 

$

(112,616

)

 

$

66,269

 

 

All definite-lived intangible assets are amortized either on a straight-line basis or an economic benefit basis over their remaining useful life. Amortization expense for customer relationships and definite-lived trademarks, trade names and other intangibles is included in operating expenses in the accompanying consolidated statements of operations. Amortization expense for patents and acquired technologies is included in cost of revenue in the accompanying consolidated statements of operations. Amortization expense is as follows (in thousands):

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

2016

 

 

October 2,

2015

 

 

September 30,

2016

 

 

October 2,

2015

 

Amortization expense – cost of revenue

$

994

 

 

$

1,175

 

 

$

3,163

 

 

$

3,468

 

Amortization expense – operating expenses

 

2,066

 

 

 

1,852

 

 

 

6,153

 

 

 

5,593

 

Total amortization expense

$

3,060

 

 

$

3,027

 

 

$

9,316

 

 

$

9,061

 

 

Estimated amortization expense for each of the five succeeding years and thereafter as of September 30, 2016 was as follows (in thousands):

 

Year Ending December 31,

 

Cost of Revenue

 

 

Operating

Expenses

 

 

Total

 

2016 (remainder of year)

 

$

1,000

 

 

$

2,098

 

 

$

3,098

 

2017

 

 

3,640

 

 

 

7,389

 

 

 

11,029

 

2018

 

 

2,126

 

 

 

6,717

 

 

 

8,843

 

2019

 

 

1,819

 

 

 

4,691

 

 

 

6,510

 

2020

 

 

1,552

 

 

 

2,718

 

 

 

4,270

 

Thereafter

 

 

3,724

 

 

 

10,370

 

 

 

14,094

 

Total

 

$

13,861

 

 

$

33,983

 

 

$

47,844