Goodwill and Acquired Intangible Assets (Tables)
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Sep. 30, 2012
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Change in Carrying Value of Goodwill | The change in the carrying value of goodwill for the period ended September 30, 2012 is as follows (in thousands):
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Impairment of Goodwill We test our goodwill balances for impairment annually on November 30th or more frequently if indicators are present or circumstances change that suggest an impairment may exist. During the third quarter of 2012, we determined that sufficient indicators of potential impairment existed to require an interim goodwill impairment analysis of our SCCS reporting unit. These indicators included the termination of an exclusive distribution arrangement with Straumann for iTero intra-oral scanners in Europe, as well as the termination of their non-exclusive distribution arrangement for iTero intra-oral scanners in North America, together with market conditions and business trends within the SCCS reporting unit. While we continue to expect revenue growth in our SCCS business, our expectations for future growth and profitability rates projected for the SCCS reporting unit are lower than our previous estimates primarily driven by overall lower than expected financial results. As of September 30, 2012, we performed step one of the goodwill impairment test, which consists of a comparison of the fair value of the SCCS reporting unit against its carrying amount, including the goodwill allocated to it. In deriving the fair value of the SCCS reporting unit, we utilized a combination of both the income and market approach. The income approach provides an estimate of fair value based on discounted expected future cash flows. The market approach provides an estimate of fair value using various prices or market multiples applied to the reporting unit's operating results and then applies an appropriate control premium. As a result of our step one analysis, we concluded that the fair value of the SCCS reporting unit was less than its carrying value, therefore, the SCCS goodwill is impaired and we must perform step two of the goodwill impairment analysis. Step two of the goodwill impairment analysis measures the impairment charge by allocating the reporting unit's fair value to all of the assets and liabilities of the reporting unit in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination. Any excess of the carrying value of the reporting unit's goodwill over the implied fair value of the reporting unit's goodwill is recorded as an impairment loss. Due to the complexity and effort required to estimate the fair value of all assets and liabilities of the reporting unit, the fair value estimates were derived from preliminary assumptions and analyses that are subject to change. Based on our preliminary analysis, the implied fair value of goodwill was substantially lower than the carrying value of the goodwill for the SCCS reporting unit by an estimated $24.7 million which we recorded as impairment to goodwill in the third quarter of 2012. As of September 30, 2012, the remaining amount of goodwill associated with our SCCS reporting unit is $52.6 million. In the fourth quarter of 2012, we expect to finalize the step two analysis and, if necessary, record any change from our original estimate. The declines expected in our SCCS reporting unit did not impact our assumptions related our Clear Aligner reporting unit, however, we will complete our annual goodwill impairment review for both reporting units as of November 30, 2012. If there are changes to our stock price, or significant changes in the business climate or operating results of our reporting units, we may incur additional goodwill impairment charges. |
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Summary of Goodwill by Reportable Segment | The following table summarizes goodwill by reportable segment as of September 30, 2012 and December 31, 2011 (in thousands):
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Schedule Of Amortized Intangible Assets | Information regarding our intangible assets either as a direct result from the Cadent acquisition or individually acquired are being amortized as follows (in thousands):
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Amortization Expense Of Acquired Intangible Assets | The following table summarizes the amortization expense of acquired intangible assets for the periods indicated (in thousands):
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | The total estimated annual future amortization expense for these acquired intangible assets as of September 30, 2012 is as follows (in thousands):
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