Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2014

Goodwill and Other Intangible Assets [Abstract]

Note 4. Goodwill and Other Intangible Assets

Goodwill

Changes in the carrying amount of the Company's goodwill for the nine months ended September 30, 2014, are as follows (in millions):

Goodwill as of December 31, 2013	$	1,195.9
Goodwill acquired		231.9
Translation differences		(2.4	)
Goodwill as of September 30, 2014	$	1,425.4

As of October 1, 2014, the Company performed its annual test for goodwill impairment, based on the reporting units to which the goodwill is allocated to. Except for MarketBot reporting unit, the Company performed a qualitative test for goodwill, and concluded that it is more likely than not that the fair value of each reporting unit exceeds its carrying amount.

For the MakerBot reporting unit, the Company performed a quantitative test by comparing the fair value of the reporting unit to its carrying amount. Based on this analysis, the fair value of MakerBot reporting unit exceeds its carrying amount by 5%. The carrying amount of goodwill which is assigned to this reporting unit is $376 million.

When evaluating the fair value of MakerBot reporting unit the Company used a discounted cash flow model. Key assumptions used to determine the estimated fair value include: (a) expected cash flow for the five-year period following the testing date (including market share, sales volumes and prices, costs to produce and estimated capital needs); (b) an estimated terminal value using a terminal year growth rate of 3.5% determined based on the growth prospects of the reporting unit; (c) a discount rate of 14% based on management's best estimate of the after-tax weighted average cost of capital.

A decrease in the growth rate of 1% or an increase of 1% to the discount rate will reduce the fair value of MakerBot reporting unit by $35 million and $54 million, respectively.

The Company will continue to monitor MakerBot reporting unit in an effort to determine if events and circumstances warrant further interim impairment testing.

Based on the Company's assessment as of October 1, 2014 no goodwill was determined to be impaired.

Other Intangible Assets

Other intangible assets consisted of the following (in thousands):

	September 30, 2014				December 31, 2013
	Gross				Gross
	Carrying		Accumulated		Carrying		Accumulated
	Amount		Amortization		Amount		Amortization

Developed technology	$	472,792	$	91,886	$	447,842	$	54,029
Patents		15,018		7,727		14,065		6,523
Trademarks and trade names		59,988		8,085		59,019		3,817
Customer relationships		146,690		21,876		100,679		10,793
Non-compete agreements		10,843		3,266		10,354		1,249
Capitalized software development costs		17,137		14,205		16,612		13,828
In process research and development		32,239		-		63,998		-
		754,707	$	147,045		712,569	$	90,239
Accumulated amortization		147,045				90,239
Net book value of amortizable intangible assets	$	607,662			$	622,330

In process research and development with a gross carrying value of $29.2 million as of December 31, 2013, of which $23.7 million was acquired in connection with the MakerBot transaction, was launched during the nine months ended September 30, 2014 and is now classified as developed technology with a seven-year weighted average life for amortization.

During the third quarter of 2014 the Company recorded impairment charges of $14.6 million related to its Digitizer desktop 3D scanner (“Digitizer”). The Company assessed the recoverability of the Digitizer desktop 3D scanner based on the estimated undiscounted future cash flows expected to result from the Digitizer. The impairment charges were measured as the difference between the carrying amount of the Digitizer and its fair value. The fair value of the Digitizer was determine based on a discounted cash flow model using updated future revenue and operating income projections.

Amortization expense relating to intangible assets for the three-month periods ended September 30, 2014 and 2013 was approximately $ 21.3 million and $15.7 million, respectively.

Amortization expense relating to intangible assets for the nine-month periods ended September 30, 2014 and 2013 was approximately $ 60.2 million and $41.9 million, respectively.

As of September 30, 2014, estimated amortization expense relating to intangible assets currently subject to amortization for each of the next five years and thereafter was as follows (in thousands):

Remainning 3 months of 2014	$	21,185
2015		83,470
2016		82,846
2017		81,224
2018		76,249
Thereafter	$	230,449

- 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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