Intangibles and Goodwill

12 Months Ended

Jul. 31, 2016

7.Intangibles and Goodwill

Our intangible assets with definite lives consist primarily of customer relationships, technology, brand names, non-compete agreements and patents. These intangible assets are being amortized on the straight-line method over the estimated useful lives of the assets ranging from 3-20 years and have a weighted average amortization period of 12 years. Amortization expense related to intangible assets was $13,095,000, $13,265,000 and $10,641,000 for fiscals 2016, 2015 and 2014, respectively. Our intangible assets that have indefinite useful lives, and therefore are not amortized, consist of trademarks and trade names.

The Company’s intangible assets consist of the following:


	July 31, 2016
			Accumulated
	Gross		Amortization		Net
Intangible assets with finite lives:
Customer relationships	$	100,649,000	$	(24,689,000)	$	75,960,000
Technology		32,767,000		(11,813,000)		20,954,000
Brand names		6,194,000		(2,394,000)		3,800,000
Non-compete agreements		3,092,000		(1,193,000)		1,899,000
Patents and other registrations		2,508,000		(913,000)		1,595,000
		145,210,000		(41,002,000)		104,208,000
Trademarks and tradenames		7,511,000		—		7,511,000
Total intangible assets	$	152,721,000	$	(41,002,000)	$	111,719,000


	July 31, 2015
			Accumulated
	Gross		Amortization		Net
Intangible assets with finite lives:
Customer relationships	$	97,697,000	$	(39,549,000)	$	58,148,000
Technology		26,508,000		(12,656,000)		13,852,000
Brand names		12,970,000		(10,865,000)		2,105,000
Non-compete agreements		3,129,000		(997,000)		2,132,000
Patents and other registrations		2,235,000		(788,000)		1,447,000
		142,539,000		(64,855,000)		77,684,000
Trademarks and tradenames		8,152,000		—		8,152,000
Total intangible assets	$	150,691,000	$	(64,855,000)	$	85,836,000

Estimated annual amortization expense of our intangible assets for the next five years is as follows:


Year Ending July 31,
2017	$	13,086,000
2018		12,787,000
2019		12,464,000
2020		10,710,000
2021		10,375,000

Goodwill changed during fiscals 2016 and 2015 as follows:


			Water
			Purification		Healthcare						Total
	Endoscopy		and Filtration		Disposables		Dialysis		Other		Goodwill

Balance, July 31, 2014	$	78,274,000	$	56,838,000	$	81,835,000	$	8,133,000	$	6,567,000	$	231,647,000
Acquisitions		11,093,000		2,965,000		6,104,000		—		—		20,162,000
Foreign currency translation		(2,360,000)		(931,000)		—		—		(827,000)		(4,118,000)
Sale of business		—		—		—		—		(5,740,000)		(5,740,000)
Balance, July 31, 2015		87,007,000		58,872,000		87,939,000		8,133,000		—		241,951,000
Acquisitions		40,047,000		—		4,351,000		—		—		44,398,000
Foreign currency translation		(6,039,000)		8,000		—		—		—		(6,031,000)
Balance, July 31, 2016	$	121,015,000	$	58,880,000	$	92,290,000	$	8,133,000	$	—	$	280,318,000

On July 31, 2016, we performed impairment studies of the Company’s goodwill and indefinite lived trademarks and trade names and concluded that such assets were not impaired. While the results of these annual reviews have historically not indicated impairment, impairment reviews are highly dependent on management’s projections of our future operating results and cash flows (which management believes to be reasonable), discount rates based on the Company’s weighted average cost of capital and appropriate benchmark peer companies. Assumptions used in determining future operating results and cash flows include current and expected market conditions and future sales forecasts. Subsequent changes in these assumptions and estimates could result in future impairment. Although we consistently use the same methods in developing the assumptions and estimates underlying the fair value calculations, such estimates are uncertain by nature and can vary from actual results. At July 31, 2016, the fair value of all of our reporting units exceeded book value by substantial amounts. However, we believe the most significant assumptions impacting the impairment assessment of Dialysis relate to the assumed rate in which annual sales will decline as well as the expected future operating efficiencies included in our projections of future operating results and cash flows of this segment. If future operating results and cash flows are substantially less than our projections, future impairment charges may be recorded. On July 31, 2016, management concluded that no events or changes in circumstances have occurred in fiscal 2016 that would indicate that the carrying amount of our intangible assets and goodwill may not be recoverable.

- 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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