Goodwill and Intangible Assets

6 Months Ended

Jan. 31, 2016

6. Goodwill and Intangible Assets

Goodwill

Analogic has goodwill balances of $73.8 million and $57.5 million at January 31, 2016 and July 31, 2015, respectively. The difference between the two periods relates to goodwill associated with the acquisition of Oncura of $16.3 million. The business acquired from Oncura is included within our Ultrasound segment. Please refer toNote 3. Business Combinations for more information on the acquisition of Oncura.

Intangible assets

Intangible assets include the value assigned to intellectual property and other technology, patents, customer contracts and relationships, and trade names. The estimated useful lives for all of these intangible assets, excluding a trade name determined to have an indefinite life, range between 1 to 14 years. Indefinite-lived intangible assets consist of trade names acquired in business combinations. The carrying values of our indefinite-lived intangible assets were $7.6 million at January 31, 2016 and July 31, 2015, respectively.

Intangible assets are summarized as follows:


			As of January 31, 2016						As of July 31, 2015
(in millions)	Weighted Average Amortization Period		Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Developed technologies		10 years	$	29.9	$	13.5	$	16.4	$	30.2	$	12.3	$	17.9
Customer relationships		13 years		47.1		22.6		24.5		44.2		20.3		23.9
Trade names*		3 years		9.6		0.9		8.7		8.6		0.9		7.7

Total intangible assets			$	86.6	$	37.0	$	49.6	$	83.0	$	33.5	$	49.5

*	$7.6 million of trade names are indefinite-lived as of January 31, 2016 and July 31, 2015, respectively, and $1.1 million and $0.1 million are finite-lived trade names as of January 31, 2016 and July 31, 2015, respectively.

Amortization expense related to acquired intangible assets was $2.0 million and $4.0 million for the three and six months ended January 31, 2016, respectively. Amortization expense related to acquired intangible assets was $2.2 million and $4.4 million for the three and six months ended January 31, 2015.

The estimated future amortization expense related to intangible assets for each of the five succeeding fiscal years is expected to be as follows:


	Estimated
	Future
	Amortization
(in millions)	Expense
2016 (remaining six months)	$	4.4
2017		7.9
2018		6.9
2019		5.7
2020		5.3
Thereafter		11.8

	$	42.0

We performed the annual impairment test for our goodwill and other intangible assets with indefinite lives as of December 31, 2015. We first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value and as a basis for determining whether it is necessary to perform the quantitative impairment test. Alternatively, we may elect to bypass the qualitative assessment and proceed to the two-step quantitative impairment test. Our quantitative impairment assessment considered both the market approach and income approach to calculate the fair value of a reporting unit, with different weighting assigned to each. Under the market approach, the fair value of the reporting unit is based on trading multiples of a peer group of companies, which was determined based on an analysis of the selected guideline public companies’ business enterprise value (“BEV”) plus a control premium, which was determined based on an analysis of control premiums for recent relevant acquisitions. Under the income approach, the fair value of the reporting unit is based on the present value of estimated future cash flows. The income approach is dependent on a number of significant management assumptions including estimates of future revenues, costs and expenses, and a number of significant valuation inputs including discount rates, working capital rates and tax rates. We determined that the fair values of our medical imaging, ultrasound, and security and detection reporting units were in excess of their carrying values, and concluded that there was no impairment.

We compared the fair value of a tradename that has an indefinite life using the relief from royalty approach to its carrying value as of December 31, 2015. The relief from royalty approach utilized an after-tax royalty rate and a discount rate. The after-tax royalty rate was determined based on royalty research and margin analysis, while the discount rate was determined after consideration of market rates of return on debt and equity capital, the weighted average return on invested capital, and the risk associated with achieving forecasted sales for the tradename. We determined that the fair value of the tradename was in excess of its carrying value.

- 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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