PROPERTY PLANT & EQUIPMENT

6 Months Ended

Jun. 30, 2014

PROPERTY PLANT & EQUIPMENT

PROPERTY PLANT & EQUIPMENT

NOTE F — PROPERTY PLANT & EQUIPMENT

Property, plant and equipment are recorded at cost less accumulated depreciation, with the exception of assets acquired through acquisitions, which are initially recorded at fair value. Equipment acquired under capital leases is recorded at the lower of fair market value or the present value of the future minimum lease payments. The cost and related accumulated depreciation of assets sold, retired or otherwise disposed of are removed from the respective accounts, and any resulting gains or losses are included in the Consolidated Statements of Income and Comprehensive Income.

During the second quarter of 2014, the Company re-evaluated its policy regarding the maximum economic useful life of key software systems.  Due to the anticipated life of such systems, historical usage of similar assets, and the significant investment that would be required to replace the software which would make it unlikely for the Company to quickly replace, the Company determined such software could have an economic useful life of up to 10 years.  Historically, the Company’s policy provided for a maximum economic useful life for computer and software equipment of 5 years.  As of June 30, 2014, no software with an estimated useful life of greater than 5 years has been placed into service nor has the economic useful of any software previously placed into service been changed.

Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the related assets, which is generally as follows:

	Estimated life
Asset class	(in years)
Furniture and fixtures	5
Machinery and equipment	5
Computers	5
Software	5 - 10
Buildings	10 - 40
Assets under capital leases	Shorter of 10 or lease term
Leasehold improvements	Shorter of 10 or lease term

Capital Lease Obligations

Included within the Buildings line item were $21.9 million and $10.9 million of buildings recorded under capital leases, as of June 30, 2014 and December 31, 2013, respectively.  Accumulated depreciation on these capital leases were $1.8 million and $0.9 million, as of June 30, 2014 and December 31, 2013, respectively.  The annual future minimum lease payments as of June 30, 2014 under the lease agreements are $1.5 million, $3.0 million, $3.1 million, $3.2 million, $3.2 million, $17.3 million for the years ending December 31, 2014, 2015, 2016, 2017, 2018 and thereafter.  These future minimum lease payments include $10.2 million of interest.

Long-Lived Asset Impairment

The Company evaluates the carrying value of long-lived assets to be held and used whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. The carrying value of a long-lived asset group is not recoverable and is considered impaired if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The Company measures impairment as the amount by which the carrying value exceeds the fair market value. Fair market value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are generally determined in a similar manner, except that fair market values are reduced for the cost to dispose. There were no long-lived asset impairments or indicators of impairment for the periods ended June 30, 2014 and December 31, 2013.