Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Other Intangible Assets

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Goodwill and Other Intangible Assets
9 Months Ended
Sep. 30, 2015
Goodwill and Other Intangible Assets  
Goodwill and Other Intangible Assets

(6) Goodwill and Other Intangible Assets

There were no changes in the carrying amount of goodwill during the nine months ended September 30, 2015.

As discussed in note 10, during September 2015, TruePosition’s largest customer gave notice that it does not intend to renew its contract, which expires on December 31, 2015. The Company believes that the receipt of the notification represents a significant change in circumstances since we last performed our annual goodwill impairment test. Accordingly, we performed a goodwill impairment test upon receipt of the notification from TruePosition. At September 30, 2015, the carrying value of goodwill for TruePosition was $20.7 million. The estimated fair value of the reporting unit was primarily determined based on the cash and cash equivalents held by the reporting unit, and when compared to its carrying value, it was concluded that a goodwill impairment did not exist.

The carrying value of TruePosition includes a deferred revenue liability related to the contract with the largest customer. Upon expiration of the contract in the fourth quarter of 2015, the deferred revenue will be recognized, as all contractual obligations will have been satisfied.  The recognition of this deferred revenue liability will likely increase the reporting unit carrying value, and it is anticipated that the carrying value will exceed the fair value. 

 

Intangible assets subject to amortization are comprised of the following (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2015

 

December 31, 2014

 

 

 

Gross

 

 

 

Net

 

Gross

 

 

 

Net

 

 

 

Carrying

 

Accumulated

 

Carrying

 

Carrying

 

Accumulated

 

Carrying

 

 

 

Amount

 

Amortization

 

Amount

 

Amount

 

Amortization

 

Amount

 

Acquired patents

    

$

10,822

    

(6,477)

    

4,345

    

8,822

    

(5,801)

    

3,021

 

Customer relationships

 

 

10,212

 

(3,735)

 

6,477

 

10,212

 

(2,712)

 

7,500

 

Tradename

 

 

2,838

 

(1,061)

 

1,777

 

2,788

 

(788)

 

2,000

 

Capitalized software

 

 

10,984

 

(10,839)

 

145

 

10,991

 

(10,597)

 

394

 

 

 

$

34,856

 

(22,112)

 

12,744

 

32,813

 

(19,898)

 

12,915

 

 

Upon acquisition of Skyhook, TruePosition assigned remaining useful lives to each of Skyhook’s intangible assets acquired. Patents, tradename and customer relationship intangible assets were amortized straight-line over five years and capitalized software intangible assets were amortized straight-line over three to five years. In connection with the intangible impairment recorded on Skyhook’s intangible assets during the fourth quarter of 2014, TruePosition re-evaluated the remaining useful lives of Skyhook’s amortizable intangible assets. As a result, as of January 1, 2015, TruePosition determined the remaining useful life of Skyhook’s patents to be three and a half years and Skyhook’s tradename and customer relationship to be five and a half years. On January 1, 2015, TruePosition began amortizing Skyhook’s intangible assets straight-line prospectively over these revised periods. Capitalized software intangible assets continue to be amortized over three to five years. Amortization expense was $707 thousand and $2.0 million for the three months ended September 30, 2015 and 2014, respectively and $2.2 million and $4.7 million for the nine months ended September 30, 2015 and 2014, respectively.

The estimated future amortization expense for the next five years related to intangible assets with definite lives as of September 30, 2015 is as follows (amounts in thousands):

 

 

 

 

 

Remainder of 2015

    

$

870

 

2016

 

$

3,400

 

2017

 

$

3,335

 

2018

 

$

2,529

 

2019

 

$

1,742