Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Intangible Assets

v3.19.1
Goodwill and Intangible Assets
 3 Months Ended
Mar. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets
Goodwill and Intangible Assets

Goodwill

Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. The fair values of net tangible assets and intangible assets acquired are based upon preliminary valuations and the Company's estimates and assumptions are subject to change within the measurement period (potentially up to one year from the acquisition date).

During the three months ended March 31, 2019, there were no changes in the carrying amount of goodwill.

The Company performs an annual goodwill impairment assessment on October 31st each year, using a two-step quantitative assessment. Step one is the identification of potential impairment. This involves comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds the carrying amount, the goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any.

In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. During the three months ended March 31, 2019 and 2018, no indications of impairment of the Company's goodwill balances were identified and, as a result, no goodwill impairment was recognized.
Acquired Intangibles
Finite-lived Intangible Assets
The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases:
 
 
 
March 31, 2019
 
December 31, 2018
 
Weighted
Average
Useful Life
(in Years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Carrying Amount
 
 
 
(in thousands)
Licensed technology
3.7
 
$
2,070

 
$
(1,265
)
 
$
805

 
$
2,070

 
$
(1,130
)
 
$
940

Developed technology
6.9
 
240,461

 
(83,055
)
 
157,406

 
238,961

 
(74,630
)
 
164,331

Trademarks and trade names
6.1
 
13,800

 
(4,816
)
 
8,984

 
13,800

 
(4,252
)
 
9,548

Customer relationships
4.6
 
121,100

 
(60,697
)
 
60,403

 
121,100

 
(55,647
)
 
65,453

Non-compete covenants
3.0
 
1,100

 
(964
)
 
136

 
1,100

 
(872
)
 
228

 
6.1
 
$
378,531

 
$
(150,797
)
 
$
227,734

 
$
377,031

 
$
(136,531
)
 
$
240,500


The following table sets forth amortization expense associated with finite-lived intangible assets, which is included in the consolidated statements of operations as follows:
 
Three Months Ended March 31,
 
2019
 
2018
 
(in thousands)
Cost of net revenue
$
8,434

 
$
8,978

Research and development
34

 
42

Selling, general and administrative
5,798

 
7,994

 
$
14,266

 
$
17,014



Amortization of finite-lived intangible assets in cost of net revenue in the consolidated statements of operations results primarily from acquired developed technology.

The following table sets forth the activity related to finite-lived intangible assets:
 
Three Months Ended March 31,
 
2019
 
2018
 
(in thousands)
Beginning balance
$
240,500

 
$
310,645

Transfers to developed technology from IPR&D
1,500

 
—

Amortization
(14,266
)
 
(17,014
)
Ending balance
$
227,734

 
$
293,631



The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the related useful lives, to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives. An impairment loss is recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss is measured based on the excess of the carrying amount of the asset over the asset’s fair value. During the three months ended March 31, 2019 and 2018, no impairment losses related to finite-lived intangible assets were recognized.

The following table presents future amortization of the Company’s finite-lived intangible assets at March 31, 2019:
 
Amount
 
(in thousands)
2019 (9 months)
$
42,715

2020
56,168

2021
55,385

2022
37,855

2023
25,660

Thereafter
9,951

Total
$
227,734


Indefinite-lived Intangible Assets
Indefinite-lived intangible assets consist entirely of acquired in-process research and development technology, or IPR&D. The following table sets forth the Company’s activities related to the indefinite-lived intangible assets:
 
Three Months Ended March 31,
 
2019
 
2018
 
(in thousands)
Beginning balance
$
4,400

 
$
4,400

Transfers to developed technology from IPR&D
(1,500
)
 
—

Ending balance
$
2,900

 
$
4,400



The Company performs its annual assessment of indefinite-lived intangible assets on October 31 each year or more frequently if events or changes in circumstances indicate that the asset might be impaired utilizing a qualitative test as a precursor to the quantitative test comparing the fair value of the assets with their carrying amount. Based on the qualitative test, if it is more likely than not that indicators of impairment exists, the Company proceeds to perform a quantitative analysis. During the three months ended March 31, 2019 and 2018, no indicators of impairment were identified and, as a result, no IPR&D impairment losses were recorded.