InfuSystem Holdings, Inc. Quarterly report pursuant to sections 13 or 15(d)

Quarterly report pursuant to sections 13 or 15(d)

Goodwill And Intangible Assets

Goodwill And Intangible Assets

9 Months Ended

Sep. 30, 2011

Goodwill And Intangible Assets [Abstract]

5.	Goodwill and Intangible Assets

In accordance with the provisions of ASC 350, "Intangibles – Goodwill and Other," we apply a fair value based impairment test to the net book value of goodwill and indefinite-lived assets on an annual basis and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis. The analysis of potential impairments of goodwill requires a two-step process. The first step is an estimation of fair value of the Company. If step one indicates that impairment potentially exists, the second step is performed to measure the amount of impairment, if any. Impairment exists when the fair value of goodwill or indefinite-lived assets is less than the carrying value.

As of June 30, 2011, based on a combination of factors, including a decline in our market capitalization, updated business forecasts, and the expiration of our warrants, we concluded that there were sufficient indicators to require us to perform an interim goodwill and indefinite lived intangibles impairment analysis. For the purposes of the analysis performed during the second quarter of 2011, our estimates of fair value were based on a combination of the income approach, which estimates the fair value based on the future discounted cash flows, and the market approach, which estimates the fair value based on comparable market prices. We concluded that an impairment loss was probable and could be reasonably estimated. Accordingly, we recorded $44.2 million for non-cash asset impairment charge.

As of September 30, 2011, based on a significant decline in our market capitalization, we concluded that there was an indicator to require us to perform an interim goodwill and indefinite lived intangibles impairment analysis and as a result, we concluded that an impairment loss was probable and could be reasonably estimated. For the purposes of the analysis performed during the third quarter of 2011, our estimates of fair value were based on a combination of the income approach, which estimates the fair value based on the future discounted cash flows and the market approach which estimates the fair value based on comparable market prices. Accordingly, for the three months ended September 30, 2011, we recorded $23.4 million for non-cash asset impairment shares representing our best estimate of the loss. This estimate was based on significant unobservable inputs and would have been considered a level 3 under ASC 820.

Based on the impairment analysis performed by the Company as of September 30, 2011, the following table outlines the impairment charges by asset category (in thousands):


	Goodwill			Trade Names
Value as of December 31, 2010	$	64,092		$	5,500
Impairment charge		(42,813	)		(1,400	)

Value as of June 30, 2011		21,279			4,100
Impairment charge		(21,279	)		(2,100	)

Value as of September 30, 2011	$	—		$	2,000

The following table presents the methods used to establish fair value measurements for Trade names (in thousands):


			Fair Value Measurements at Reporting Date Using
Description	September 30, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Trade names	$	2,000	$	—	$	—	$	2,000

Total	$	2,000	$	—	$	—	$	2,000

In accordance with ASC 820, "Fair Value Measurements and Disclosures," the estimated fair value of the trade names were estimated based primarily upon discounted cash flow methodologies reflecting the Company's own assumptions resulting in a Level 3 classification.

Identifiable Intangible Assets

The carrying amount and accumulated amortization of intangible assets as of September 30, 2011 and December 31, 2010 were as follows (in thousands):


	September 30, 2011			December 31, 2010
Nonamortizable intangible assets
Trade names	$	2,000		$	5,500
Amortizable intangible assets
Physician and customer relationships		32,864			32,400
Non-competition agreements		848			760
Software		1,376			980

Total nonamortizable and amortizable intangible assets		37,088			39,640
Less accumulated amortization		(8,405	)		(6,388	)

Total identifiable intangible assets	$	28,683		$	33,252

Amortization expense for intangible assets for the three and nine months ended September 30, 2011 was $683 thousand and $2.0 million, respectively. Amortization expense for intangible assets for the three and nine months ended September 30, 2010 was $624 thousand and $1.6 million, respectively. The expenses for all periods were recorded in operating expenses. Expected annual amortization expense for intangible assets recorded as of September 30, 2011 is as follows (in thousands):


	2011		2012		2013		2014		2015
Amortization expense	$	2,772	$	2,766	$	2,635	$	2,397	$	2,343

- 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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