InfuSystem Holdings, Inc. Annual report pursuant to section 13 and 15(d)

Annual report pursuant to section 13 and 15(d)

Goodwill and Intangible Assets

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets [Abstract]

6.	Goodwill and Intangible Assets

Impairment Testing

The Company applies 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 and non-amortizable intangibles 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. The Company performed its annual impairment analysis in October 2012 and determined that the fair value of indefinite-lived assets was greater than the carrying value, resulting in no impairment of indefinite-lived assets.

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, the Company 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. The Company concluded that an impairment loss existed and accordingly, a $44.2 million non-cash asset impairment charge was recorded.

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, 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, $23.4 million was recorded for non-cash asset impairment charges representing the Company’s best estimate of the loss. This estimate was based on significant unobservable inputs.

Based on the impairment analyses performed by the Company during the years ended December 31, 2012 and 2011, the following table outlines the impairment charges by asset category as of December 31 (in thousands):


	Goodwill			Trade Names
Value as of December 31, 2010	$	64,092		$	5,500
Impairment charges in 2011		(64,092	)		(3,500	)

Value as of December 31, 2011 and 2012	$	—		$	2,000

Identifiable Intangible Assets

The carrying amount and accumulated amortization of intangible assets as of December 31 are as follows (in thousands):


	2012
	Weighted Average Remaining Amortization Period in Years		Gross Assets		Accumulated Amortization		Net
Nonamortizable intangible assets
Trade names		—	$	2,000	$	—	$	2,000
Amortizable intangible assets
Physician and customer relationships		5		32,866		10,373		22,493
Non-competition agreements		3		848		441		407
Software		2		1,647		1,006		641

Total nonamortizable and amortizable intangible assets			$	37,361	$	11,820	$	25,541


	2011
	Weighted Average Remaining Amortization Period in Years		Gross Assets		Accumulated Amortization		Net
Nonamortizable intangible assets
Trade names		—	$	2,000	$	—	$	2,000
Amortizable intangible assets
Physician and customer relationships		6		32,865		8,182		24,683
Non-competition agreements		4		848		258		590
Software		2		1,593		645		948

Total nonamortizable and amortizable intangible assets			$	37,306	$	9,085	$	28,221

Amortization expense for intangible assets for the years ended December 31, 2012 and 2011 was $2.7 million, respectively, which was recorded in operating expenses. Expected annual amortization expense for the next five years for intangible assets recorded as of December 31 are as follows (in thousands):


	2013		2014		2015		2016		2017
Amortization expense	$	2,615	$	2,465	$	2,275	$	2,191	$	2,191

- 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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