Intangible Asset and Goodwill

9 Months Ended

Sep. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

Goodwill

During the third quarter of 2013, the Company curtailed its immersive media platform spending and redirected some of its resources to other strategic programs. Under generally accepted accounting principles, when indicators of potential impairment are identified, companies are required to conduct a review of the carrying amounts of goodwill and other long-lived assets to determine if impairment exists. The Company conducted this impairment review as a result of the change of its strategy related to the immersive media platform. As a result of this impairment review, the Company recorded $8.1 million of impairment of goodwill related to the Mobile Technology Division (“MTD”) reporting unit which is part of the CTO reportable segment. This impairment was reflected in impairment of goodwill and long-lived assets in the condensed consolidated statements of operations. The Company estimated the fair value of MTD reporting unit using the income approach which was determined using Level 3 fair value inputs. The utilization of the income approach to determine fair value requires estimates of future operating results and cash flows discounted using an estimated discount rate. Cash flow projections are based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions. The discount rate used is based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the business and the projected cash flows. Certain estimates used in the income approach involve information from a business with developing revenue models and limited financial history, which increase the risk of differences between the projected and actual performance.

The following table presents goodwill balances and adjustments to those balances for each of the reportable segments for the nine months ended September 30, 2013:



Reportable Segment:	December 31, 2012		Additions to Goodwill		Impairment Charge of Goodwill			September 30, 2013
	(In thousands)
MID	$	19,905	$	—	$	—		$	19,905
CTO	8,070		—		(8,070		)	—
All Other	96,994		—		—			96,994
Total	$	124,969	$	—	$	(8,070	)	$	116,899



	As of
	September 30, 2013
Reportable Segment:	Gross Carrying Amount		Accumulated Impairment Losses			Net Carrying Amount
	(In thousands)
MID	$	19,905	$	—		$	19,905
CTO	8,070		(8,070		)	—
All Other	110,694		(13,700		)	96,994
Total	$	138,669	$	(21,770	)	$	116,899

Intangible Assets

The components of the Company’s intangible assets as of September 30, 2013 and December 31, 2012 were as follows:



		As of September 30, 2013
	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
		(In thousands)
Existing technology	3 to 10 years	$	195,345	$	(77,105	)	$	118,240
Customer contracts and contractual relationships	1 to 10 years	32,650		(18,509		)	14,141
Non-compete agreements	3 years	300		(233		)	67
Total intangible assets		$	228,295	$	(95,847	)	$	132,448



		As of December 31, 2012
	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
		(In thousands)
Existing technology	3 to 10 years	$	191,815	$	(57,240	)	$	134,575
Customer contracts and contractual relationships	1 to 10 years	32,650		(14,194		)	18,456
Non-compete agreements	3 years	300		(158		)	142
Total intangible assets		$	224,765	$	(71,592	)	$	153,173

During the three months ended September 30, 2013, the Company did not purchase any intangible assets. The Company also reclassified certain intangible assets with a gross carrying amount of $2.0 million to assets-held-for-use. These assets were previously classified as assets-held-for-sale within prepaids and other current assets in the condensed consolidated balance sheet. During the nine months ended September 30, 2013, the Company purchased intellectual property of $2.5 million, which was recorded as intangible assets on the condensed consolidated balance sheets. During the three months ended September 30, 2013, the Company did not sell any intangible assets. During the nine months ended September 30, 2013, the Company sold portfolios of its intellectual property covering lighting technologies for $2.3 million and the related gain was recorded as gain from sale of intellectual property in the condensed consolidated statements of operations.

During the nine months ended September 30, 2012, the Company entered into various business combinations and technology asset acquisitions. These transactions had a total purchase price of $48.2 million. These transactions were completed to acquire patents and technology to expand the Company's existing technology for its MID and MTD groups.

The favorable contracts (included in customer contracts and contractual relationships) are acquired patent licensing agreements where the Company has no performance obligations. Cash received from these acquired favorable contracts reduces the favorable contract intangible asset. For the three months ended September 30, 2013 and 2012, the Company received $0.9 million and $1.1 million related to the favorable contracts, respectively. For the nine months ended September 30, 2013 and 2012, the Company received $2.2 million and $4.7 million related to the favorable contracts, respectively. As of September 30, 2013 and December 31, 2012, the net balance of the favorable contract intangible assets was $2.6 million and $4.8 million, respectively.

Amortization expense for intangible assets for the three and nine months ended September 30, 2013 was $7.4 million and $21.4 million, respectively. Amortization expense for intangible assets for the three and nine months ended September 30, 2012 was $8.0 million and $23.5 million, respectively.

The estimated future amortization expense of intangible assets as of September 30, 2013 was as follows (amounts in thousands):



Years Ending December 31:	Amount
2013 (remaining 3 months)	$	9,352
2014	28,266
2015	27,115
2016	26,081
2017	24,625
Thereafter	17,009
	$	132,448

It is reasonably possible that the businesses could perform significantly below the Company's expectations or a deterioration of market and economic conditions could occur. This would adversely impact the Company's ability to meet its projected results, which could cause the goodwill in any of its reporting units or long-lived assets in any of its asset groups to become impaired. Significant differences between these estimates and actual cash flows could materially affect the Company's future financial results. If the LDT reporting unit is not successful in commercializing new business arrangements, or if the Company is unsuccessful in signing new license agreements or renewing its existing license agreements for the MID and CRI reporting units, the revenue and income for these reporting units could adversely and materially deviate from their historical trends and could cause goodwill or long-lived assets to become impaired. If the Company determines that its goodwill or long-lived assets are impaired, the Company would be required to record a non-cash charge that could have a material adverse effect on its results of operations and financial position.

- 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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