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GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended
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Dec. 26, 2015
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Goodwill Impairment Testing and Charges Under ASC Topic 350, Intangibles - Goodwill and Other, goodwill and intangible assets determined to have indefinite useful lives are not amortized. Instead these assets are evaluated for impairment at least annually, or on an interim basis between annual tests when events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying value. We perform our annual impairment test on the first day of the fiscal fourth quarter for each of our reporting units. Our reporting units for purposes of assessing goodwill impairment are the same as our operating segments, which are organized primarily based on geography and include: North America Plasma, Americas Blood Center and Hospital, Europe, Middle East, and Africa (collectively "EMEA"), Asia-Pacific and Japan. The North America Plasma reporting unit is a separate operating segment with dedicated segment management due the size and scale of the plasma business. During the third quarter of each fiscal year, we prepare our long term projections for net revenues, income and operating cash flows. The economic weakness in EMEA, particularly Russia, and declines in our U.S. blood center collections have negatively impacted earnings before interest, taxes, depreciation, and amortization ("EBITDA") and net revenues for our EMEA and Americas Blood Center and Hospital reporting units. Because of these market conditions and key uncertainties, including the market rate of adoption of our new products and the negative impact of intense competitive pressure on pricing and market share, we lowered our expectations in terms of the timing and amount of our future revenue, income and cash flows. As a result, we concluded in the third quarter of fiscal 2016 that indicators of potential goodwill impairment were present for the EMEA and Americas Blood Center and Hospital reporting units, therefore requiring an interim test for goodwill impairment. In accordance with ASC Topic 350, we prepared a “Step 1” Test that compared the estimated fair value of each reporting unit to its carrying value. We utilized a discounted cash flow approach in order to value our reporting units for the Step 1 Test, which required that we forecast future cash flows of the reporting units and discount the cash flow stream based upon a weighted average cost of capital that was derived, in part, from comparable companies within similar industries. The discounted cash flow calculations also included a terminal value calculation that was based upon an expected long-term growth rate for the applicable reporting unit. We believe that our procedures for estimating discounted future cash flows, including the terminal valuation, are reasonable and consistent with market conditions at the time of estimation. We corroborated the valuations that arose from the discounted cash flow approach by performing both a market multiple valuation and by reconciling the aggregate fair value of our reporting units to our market capitalization at the time of the test. The results of the Step 1 Test performed in the third quarter of fiscal 2016 indicated that the estimated fair value of all of our reporting units exceeded their respective carrying values, with the exception of EMEA, for which we recorded an estimated goodwill impairment charge, as discussed below. Based on this Step 1 analysis, the reporting unit that is most at risk of impairment in future periods is the Americas Blood Center and Hospital, which has an excess fair value over carrying value of approximately 25.8% and has allocated goodwill of $175.9 million as of December 26, 2015. We believe that our assumptions used to determine the fair value of the Americas Blood Center and Hospital reporting unit were reasonable. If different assumptions were to be used, particularly with respect to estimating future cash flows, or if actual operating results and cash flows of the Americas Blood Center and Hospital differ from the estimated operating results and related cash flows, there is the potential that an impairment charge could result in future periods. Additionally, changes to the discount rate or the long-term growth rate could also give rise to an impairment in future periods. As a result of the carrying value of the EMEA reporting unit exceeding its estimated fair value, a "Step 2" Test is required for this reporting unit. The Step 2 Test measures the impairment loss by allocating the estimated fair value of the reporting unit, as determined in Step 1, to the reporting units’ assets and liabilities, with the residual amount representing the implied fair value of goodwill. To the extent the implied fair value of goodwill is less than the carrying value, an impairment loss is recognized. The Step 2 Test under ASC Topic 350 requires us to perform a theoretical purchase price allocation for the EMEA reporting unit to determine the implied fair value of goodwill as of the evaluation date. Due to the complexity of the analysis required to complete the Step 2 Test and the timing of our determination of the Step 1 goodwill impairment, we have not yet finalized our Step 2 Test, however, we have completed a preliminary assessment of the expected impact of the Step 1 and Step 2 Tests using reasonable estimates of discounted cash flows and for the theoretical purchase price allocation. Based on this assessment, we have recorded a preliminary estimate of the goodwill impairment loss for the third quarter and first nine months ended December 26, 2015 of $66.3 million, which represents the entire goodwill balance allocated to EMEA. This charge does not impact our liquidity, cash flows from operations, future operations, or compliance with debt covenants. The preliminary estimates of goodwill impairment loss will be finalized prior to the issuance of our Form 10-K for the year ended April 2, 2016 as part of our annual evaluation as of the first day of our fiscal fourth quarter. We believe that the preliminary estimate of goodwill impairment loss is reasonable and represents our best estimate of the goodwill impairment loss to be incurred; however, it is possible that when the year-end tests are completed we may be required to record a material adjustment to this preliminary estimate. The following procedures are, among others, the more significant analyses that we need to complete to finalize our year end Step 2 Tests for the EMEA reporting unit:
• | Final appraisals to determine the estimated fair value of identifiable intangible assets.
• | Final analysis to determine the estimated fair value adjustment required to inventory.
• | Final deferred tax analysis.
In connection with the preliminary Step 2 Tests, we made what we considered to be reasonable estimates of each of the above items in order to determine our preliminary best estimate of the goodwill impairment loss under the theoretical purchase price allocation required for Step 2 Tests by ASC Topic 350. The completion of the final analyses described above may result in significant changes to the estimates used and therefore may have a significant impact on the final goodwill impairment loss recorded for fiscal 2016. In addition, we may identify other issues during the completion of the Step 2 Tests that may have a significant impact on the final goodwill impairment loss recorded for fiscal 2016. The changes in the carrying amount of goodwill for fiscal 2016 and 2015 are as follows:
(In thousands) |
Carrying amount as of March 29, 2014 | $ | 336,768 |
Effects of change in foreign currency exchange rates | (2,458 | )
Carrying amount as of March 28, 2015 | $ | 334,310 |
Impairment charge | (66,305 | )
Effects of change in foreign currency exchange rates | (1,060 | )
Carrying amount as of December 26, 2015 | $ | 266,945 |
Intangible Asset Impairment In April 2013, we acquired a patented red cell storage solution, referred to as SOLX, from Hemerus Medical, LLC for cash consideration of $24.1 million plus an agreement to make certain future payments accounted for as contingent consideration. During the third quarter of fiscal 2016, we received U.S. Food and Drug Administration clearance for the SOLX solution with a Haemonetics whole blood filter. Currently, the vast majority of the U.S. market utilizes a red cell filter, not a whole blood filter, for whole blood collection procedures as they seek to optimize blood component yield from each collection. To bring SOLX to market with a red cell filter requires substantial additional investment. Accordingly, we conducted a final market review prior to proceeding with this investment, which indicated customers would not pay a price for a SOLX collection kit sufficient to recover the cost to produce it, or to provide an adequate return on the additional investment. As result, we have suspended further investment in the SOLX technology and have recorded an impairment charge of $18.7 million to write down the carrying value of the SOLX intangible assets as of December 26, 2015. In addition, we reversed the $4.9 million of contingent consideration liability we had recorded, as we now do not expect to achieve the conditions that called for its payment. The gross carrying amount of intangible assets and the related accumulated amortization, as of December 26, 2015 and March 28, 2015 is as follows:
(In thousands) | Gross Carrying Amount |  | Accumulated Amortization(1) |  | Net |  | Weighted Average Useful Life
|  |  |  |  |  |  | (In years)
As of December 26, 2015 |  |  |  |  |  |  |  |  |
Patents | $ | 11,210 |  |  | $ | 7,445 |  |  | $ | 3,765 |  |  | 9
Capitalized software | 52,557 |  |  | 9,242 |  |  | 43,315 |  |  | 6
Other developed technology | 126,066 |  |  | 70,887 |  |  | 55,179 |  |  | 12
Customer contracts and related relationships | 195,368 |  |  | 84,758 |  |  | 110,610 |  |  | 10
Trade names | 7,032 |  |  | 5,092 |  |  | 1,940 |  |  | 11
Total intangibles | $ | 392,233 |  |  | $ | 177,424 |  |  | $ | 214,809 |  |  | 10
(1)Includes impairment of SOLX asset, as discussed above.
(In thousands) | Gross Carrying Amount |  | Accumulated Amortization |  | Net |  | Weighted Average Useful Life
|  |  |  |  |  |  | (In years)
As of March 28, 2015 |  |  |  |  |  |  |  |  |
Patents | $ | 10,473 |  |  | $ | 7,373 |  |  | $ | 3,100 |  |  | 9
Capitalized software | 39,690 |  |  | 5,654 |  |  | 34,036 |  |  | 7
Other developed technology | 124,573 |  |  | 46,474 |  |  | 78,099 |  |  | 12
Customer contracts and related relationships | 195,985 |  |  | 70,440 |  |  | 125,545 |  |  | 10
Trade names | 7,042 |  |  | 3,234 |  |  | 3,808 |  |  | 11
Total intangibles | $ | 377,763 |  |  | $ | 133,175 |  |  | $ | 244,588 |  |  | 10
Intangible assets include the value assigned to license rights and other developed technology, patents, customer contracts and relationships and trade names. The estimated useful lives for all of these intangible assets are 2 to 19 years. The changes to the net carrying value of our intangible assets from March 28, 2015 to December 26, 2015 reflect the impact of the SOLX impairment discussed above and amortization expense, partially offset by the investment in capitalized software and other less significant intangible assets. Aggregate amortization expense for amortized intangible assets, excluding the impact of the SOLX impairment, for the nine months ended December 26, 2015 and fiscal year 2015 was $25.9 million and $33.5 million, respectively. Future annual amortization expense on intangible assets is estimated to be as follows:
Fiscal Year |  | Amount (in thousands)
2016 |  | $ | 7,771 |
2017 |  | $ | 32,195 |
2018 |  | $ | 31,411 |
2019 |  | $ | 29,666 |
2020 and thereafter |  | $ | 96,395 |

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16373-109275 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16265-109275 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=26713463&loc=d3e16323-109275 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13816-109267 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35741047&loc=d3e13854-109267 + Details
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